A top civil servant has told a jury that a document with his signature that was being used in negotiations to buy an airline was a fake.

On day three of Jason Scales’ fraud trial, the jury heard evidence from Department for Enterprise chief executive Mark Lewin and his former deputy Carl Hawker.

The court heard they had been informed in March 2021 of a proposal by Ettyl to purchase Stobart Air and Mr Scales contacted the department requesting funding of £10m for the purchase of the airline.

This figure was around three times the DfE’s budget for financial assistance, Mr Hawker said.

He wrote to Mr Scales on April 7 telling him the timescales were ‘verging on the impossible’, especially given the amount involved and the nature of the transaction.

Mr Lewin said a loan facility of this size would be ‘very difficult, very unusual and almost impossible in those circumstances’. He said no application by Ettyl for any funding was forthcoming.

The DfE had previously provided financial assistance in support of Mr Scales’ business venture, The Hubb on Victoria Street, Douglas.

He said on the weekend of May 24-25, concerns came to him through Minister Skelly, who had received a call from then Tynwald member Mr Quine, that the department and Isle of Man government were involved in the deal to buy Stobart.

‘I assumed it was a misunderstanding,’ said Mr Lewin.

On the Monday, the Minister received a call from Aer Lingus, which had a franchise arrangement with Stobart Air, wanting to validate two documents purportedly signed by the Mr Lewin and Mr Greenhow.

This was first time he had heard his name referenced. ‘Did that take you by surprise?’ asked prosecutor James Robinson. ‘Absolutely,’ replied Mr Lewin.

He was subsequently sent the documents. ‘This was first time I had seen the documents,’ he said.

‘Did you write that letter?’ he was asked. ‘I did not,’ he replied. Mr Lewin said the typeface was different from the heading and it would have been unusual to have talked about the Minister’s opinion as it did.

Mr Hawker learned he had been named as a potential non-executive director for Ettyl. ‘Did you ever agree to this?’ he was asked. ‘Absolutely not,’ he replied. He said to take on that role he would need an indemnity guarantee from Treasury.

‘You become personally liable for debts. I could have lost my house, lost everything without a guarantee,’ he explained.

A text message to Aer Lingus sent the deal to buy Stobart Air into a ‘tailspin’, the fraud trial jury heard.

On Thursday the seven-strong jury heard evidence from Jonathan Brown, who was non-executive director for Stobart Air and legal adviser to its parent company Esken.

Stobart Air had a ‘potentially very lucrative’ franchise agreement with Aer Lingus worth about 100m Euros a year, the witness said. The Irish carrier would have had to give consent of any change of control from Esken to Ettyl.

At a presentation, Ettyl claimed the deal would be underwritten by the Manx government to the tune of £12m. Mr Brown said that government being prepared to underwrite the deal added credibility to the transaction.

The presentation indicated that the defendant had a minority 25% shareholding in Ettyl with fellow director Nigel Morris having 10% and island businessman Doug Barrowman of the Knox Trust holding 65%. Knox were said to be involved in the takeover with Mr Barrowman being a source of finance.

But in a video conference on April 30, prior to the exchange of contracts, they were informed that Mr Barrowman, would not be investing.

However, Mr Scales wanted to continue and his shareholding in Ettyl would increase to 90%.

Mr Brown said with the primary investor no longer involved it was important to know that the government was providing direct financial assistance.

On May 5, Stobart Air was sent a ‘know your customer’ pack which included the ‘letter of comfort and support’ from Mr Lewin and the ‘Greenhow guarantee’.

These documents made out that the government were acting as guarantor for a loan of £13m between Ettyl and a company named Paradigm VL Group Ltd in order to purchase the airline.

‘Did you have any reason to doubt their authenticity?’ Mr Robinson asked. ‘No, not at all,’ Mr Brown responded.

Mr Scales’ defence advocate Laurence Vaughan-Williams told the jury that it was ‘accepted that the documents on the evidence are not genuine’.

The jury was told that Ettyl had also expressed an interest, as part of the deal, in acquiring Carlisle Lake District Airport, which was another of Esken’s assets.

It had also hoped to secure the potentially valuable patient transfer contract which Mr Brown told the court made a profit of £1m to £1.5m a year.

Mr Brown said when he had been informed, via a tip-off to Aer Lingus, that the documents may not be genuine it had ‘come as a bolt out of the blue’.

‘Everything went into a tailspin, if you forgive the pun,’ he said.

But he said at this stage he still believed the documents to be genuine and thought there must have been a misunderstanding and somebody was trying to cause trouble.

‘It sounds naive. we just assumed they were genuine,’ he told the court.

Aer Lingus legal director Laurence Gourley told the jury on Friday that the backing of the Isle of Man government was critical to the credibility of the transaction.

But he said that even with government backing, Aer Lingus would still need to have carried out KYC checks on Ettyl, a company which had no history or experience in the aviation industry, before it could give its consent.

Mr Gourley said he had received a text towards the end of May which led Aer Lingus to question the veracity of the documents. He said: ‘The general tone of it was we were being misled by Ettyl and that the IoM government was not involved in the transaction at all.’

Did that take you by surprise? he was asked. ‘Very much so,’ he replied.

At a video call on June 10, it was indicated that Mr Scales was looking for alternative sources of finance and there wasn’t funding from the Manx government.

The whole deal fell through and on June 14, Esken wrote to Ettyl to terminate the agreement.

The same day Stobart Air ceased trading immediately.

The trial continues