What a card
Sunday, March 07, 2010 By Andrew Lynch Achilleas Kallakis
AGE: 41
APPEARANCE: chubby, balding, pugnacious
NEWSWORTHINESS: the Anglo-Greek shipping tycoon has appeared in a London court charged with defrauding AIB of stg£56million
As a dedicated poker player, Achilleas Kallakis knows all too well that fortunes can be won or lost on the turn of a single card. There is a video clip on YouTube that shows him playing for high stakes in a televised tournament, holding a pair of aces and seemingly invincible. Against all the odds, however, his opponent draws the last queen in the pack and scoops the jackpot, leaving the Greek shipping tycoon shaking his head in disbelief.
Today, the cards have turned against Kallakis once again: this time, he is accused of gambling with money borrowed from an Irish bank. Last Monday, he and his business partner, Alexander Williams, appeared at the City of London Magistrates Court on multiple charges of property related fraud amounting to €61 million.
Their alleged chief victim is Allied Irish Banks, which the following day announced record pre-tax losses of €2.65 billion.
While the money lost on the Kallakis affair is a drop in the ocean of AIB’s overall losses, the coincidence of the court action and the annual results was unfortunate for the bank.
Kallakis is suspected of duping AIB by borrowing money on the strength of fraudulent property leases that allegedly claimed higher rents and longer tenancy periods than was actually the case. When the bank discovered the alleged scam, it seized the properties and sold them to Stephen Vernon’s Green Property, resulting in a stg£56 million write-down.
While the full terms of the deal with Green are not known, the bank is likely to be exposed to further losses if the properties do not perform. The fact that the British property market is healthier than its Irish equivalent may provide some protection. On a smaller scale, Bank of Scotland (which is owned by Lloyds Banking Group) allegedly lost £5 million on a 2008 loan it gave him to refurbish a former ferry that he planned to turn into a luxury yacht.
The Kallakis affair would be deeply embarrassing for AIB at any time. With the country’s biggest bank about to transfer its bad loans to the National Asset Management Agency (Nama) in return for state bonds - and most likely require further cash from the taxpayer to recapitalise - it amounts to a PR disaster.
Although born in London, the man at the centre of the affair is from an established Greek shipping family. As a young man, he was involved in several small scale businesses that went into administration, including a discoboat in Liverpool and a nightclub in Yorkshire.
In 1995, ‘Stefanos Kollakis’ and his partner ‘Martin Lewis’ pleaded guilty to a conspiracy to commit forgery, following an investigation by Cambridgeshire police into claims that they were selling fake Hong Kong passports for $50,000 each. It is now known that these were the same two men who appeared under different names in a court last week.
The investigation revealed that Kallakis, who was at this time working for a travel firm in Croydon, had also bought a large number of feudal titles from the Manorial Society of Great Britain before subdividing them into districts and offering them for sale through newspaper ads.
His scheme claimed to take advantage of an ancient process called subinfeudation, the splitting and increasing of titles, that had been banned in 1290.Ajury heard how he and his co-conspirator used bogus companies to set up the Institute of Heraldic Affairs. One of the companies used a Latin motto which translated as ‘‘virtue is the way’’.
The technique was used to con several wealthy and naïve Americans, including the Louisiana congressman Charles Boustany.
When police raided Kallakis’s house, they uncovered hundreds of documents with forged signatures, including that of Lord Denning (the controversial judge who claimed that the Guildford Four should have been hanged).Kallakis and Williams travelled by Concorde and were traced through their BA air miles, but eventually escaped with a fine of £7,500 and 160 hours of community service.
While this kind of setback might have ruined a lesser man, Kallakis has always shown a remarkable talent for reinvention. According to his entry in the 2004 edition of the British etiquette guide Debrett’s, he is a member of the exclusive Berkshire country club Cliveden and a director of the Friends of Florence foundation that sponsors Italian art.
He is said to have published two books, Maritime Registries of the World and The Wonders of Italy. An investigation by the British business magazine Property Week found that none of these claims stood up to scrutiny. One aspect of his CV that appears to be beyond dispute is that he is a diplomatic representative of San Marino, the landlocked state in northern Italy that counts itself as the oldest in Europe. He is inordinately proud of this fact and likes to be addressed as ‘‘Your Excellency’’.
A foreign affairs spokesman for the country said last week that it would await the outcome of the criminal investigation before taking any decision on his status.
Kallakis first became a major player on the London property scene in 2003 when he tried to buy Orion House, an office block in Covent Garden, for £57 million.
The negotiations were done through the Pacific Group, the investment arm of his overseas family trust. That deal eventually fell through, forcing him to start his portfolio with the more modest purchase of Network Rail’s head offices in Euston for £15 million.
In late 2005,Kallakis approached AIB for the first time. He wanted money to close the deal on Astral Towers, a 115,000 square foot building in Crawley, West Sussex that he eventually purchased for £21 million. This was at the height of the boom, when the bank had plenty of spare cash and was eager to lend it.
As collateral for the loan, Kallakis was able to show valuable rental income from the buildings owned by his Pacific Group company, as well as the potential return from Astral Towers. He may also have repeated the boast he once made to Property Week, that his backers were Swiss investors ‘‘so rich that they don’t even appear in Forbes’’.
AIB has yet to disclose the precise amount that it lent to Kallakis over the next two years, although it is thought to be in the region of £700 million. What is known is that he used the money to embark on a reckless spending spree, building up a property portfolio that included some of London’s most prestigious addresses.
By the end of 2007, his trophy assets included the headquarters of the Daily Telegraph (£225 million), a number of luxury apartments in Mayfair, and a tower block leased to the British Department of Health (£75 million).
Just before the credit crunch took hold, Kallakis announced that he was going to build the world’s most expensive apartment.
He paid £120 million for 7-8 St James’s Square, between Pall Mall and Piccadilly, and revealed plans to create a 20,000 square foot penthouse and seven other flats of around 10,000 square ft each.
The penthouse was to cost £105 million, while the other units were to be marketed at £60-80 million.
While he has always shunned any kind of personal publicity, Kallakis clearly enjoys the trappings of wealth. He arrived at meetings in a chauffeur-driven Bentley, used a private jet, and is said to have one of the biggest yachts on the Cote d’Azur. In 2008, he celebrated his 40th birthday with a lavish party on the Greek island of Mykonos, where the entertainment included a star turn by the Bee Gees.
Until this scandal broke, Kallakis was better known for his poker skills than his business deals. Although he played five card stud with matchsticks as a child, his obsession really started in 2003 when he was in Las Vegas on business and dropped into the famous Bellagio casino.
He promptly decided to enter the World Series, later claiming that his only preparation was reading a book on Texas Hold’Em called How to Play Poker and Win the night before. He became a regular on the international circuit and appeared in several televised tournaments, where he was nicknamed ‘The Don’. His biggest payday came in 2005,when he won $100,000 for finishing third in the 2005 888.com Pacific Poker Open.
Inmid-2008,AIB became nervous about its exposure to a plunging commercial property market. The bank conducted an internal review, which included an examination of the paperwork that the Pacific Group had submitted with its loan applications. To their horror, they found that the blue-chip property firm that had allegedly underwritten the long leases at high rents flatly denied making any such deals with Kallakis’s companies.
AIB was left with no option but to call in Britain’s Serious Fraud Office (SFO), which then raided Kallakis’ offices, as well as his £4 million luxury home in Knightsbridge.
What they found there has yet to be fully revealed, but it is one of the largest such property cases ever investigated by the SFO.
When AIB realised the scale of their problem it quickly sold the buildings concerned to Green Property, which also owns Blanchardstown Shopping Centre.
While the write-down of £56 million was included in the bank’s annual report, the fact that it was not revealed to either the public or the stock exchange at the time has led to questioning about why management they did not reveal the whole affair earlier.
AIB chief executive Colm Doherty was head of the capital markets division, which also included the corporate banking arm which loaned the money to Kallakis. Last week he defended the bank’s handling of the affair, and said it had been reported to the Serious Fraud Office as soon as it was discovered. He said that the fact that a number of people had subsequently left the bank indicated that he was not pleased with the level of control exercised in giving out the loans.
Questions have also been raised about why Green Property paid virtually the same price for the properties in 2008 as Kallakis paid at the height of the Celtic Tiger, although Doherty insisted they were ‘‘normal, arm’s-length transactions’’ approved by the board.
The charges now facing Kallakis are serious. He faces two counts of conspiracy to defraud,13 counts of forgery, five counts of fraud by false representation, two counts of money laundering and one count of obtaining a money transfer by deception - all of which could add up to a ten-year prison sentence. For the moment, he has posted bail of £140,000 and must report to Chelsea police station until his next appearance at Southwark Crown Court on May 4.
It will now be up to the courts to decide whether fate has dealt him a bad hand - or whether the Don has been stacking the deck all along.
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