Jyske Bank ‘dishonestly assisted’ Marrache brothers, court rules

Jyske Bank “dishonestly assisted” Marrache brothers Benjamin, Isaac and Solomon as they stole millions of pounds from clients of their law firm Marrache & Co, the Supreme Court ruled yesterday.
In a 104-page judgement, Puisne Judge Adrian Jack found the bank was liable for money belonging to 16 clients which had gone missing from Marrache & Co client accounts held by the bank.
This was the outcome of a lawsuit filed by Edgar Lavarello and Adrian Hyde, the liquidators of Marrache & Co, against Jyske Bank in a bid to recover £6.7m plus interest following the collapse of the law firm in 2010.
The bank had robustly rejected the allegations during a month-long court case, but Mr Justice Jack was clearly not convinced and ruled in favour of the claimants.
The Marrache brothers had repeatedly used client monies from one client to pay another client or to reduce their own overdraft, the judgement noted, as it tracked transfers in and out of the law firm’s accounts held by Jyske Bank.
“The repeated transfers from the office account to the client account are only sensibly explicable by the firm having spent client monies, which they then could only repay by replenishing the funds in the client account from the office account,” Mr Justice Jack said in his judgement.
“A reasonable banker knowing of the transfers would in my judgment have a very great suspicion, bordering on knowledge, that client monies were being misused.”
The court had heard Jyske Bank extended signifiant overdraft facilities to the firm which, depending on the size of the facility being sought, had been approved by senior staff either in Gibraltar or in Denmark.
But between 2001 and 2008, Marrache & Co had exceeded its overdraft limits on “an astonishing” 1,552 out of 2,677 days, the judgement noted.
Mr Justice Jack said “it must have been obvious” that the firm was under financial pressure.
A key issue in the case was whether the bank’s employees had knowledge of Solicitors Accounts Rules, which forbid the use of a client’s money for anything other than transactions relating to the client’s business.
Jyske Bank’s lawyers had argued that bankers were not expected to know the rules and that its employees had been ignorant of the law.
But the judge noted: “Although, as I have found, bankers are not expected to know the details of these rules, the rules are by-and-large just common sense.”
Mr Justice Jack questioned evidence he had heard from Jyske Bank employees, adding that the transfers under the court’s scrutiny “were screaming for an explanation”.
He noted how no enquiries had been made by the bank, even though “an honest man would have asked questions”.
In his judgement, Mr Justice Jack was toughest on Bill Bishop, the Jyske Bank employee responsible for managing the Marrache accounts between 2003 and the firm’s demise in 2010.
The judge said he was satisfied that Mr Bishop had “a perfectly adequate understanding of his trade” and as a result had “at least blind-eye knowledge” that something was awry with the Marrache accounts.
“By failing to stop the relevant transactions and failing to make further investigations, the reasonable banker would be acting recklessly,” Mr Justice Jack said.

But the judge went further and said Mr Bishop “…simply must have been aware that client monies had gone missing, stolen by the Marrache brothers.”

Mr Justice Jack submitted that there was “no obvious motive” for the employee to assist the Marraches, not least because the bank did not pay bonuses to its staff.
He noted, however, that Marrache & Co was an “important customer” for Jyske Bank, which had made £1.25m in fees and interest during its relationship with the firm. The law firm had also introduced clients to the bank.
Mr Justice Jack concluded that Mr Bishop - and therefore Jyske Bank - had been aware since mid-2004 that the Marrache’s had “misappropriated client funds”, adding that the “dishonest assistance continued until the firm went under in 2010”.
“Jyske are liable for his behaviour,” the judge said.
FULL STORY IN OUR PRINT AND E-EDITIONS