Former Dunloe chief denies insider trading charges

The former managing director of Dunloe Ewart plc has pleaded not guilty to two charges of insider trading.

In the first such prosecution in this State, Mr Philip Byrne (44), of Trafalgar Tce, Monkstown, Co Dublin, has been charged with offences under sections 111 and 14 of the Companies Act 1990, which involved the sale of 260,000 Dunloe House plc shares in the period April 27th 1997 to May 9th 1997.

Opening the case for the prosecution yesterday, Mr George Birmingham SC said: "The topic is not the usual bill of fare for the Circuit Criminal Court, where the more usual areas of concern are burglaries, robberies and so on. But even so, this remains a criminal trial."

The trial is set to last three weeks. The witnesses are expected to include Mr Noel Smyth, executive chairman of Dunloe Ewart, other executives from the company, persons from Monarch Properties, Davy Stockbrokers, Davy Corporate Finance, and possibly International Investments & Underwriting (IIU) and NCB Stockbrokers.

Mr Birmingham told the jury that insider dealing consisted of dealing in shares carried out by an insider who has price-sensitive information which is not generally available.

He said that in the mid-1990s, Dunloe House, as it was then called, was not a major player in the property scene, though it did have a stock market listing.

The share price stood at around €0.30 (24p) at the end of 1996 and this was a significant premium over the net asset per share value, which was about €0.11.

Mr Byrne, who was then an executive with Green Isle Foods, had a personal shares portfolio worth about €2.29 million. It included some 750,000 Dunloe shares which he had bought at about €0.13 per share two years earlier.

His portfolio was looked after by Davy Stockbrokers, and, more particularly, by stockbroker Mr Dermot Walsh. Mr Smyth asked Mr Byrne to join the board of Aviette Ltd, a company owned by Mr Smyth and through which he held his significant shareholding in Dunloe.

"Mr Smyth clearly saw [Mr Byrne] as someone who had much to contribute," Mr Birmingham said.

Mr Byrne was asked to join Aviette on April 1st, 1997. On April 18th, 1997 Mr Byrne attended a meeting with representatives of Davy Corporate Finance. Mr Smyth was present, as were Dunloe representatives Mr Tim Kenny and Mr Stewart Harrington.

Dunloe was seeking to increase the size of its asset base eightfold through the merger of Monarch Properties with Aviette to form a new company, Cradder, and the purchase of Cradder by Dunloe.

The operation, which would raise the value of Dunloe's assets from €10.1 million to €63.5 million, would require €31.7 million, and Dunloe was hoping to raise the money through a share issue. The Davy representatives advised that it would not be easy to raise that amount of money. At the time, the Dunloe shares were trading at €0.46.

"It was very clear from the meeting and to everyone at the meeting, that if Dunloe House was to raise the money required, it wasn't going to happen at 36p or anything like it," said Mr Birmingham.

The shares issue, he said, was more likely to happen at something closer to the net asset per share value, or about €0.14.

"That advice was far from welcome and was a real disappointment for Dunloe," continued Mr Birmingham.

Dunloe contacted two other institutions over the following days - NCB Stockbrokers and IIU. Dunloe was looking for a €15.24 million deal involving a €0.31 share price. Mr Byrne was present at meetings with both NCB and IIU to discuss the matter. On May 13th, NCB wrote to Dunloe suggesting €0.14 as a more appropriate price.

On April 24th Mr Byrne had one of the regular, quarterly meetings he held with his stockbroker, Mr Walsh, to discuss his shares portfolio.

Mr Walsh pointed out that, because of its rise in price, the Dunloe shares now constituted a high proportion of his overall portfolio. No decision was taken to do anything about this.

There was no suggestion, Mr Birmingham said, that Mr Walsh knew his client was involved with Aviette.

On April 28th, Mr Byrne telephoned Mr Walsh and told him to sell 250,000 of his Dunloe shares.

The instruction was recorded and the tape may be played during the trial. The shares (260,000 in all) were sold over the following days at €0.43 each, netting €113,010.

In June 1997, trading in Dunloe shares was suspended and the deal with Monarch and Aviette was announced. The deal went ahead and trading resumed on September 17th. In the meantime, Dunloe had sent a document to the Irish Takeover Panel.

Included in the document were the facts that Mr Byrne would be joining the board of Dunloe if the deal went ahead, and that he had sold 260,000 Dunloe shares during the previous 12 months.

The former director general of the panel, Mr James Conway, told the court he noted this statement and brought it to the attention of the Stock Exchange.

The case continues today.