Company sought stock exchange help in subverting insider dealing inquiry to damage Fyffes' civil action, according to Supreme Court submissions, writes Colm Keena.

DCC plc initiated a campaign in 2002 to get the assistance of the Irish Stock Exchange (ISE) in undermining a stock exchange report on suspected insider dealing by DCC, the Supreme Court heard yesterday.

The report had been sent by the Exchange to the Director of Public Prosecutions in 2001, and had led to the initiation of an inquiry by the Garda Bureau of Fraud Investigation.

DCC set out to bring an end to the Garda inquiry into alleged insider trading in Fyffes shares by DCC in the hope that this would damage the civil action being taken by Fyffes against DCC, Fyffes told the Supreme Court in its submission.

The strategy was devised by DCC's advisers and was discussed with Mr Tom Healy, chief executive of the Stock Exchange, in October 2002.

It was agreed that expert reports commissioned by DCC and reporting on whether information DCC had at the time it dealt in Fyffes shares was price-sensitive or not would be sent to the Exchange in such a manner that, if Mr Healy thought the information would be unhelpful to DCC, it would be returned, the court was told.

"Mr Healy recognised that if the stock exchange conclusion [after reviewing the reports] was not positive from DCC's perspective, DCC would not want the information to be circulated widely as it meant they would be playing their hand in advance" of the civil action being taken by Fyffes, the Fyffes submission said.

In agreeing this strategy, DCC's advisers must have been aware that it was a strategy difficult to reconcile with the obligations on the Exchange to investigate and report suspected insider dealing, Fyffes argued.

The expert reports were passed to the Exchange and the DPP in the latter case in the knowledge that they would be passed to the Garda, "in the hope that those persons could be prevailed upon to cease their investigation," according to Fyffes.

DCC "hoped to enlist the assistance of the stock exchange" to prevent a prosecution, notwithstanding the stock exchange's role in law in cases of suspected insider dealing.

DCC, in its submission to the Supreme Court, said it had been asked certain questions by the Exchange on September 1st, 2000, and had responded one week later. DCC believed these were preliminary answers.

However it subsequently learned, from the press at the end of November 2001, that a file on the insider dealing inquiry by the Exchange had been sent to the DPP. Contrary to the principles of natural justice, the company had not been given an opportunity to make any representations other than those made in September 2001 by way of initial response. DCC subsequently set out to persuade the Exchange to "change its mind".

"The overall purpose was to convince first the ISE and later the DPP, that the defendants had done nothing wrong and that no prosecution should proceed or investigation continue. This was and is, it is submitted, both an entirely proper and wholly understandable way for the defendants to proceed."

The defendants meet the stock exchange

On February 20th, 2002, the compliance officer at DCC, Mr Michael Scholefield, wrote to Mr Donal O'Connor, senior partner in PricewaterhouseCoopers (PwC). The letter referred to a previous meeting and stated: "As we explained, our principal focus at this time is to encourage the stock exchange to re-open their examination of the matter so that they might reconsider the appropriateness of their referral to the DPP."

A meeting had been held the previous week between Mr Alex Spain and Mr Jim Flavin, chairman and chief executive, respectively, of DCC, and Mr Tom Healy, chief executive of the ISE. A briefing note was prepared for DCC by Mr Alvin Price of William Fry solicitors in advance of the meeting.

On September 24th, 2002, there was a meeting with PwC, Investment Bank of Ireland (IBI) and William Fry, and a note was kept, the Supreme Court was told. The meeting considered the internal workings of the ISE and stated: "In terms of formulating our strategy, should we consider the executive and the board as two separate parties and establish strategies for approaching each? Given the personalities and vested interests involved, it seems likely [DCC] might make greater progress with the board than with the executive.

"While there may not be a legal or procedural way in which the ISE can withdraw their file from the DPP (Alvin Price's point), we would win a tactical and strategic battle against the DPP if the ISE conveyed to the DPP that, with the benefit of information that has come to light subsequent to their original referral, they were unlikely to be helpful prosecution witnesses.

"In order for them to come to this view, it is likely they would have to re-analyse the price-sensitivity issue, probably by engaging (and properly briefing) another expert witness as discussed above. Coupled with the mens rea issue, the undermining of Fyffes as a credible witness for the DPP and the likely inadequacy of whatever expert opinion the ISE had procured, the undermining of the ISE themselves as a helpful witness would be a further reason why the DPP would have difficulty proceeding."

On October 30th, 2002, Mr O'Connor (of PwC), Mr Peter Crowley, of IBI (an adviser to DCC), and Mr Healy met to discuss the case. A note was kept by Mr O'Connor.

"We pointed out to Tom that we had been separately engaged by DCC to give them our views as independent advisers as to whether the information that Jim Flavin had in February 2000 was information which, if generally available, would have been price-sensitive information.

"Peter made an opening statement which closely followed the previously agreed script. We said that based on the work each of our organisations had carried out, we had arrived at our opinions and also had sight of each other's opinions and of the opinions of two other experts that DCC had engaged..."

"We explained that we had both formed the clear view, as had the two other experts that had been engaged by DCC, that the information was not price-sensitive...

"Tom gave the opinion that he would be happy to 'see the whole issue go away'. He did point out that, in terms of the Exchange's statutory role under the act, the Exchange's role was complete once the referral was made and there was no statutory avenue for revisiting or re-opening dialogue with the DPP.

"However, Tom confirmed that if he received information from DCC which now led him to the view that the "information" was not price-sensitive, he would pass this conclusion to the DPP."

Mr Healy said he thought the most likely outcome was that the DPP would then drop the case but he could not be certain of this and he thought it likely that the DPP would probably want to see the information that changed Tom's opinion, the note said.

"Tom also confirmed that while he was not in daily or weekly contact with the DPP there is an open line available to discuss issues with the DPP and he thought it unlikely the DPP would want to go ahead with the case if it was clear the ISE, who referred it to them in the first place, now did not support the case."

"He said... he thought the DPP would be concerned if the ISE were now changing their view based on direct dialogue with the company. However, he said that he thought it was very persuasive from both the ISE perspective and the DPP's that the people whose views they were considering were IBI and PwC, both of whose independence could not be questioned."

The note, said Mr Healy, focused on the issue of how closure might be achieved and how this might get into the public domain. It seemed to Mr O'Connor and Mr Crowley that Mr Healy was anxious that there be closure and that this get into the public domain, but "in a manner that is not negative from the ISE point of view".

"We all agree that this is an issue that could be dealt with at the time but felt as it was likely to be a 'win' situation for everybody, it should be possible to agree a form of words and a method of formal release of information."

Advice from the Irish Stock Exchange

The memo stated that another issue was raised by Mr Healy on a number of occasions and subsequently in a telephone call to Mr O'Connor, concerning the confidentiality of the information that was to be sent to the Exchange.

"Tom's advice was that the information should be made available to them on a confidential basis and DCC should require that this information be returned without copying. He made this point because he said he recognised if the stock exchange conclusion was not positive from the company's perspective, they would not want information to be circulated widely as it meant they would be playing their hand in advance.

"However he said if they (the ISE) were giving a positive recommendation to the DPP that the information was not price-sensitive, he thought it likely, as mentioned earlier, that the DPP would want to see the documentation which gave rise to the stock exchange's point of view."

The two sides subsequently discussed the nature of the confidentiality agreement that would cover contacts between them. It was eventually agreed that the Exchange would, following its review of the documentation sent to it, be entitled to inform the DPP of the fact of the review and the broad conclusions drawn.

Visits to the Data Room

A data room was set up in the offices of PwC containing Fyffes' statement of claim against DCC, the DCC defence, the expert reports, and a statement summarising DCC's principal defence points. On December 18th, 2002, Mr Brian Healy, director of trading & regulation at the ISE, and Mr Ailish Byrne, regulation manager of the ISE, reviewed the data. A memo of "interaction" was prepared by Mr O'Connor.

Mr O'Connor recorded Mr Healy responding carefully when asked how they got on in the data room. Mr O'Connor noted that Mr Healy did not respond and he waited to see if Mr Healy would comment further. This occurred a few times, with Mr Healy remaining cautious. Mr Healy eventually said the expert reports they had seen were "compelling" and they would think about them.

The following day, according to a memo prepared by Mr O'Connor, Mr Tom Healy told him, Mr O'Connor, that the ISE review had not changed the basic picture or the core of the report sent to the DPP. Mr O'Connor expressed his disappointment.

In January Mr O'Connor wrote to Mr David Kingston, chairman of the ISE, requesting the board to carry out a fresh assessment of the case. In February Mr Crowley and Mr O'Connor, sent another letter to Mr Kingston, offering the board access to the "confidential" expert reports and discussing a planned meeting with the board. The meeting took place on February 13th, 2003. (The board of the Exchange had not been involved in the original inquiry into the DCC case.)

Mr O'Connor's note of the meeting records DCC saying it believed Mr Tom Healy should review the expert reports at first hand as he was the person interfacing with the DPP. Mr Kingston subsequently wrote to Mr Crowley and Mr O'Connor and said the board had decided it had no function in the case.

"This does not preclude you from speaking to the relevant authority for the particular case (Mr Tom Healy) although clearly he too is very restricted in any future action by the Companies Act."

On March 12th, 2003, Mr Tom Healy visited the data room in PwC. A note by Mr O'Connor recorded that afterwards the two men "had a general chat regarding what would happen next and Tom agreed that if DCC wanted, they were happy to act as a conduit and would indicate in their letter to the DPP that they had received the documentation and were happy to discuss the reports with the DPP if the DPP would find this useful". Mr Healy said he would be very surprised if the DPP did not seek their view.

"I said that I would say to DCC that while Tom could not engage with me or share his view with me, having read the reports my reading of his body language was that he thought we should make the reports available to the DPP. Tom's 'body language' appeared to agree with that statement."

Mr Brian Davy

According to the Fyffes submission to the Supreme Court yesterday, Mr Flavin prepared a memo on May 13th, 2003, which reported on a telephone call made the previous week to Mr Tom Healy by Mr Brian Davy, chairman of Davy Stockbrokers and a director and deputy chairman of the stock exchange.

Mr Davy was seeking Mr Healy's view of the expert opinions on the alleged price-sensitive information, which had been viewed by Mr Healy, according to Mr Flavin's note.

The memo recorded Mr Healy as having told Mr Davy that the DPP wasn't sure what to do but that it wanted to do the right thing. Mr Healy said he was surprised he had not received the expert reports from DCC, which he would pass on to the DPP. "Tom said to Brian that he was very clear in what his advice would be to the DPP if the DPP sought it on the reports."

On June 9th, 2003, Mr Flavin and DCC independent director Mr Maurice Keane, met Mr Tom Healy and Mr Brian Healy, of the Exchange. Mr Flavin wrote a memo the following day which recorded, in part: "Both Tom and Brian actively encouraged us to send the expert reports and any other information we had to them for conveyance to the DPP. Tom said that he had already communicated with the DPP on the matter and the DPP had indicated that he would welcome receipt of the reports... Tom Healy stressed that if they thought that wasn't in our interests they clearly wouldn't request it."

According to the Fyffes submission to the Supreme Court, Mr Davy called Mr Flavin on June 23rd, 2003, to report on a conversation he'd had earlier that day with Mr Tom Healy. Mr Flavin recorded the conversation in a memo. "Tom reiterated his previously expressed belief to Brian that he thought it would be very much in the interests of DCC to make available the expert opinions through the stock exchange to the DPP. He made it clear that if DCC does this and his opinion is sought from the DPP, which he believes is likely, he will indicate that he was impressed by the content, quality and sources of the expert reports."

"Brian asked him again about why a file was referred and he said, you know it was related to 'sensitive information' and he said he could say no more, but he confirmed there was nothing else."

The Exchange tells the defendants what the Garda is thinking

On July 3rd, 2003, DCC sent copies of reports by five independent experts to the Exchange, asking Mr Tom Healy to pass them on to the DPP. On August 28th, 2003, Mr Healy informed Mr Flavin by email that the DPP had passed the reports on to the Garda Bureau of Fraud Investigation for review.

On January 27th, 2004, Mr Flavin called Mr Brian Healy and took a memo of the conversation. "Brian again confirmed that both Tom Healy and he had had contact with the guards on the matter.

"In response to my question as to whether he had any inkling as to the guards' disposition, Brian said that both he and Tom had gained the impression that they regarded the expert reports as being 'very conclusive' in our favour. I then asked whether there was any danger that the guards could have misinterpreted the Exchange's interest in the matter as in some way conveying a view that the Exchange wanted to see a prosecution brought about. Brian said there was no danger of this as the whole context of their contact had been all about getting a positive result for DCC."

The civil action that Fyffes was taking against Mr Flavin and DCC, alleging insider dealing, was then referred to, with Mr Flavin saying Fyffes was "piggybacking" on the the fact that the exchange had referred a file to the DPP. Mr Healy was careful in responding, Mr Flavin noted. "However he did use words to the effect that he understood the point and that it was an aspect he had discussed with the DPP's office."

On February 19th, 2004, Mr Scholefield prepared a memo on a conversation he'd had with Mr Brian Healy in which Mr Healy described conversations he'd had with Det Inspector Pascal Walsh. Det Inspector Walsh "had given Brian an insight into the DPP's view that the DPP's office had not given to Brian. This was that the DPP's office had a'presumption that it would not go forward' as a result of their review of the expert opinions."

The Fyffes' case

The Fyffes civil action was due to open in the High Court on December 2nd, 2004. On November 2nd Mr Flavin called Mr Brian Healy. A memo by Mr Flavin recorded that Mr Healy had advised his contact in the DPP's office that the case was about to commence and the contact had not been aware of this.

"Brian emphasised to his DPP contact the Exchange's view that the civil action would not be taking place but for the lapse of confidentiality in the official process through the leaking of information to the press. He made it clear that it was the Exchange's view that the official case should be closed before December 2nd, with a public announcement."