Flavin accused of deliberately avoiding issue

Fyffes chief executive Mr David McCann has told the High Court that he believed DCC chief executive Mr Jim Flavin deliberately chose not to address the issue of price-sensitive information when clearing the way for the issue of some 900,000 share options to Fyffes shareholders in late January 2000.

Mr McCann said Mr Flavin was then the chairman of Fyffes' compensation committee, which dealt with remuneration for non-executive directors and with share issues.

He said the absence, in a letter from Mr Flavin clearing the way for the options issue, of any reference to price-sensitive information was a "glaring omission".

He believed that Mr Flavin had chosen to write the letter in such a way as to try to prevent a process inside Fyffes to determine if there was price-sensitive information. His view was based on Mr Flavin's letter and Mr McCann's knowledge of how Mr Flavin operated.

On previous occasions, Mr Flavin was "energetically occupied" with the issue of price sensitivity.

In his continuing examination of Mr McCann in the action by Fyffes alleging insider dealing by DCC and Mr Flavin regarding three share sales of €106 million in February 2000, Mr Kevin Feeney SC, for DCC and Mr Flavin, asked Mr McCann if he was suggesting that Mr Flavin knew there was price-sensitive data and had chosen not to look at it. Mr McCann said he could not look into Mr Flavin's mind.

There seemed to be a "glaring omission" from the letter and Mr Flavin seemed to be afraid of a process that he could not control and chose to avoid that process.

Mr Feeney said Mr Gerry Scanlan, a former chairman of the Irish Stock Exchange, was also a member of the compensation committee, and he asked was Mr McCann making similar claims about Mr Scanlan's handling of the options issue.

Mr McCann said he was not. He agreed that Mr Scanlon was a knowledgeable and experienced non-executive director of Fyffes. He said he believed that Mr Flavin deliberately chose not to examine the issue of price sensitivity, and said that it did not necessarily follow that Mr Scanlan had to be a party to that.

Mr Feeney said the list of persons to whom it was proposed to issue the stock options was sent to Mr Carl McCann, Fyffes deputy chairman, on December 21st, 1999.

Counsel suggested that he, David McCann, would also have seen it. If there were any concerns that the options issue should not proceed because of price-sensitive information, there was an obligation on the McCanns to raise those concerns, counsel said. The fact that they had not done so showed that there was no issue regarding price-sensitive information, counsel suggested.

Mr McCann said he did not know when he saw the list, but it could have been prior to December 21st. He said the examination of the list by the Compensation Committee was a different part of the process in relation to whether there were any constraints on the options issue.

Yesterday, Mr Feeney repeatedly pressed Mr McCann on Fyffes' claim that Mr Flavin had price-sensitive information at the time of the share dealings in February 2000.

Mr Feeney suggested that, from December to March 2000, the information available to Mr McCann and other executive directors of Fyffes was considerably more detailed than that available to Mr Flavin in late January 2000.

If Fyffes truly believed from late January 2000 that it would not make its half-year targets, it would have issued a profit warning earlier than March 20th 2000 (when a warning did issue), he suggested.

Fyffes, he said, was making the case that information available to Mr Flavin on December 9th and January 26th would have been adequate to inform Mr Flavin that Fyffes would not meet its half-year targets when all the documents indicated that was not the view of Fyffes' board.

Mr Feeney suggested that Fyffes could not have it both ways.

Mr McCann said no profit warning was issued in December 1999 because he made a judgment then that the situation was too early to call. Two court cases were pending at that time, and Fyffes was hopeful of a successful outcome for those. That situation continued into January.

With the benefit of hindsight, it might have been better if they had done things differently, he added.

Mr Feeney said Fyffes' own documents indicated no discussion of any concerns within Fyffes about Mr Flavin having price-sensitive information.

Mr McCann said a board meeting was called in June 2000 to examine the fall in Fyffes' share price and a process was started to examine the circumstances surrounding that.

Mr Feeney said a letter from Fyffes chairman Mr Neil McCann to Mr Flavin on February 4th, 2000, the day after the first share sale, encouraged the sale of the rest of the shares to avoid an overhang in the market.

Mr McCann said it was not his letter but he would have had the same feeling that it was in Fyffes' interest for the rest of the shares to be sold.

If Fyffes believed Mr Flavin had price-sensitive information at the time of the February 3rd deal, the sales on February 8th and 14th would also involve price-sensitive information, counsel suggested. When one looked at the documents in the case, all that could be seen was that it was the belief of the chairman and David McCann that Mr Flavin had no price-sensitive information.

Mr McCann rejected that suggestion. Asked whether he believed that, on February 4th, 2000, Mr Flavin had price-sensitive information, Mr McCann said he himself was then aware of the trading performance of the firm, of the difficulties in December and January, that pointers were poor and that Fyffes needed the benefit of external factors to have a shot at making the necessary numbers. The information he had seemed to him to be price-sensitive.

Mr Flavin was a "seasoned director" and knew Fyffes' business very well. He was able to read November and December's performance very well and could read signals for the future.

Mr Feeney asked Mr McCann whether he himself had price-sensitive information on February 4th, and Mr McCann said he believed he did. He would not use the words price-sensitive information, he might use words such as "insider knowledge" or "closed period". The firm's trading performance was clearly spoken about.

Mr McCann said Fyffes had tried to get Mr Flavin to delay the share sale on February 3rd, 2000, but he had ignored the company rules and sold shares without the chairman's permission.

Fyffes had taken advice and were told that if Mr Flavin chose to do that and if there were risks involved, those risks were Mr Flavin's. Mr McCann added that he formed the view that the relationship with Mr Flavin was over on February 3rd, 2000.

He also said that Fyffes had not told Mr Flavin of a letter from the Irish Stock Exchange on February 28th, 2000, which sought details about the resignation of Mr Flavin from the Fyffes board and about his position in the firm.