Desmond interest not disclosed

Moriarty Tribunal: A solicitor who acted for Esat Digifone has accepted that "probably" the company did not comply with the rules for the competition for the State's second mobile phone licence.

Mr Owen O'Connell, managing partner with William Fry Solicitors, agreed with Mr John Coughlan SC, for the tribunal, that at the time Digifone was announced as the winner, Mr Dermot Desmond had a beneficial interest in Digifone and this was not known to the Department.

He agreed that "probably" this meant the consortium had not complied with the rules for the competition whereby the information submitted in bids for the licence would not change for 180 days after they were submitted. The bids were submitted on August 4th, 1995. January 1st, 1996 was 180 days later.

Mr Desmond became involved in late September 1995 and the Department was not told about this until April 16th, 1996. The licence was issued a month later.

Mr O'Connell said that Digifone did not at the time consider Mr Desmond's involvement to be as important as it has since been deemed to be, in the media and in the tribunal's proceedings. He agreed that it was seen by Digifone at the time to be a problem, but did not accept that it was seen to be a "serious problem".

He said if he had considered the matter to be a serious problem, then when details of Mr Desmond's involvement were disclosed in an article in The Irish Times in February 1996, he would have "had a heart attack and dropped dead on the floor of my office". As it was, he presumed he had read the article but couldn't recall doing so. The article appeared before the Department had been told of Mr Desmond's involvement but was not noticed within the Department.

Mr O'Connell agreed that it was unlikely that Digifone omitted to tell the Department by accident. He said the problem was not seen as a significant one and was one for which the company had the right to choose the timing at which the Department was told.

The first time the Department asked for ownership details concerning Digifone was on April 16th, 1996, and the details were immediately given, he said.

In a letter to the Department on April 17th, Mr O'Connell described a 5 per cent shareholding in Digifone, that formed part of the total shareholding of 25 per cent that Mr Desmond was entitled to, as a "pre-placing". The 5 per cent was described as part of a 12.5 per cent shareholding Digifone had said in its bid document would be placed with investors at some time down the line and after the licence award. It had said in the bid document that 20 per cent would be given to financial institutions at the outset.

Mr O'Connell did not agree with Mr Coughlan that the statement in the letter about the 5 per cent was inaccurate. "I say it is a rationalisation," Mr O'Connell said. "I would not go so far as to say it is inaccurate or wrong." Mr Coughlan said the files showed no mention of the shares being a pre-placement at the time the deal was being negotiated with Mr Desmond.

Mr O'Connell said there was an agreement with Mr Desmond prior to January 1st, 1996, but it had not been implemented prior to January 1st. However, he agreed it was arguable that Mr Desmond had a beneficial interest in Digifone, and that this was not known to the Department. Mr Coughlan said this meant the requirement that the information in the bid remain valid for 180 days had not been complied with.

Mr O'Connell said: "Probably, yes." However, he said the question then arose as to whether the change to the bid document was a material one or not.

He agreed that after the announcement of October 25th, 1995, Digifone had many opportunities to inform the Department of Mr Desmond's involvement, but had not chosen to do so. "There was an opportunity every day. We could have always picked up the phone." He said the obligation was to inform the Department prior to the issuing of the licence. The "putative licensee" had a "degree of discretion" as to when and how it would present the information to the Department.