The chief financial officer of DCC has denied that it was "highly unusual" for the board of a Dutch-registered subsidiary of DCC not to have sought independent advice prior to approving the €106 million sale of its shareholding in Fyffes in February 2000.
He also rejected a suggestion that the reason Lotus Green did not seek such advice or other information was because the sale of the stake was not being directed by Lotus Green but rather was being directed at "a higher level" within DCC.
DCC chief financial officer Fergal O'Dwyer is also the sole Irish director of Lotus Green Limited, the Dutch-registered subsidiary. He repeatedly denied suggestions that DCC chief executive Jim Flavin had negotiated the sale or that the board of Lotus Green had authorised Mr Flavin to negotiate. He said Mr Flavin had acted as "a conduit" to the market of Lotus Green's requirements in relation to the sale of the shares.
Mr O'Dwyer said the board of Lotus Green was adequately informed prior to deciding, on February 3rd 2000, to accept any offers of €3 or more for the Fyffes shareholding. He agreed the board had not addressed the issue of conversion of preference shares in Fyffes which issue, Paul Sreenan SC, for Fyffes, said was discussed by Mr Flavin in phone conversations with brokers on that same day.
Mr O'Dwyer said he may have told Mr Flavin about a yield pick-up on preference shares but beyond that he did not have a particular recall.
Mr O'Dwyer said the Lotus Green board knew from 1995 onwards that it was DCC's strategy to exit Fyffes when the price was right. Management of that strategy had been delegated from 1995 to Lotus Green - which was set up to ensure no capital gains tax would be payable on foot of the sale of the shareholding - and the strategy was executed without intervention from DCC or anyone else, he said.
He said Lotus Green had taken no steps to establish if it was free to deal in the Fyffes shareholding in light of the fact that Mr Flavin was also a director of Fyffes. The issue had never crossed his mind and he believed Lotus Green was unfettered in that regard.
He said Lotus Green had not sought advice from brokers, advice regarding compliance or specific tax advice in relation to the sale of the shareholding. "We felt we had the competence to handle the matter ourselves." The overall strategy of Lotus Green was "to keep our head down and to accept offers of €3 or more".
Mr O'Dwyer added that this was in the context of the market being unaware of the existence of Lotus Green and a concern that, if brokers were made aware, Lotus Green would move from being "the chased" to a position where it was the chaser and this could lead to an overhang in the market, which would not be good for Lotus Green, Fyffes or DCC.
Mr O'Dwyer was being cross-examined on the 53rd day of proceedings by counsel for Fyffes alleging "insider dealing" in connection with the sale of the DCC stake over three days in February 2000. The action is against DCC plc, Mr Flavin, and two DCC subsidiaries - S and L Investments Ltd and Lotus Green.
The defendants deny the claims and plead the sales were properly organised by Lotus Green, to which beneficial ownership of the Fyffes shareholding was transferred by DCC in 1995.
The court has heard that Mr O'Dwyer prepared a memorandum on February 1st 2000 for the Lotus Green board regarding the possible sale of the Fyffes shareholding and that he asked two Dutch directors of that company to agree that the memo be in their names. Mr O'Dwyer said the memo was discussed at a meeting in Amsterdam on February 2nd 2000 attended by him and those two directors and that a number of alterations were made to it. He said the memo was read by a third Dutch director of Lotus Green, Tom Diepenhorst, prior to the board deciding at a meeting on February 3rd 2000 that it would accept offers of €3 or more for the Fyffes shares.
Yesterday, Mr O'Dwyer denied a suggestion by Mr Sreenan that only "stylistic" changes were made to the memo at the February 2nd meeting. He said the key change to the memo was that he and the two Dutch directors had agreed that the board of Lotus Green would accept offers of €3 or more for the Fyffes shareholding. The critical point in the memo was that the board agreed it was a seller of the shareholding and at what price.
Mr O'Dwyer said he had phoned Maireád O'Malley of DCC on February 2nd 2000 and asked her to fax a copy of the memo to Terry O'Driscoll of PricewaterhouseCoopers for his comments on the construction of the memo from a tax perspective.
Mr Sreenan suggested that Mr O'Dwyer was concerned about the "optics" of the memo regarding the scheme put in place from 1995 to avoid payment of capital gains tax in the event of the sale of the Fyffes shareholding. Counsel added that no letter had been discovered in relation to seeking tax advice from Mr O'Driscoll on the memo.
Mr O'Dwyer said the situation was very fluid and there was no time for letters. He could not recall that Mr O'Driscoll had given any specific tax advice relating to the memo.
Mr O'Dwyer agreed he had had three separate phone conversations with Mr Flavin on the evening of February 2nd 2000 but said he had not discussed the memo with Mr Flavin. He had also had a phone conversation with Mr Flavin on the morning of February 3rd 2000 and informed him of the result of the Lotus Green board meeting.
He agreed the final minutes of the Lotus Green board meeting of February 3rd 2000 were typed in Dublin and contained matters not included in initial drafts. He said one insertion followed tax advice received from PricewaterhouseCoopers in Amsterdam.
He denied a suggestion that the absence of any reference in the minutes to approaches from brokers about the Fyffes shareholding reflected a deliberate decision to conceal negotiations occurring prior to that date.
The case continues today before Ms Justice Laffoy.
