Former underwriting manager accused of fraud is restrained from reducing assets or selling property

GE Capital Woodchester yesterday secured a High Court order restraining a former underwriting manager with the company from reducing his assets below €980,000.

Mr William (Bill) McGrotty was also restrained from disposing of property at Cabinteely, Dublin, and in Wexford town.

The court heard the company believed there was substance in a number of allegations made by customers against Mr McGrotty, including an allegation about the provision of brown envelopes containing cash payments in return for approval of loans.

It was also stated the company believed a particular customer had operated with Mr McGrotty in relation to a number of deals that amounted to a fraud on the company.

The injunctions against Mr McGrotty, who was employed by the company since 1988 but had written some weeks ago saying he was resigning, was granted by Mr Justice White to GE Capital Woodchester (formerly known as Woodchester Crédit Lyonnais Bank) and GE Capital Woodchester Finance.

The judge gave liberty to Mr McGrotty, who was not in court, to apply to the court to vary the order on 24 hours' notice to the other side. In an affidavit, Mr Paul Whelan, chief financial officer with GE Capital Woodchester, said Mr McGrotty's duties included the underwriting of business to third parties and assessing customers' ability to repay. Following information received from a customer, the company made certain investigations regarding the manner in which Mr McGrotty underwrote business. An internal investigation was conducted into the practices of Mr McGrotty.

It had concluded that Mr McGrotty operated a system whereby customers were asked to endorse two cheques, one of which was cashed at the plaintiff's office, but in relation to which the customers never received any value. An allegation was also made by a customer concerning the provision of brown envelopes containing cash payments of undisclosed sums in return for loan approvals.

Mr Whelan said Woodchester believed there was substance in the allegations.

The investigation had also uncovered that Mr McGrotty continued to underwrite business introduced by a particular customer despite being advised not to by his superiors. This customer appeared to have been operating with Mr McGrotty in relation to a number of deals that amounted to fraud on the company.

This customer had a number of accounts over a six-year period with GE Capital Woodchester. When he decided to cease payments on certain accounts, he arranged for their transfer to other parties to protect his credit rating.

He warranted that these third parties were taking on the burden of the loans and that they required the items for legitimate purposes. However, these third parties were connected to the customer and never required the loans.

Mr McGrotty was "owner of and colluded in these practices". Had he followed proper company assessment policies, these loans would never have been assigned to third parties.

Mr Whelan said the company estimated that it had lost about €480,000 in relation to business written by Mr McGrotty to which the debtors had failed to discharge their contractual obligations. The company was under a duty to mitigate its loss.

However, the systematic nature of the fraud and the fact that loans were given for bogus purposes meant the plaintiff was unlikely to recoup any significant proportion of these monies.

Also, it was estimated that €750,000 was at risk, of which the company estimated it may be able to recoup €250,000 from customers.

On May 19th, Mr McGrotty was suspended on full pay following the investigation. A meeting in relation to the allegations against Mr McGrotty was fixed for June 5th. On May 30th, he wrote saying it would be too stressful for him to attend the meeting and he was resigning his position.

The company referred the matter to the Garda Bureau of Fraud Investigation on July 4th.

Mr Whelan said Mr McGrotty's main asset was his house, held jointly with his wife, in Cabinteely, Dublin, which the company said was now for sale. It had also traced a house belonging to the couple at Barrack Street, Wexford.