THE HIGH Court inspector who investigated allegations of insider trading by former DCC chief executive Jim Flavin found that the company had “good and effective corporate governance”.
Bill Shipsey SC said in his report that, contrary to the “understandable apprehension” of the Director of Corporate Enforcement Paul Appleby at the time of his appointment as inspector in 2008, his concerns were “largely unfounded”.
“The good news from the perspective of the director, and corporate compliance in Ireland, is that the court, the public and the market can be assured and take comfort from the fact that one of Ireland’s largest listed public companies had a well-developed culture of compliance, maintained high corporate standards and was a good corporate citizen, notwithstanding the costly error of appreciation by its then chief executive,” wrote Mr Shipsey.
DCC and its subsidiaries, SL Investments and Lotus Green, took their corporate responsibilities “very seriously” and had “good and effective corporate governance procedures and controls at board level”, said Mr Shipsey.
“The directors, officers and employees, from the then chief executive down, placed a high value on legal and regulatory compliance,” he concluded.
The officers and executive directors of the companies were “qualified, competent and careful individuals” and DCC “attracted and retained highly experienced and quality non-executive directors”, he said.
The companies took legal advice “when it was appropriate to do so” and followed it, he said.
“At a time when Ireland Inc was taking a beating internationally from the perception of low standards in high corporate places”, the actions and behaviour of DCC and its subsidiaries “measured up to the standards required by law notwithstanding Mr Flavin’s error of judgment”, Mr Shipsey concluded.
There were “facts and circumstances” which suggest that Lotus Green’s decision “not to make the necessary notification” of a beneficial interest in just over 10 per cent of Fyffes’ share capital in 1995 breached company law, he said, but this was done on legal advice.
“The decision not to notify was made, however, with the benefit of legal advice from the companies’ trusted and respected legal adviser and, in all the circumstances, it was not unreasonable for the directors of the companies to follow that advice,” said Mr Shipsey.
“I have also concluded that the legal advice, which I believe to have been incorrect, was given in good faith and in the firm belief that it was correct.”
The inspector said that the decision of DCC and SL to transfer the Fyffes interest to Lotus Green in 1995 “does not give rise to facts or circumstances” suggesting that company law was breached.
Mr Shipsey said that a shareholder’s “consideration” to sell its shares in a publicly quoted company, “divorced from any knowledge or awareness of price sensitive information about that publicly quoted company”, did not itself infringe company law.
The fact that the sale of a shareholder’s stake in a public company might affect the price could not constitute “insider dealing” within the meaning of company law.
“If it did, a shareholder in DCC’s position could never sell its shares for fear of what effect the sale of the shares might have on the publicly quoted company’s share price,” said Mr Shipsey’s report.
Even if he was wrong in his interpretation, he does not believe that a transfer within the same group could ever be described as a “fraud on the market”, said Mr Shipsey.
There was “an admitted failure” to serve a notice to the stock exchange fulfilling one section of company law when the Fyffes shares were sold in 2000 but there were three announcements which “fulfilled in substance, if not in form” stock exchange notification.
