DCC tries to stop move by Appleby to appoint inspectors

DCC IS opposing as "wholly unwarranted" an application by the Director of Corporate Enforcement to have the High Court appoint inspectors to it and two subsidiaries over findings of unlawful insider dealings in shares in fruit distributors Fyffes.

Director Paul Appleby's application, to be heard on June 19th next, follows the Supreme Court decision last year that both DCC and its recently resigned chief executive Jim Flavin unlawfully engaged in insider dealing in relation to the sale of the DCC stake in Fyffes in early 2000, which realised book-value profits of some €76 million for DCC.

The inspectors' report could provide the basis for disqualification proceedings against any persons involved in the share sales and Mr Appleby has said a "thorough investigation" of the circumstances surrounding the 2000 share sales and the 1995 sale of the DCC stake in Fyffes to the wholly owned DCC subsidiary Lotus Green is required "in the public interest".

It is important there is "a clear connection" between the actions of any persons found to have caused, procured or actively participated in insider dealing and their being brought to account for those actions, he said in an affidavit. High Court inspectors have considerably more extensive powers than he has, he added.

In a lengthy affidavit, Mr Appleby said there are circumstances suggesting DCC's affairs have been conducted in an unlawful manner and that persons connected with the governance and/or management of its affairs have been guilty of misconduct in light of breaches of various provisions of the Companies Acts by one or more of the company's officers.

Mr Appleby also said there are circumstances suggesting "certain senior persons" in Fyffes benefited from insider dealing transactions in 2000 and that dealing in shares occurred contrary to provisions of the Companies Act related to price sensitive information.

However, he had decided, on the basis of the information available to him and the relatively small value of the dealings, that he would not seek a formal investigation of Fyffes at this stage.

In a brief affidavit opposing the application, DCC chairman Michael Buckley said the application is based on a "misunderstanding" of the relevant statutory provisions and that this was a matter for legal argument.

He said DCC employs some 7,000 people in 16 countries and the appointment of inspectors had the potential to significantly impinge on the management and development of the DCC group.

Mr Justice Peter Kelly yesterday fixed June 19th for the hearing of the application to have inspectors appointed to DCC plc and its subsidiaries S & L Investments and Lotus Green, the vehicle for the Fyffes share sales, which Mr Appleby said was Irish-registered and wholly owned by DCC but which was "ostensibly registered in Holland".

Both sides expect the hearing to take up to two days.

The judge was told by Jim O'Callaghan that he was representing DCC, S & L, Lotus Green, the DCC board and Mr Flavin, who were all opposing the application on the basis of the affidavit from DCC chairman Michael Buckley.

Mr O'Callaghan said his side wanted the application heard as soon as possible and anticipated that the hearing could take up to two days.

Mr Appleby said in his affidavit that the circumstances surrounding the sale of the DCC and S & L stake in Fyffes to Lotus Green in 1995 suggest possible breaches of various provisions of the Companies Acts and may have constituted insider dealing.

He also said the circumstances of the 1995 and 2000 transactions suggested Mr Flavin may have "actively advised" the DCC group to acquire and dispose of the Fyffes shares and that a number of other officers and senior managers in the DCC group may have facilitated transactions which gave rise to breaches of certain provisions of the Companies Acts.

Having regard to the facts contained in the High and Supreme Court judgments on the Fyffes case, the circumstances suggested other senior persons in the DCC group may have given support to the insider dealing transactions in 2000, he said.

He said that the DCC board meeting of July 31st, 1995 approved of the disposal of the beneficial interest to Lotus Green and it was "noteworthy" that the five persons who comprised the DCC board in early February 2000 also comprised its board in 1995 when it disposed of the Fyffes stake to Lotus Green.