Solicitor scrutiny after debts exposed

By Diarmaid Fleming
BBC Dublin correspondent

The regulation of solicitors in the Irish Republic is under scrutiny in an unfolding case of two solicitors, Thomas Byrne and Michael Lynn, who ran up business debts of up to 130m euro.

How they managed to borrow so much money is the subject of police and legal investigations, while clients and banks of the two are pursuing legal action in the High Court in Dublin.

The Celtic Tiger as Ireland's economic boom was known brought an insatiable appetite for property, with many in Ireland seeing huge price increases since the 1990s as the key to fast riches.

Thomas Byrne ran up business debts of up to 130m euro

"The Celtic Tiger certainly orientated Irish people's interest towards property because simply it was a way whereby money was being attained on paper by people doing very little other than acquiring an asset."

That was the view of solicitor and international building developer Michael Lynn, just last September, in an interview in Dublin for Bulgarian National Television.

The Irish property boom is over with prices falling for the first time in more than a decade, but the hangover after the party has already begun for some.

The Irish legal and banking worlds have been rocked by revelations that two Dublin solicitors, Michael Lynn and Thomas Byrne, separately managed to borrow up to 130m euros, without anyone apparently realising the scale of their borrowings.

The Law Society of Ireland has shut the pair's legal firms, and the High Court in Dublin has been told that many loans were generated through multiple mortgages on single properties the men owned, without the lending banks knowing such properties were already mortgaged.

Mr Byrne, 41, from Dublin and Mr Lynn, 39, from Mayo both ran conventional solicitors' practices in Ireland's capital, but also had extensive business interests.

Limousines

Mr Byrne had a reputation as a man going places, driving a Bentley around Dublin, and running a limousine business as well as other operations.

Michael Lynn's international property interests extended across seven countries in Europe from Portugal to the Bulgarian Black Sea coast, through his Kendar Global Properties Group.

The Law Society of Ireland began its investigations into Mr Lynn during the summer following a complaint. In September, a month before his law firm was shut down, he was interviewed in Dublin but gave no hint that anything was wrong.

Michael Lynn's property interests spread across seven countries

"Approximately two years ago we began our development of an interest which was generated from investors in Ireland. There's been a huge interest in development in Bulgaria for the last two to three years - our company is an Irish company which is now an international development company," said Mr Lynn said then.

"We try to satisfy the needs of our investors and where they are moving towards and where we also believe they should also be orientated towards in terms of investment and value for their investment.

"We felt that economically Bulgaria represented a strong opportunity for Irish and indeed UK and European investors. As our company is spread over seven different jurisdictions with Ireland as its Head Office we're in a position to offer the Bulgarian investment opportunity to many other different countries as opposed to just Ireland," he added.

'Self-belief'

He described his business approach in the country: "The most important thing for us is in Bulgaria that we have people who have a belief within themselves and the company, that's the basic for success. Our company is based on very straightforward principles. There's very little room for bullshit, it's very straightforward," he added.

Shortly after the interview, Mr Lynn's law practice was shut down by the Law Society of Ireland. Its investigation, the High Court was told, uncovered "acts of dishonesty".

Dublin has been the centre of Ireland's economic boom

These included the raising of multiple mortgages on single properties, without the lending banks being told. Mr Lynn now owes up to 80m euros, but has accumulated 148 properties and assets of around 53m euros.

An investigation into Thomas Byrne found he also raised multiple mortgages, and owes 50m euros. His assets are being assessed. But the suggested shortfall means that not all the banks now seeking judgments in the High Court may get their money.

The High Court is currently hearing the Law Society of Ireland disciplinary actions against Mr Lynn and Mr Byrne, which are also dealt with by the court.

'Witches' brew'

But it is also hearing a multitude of actions by banks and others caught up in the legal mess, the intricacies of Mr Lynn's properties being described by Mr Justice Peter Kelly as a "witches' brew".

One man who has invested in property being built by Kendar told the BBC he has been contacted by other investors worried about pouring more money into schemes not yet completed.

Kendar's overseas arms are stand-alone businesses but the company says their "investments are secure" and that projects will be completed.

The High Court has ordered papers from the proceedings relating to the two men's affairs to be passed to the Garda Fraud Bureau, which is also investigating.

The story has focused attention on the regulation of solicitors in the Republic of Ireland. Banks involved in the cases have found themselves exposed after relying on the word of solicitors and allowing lawyers involved in their own property deals to represent themselves.

But the Law Society of Ireland's role is also under scrutiny in this affair. Other complaints were made to the Law Society before against Mr Lynn and Mr Byrne.

According to Mr Ahern, a change could well be on the way

An allegation Mr Lynn had overcharged a client was not upheld, but Mr Byrne was fined 15,000 euros by the society in December 2006 for having a deficit in his client account of 1.69m euros in 2005. It is also being reported that the Society investigated him in 2002 over the need for a second signatory for cheques on his client account.

A judgment for 7,000 euros for a debt against Mr Lynn went unpaid for four years until September this year, seemingly unnoticed by the banks willing to lend him and his companies large sums of money.

The Consumers' Association of Ireland says the system governing solicitors is effectively one of self-regulation which it says must end.

This view has been echoed in high places: the Taoiseach Bertie Ahern gave an indication to parliamentarians in the Dail that although a government decision had not been taken and was only under consideration, change could well be on the way for Ireland's legal profession.

"I am not satisfied that self-regulation, as it has been operated over the years, is the best model. Total self-regulation does not provide the impression that the public interest is best served in a transparent way, notwithstanding the fact that the overwhelming majority [of solicitors] are doing a good job," he said.

The Law Society of Ireland, which is the primary body responsible for the regulation of solicitors, is defending its role but denies the system amounts to self-regulation, as the High Court ultimately deals with disciplinary proceedings should cases progress that far.

Sorting out the affairs of what are now Ireland's two best-known solicitors is likely to continue in the courts for quite some time, in a case which has shaken trust in the legal profession in the country to the core.