Michalis Kallakis, son of convicted fraudster Achilleas Kallakis, is suing Allied Irish Banks (AIB) for more than £200m, alleging it sold a portfolio of properties connected to his father’s fraud at a massive undervalue.
The long-running dispute, which has been described by AIB’s lawyers as “beyond fiction”, was filed soon after Achilleas Kallakis was released from prison in 2018 and is currently being heard at the Rolls Building of the High Court in London.
Achilleas Kallakis was sentenced to 11 years in jail in 2013 for tricking banks into lending him more than £750m by pretending to be successful property tycoon. It is thought to be the UK’s biggest-ever mortgage fraud.
AIB was his biggest victim. The bank had lent more than £700m to 14 SPV companies in the British Virgin Islands controlled by Achilles and used to fund property investments in London.
According to court papers, AIB first became aware that the loans were obtained fraudulently on 15 September 2008, the day Lehman Brothers collapsed. To mitigate its losses, the bank sold on the mortgages by November, while the property market was in free-fall, for £652m million – a loss of £56m.
Michalis Kallakis was 10 at the time, and wasn’t connected with the fraud. However, it is this sale that is the subject of his lawsuit which he is able to bring because he says the SPVs were owned by a family trust, which he is the beneficiary of.
According to court papers, he argues that while the loans were obtained by deception, the properties bought with the loans were well managed, legitimate investments. He argues that AIB acted fraudulently or negligently by selling the properties massively below their market value.
Michalis Kallakis “is in no position to challenge AIB’s case that [Achilleas Kallakis] obtained the loans from AIB by, in part,… [by] deception,” his lawyers said in written arguments.
“But in contra distinction to many, perhaps most, fraud cases, it is plain that the intention of such deceits was to obtain the loans and thereafter to make money legitimately through property developments and improvements and not simply to run off with moneys transferred at some time in the future (unlike a Ponzi scheme fraudster).
“And that is what actually happened between 2003 and 21st November 2008 when AIB foreclosed… So in this case, there is absolutely no difference in principle between this case and the case of an intending house purchaser dishonestly overstating his income to obtain a mortgage but thereafter meeting all his mortgage responsibilities.”
AIB strongly refutes all of Michalis Kallakis’ allegations. Although Achilleas Kallakis is also being sued by his son, it says the pair are working together to extract more money from the bank.
“Sometimes in this court, one comes across parties or witnesses who lie,” the bank’s legal team said in written arguments.
“One does not often encounter persons like Achilleas and his associates, who have made careers out of dishonesty and who cannot be believed on any particular, big or small. That is not forensic exaggeration. It is the inescapable inference from proven criminality,” it said.
“The idea that the victim of the fraud could somehow find itself in the dock – criticised by the fraudster for manner in which it sought to mitigate the losses to which it was exposed by reason of the fraud – is beyond fiction.”
Kallakis v AIB Group PLC and others
Commercial Court (Mr Justice Andrew Baker)
