Fyffes says transcript reveals insider deals

A transcript of a phone conversation between a stockbroker and DCC chief executive Mr Jim Flavin on the day of the alleged unlawful €106 million "insider deal" in shares in Fyffes was read to the High Court yesterday.

Fyffes claims the transcript shows that Mr Flavin was dealing in the shares on February 3rd 2000. It also claims that he did so unlawfully and at a time when he had price-sensitive information not available to the market.

Mr Paul Gallagher SC, for Fyffes, read documents showing that members of the Fyffes board had discussed their concerns about Mr Flavin dealing in shares some time prior to Mr Flavin allegedly "masterminding" the alleged insider deals.

Documents read to the court also showed Fyffes board members were concerned that any share dealing by Mr Flavin could breach provisions of various Stock Exchange codes. There were also concerns within Fyffes about Mr Flavin's independence as a Fyffes director given his position with DCC.

Other documents showed that DCC had strategy plans from 1996 which envisaged the sale of Fyffes shares, the court was told.

Mr Paul Gallagher SC, for Fyffes, said further documents showed that Lotus Green, a wholly-owned Dutch subsidiary of DCC and the alleged beneficial owner of the Fyffes shares, was at all times controlled by DCC.

He read documents which, he said, showed that DCC passed on documents for Lotus Green to sign. His case was that the decisions and agenda of Lotus Green were effectively set by DCC. Then the Lotus Green board would meet and purportedly approve those decisions.

Fyffes rejected the defendants' claim that it was the Lotus Green board who had decided to dispose of most of DCC's 10.8 per cent Fyffes shareholding on dates in February 2000, Mr Gallagher said. Events prior to a Lotus Green board meeting which purported to approve the share disposal contradicted that account, he said.

Counsel was continuing his opening of the legal action brought by Fyffes in which it is seeking some €85 million compensation arising from the February 2000 share deals which, the company claims, breached "insider dealing" provisions of the Companies Acts.

The action is against DCC, S and L investments, of DCC House, Stillorgan, Co Dublin; Mr Flavin, of Shankill, Co Dublin; and Lotus Green Ltd, of Fitzwilton House, Wilton Place, Dublin, a subsidiary of DCC which owned 10 per cent of Fyffes.

Fyffes claims Mr Flavin had price-sensitive and confidential information and "masterminded" the share deals. The defendants deny those claims and, Mr Gallagher has outlined, will plead that Lotus Green dealt in the shares and that Mr Flavin had no involvement other than passing on to Lotus Green unsolicited bids for the shares.

Yesterday, Mr Gallagher continued his analysis of the origin and development of Lotus Green which was incorporated in 1995 and became resident for tax purposes in the Netherlands. He read further documents which, he said, support Fyffes' claim that a mechanism was put in place, involving "A" and "B" directors, under which DCC maintained control over Lotus Green.

He said the "A" directors were at all times DCC employees while the "B" directors were persons living in the Netherlands. No Lotus Green transactions could be binding without the signature of at least one "A" and one "B" director. The idea was to keep control of any disposal of shares and there could be no such disposal without the approval of the "A" directors, counsel said.

From 1995, there was a trend of DCC providing documents for signature by the Dutch directors of Lotus Green. The documents had indicated that DCC had determined there would be no transfer of the legal ownership of the Fyffes shares, only the beneficial ownership.

DCC was asking the court to accept that DCC had transferred to Lotus Green through a 15-year interest free loan, a core asset of shares valued at £38 million in circumstances where DCC claimed that Lotus Green was entirely independent regarding what would be done with that core asset, counsel said.

On any view, this was a highly artificial transaction, Mr Gallagher said.

There was no indication of any consideration by the board of Lotus Green of the advisability of the transaction and the extent of the undertakings.

Mr Gallagher said legal advice regarding share dealings which was outlined in the documents could only have been given on the basis that the true owner of the Fyffes shares was DCC.

His side would be disputing other documents relied on by the defendants to support their claim that it was Lotus Green, and not DCC or Mr Flavin, which authorised the sale of Fyffes shares on dates in February 2000.

Later yesterday, Mr Gallagher read transcripts of phone conversations relating to the Fyffes share sale.

One transcript, he said, related to a conversation between Mr Ronan Godfrey, of Davy stockbrokers, and Mr Bruce Ashmore, an equity dealer with Goodbody, about putting together a joint deal for the Fyffes shares. A second transcript related to a phone call between Mr Godfrey and Mr Flavin on February 3rd, 2000.

That transcript recorded the conversation as follows:

"Jim: Ronan, how are you?

"Ronan: Jim, how are you - we meet again?

"Jim: "You're having another relaxed day in the market?

"Ronan: And you there Jim...Great, great stroll.

"Ronan: No Jim, I just wanted to touch base again on where we are cos Kyran has had to head out to a meeting and just to say where to reconfirm really, we're firm for 10 million shares, 10 million ordinary shares at €3.20. As I said you know we cannot give you certainty beyond that.

"Jim: Yeah, I know, I just, I mean we're reacting to events (inaudible) I suppose I'm getting slightly iffy stories here, Kyran was making it sound iffy if we wanted to do the lot, I'm not saying we wanted to, but Roy Barrett has just been on the phone, sounded more optimistic about being able to.

"Ronan: Jim, Jim, absolutely optimism is one thing - deliverability..."

Later, the transcript records:

"Jim: No, no, just let's move on. What I've asked really is, first of all, there's only two levels we can sell at and I've explained to Kyran - it's either the lot or I've given the number - 17,895,697 shares - which is exactly half a holding."

"Ronan: Yeah

"Jim: And that splits down 13,273 796 ordinary and 4,621,901 preference."

Later the transcript states:

"Jim: Look, anyway, what I mean, the whole thing is quite pathetic, I mean I haven't yet received an offer from anybody for anything, but asides, we've received an offer, I believe at a crazy price here.

"Ronan: Well, no, I have to correct you Jim, you received a bid from us for the entire block of stock yesterday."

Jim: "Yeah, a crazy price."

Ronan: "But Jim, sorry, just to be sure now, we gave you a bid for the entire block of stock yesterday and we've given you a further bid today for a smaller block.

"Jim: For 10 million."

The case continues today.