One of the anecdotes about developer Liam Carroll that did the rounds during the property boom was that, every so often, staff in his Chapel House office would come across title documents to properties they didn't even realise he owned.
I'd always dismissed it as hyperbole but last week's revelation that AIB relied on letters of undertaking from solicitors for Carroll's Zoe companies to hold on trust for the bank the title deeds to a large number of properties owned by Zoe makes me wonder if there might have been a kernel of truth in it. Based on a conversation last week with an informed source, this "astonishing" situation, as Mr Justice Peter Kelly dubbed it, between the bank and the developer may not have even been a once-off.
Did the bank truly believe that Carroll was too big to fail and that it therefore did not need to be as strict as it would be with other customers? If so, it has been proved wrong in relation to his Zoe Group at least, and is now scrambling to recover some of his unpaid loans of some €544m.
As Mr Justice Kelly put it, it was "fortunate" for AIB that Zoe's companies acknowledged that the intention of the letters of undertaking was to create an equitable mortgage over the relevant properties. Nevertheless, as stake-holders in the bank, we have a right to be concerned. After all, last year AIB seized back property assets in Britain from Greek businessman Achilleas Kallakis, to whom it had lent more than €800m between 2003 and 2007. It was announced at the time that Kallakis was under investigation for alleged fraud that involved inflating the rent of the properties and the lease lengths. Why didn't that show up in the bank's due diligence when it was deciding whether to fund the purchases?
This is a serious issue, and over the next few months, attention will move to the bank's practices in relation to property valuations when it was funding purchasers. A property industry source said that in the case of some of the Irish banks, they often weren't viewed as being a necessity despite the fact that "at least a valuation would have given them a neck to sue".
In the meantime we can only hope that Nama is paying particularly close attention to the title backing the loans given by AIB and the other Irish financial institutions during the boom.