Did the Independent newspaper group flex its muscle to get government action on issues close to its own commercial interests, asks Colm Keena
At the end of the Moriarty Tribunal's consideration this week of relations between Independent News & Media (IN&M) and the 1994 to 1997 Rainbow Coalition, the public has been left with two versions of that relationship, only one of which can be correct.
As the evidence heard on the issue by the tribunal is tangential to its inquiry into the granting of a mobile phone licence to Esat Digifone in 1995/1996, the chairman, Mr Justice Moriarty is unlikely to rule on the matter in his final report.
However, the issues raised are very serious. A powerful newspaper group using the content of its titles in pursuit of particular policies or decisions from a government, can have a distorting effect on the politics of a jurisdiction. The British government and the power of the Murdoch newspaper group could be cited as a case in point.
It is an allegation about a minor comment that led to Sir Anthony O'Reilly's appearance at the tribunal. During his two hours in the witness box on Wednesday, he denied that a comment he claims was made to him by Michael Lowry, then minister for transport, energy and communications, concerning the 1995 mobile phone licence competition, was "made up" or was conveyed to the tribunal out of a sense of malice. The alleged comment was: "Your fellas didn't do so well today."
The comment, concerning the performance of a consortium bidding for the licence in which IN&M had an interest, could, if it occurred, indicate Lowry had access to information in September 1995 that he should not have had at that time. Lowry denies making the comment.
It was while exploring this matter that the whole issue of the Rainbow Coalition's relationship with IN&M arose. At the heart of the obviously difficult relationship was IN&M's investment in Princes Holdings Ltd (PHL), a company set up to deliver TV channel signals to homes around the State.
The investors in PHL were IN&M and two US shareholders, TCI and UIH/Phillips. A licence for such a service, an MMDS (Multi-channel Microwave Distribution System) service, was issued to PHL in September 1989. There followed some negotiations between IN&M and the Department of Communications concerning assurances PHL were seeking in relation to the service. The assurances included a commitment from the minister that unauthorised operators providing a similar service - TV deflector operators - would be shut down once the MMDS system came into being.
The minister for communications at the time of the licence issue and during these negotiations was Ray Burke. Burke received a cheque for £30,000 made out to cash from Rennicks, a subsidiary of Fitzwilton, in June 1989, during the then general election campaign. Fitzwilton is a company associated with Sir Anthony. The matter may yet be investigated by the Mahon Tribunal.
In a letter issued from Burke's office in early 1991, IN&M was given assurances by Burke that had been sought by the company and that had been advised against by his officials. Notation on the letter included rarely-used coding by a civil servant that served the purpose of highlighting that the content of the letter was a ministerial as against a departmental decision.
PHL began investing in its new service but matters did not develop in accordance with its business plan. Losses began to build up, as outlined in a letter sent to the home of the then taoiseach, John Bruton, on Monday, July 29th, 1996, by Brendan Hopkins, a senior executive with both IN&M and PHL.
"Accumulated losses since 1992 have reached £18.5 million by the end of 1995 with further losses expected in 1996 and bear no resemblance to the original business plan. The principal difference relates to the non-achievement of anticipated subscriber growth which is directly related to on-going pirate activity.
"The failure to police exclusive licences granted by the government and issued by Minister Ray Burke in 1991, has led to significant pirate activity, particularly in the area of Carrigaline [Co Cork\] where we estimate in excess of 30,000 homes pay illegal operators £30 to £40 per annum." IN&M was a 50 per cent shareholder in PHL. Total investment by shareholders at that date was £75 million. By mid 1996 IN&M had a real reason to feel sore with the Rainbow Coalition.
As explained by Bruton in his evidence to the tribunal, he found when he came into office in December 1994 that there were legal restrictions on what he could do about the TV deflector issue. His senior adviser, SeáDonlon, told the tribunal that the issue had become political by 1996 and that seats in the upcoming general election were at risk.
Lowry, as minister for transport, energy and communications, had responsibility for the whole MMDS/TV deflector issue. Donlon, a former secretary general of the Department of Foreign Affairs, made clear in his evidence that it was his view that IN&M adopted a "hostile" attitude towards the government from early on in its existence, and that the cause was the government, and Lowry's failure to take action against the "pirates".
The TV deflector issue was before the courts in 1995, but as 1996 wore on IN&M became increasingly concerned about government inaction. In late July 1996, Bruton travelled to west Cork for the weekend. A dinner was organised by a local Fine Gael activist, Bernard McNicholas, and Sir Anthony was among approximately 75 guests. It was arranged that Bruton would visit Sir Anthony the following morning, Sunday, July 28th, at Sir Anthony's holiday home, Rushane, in Glandore, west Cork. The meeting between the two men lasted about an hour and no notes were taken.
Both men agree that the main issue discussed was the government's failure to crack down on the illegal deflector operators. Bruton came with suggestions for addressing the issue, but Sir Anthony, he said, was not interested. Both men agree Sir Anthony expressed a general dissatisfaction with the government in relation to a number of commercial matters with which he was connected. Bruton said Sir Anthony mentioned his disappointment at not winning the mobile phone licence. Sir Anthony was sure that this was not the case.
Donlon, who said he received a faxed note on the meeting that night from Bruton, said he was informed in that fax that the licence competition was mentioned at the meeting. The fax has not been located. Other matters mentioned included the size of a grant to a Heinz factory in Co Louth, and access to an Arcon mine in the midlands.
On Monday, Hopkins wrote to Bruton. On Tuesday, Sir Anthony wrote a longer letter to the taoiseach, again to his home address. He listed the range of areas in which he was involved in Ireland - Heinz, IN&M, Fitzwilton, Waterford Wedgwood, Arcon and a number of hotels. "We employ over 10,000 people in Ireland and well over 100,000 people worldwide." He raised issues to do with a number of sectors, including the newspaper sector and Competition Authority, the recent conduct of which he described as "frankly disgraceful". The issue had to do with IN&M's market share here.
He said that to "opine that the Irish newspaper market need not take account of UK newspapers (sold here) was completely incompetent in defining the 'relevant market' . . . It must be clear to even the most biased observer that the enemy is not within but without - in the person of Rupert Murdoch - whose affection for Ireland is not among his most discerning characteristics." He said the indigenous industry needed support if it was to prevent Murdoch from taking over the Irish media scene.
Sir Anthony referred to Hopkins's letter on PHL. The figures speak for themselves, he wrote. "What is required is an immediate meeting with Seán Donlon and the committee of PHL, which should address each of the points raised in Brendan\'s letter."
A meeting took place on September 4th, 1996. (Bruton had been away on holiday for August.) Present were Donlon, Hopkins, Liam Healy, then chief executive ofthe Independent group, and Mike Burns, a consultant acting for IN&M. Donlon raised the issue of not taking action against the TV deflectors because of the danger of losing seats. He said four seats could be at issue.
The Independent executives, for their part, pushed a number of measures that had been noted in Hopkins's letter to Bruton, including a clampdown on illegal operators. The meeting ended without any progress being made. A memo, kept by Hopkins, finished off: "We said they (the government) would lose Independent Newspapers as friends and would mean any future administration would have to pay a large bill."
Donlon reported back to Bruton. He told the tribunal that the meeting, though cordial and relaxed, left him "in no doubt about Independent Newspapers' hostility to the government parties if outstanding issues were not resolved to their satisfaction."
Bruton said he could not recall the detail of the report given to him by Donlon, but that he would have taken the reference to losing IN&M as friends to mean hostile coverage of the government parties in the newspapers, and not a threat of litigation. He agreed that the words could be seen as a "threat". During the meeting, the Independent executives had made clear that the US shareholders in PHL were anxious to take the State to court over its failure to "police the exclusivity of the licences".
Sir Anthony, in his evidence, said this was what was meant by the government losing IN&M as friends. "I think it is absolutely, unequivocally clear . . . that this particular use of the word friends related specifically to losing us as friends in this debate internally within our consortium (PHL), to stop them (the US shareholders) from taking the State to law, and allowing us to exhaust all the various means that we could to remedy the deflector crisis." He said the US shareholders had been "seething with us as well as with the government, at the amount of money they were losing in Ireland". It was this straightforward issue of the possibility of a major suit that was at issue.
The commercial situation was being conveyed to Donlon.
In 1997 a claim was lodged by PHL against the State for £100 million in damages. It has not since come to court. Earlier this year IN&M sold its shareholding in Chorus, as PHL had come to be called, for one euro. It invested more than €100 million in the venture over the years, but has now written this off in its books. Chorus is in examinership.
On June 5th, 1997, the day before the general election, the Irish Independent carried a front page editorial, headlined Payback Time and calling on voters not to vote for the government parties. John Coughlan SC, for the Moriarty Tribunal, said both Bruton and Donlon had seen this as an expression of IN&M's hostility and arising from the government's handling of matters linked to "O'Reilly interests" or "Independent group interests".
Sir Anthony said Fine Gael actually increased their vote in the 1997 election. "It could be that the front page editorial helped them." Sir Anthony agreed that the editorial was "unusual". He said he had no input into it. "Absolutely none, nor do I interfere in the editorial process whatsoever in the IN&M group throughout the world." He said he did not cause the editorial to come into being and "nor did I know that it was going on the front page". He said the board of IN&M does not interfere in the editorial policy of Independent titles. "That can be ascertained by direct contact with any of the editors in the group," he told the tribunal barrister.
(In Thursday's Irish Independent, its editor, Vincent Doyle, was quoted as saying the editorial was not the result of a directive from Sir Anthony.) Sir Anthony told the tribunal: "The general view, I would say, about Independent News & Media, is that governments always feel they are being maligned by it, whatever government, and opposition feel that they are being ignored."