Bank's golden boy who fell from grace in GBP21m scandal From employee of year to shelf-stacker

Trips to Rome and Monaco were rewards for his consistently high level of performance at one of the world's most profitable banks where he dealt with vast amounts of money in the bustling west end branch in Princes Street.

But the trusted and popular banker, who regularly entertained male and female clients with long business lunches and dinners, hid a secret that would prove a major embarrassment for his paymasters.

A vast amount of the business that made MacKenzie - whose late father George was a respected community councillor and former RAF officer - an award-winning RBS employee was fabricated.

Under the noses of his senior managers, the banker, described by colleagues as a 'Mr 2.4 Children' with his comfortable semi-detached suburban villa, had virtually set up a bank within a bank.

The 45-year-old, raised by his church-going parents in Cellardyke, Fife, pretended to his employers that loan applications he processed and submitted were for genuine customers. Instead he was creating false loan accounts, regularly using deliberately mis-spelt names of solicitors' firms which allowed him to control the scam as it mushroomed.

MacKenzie would omit the business lending unit code, ensuring applications did not go to the unit for approval prior to funds being put into the fictitious accounts.

With the help of "teeming and lading" - a term used to describe attempts to hide the loss of cash received from one customer by using cash from another - MacKenzie swindled those who not only paid his salary but also continue to pay the wages of Margaret, his wife.

MacKenzie started work with the bank in Anstruther, Fife, in 1980 and worked at branches in Dundee and East Wemyss before transferring to Edinburgh, where he met his future wife. She was kept completely in the dark about his fraud until action was taken against her husband.

Police investigations went on to reveal MacKenzie had forged a number of close relationships with individuals and would go for long business lunches.

Yesterday, he admitted stealing GBP21.4m over a fiveyear period. The court was told that one Edinburgh businessman, who has been charged and is also due to appear in court, received more than GBP1.6m.

But MacKenzie insisted his gain from the embezzlement was a fraction of the overall amount. He pled guilty to stealing GBP37,170 from existing customers between May 15, 2000 and April 14, 2004.

A total of 57 withdrawals were made for his benefit in the weeks before bank staff detected the first hints of his crime. The smallest was for GBP11.26 to pay a household electricity bill, but the biggest for GBP6547 was used to make a payment to one of his credit cards.

About GBP25,000 was paid to Waid Academy old boys' rugby club in Anstruther, where he served as treasurer for 15 years, including GBP4027 to the Inland Revenue to settle fines for late submission of accounts he was supposed to be dealing with.

The former pupil, who since his fall from grace has stacked shelves at a local Tesco's in Edinburgh, even involved his unwitting mother Christina by moving funds through her personal account. Of the amount cited as embezzled, the bank said it had currently lost about GBP10m, and estimated that as the manipulation of the cash was so complex and intricate, as much as GBP4m may never be accounted for. It has since carried out a major overhaul of its systems and controls.

For some of its clients, according to a leading figure in the financial sector, the fallout has also proved disastrous. With the bank trying to recover as much of its money as possible through civil actions, some caught up in the loan scam have gone out of business.

It was in April 2004 that suspicions among colleagues about transactions involving MacKenzie led to auditors being called in. While the discovery that money was being paid into false accounts was swift, the massive scale of the embezzlement was to take many months to unravel.

As soon as the initial suspicions proved wellfounded, MacKenzie, a father of two children aged three and six, was interviewed by bank staff who found he was carrying GBP17,000, setting off a round of telephone calls higher up the chain of command within the bank.

The police were called and detectives went to MacKenzie's GBP400,000 home at Belgrave Gardens, Corstorphine, Edinburgh. Looking out over to the Pentland Hills it was an unlikely setting for a dawn swoop. After being detained in connection with a single transaction involving GBP300,000 which had been transferred from a genuine client's account into a false one, a search of his garage uncovered GBP7900 in a briefcase.

A team of 16 officers from Lothian and Borders Police sifted through bank transactions going back more than five years but the motive remains something of a mystery. One theory is that he did it to gain kudos among the banking community.

As a fellow city businessman said: "He became his own wee lender, but the bank that was Donald MacKenzie was always going to be found out."

Victim: my absolute hell

BARRY Pringle used to describe Donald MacKenzie as "affable, likeable, presentable", but no longer. Words like conman and criminal are now in the Edinburgh businessman's vocabulary when speaking of his one-time banking business manager.

Mr Pringle now regrets his choice of bank, made because it had a branch "just around the corner" and was the financial institution his father dealt with for around 30 years.

He said: "At one time I would have felt proud to be part of the Royal Bank of Scotland. Now I feel sick."

Mr Pringle suffered what he calls "absolute hell" as a result of years of dealing with MacKenzie. In the fall-out from the banker's criminal acts, Mr Pringle's water cooler and water filtration systems company was forced into receivership, although it has yet to be wound up.

The bank has so far refused to comment on the case.