Analysis: Fyffes chief executive David McCann was involved in issuing share options to staff just prior to the time when he claims Jim Flavin had price-sensitive data, writes Colm Keena

The chief executive of Fyffes, Mr David McCann, was questioned closely yesterday about the issuing of 900,000 share options to a number of staff in January 2000.

The granting of share options is technically a trade in the shares, and companies should not trade when in possession of price-sensitive information.

The company's case against Mr Jim Flavin and DCC plc argues that Fyffes directors were in possession of price-sensitive information at the time DCC sold its Fyffes shares in February 2000. Mr Flavin, chief executive of DCC, was a non-executive director of Fyffes at the time.

Mr Flavin was chairman of Fyffes' compensation committee, and, along with another non-executive director, Mr Gerry Scanlan, approved the granting of the options on January 25th, 2000.

Mr Scanlan is a former chief executive of AIB and a former chairman of the Irish Stock Exchange.

Mr McCann has said that it was his view that Mr Flavin "deliberately" chose not to raise the issue of price-sensitive information when processing the share options.

He said the absence of the issue from a letter written by Mr Flavin on January 25th was "a glaring omission". He felt he could make this observation based on his knowledge of Mr Flavin.

Asked directly by Mr Kevin Feeney SC, for the defendants, if he believed that Mr Flavin knew he was in possession of price-sensitive information at the time, Mr McCann said he could not look into the mind of Mr Flavin.

Mr McCann approved the list of persons who were to receive shares, but said it did not follow that he knew there was no price-sensitive information known to the directors at the time.

He said that in the past, approved lists had been held up pending the resolution of price-sensitivity issues.

In order for the options to be issued during the 42-day period following Fyffes' release of its preliminary results, as stipulated by the Model Code, which guides directors of listed companies in relation to share dealings, the options had to be granted by January 26th, 2000.

The then deputy chairman of Fyffes, Mr Carl McCann, now the company's chairman, approved the list on January 23rd.

Mr David McCann did not accept that the accusation he was making against Mr Flavin in relation to ignoring the issue of price sensitivity must also apply to Mr Scanlan. He said he was drawing his conclusion from a letter written by Mr Flavin, who was "preoccupied" with the issue of price-sensitive information.

Mr Feeney said the facts indicated that in January 2000 it had not occurred to Mr David McCann, Mr Carl McCann, Mr Scanlan or Mr Flavin that Fyffes directors were in possession of price-sensitive information.

He said it would be "irrational" for Fyffes to issue staff with options, which were supposed to act as an incentive, when the board believed the shares were overvalued. Mr McCann agreed.

The options were available at the January 24th, 2000 price of €2.70 per share. The options are currently valueless, as Fyffes shares are trading at €1.88.

DCC sold its shares in three tranches in the period between February 3rd and February 18th, 2000.

Mr McCann agreed that he had not raised the issue of price sensitivity with Mr Flavin following the first sale.

Asked directly if he believed Mr Flavin had price-sensitive information on February 4th, 2000, Mr McCann said that it was his, Mr McCann's, state of mind on that date that the company had "serious" trading problems and needed a positive result from two major court cases if it was to make its half-year figures.

He said this information seemed to him to be price-sensitive information.

Asked four times if he believed Mr Flavin had price-sensitive information on that date, Mr McCann repeated his earlier answer.

Asked if he, Mr McCann, had price-sensitive information on February 4th, Mr McCann said that, looking back, he believed he had. Asked if he had told anyone this at the time, he said he believed the executive management was "fully familiar with the situation at the time".

Mr McCann said the positive and negative factors involved in proceeding with inquiries into the February 2000 trades by DCC were thrashed out during two board meetings in late 2001.