Two documents available to DCC chief executive Jim Flavin prior to the controversial €106 million sale of DCC's stake in Fyffes in February 2000 could not be considered to contain price-sensitive information, a UK expert on accounting and finance told the High Court yesterday.
Prof Richard Taffler also told the court that, given the "irrational euphoric behaviour" of the stock market associated with the "late stage" of the "internet bubble" in February 2000, any company-specific information relating to short-term trading issues in bananas would be highly unlikely to have had any impact whatsoever on Fyffes share price.
Prof Taffler was beginning his evidence on the 71st day of proceedings in which Fyffes alleges insider dealing in connection with the sale of the DCC stake in Fyffes over three days in February 2000.
The action is against DCC, Mr Flavin, and two DCC subsidiaries - S&L Investments and Lotus Green - who deny the claims and plead that the share sales were properly organised by Lotus.
The court has heard that the DCC shareholding in Fyffes was transferred to Lotus, a Dutch-resident subsidiary, in 1995 for the purpose of avoiding a capital gains tax liability in the event of any future sale of the stake.
Yesterday, Prof Taffler, called as an expert for DCC, presented a 37-page report outlining his expert academic opinion on whether the documents available to Mr Flavin prior to, or on, February 3rd, 2000, the date of the first share sale, constituted price-sensitive information - defined as any securities information "that is not generally available but, if it were, would be likely to materially affect the price of those securities". The documents in question were Fyffes' November 1999 management accounts and the company's December 1999 summary trading report.
Prof Taffler concluded that the contents of the two documents would already have been broadly reflected in the Fyffes share price at the time, independent of the hypothetical release to the market of the substance of the documents. In any case, the documents contained information which could "only very arguably" have been considered material in price terms, he said.
He said that conclusion was based on the clear availability to the market at the time of proxy sources of information, including banana prices and exchange rate movements, as well as competitor profit warnings. Such data allowed for general estimates to be made about Fyffes' short-term trading performance in bananas.
He had also taken into account the general lack of importance to Fyffes overall annual trading picture of the first months of the trading year (beginning in November) due to the seasonal nature of the banana market.
Earlier yesterday, Michael Cush SC, for DCC, concluded his direct examination of DCC witness Tom Byrne about a report he compiled for the case.
Mr Byrne is a non-executive director of DCC and was head of Davy Corporate Finance from 1987 to 2001. He is also a member of the New Issues Committee of the Irish Stock Exchange.
Among the matters Mr Byrne addressed in his report was whether, in his opinion as an experienced market practitioner, he believed a reasonable investor would have believed Fyffes and/or its management had, at the time of the February 2000 share deals, acted as if they were in possession of relevant information that was not public knowledge and which, if made public, would be likely to lead to a substantial movement in Fyffes' share price.
He had concluded that, in the absence of a trading statement from Fyffes, an investor could assume that the company and its management were not aware of information which would be likely to lead to a substantial movement in the share price.
He also concluded that Fyffes management did not act as if it had information that was not public knowledge and which, if made public, would be likely to lead to a substantial movement in the share price.
In cross-examination by Brian Murray SC, Mr Byrne agreed that he had worked in Davy for some 14 years, during which he would have dealt with DCC. He knew Mr Flavin. He was engaged as an expert in this court case about November last.
Mr Byrne said that he was in regular contact with the Irish and London stock exchanges about compliance issues regarding Davy clients. He did not believe that he was aware of discussions between Kyran McLaughlin of Davy and DCC about a possible sale of the Fyffes shareholding until after the sale. It was only much later in 2000 that he became aware the Dublin exchange had an interest in the sale.
Mr Byrne agreed that he was giving expert evidence on stock exchange listing rules in the case. He agreed the rules seemed to imply that there were certain share options scheme dealings that were exempt from the provisions of the rules. He said the rules were the means by which the exchange regulates the market and were "not a legal document per se".
He agreed Rule 9/2 deals with the disclosure requirements of companies where there is an issue about trading performance and involved companies having to address whether they should make an announcement because of an actual or possible downturn in trading.
He agreed this could be a difficult decision for a company to make and that the question of when an announcement might be made depended on all the circumstances, including the type of information available to the company. He also accepted that the company would, in some circumstances, need to consider, where it has "predictive information", whether it should wait and see if that information actually materialised.
The case continues today before Ms Justice Laffoy.
