'Walter Mitty' hostel boss stole to pay off council tax

A FORMER director of a £10 million Old Town hostel has been branded a "Walter Mitty-character" after being convicted of embezzling nearly £12,000 from the business to pay off his council tax debts.

Paul Whittaker was found guilty of embezzling the cash from Smart City Hostels, a 622-bed facility in Blackfriars Street which was awarded five stars by VisitScotland.

The 57-year-old forged the signature of a fellow director of the company on a cheque to pay back five years of council tax arrears.

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One of his former business partners today said Whittaker enjoyed "living beyond his means" and took the money to avoid "losing face" by curbing his spending. The former associate said Whittaker went on two skiing holidays and a sailing trip to Croatia in the same year that he forged the cheque.

Whittaker was removed as a director of Smart City Hostels for "gross misconduct" in November 2008 and the firm went into liquidation the following month. The hostel was later taken over by new owners.

Whittaker, whose address in court was given as Craiglea Drive in Morningside but who is now understood to live in North Berwick, denied embezzling 11,921.22 on August 21, 2007 and forging the signature of another director on a cheque. Sheriff Nigel Morrison QC found the first offender guilty during the trial at Edinburgh Sheriff Court yesterday, but deferred sentence on him until January for background reports.

Whittaker's former business partner told the Evening News: "He was a Walter Mitty character who wanted to live a lifestyle which his ability to generate money did not match.

"During the five years he didn't pay council tax, he could have afforded it. He think he's a magical genius with money but the reality is different.

"Then he embezzled the money because he didn't want to lose face with people seeing he could not afford that lifestyle any longer. He pled not guilty because he still thinks he has done nothing wrong."

Two former directors of Smart City Hostels, Alexander Stewart and Vincent O'Donoghue, told the court that the bank required any cheque for more than 1000 to be signed by two directors, and that if a director wanted a loan from the company it had to be agreed by another.

Giving evidence, both men told the court that they had neither signed the cheque nor granted Whittaker a loan for the amount taken.

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In his evidence, Whittaker said he could not remember if it was Mr Stewart or Mr O'Donoghue that he had spoken to about getting a loan to pay his tax arrears.

Fiscal depute Malcolm Stewart pointed out that such a loan had to be approved by fellow directors and they had denied it.

He added: "I have to suggest you were in financial trouble, not just with the company, but with your own personal circumstances. You were faced with bankruptcy and forged this cheque".Whittaker answered: "In all the years we had worked we had never ever refused a directors' loan".

The massive Smart City Hostel opened in December 2006, complete with a women-only floor with additional toiletries and pampering products for single woman and groups.