Desmond worth 'at least #40m' before licence granted - report

Moriarty tribunal An accountant on secondment to the Department of Communications conducted an inquiry into the wealth of Mr Dermot Desmond in the days immediately before the granting of a mobile phone licence to Esat Digifone in May 1996.

Mr Donal Buggy, now chief financial officer with Independent News & Media, produced a short "desktop report" for the secretary of the Department, Mr John Loughrey, stating that Mr Desmond was worth "at least £40 million" and had unencumbered assets totalling £77 million.

Mr Buggy said he could not recall who told him that the list of assets he was told were owned by Mr Desmond were unencumbered, or free from financial liability.

He agreed with Mr John Coughlan SC, for the tribunal, that he may have been told this verbally by Mr Loughrey, or by Mr Martin Brennan, the civil servant who had chaired the team which selected Esat Digifone as the winner of the licence competition. Mr Buggy was reporting to Mr Brennan and Mr Loughrey.

Queries to Mr Pearse Farrell, Mr Desmond's accountant, were made over the telephone by Mr Brennan.

Mr Desmond's IIU Ltd had a 20 per cent shareholding in the Digifone consortium and held the shares for Mr Desmond.

Mr Farrell produced a letter for Mr Buggy in which he said "Mr Desmond/IIU" had undertaken to invest and/or underwrite an equity investment of up to £40 million in Esat Digifone. He confirmed that Mr Desmond was in a position to make the underwriting commitment.

He said he was also authorised to confirm that Mr Desmond was the owner of a number of listed assets.

These were: various marketable securities, £10 million; principal unquoted investments, at cost, (IIU Ltd £13 million, London City Airport and associated companies, £25 million, and 44 per cent of Pembroke Capital Ltd, £9 million) £47 million; cash at bank, £15 million; money lodged with William Fry solicitors, £5 million. The letter did not say these assets were unencumbered.

Mr Buggy said he would not have used the term unencumbered lightly. He thought he must have been informed verbally that the assets were unencumbered. He agreed the word did not appear in the notes of his meeting with Mr Farrell or in the letter from Mr Farrell.

Mr Buggy was asked to conduct his inquiry on May 13th. He met with Mr Farrell on the 14th, at 10.30 a.m. His note of the meeting recorded Mr Farrell as saying Mr Desmond was resident abroad and had assets spread out worldwide. "Logistically difficult before you get to confidentiality," the notes recorded Mr Farrell as saying concerning the assets.

Mr Farrell was also recorded as raising Mr Desmond's "track record over the years, (NCB etc.)".

Mr Coughlan asked Mr Buggy for his view of Mr Desmond's track record at that time. Mr Buggy replied: "Pretty good." Mr Coughlan asked what that track record was and Mr Buggy answered, "NCB".

Mr Coughlan asked if there was anything else and Mr Buggy said, "Not really".

Mr Coughlan asked if Mr Buggy had been aware of the Glackin inquiry into the Telecom affair. Mr Buggy said he believed he would have been aware of the Glackin report though he had not read it.

Mr Buggy said that his analysis of the Digifone consortium came down to an analysis of Mr Desmond's wealth. This was because there was no question concerning the financial strength of the Norwegian company, Telenor.

It was also clear that in May 1996 Communicorp did not have the financial strength to fund its obligations to the consortium. The issue then became whether Mr Desmond or IIU had the strength to fund its underwriting commitments.

Mr Buggy rejected a suggestion by Mr Coughlan that he might have decided not to raise concerns he had about the licence selection process in October 1995, after he'd heard that the minister, Mr Michael Lowry, was aware of the ranking of the bids that had been received. The ranking placed Esat Digifone in first position.

He told Mr Richard Nesbitt SC, for the Department, that the team did a lot of work after being told Mr Lowry knew the ranking.