Business Opinion: It just gets better and better. The titanic struggle between Fyffes and DCC currently being waged down at the Four Courts has afforded another glimpse into the inner workings of the Dublin financial markets.
Last week, it emerged in the Supreme Court that DCC prevailed on the Irish Stock Exchange (ISE) to try and stop the Director of Public Prosecution's (DPP's) investigation into alleged insider trading by DCC in Fyffes shares. This took the form of the advisers to DCC, PricewaterhouseCoopers and Investment Bank of Ireland, getting the chief executive of the exchange, Mr Tom Healy, to forward information to the DPP, which DCC hoped would convince the authorities that their case against the company did not stack up.
To be fair to DCC, and this did not get fully aired last week, it felt that it was within its rights to try to get the ISE to effectively undermine its original submission. The reason advanced by DCC is one of natural justice. It claims that it was unreasonable of the ISE to conclude that there was a case to answer, and inform the DPP to this effect, without first reverting to DCC and giving it a chance to answer the charges.
DCC claims that the first it knew of the DPP investigation was when it was reported in the papers in November 2001, four months after the ISE had forwarded the file. The firm had heard nothing from the ISE since it answered a series of questions in September 2000 and had presumed that the matter was, to all intents and purposes, closed.
To underline the inherent unfairness of what happened, DCC pointed out that the ISE has changed its procedures to ensure that a file could not go to the DPP without the party that is being accused having a chance to answer the allegations first. It would also rely on the comment of Mr Justice Smyth who, in the course of the High Court action that preceded last week's Supreme Court case, described the previous system as "alarming".
Looking at from this perspective, DCC's decision to approach the ISE as it did seems quite reasonable. But there are a number of aspects to the way that the company and its advisers proceeded and the ISE response to its approaches that are truly alarming.
On the basis of what was said in court last week, the ISE would appear to have gone beyond merely facilitating the passing of information between DCC and the DPP, and collaborated with the company to try and halt the investigation.
For example, Mr Healy agreed that it would only forward information supplied to it by DCC - namely a number of expert opinions - if, after reviewing it, the ISE came to conclusion that it advanced DCC's case. To that effect, Mr Healy discussed with DCC's advisers the best way to make the information available in order to facilitate this.
As it transpired, the stock exchange officials who reviewed the documents in December 2002 concluded that they did not change "the basic picture or the core of the report sent to the DPP".
That, however, was not the end of the matter. DCC's advisers then changed tack and approached the board of the ISE directly in January 2003. It was an option discussed as far back as September when the advisers considered that, "given the personalities and vested interests involved, it might seem likely [ DCC] might make greater progress with the board that with the executive". The point was not elaborated on but it is worth noting that seven of the 13-member ISE board are stockbrokers.
After being approached about reopening their inquiry, the ISE board said they had no role in the matter but, in effect, gave DCC's advisers the go-ahead to approach Mr Healy directly on the issue. As a consequence, Mr Healy then personally examined the documents that his officials had decided did not change the ISE position.
Mr Healy then discussed the documents with Mr Brian Davy, the deputy chairman of the ISE and the chairman of Davy Stockbrokers, which was the broker to DCC. Mr Healy shared with Mr Davy his thinking on the matter and his views on the attitude of the DPP and, in particular, whether or not it would be a good idea to forward the documents to the agency. The contents of these discussions where relayed back to Mr Jim Flavin, the chief executive of DCC, by Mr Davy.
Subsequently the ISE's head of regulation, Mr Brian Healy, spoke directly to Mr Flavin about, amongst other issues, the ISE's dealings with the Garda investigating the case and assured him that "the whole context of their contact had been all about getting a positive result for DCC".
The net effect of all this was that a company being investigated by the DPP was being given an insight into the DPP's thinking. It was also being briefed on the likely response of the DPP to its proposed course of action. This information and advice was coming from the regulatory authority that was charged with investigating and reporting on insider dealing to the DPP.
Fyffes' case against DCC has many more months to run and, when it is over, there will be casualties. The right of the brokers in the Irish stock market to regulate themselves via the Irish Stock Exchange may be one of them and, on the basis of last week's revelations, deservedly so.
