BUSINESS OPINION:The Smart Telecom action may shine an unwanted light on how the Irish market works

JUST WHEN it looks as though the dust stirred by the Fyffes-DCC affair may finally be starting to settle, the last thing Dublin's tight-knit financial community needs is another damaging court case.

But that is what it appears it is about to get.

There is a growing expectation, perhaps somewhat optimistic, that Jim Flavin will announce in the coming weeks that he is to step down from the helm of DCC, paying the ultimate price for being found guilty of insider dealing.

This would draw something of a line under the five-year legal battle with Fyffes over the sale of DCC's stake in the fruit distributor in 2000.

It would also render somewhat moot the last outstanding issue, which is the concern expressed by the Director of Corporate Enforcement on whether people who have been involved in insider dealing should hold senior corporate office.

In any case, the substantial issue, of whether or not DCC and Flavin illegally dealt in shares, has been settled.

The whole affair, as it played out in court, did little to enhance the reputations of the various individuals and institutions involved on either side. But, With the exception of Flavin, none of the individuals appear to have suffered any lasting damage to their reputations and Dublin's financial community would like nothing more than to draw a collective breath and move on.

How unfortunate, then, that a court case that could prove just as embarrassing in terms of the light it shines on the inner workings of the Irish market should have arrived in the Commercial Court last month.

Oisín Fanning, the former chief executive of Smart Telecom, has initiated proceedings to cancel the management buyout of the telecoms company, which took place in 2005.

During the course of the hearing last month, it emerged that Fanning claims that one of the other shareholders, Brendan Murtagh, withdrew his support for the company in order to drive down the price at which the management buyout - that he was backing - could be completed.

Fanning claims that when Murtagh first considered a management buyout, he was advised by Davy stockbrokers that the management team would have to pay at least 18p sterling per share.

Fanning went on to claim that Murtagh then told him to meet Liam Booth of NCB, who was Murtagh's adviser.

It is alleged that Booth said the management buyout could be done at just 6p or 8p a share if Murtagh held off financing the company, as the deal could be presented to the Takeover Panel as fair, given that the only alternative was bankruptcy.

Fanning claims that Booth said he was confident he could get the deal through at that price because a previous director of NCB was on the Takeover Panel.

The court was then told that Fanning was forced to step down, and that Murtagh reneged on funding promises and then bought 90 per cent of the company for just €1.

Murtagh and his two sons Alan and Fergal have responded in kind, describing Fanning's actions as an abuse of process and rejecting the allegations, saying they were intended to disrupt a number of transactions currently being undertaken by Smart.

They have sought to have the action struck out on the basis of his motives for bringing the action and the claim that Fanning approved the sale of Smart.

NCB has not as yet had a chance to address the allegations made against it, and it would be wrong to form any sort of view as to their veracity at this point. Davy has also not had a chance to answer the claims made about its role in the matter.

The case is due in court again on June 25th, when Mr Justice Peter Kelly will hear the application from the Murtaghs to have it struck out.

The Murtaghs are seeking to have the strike-out proceedings held in camera, which is understandable given the damaging nature of the allegations that have been made to date. And it will be up to the court to decide if that is appropriate or not.

Regardless of whether the case is heard in camera, or even struck out, the genie is substantially out of the bottle.

Serious allegations have been made about the way in which a listed company was taken private. The suggestion is that shareholders in Smart were in some way swindled by the Murtaghs.

Damaging allegations have also been made about the way in which one of the country's better-known stockbroking firms and a leading figure in corporate finance circles carry out their business. A second stockbroking firm stands accused of pretty much standing by while all this happened.

And, above all, the suggestion has been made that the Irish Takeover Panel - whose role it is to protect the interests of shareholders in such situations - is an organisation that can be easily circumvented through the use of patronage.

These allegations are too serious to be left unanswered and, regardless of the outcome of the strike-out proceedings, they must be addressed.