Hibernian Insurance has asked the High Court to help thwart a €2.7 million fraud by one of its employees in its Galway technical unit.

Mr Justice Peart heard that the insurance firm's bank, AIB, had issued seven sterling draft cheques totalling €2.7 million fraudulently drawn on Hibernian's bank account.

Mr Lyndon MacCann, SC, for Hibernian, told the court at the weekend a draft for £550,744 sterling (almost €700,000) had been presented to AIB for payment last Friday morning.

He said it appeared the fraud had been perpetrated by an untraced Hibernian insurance employee or a number of them.

When obtaining court orders restraining AIB from honouring any of the fraudulent drafts Mr MacCann said immediate publication of the court application could frustrate Garda fraud squad inquiries.

He said it could assist fraudsters to enrich themselves at a time when those responsible may not be aware the fraud had been discovered.

Mr MacCann said the drafts had been made payable in the names of three dissolved or dormant companies with a common address at Washington Street West, in Cork city.

He said no one could rule out the possibility that innocent third parties had already paid out on the bank drafts.

Mr Pat Creighan, finance manager with Hibernian, told the court that the fraud had been discovered when a claims handler had returned from holiday and found she could not reconcile the seven drafts with the sterling draft book and could not make out the identity of the purported claims handler.

Mr Creighan said a practice had developed whereby applications for sterling drafts had been accepted and processed by AIB in circumstances where they had not necessarily been in strict compliance with the mandate and, indeed, may not have been signed at all. Normally such drafts would be for vastly smaller amounts. He said the claims handlers names were illegible on the drafts application forms and checks had been carried out to no avail with a number of employees to ascertain if it was their handwriting.

"The signatures are not those of the managers whose names appear as signatures on the application forms," he said.

Mr Creighan said the application forms had been generated by a person who had used them to obtain sterling drafts from the bank which had been misappropriated presumably with a view to presenting them and collecting the proceeds for his or her personal benefit.

He said the total amount involved was £1,865,020 sterling or €2,701,230. Detailed and exhaustive inquiries had confirmed that the application forms were not genuine. Hibernian was satisfied that the draft applications had been generated fraudulently and the letters going out with them were bogus.

Mr Creighan said AIB had confirmed that it could not stop the drafts without a court order given the legal nature of a draft.

The injunction remains in force until tomorrow.