Mayfair’s poker ‘Don’ who gambled it all

In a World Series poker game a few years ago a rookie player from London found himself up against Phil Helmuth Jr, a legendary card player and, at the age of 24, the youngest ever champion. Helmuth was trying to intimidate the beginner, taunting him with questions about how big a bet it would take to knock him clear out of the tournament. His victim focused an icy smile on the champ. "I'm counting," he said. Then he laid down a winning hand, taking $6,000 of Helmuth's money.

This was Achilleas Kallakis in one of his first big poker games. He would go on to become a champion in his own right, winning $1 million in one match and acquiring a sobriquet - The Don.

The name seemed to suit the slight menace in his bulky presence and the whiff of Marlon Brando's Godfather in the 1,000-yard stare he turned on opponents at times of high tension. As the poker-playing Don he tangled with some of the sharpest operators on the planet, yet none of them could have guessed that Kallakis was playing a game for far higher stakes.

Last Friday he was identified in reports that the Serious Fraud Office is investigating an alleged scam involving his £1 billion London property empire. Kallakis, 40, is head of Pacific Group, the investment arm of an offshore trust which, over a four-year period, bought up some of the capital's most valuable properties, including such well-known landmarks as Lunar House, the Home Office's asylum processing centre, the headquarters of the Daily Telegraph and Orion House, the tallest tower in Covent Garden.

Kallakis, along with a number of individuals, is being investigated by the SFO over allegations that companies linked to them used phoney paperwork to persuade banks to grant massive loans to cover the cost of a property spending binge. According to the SFO, the loans were raised on the basis of fraudulent claims that the buildings earned higher rents and had longer leases than was actually the case.

Officers from the SFO visited Pacific's London office last week and searched a number of addresses, including Kallakis's opulent flat in Carlos Place, Mayfair. Documents seized in the raids are being studied for evidence that the SFO believes may unravel one of the most audacious frauds ever committed on the London property scene.

It involves a portfolio of buildings which was valued at more than £1 billion. Kallakis's companies bought the properties between 2003 and 2007 in a dizzying display of wealth that even seasoned operators such as the Reuben brothers and Robert and Vincent Tchenguiz found impressive. He dealt with all these individuals, acquiring along the way tenants including the Metropolitan Police and the Government.

Little was known about the poker-playing multi-millionaire. He rarely spoke about himself but there were suggestions he was related to a wealthy Greek shipping family. Kallakis was born in London and has the accent to prove it but he is based in Monaco where he has contacts among the principality's monied elite.

He is a member of Prince Albert's charitable foundation and is said to give generously to the arts. He once said he was an ambassador for the tiny state of San Marino and could, if he desired, command the title of Excellency. When the Honda Formula 1 racing team came up for sale, Kallakis was among the bidders, although he later dropped out.

As he pursued his quest to snap up trophy assets, experts watched with growing interest. Kallakis appeared to disdain all caution and, even as warning signs of a downturn appeared, he was chasing ever bigger deals. What, many wondered, was he up to?

The answer was that Kallakis was playing the biggest poker game of his life. He was raising huge stakes from banks and betting them on the richest property boom of recent times. But, according to allegations now being investigated by the SFO, Kallakis may have been playing with a rigged deck. His companies stand accused of cheating in their £1 billion property gamble.

Kallakis first registered on the London property scene in 2003 when he tried to buy Orion House, a block in Covent Garden. He ultimately secured the building for £80 million and indicated he wanted to turn it into luxury apartments.

In late 2005 he negotiated a deal to buy a 115,000 sq ft building, Astral Towers in Crawley, West Sussex. The price was £21 million and he approached Allied Irish Bank for finance. At the time, the bank was awash with money. Allied had been in the forefront of the economic revolution that led to Ireland being dubbed the Celtic tiger.

Kallakis already had a property portfolio and when he introduced himself to the lending team at Allied they were keen to deal. The first question, of course, was how did he propose to cover the loan? This is where his company, Atlas Management Corporation, came in. Atlas ran Kallakis's Pacific Group property investments. It managed tenants, rents and outgoings from offices at Kallakis's headquarters in Mayfair.

Atlas could show valuable rental income from Pacific Group's buildings. The potential returns from Astral Towers in Crawley also looked substantial and sufficient to cover the loan Kallakis was seeking. Allied put up the money and the purchase was concluded in January 2006.

The commercial property market had never been hotter. A record £70 billion was flowing into the sector and everyone was chasing deals. Between 2001 and 2005 returns from commercial property leapt from 6.8 per cent to a giddy 19.1 per cent. Such was the clamour for real estate in London that a seven-acre, 39property estate in Covent Garden jumped in price from £358 million to £400 million in a matter of weeks.

Kallakis was up with the leaders in the dash for big buildings and in 2006 he entered negotiations with the Tchenguiz brothers, Vincent and Robert, to buy Lunar House and its sister building, Apollo House, in Croydon. Lunar House acquired notoriety as the government's processing centre for asylum seekers and, with Apollo House, accounted for nearly 500,000 sq ft of office space rented to government departments, principally the Immigration and Nationality Directorate.

Kallakis paid the Tchenguiz brothers £100 million and immediately announced plans for a grandiose scheme to redevelop the site with six times the space, including a 59-storey block of flats. It was a bold move, and if it had come off it would have left him with an asset which, according to one calculation, could multiply his investment 10 times over. That must have been welcome news to the Allied Irish Bank, because it advanced him the money to make the deal.

The bank also stepped up with the cash when Kallakis negotiated with the Reuben brothers to buy a block at Nine Elms in Vauxhall. The 23-storey Market Towers overlooks the Thames and was built in 1975. It was mainly let to the Department of Health and after Kallakis paid Simon and David Reuben £75 million, a source, said to have been close to the negotiations, described the deal as a "win-win" situation for Kallakis.

Now the Reuben brothers are among the most shrewd of London's property billionaires. They made much of their fortune in the Russian aluminium industry in the 1990s when it was not unusual for disagreements to be settled with a burst from an AK-47. So why would the Reubens present a business rival with a "win-win" deal? And, intriguingly, why would they post an article stating that on their website? The answer may lie in what was happening below the bubbling surface of the property market. Even as Kallakis was buying Market Towers the Bank of England was sounding a warning. Commercial property was overheated, the bank said, and represented a "key vulnerability" in the UK's financial sector. If the economy faltered, commercial property values could plummet by 35 per cent, it advised.

It was an unusually prescient statement but Kallakis was busy raising his stakes. In 2007 he announced he was going to build the world's most expensive flat. He bought 7-8 St James's Square, between Pall Mall and Piccadilly, and revealed plans to create a 20,000 sq ft penthouse and seven other flats of around 10,000 sq ft each. The penthouse was to cost £105 million - surpassing even the prices asked at the Candy brothers' development at One Hyde Park - and the other flats were to be marketed at £60-£80 million.

Kallakis paid £120 million for the St James's Square building. He bought it just after paying £225 million for the Telegraph Group's headquarters in Victoria. Allied Irish put up the money for each deal. The bank asked for evidence the money could be repaid and it was given sets of figures that satisfied its corporate lending department.

According to evidence gathered by the SFO, this included documents relating to returns from the properties on which Allied had advanced hundreds of millions of pounds. Paperwork showed a blue-chip property company - not yet publicly named - had taken an overriding interest in the mortgaged buildings and had guaranteed a minimum level of income from them.

Last year, as Allied started to become nervous about its exposure in a plunging commercial property market, the bank conducted an internal review. The documents on which it had based its decisions when advancing Kallakis's Pacific Group huge sums were examined and, for the first time, checked with the highly reputable property concern that had allegedly underwritten the long leases and high rents on Kallakis's Pacific Group buildings.

The property company said it had issued no such paperwork. It was not involved in any deal like that with Kallakis's companies. Allied called in the police and the case was referred to the SFO, where new director Richard Alderman has pursued alleged fraud with a vigour not previously seen in an organisation burdened by a reputation for ineffectiveness.

His officers launched the current investigation. Summarising the alleged scam SFO spokesman Davie Jones said that the blue-chip property company's name had apparently been used fraudulently to attract investment loans from the banks. Other financial institutions were involved, he added.

That was unlikely to provide much comfort at Allied Irish. It repossessed Market Towers, Lunar House, Apollo House, the Telegraph headquarters and 7-8 St James's Square and sold them to Stephen Vernon's Green Property group. The banks losses have been estimated at £56 million.

The SFO says no arrests have been made so far but it is believed that Kallakis could be interviewed soon. He was believed to be in Monaco when last week's raids took place.

The SFO sleuths might find it worthwhile to watch a piece of film on YouTube. It shows Kallakis playing a hand of poker in a game that has entered gambling legend. Kallakis is holding a pair of aces and as the stakes mount it seems he is invincible.

But a surprise card falls to his opponent and Kallakis, against all the odds, ends up a loser.