The Bank of Butterfield may have earned more than 90,000 pounds from a loan that David Diggins processed, but the cost of the investigation into the procedures used for the loan cost the bank "significantly more than that.'' William Spencer, senior manager for banking operations, made this claim during Diggins' fraud trial in Supreme Court yesterday although he was unable to back up his assertion with any concrete proof.

Spencer, who headed the international audit department in 1995, was chosen to lead the investigation into Diggins' alleged impropriety.

In 1995 Diggins was a senior manager responsible for all foreign and international loans at the Bank of Butterfield.

He was arrested in March 1996 after questions were raised about his handling of a loan for 1,875,000 pounds to a Gibraltar based company called Neway Properties Ltd.

The company used the money to purchase a property in London's west end called the Moulin Complex around August 1995.

Since that time, the money has been repaid and the bank has made more than 90,000 pounds from the deal.

During cross examination from defence lawyer Julian Hall, Spencer said the bank spent more to investigate Diggins then it earned from the Neway Properties' loan.

Moreover, he said the entire investigation was begun because the bank was trying to understand the nature of the Neway Properties' loan.

Spencer admitted that there were other bank officers who had advanced loans without getting the proper authorisation.

It has emerged during the trial that there is an unwritten policy that requires all emergency loans above the lending limit of the officer concerned to get three signatures from members of the senior credit committee.

However this policy has been breached in the past but the officers involved were never arrested, subjected to a search of both their offices and homes as Diggins was.

The reason Spencer said was that the loans that had been advanced were much smaller than the loan Diggins had processed for Neway Properties and thus.

Consequently all the actions taken against Diggins, Spencer said -- he ordered security chief John Graham to block (Diggins') current and savings accounts, run checks on his credit cards in Bermuda and in the United Kingdom as well as going through the bank accounts and credit cards of his wife, son, daughter and mother -- were all justified.

Moreover, he said that Diggins had taken out a personal loan from the bank ($40,000) and they had concerns about the Bank of Butterfield's financial status.

The Crown's case is expected to end later today with the defence scheduled to start on Monday.

Solicitor General Barrie Meade has alleged that Diggins falsified the information contained in a loan application when he arranged the Neway Properties Ltd. loan back in 1995.

And he also alleges that Diggins did not follow proper procedures and that the money was advanced improperly.

Diggins' trial is now in its third week. At the beginning he was charged with stealing $2,812,500 and obtaining the money under false pretences and with intent to defraud, inducing Mary Faries to deliver the money to Neway Property Ltd. without proper authorisation on August 29, 1995.

But those charges were dropped when Mr. Meade issued a Nolle Prosequi which meant that he was no longer prepared to proceed on either the stealing or the obtaining money by false pretences charges as they first appeared on the indictment.

Diggins now stands accused of fraudulent false accounting. It is alleged that on August 25, 1995 he falsified a report and its supporting documents.

Secondly, it is alleged that he obtained a valuable security by false pretences on August 28 and with intent to defraud caused Mary Faries to send $2,812,500 (1,504,991.93 pounds) to the National Westminister Bank in London.

Pusine Judge Richard Ground is presiding.