On November 11th, 2016, then chief executive of Independent News and Media Robert Pitt met the company’s senior non-executive director, Jerome Kennedy, at the Conrad Hotel in Dublin. The former Lidl and Tesco executive told Kennedy about issues that concerned him relating to the actions of non-executive company chairman Leslie Buckley.
Pitt set in motion a chain of events that culminated this week in the publication of a report by two High Court inspectors into aspects of Buckley’s stewardship and his relationship with the company’s largest shareholder, Denis O’Brien. They included a proposal to pay O’Brien’s personal investment company Island Capital a fee in connection with the disposal of INM’s Australian business and also Buckley’s advocacy of a possible acquisition of Newstalk radio from O’Brien.
The inspectors, while critical of some of Buckley’s actions, found no evidence he behaved in a way that put O’Brien’s interests ahead of other shareholders, which had been alleged by Pitt.
Both men availed of the legal protection afforded to whistleblowers by making a protected disclosure under law, which means you cannot be penalised for sincerely making allegations of wrongdoing
In the battle of competing narratives that followed publication of the reports, O’Brien and Buckley have made their voices heard. Pitt, who has returned to Hungary where he was based before taking the job at INM, has said nothing; likewise, former chief financial officer Ryan Preston, who also voiced concerns.
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Their story is a salutary warning to others in their position who might be thinking of blowing the whistle. Both men availed of the legal protection afforded to whistleblowers by making a protected disclosure under law, which means you cannot be penalised for sincerely making allegations of wrongdoing.
As the inspectors noted in the report, the legislation exists to counter the reaction most whistleblowers experience. “The organisations involved have a natural tendency to believe those complained against who they have known or worked with,” according to the report.
Pitt and Preston are unlikely to disagree. The report describes in detail their interaction with the board of INM. It does not reflect well.
A subcommittee was set up to consider Pitt’s disclosure to Kennedy. It comprised Kennedy (a former KPMG managing partner), businessman Terry Buckley, who has held senior roles in several Irish companies, Len O’Hagan, a northern Irish businessman who serves on several State boards, and Allan Marshal, a former newspaper executive and consultant.
The committee met twice. At the first meeting, they reviewed a note from McCann Fitzgerald on Pitt’s disclosure. At the second they met Buckley and decided “there was no evidence of wrongdoing or of any issues or matter which raised a serious concern for the company” and “that no further action” was required.
The committee failed to discharge its remit and did not have a sound and proper basis for reporting to the board that there was no evidence of wrongdoing on the part of Buckley
This decision was accepted by the full board, which also accepted the subcommittee’s conclusion that Pitt’s disclosure was not covered by the protected disclosure legislation. The full board included financier Paul Connolly, who represented O’Brien, David Harrison, who represented another large shareholder Dermot Desmond, and Triona Mullane, a businesswoman with a background in technology.
The subcommittee’s consideration of Pitt’s disclosure was “fundamentally defective”, according to the inspectors. It failed to give “appropriate or proper weight” to the matters Pitt raised and didn’t “take the steps necessary to investigate and establish the implications of the matters raised”. The committee failed to discharge its remit and did not have a sound and proper basis for reporting to the board that there was no evidence of wrongdoing on the part of Buckley. “The conduct of the directors concerned fell below that to be expected of directors of a public limited company”, concluded the inspectors.
Unsurprisingly, Pitt refused to accept the board’s conclusion and threatened legal action which prompted the board to establish an independent review. Preston had also made a protected disclosure at this stage.
The independent review was carried out by David Barniville, then a senior counsel and now president of the High Court, and Stephen Kingon, a British accountant. They reported back in July 2017 saying they could not resolve allegations regarding the proposed Newstalk acquisition but found no wrongdoing regarding the proposed payments to Island Capital. They also found Pitt’s right to fair procedure had been breached.
The INM board accepted the findings of the independent review in August 2017 and determined that its consideration of Pitt’s allegations should be regarded as concluded.
In March 2018 the Office of the Director of Corporate Enforcement sought the appointment of inspectors, who reported back to the High Court this week
Things did not end there. Pitt had also made a protected disclosure to the Office of the Director of Corporate Enforcement (ODCE) shortly after making one to the company. The ODCE had been working away in the background when Pitt made a second disclosure to them in August 2017 about the external examination of INM data at the instruction of Buckley. In March 2018 the ODCE sought the appointment of inspectors, who reported back to the High Court this week.
Buckley and the INM board were strongly criticised by the inspectors but in the end, the central allegation that Buckley was putting O’Brien’s interests ahead of other shareholders was not upheld. The inspectors also criticised Pitt and Preston for misleading them by saying that they made their disclosures independently. However, the inspectors went on to say it did not affect the substance of their disclosures and that “whilst certain of the facts or matters relied upon or conclusions reached by them were not correct, that did not occur because those matters were fabricated, exaggerated or invented. We are, therefore, satisfied as to Mr Pitt and Mr Preston’s bona fides in the expression of their concerns.” They made a point of noting that Pitt was cross-examined for more than 45 hours on 13 days spread over 19 weeks.
The inspectors’ comments should be of some comfort to the two men. It is unlikely, however, that the inspectors’ comments would be enough to encourage someone in a similar position to come forward and that should worry anyone who cares about standards in Irish public and commercial life.