ANALYSISThe Fyffes/DCC case raised questions for the DCC board as well as for Jim Flavin, writes Colm Keena

THE STATEMENT issued yesterday by the board of DCC plc is striking in that it seeks to play down the importance of what was revealed in the course of the civil insider trading action Fyffes took against DCC.

The action raised very serious questions not just for the executive chairman of DCC, Jim Flavin, but also for the board which issued the statement yesterday.

The latter point is not addressed at all by the statement and Mr Flavin's position is portrayed as almost a technicality.

There were two key points that emerged in the case.

Firstly, buyers in the market, including pension funds, bought shares worth €106.7 million in February 2000, only to see the shares lose 25 per cent of their value (€26.7 million) the following month after the release of a profit warning by Fyffes.

Secondly, DCC avoided paying capital gains tax on the huge profit it made from the Fyffes shares, because of its presentation to the Revenue that the share sale had been handled by a Dutch resident subsidiary, Lotus Green, acting independently of DCC headquarters in Dublin.

The courts have since found against DCC in such a way as to affect both these matters.

The company has had to pay recompense to some of the buyers of the shares because of Mr Flavin's possession of price sensitive information at the time he sold them the shares.

Also DCC most likely has had to make a €17 million plus settlement with the Revenue, because the court found that Mr Flavin, and not Lotus Green, dealt in the shares.

DCC refuses to confirm or deny if it has had to settle with the Revenue, thought it seems fair to presume that if it had not made a settlement it would make this clear.

The Supreme Court found that "common sense" indicated that the negative trading information Mr Flavin had in his possession in February 2000, by way of his non-executive directorship of Fyffes, was price sensitive information.

The evidence to the High Court was that Mr Flavin had considered the matter.

He spoke with DCC compliance officer Michael Scholefield, and William Fry solicitor, Alvin Price.

He mentioned the fact that he had some bad trading news about Fyffes but did not disclose the details.

Mr Flavin said his "conscience was clear" on the issue of price sensitivity and proceeded with the sale.

Mr Flavin is one of the most experienced operators on the Irish public company scene.

He bought his first share when he was 17 years old.

The statement issued yesterday by the DCC board is predicated on a belief that Mr Flavin's assessment of the information was at odds with the view of the five judge Supreme Court.

The statement by the DCC board yesterday sought to present the impression that the share sale ruling by the Supreme Court was almost a technicality.

It pointed to the High Court's finding that Mr Flavin's decision to deal was motivated by the high price Fyffes' shares were achieving in February 2000.

The board also pointed to the fact that Fyffes had not contested this finding in its appeal to the Supreme Court.

But there was no need for Fyffes to challenge the matter of motivation in the Supreme Court and Mr Flavin's motivation is in a number of senses irrelevant.

Firstly, the law precluded him from dealing if he was in possession of price sensitive information, irrespective of motivation.

Secondly, he sold shares worth €106.7 million to buyers who did not have the information he had, and which the Supreme Court has found "common sense" indicated was price sensitive.

In its statement the DCC board stated it has given the case "continuous scrutiny" and "has carefully considered whether any corporate governance issues arose".

It did not say whether it in fact believed any corporate governance issues did arise.

The High Court ruled that the position of Mr Flavin, DCC and its subsidiaries on the Lotus Green matter was an "absurdity".

DCC did not appeal this finding.

Although the sum involved is not as large, the Lotus Green issue is in many ways more troubling than the price sensitivity issue.

Mr Flavin said in sworn evidence that he did not deal and that Lotus Green dealt. Others in DCC close to the deal at the time supported this evidence.

The defendants in the case were Mr Flavin, DCC, and two of its subsidiaries.

The judge found not just that Mr Flavin, rather than Lotus Green, had dealt, but that Mr Flavin had controlled the whole matter from the outset.

Tapes of his dealings with a stockbroker were played during the case, something that must have contributed to Ms Justice Mary Laffoy's description of the DCC position on the matter as an "absurdity".

The judge found that given the sum involved Mr Flavin must have acted with the "informal express approval of the members" of the DCC board, the same board that stood over DCC's evidence to the court on the matter, and that yesterday issued a statement addressing the issue of corporate governance.

It gave Mr Flavin a pass and didn't even raise the matter of whether it itself had questions to answer.