Query over O'Brien's money-raising to be revisited

The Moriarty tribunal: The former secretary-general of the Department of Transport,Energy and Communications, Mr John Loughrey, has said he may have been aware in May 1996 that Mr Denis O'Brien didn't have the money to pay for his part of the fee for the State's second mobile-phone licence.

Counsel for the tribunal, Mr John Coughlan SC, said he was surprised by the statement.

The matter is to be raised again when Mr Loughrey returns to give further evidence at a date to be decided.

The licence cost the consortium £15 million, and Mr O'Brien's share of the cost was £6 million. The fee was paid on the date the licence was issued, May 16th, 1996.

Mr Loughrey was giving evidence concerning an inquiry into the financial situation of the members of the Esat Digifone consortium conducted by his Department in the days immediately before the granting of the licence. The members of the consortium were: a Norwegian company, Telenor; Mr Denis O'Brien's Esat Telecom; and Mr Dermot Desmond.

An accountant, Mr Donal Buggy, conducted a "desktop" exercise into the wealth of the constituent members of the consortium. Mr Loughrey said Mr Buggy did great work in a two-day period, but he was not so interested in what was in Mr Buggy's note.

The details concerning Mr Desmond's assets and whether they were encumbered or not was not the issue for him. He was interested in "liquidity, liquidity, liquidity".

He said he was especially interested in how much cash was available to Mr Desmond for Digifone's first year of operation.

He believed the note showed that Mr Desmond had the liquidity to cover his responsibility to the consortium for its first year and to underwrite Mr O'Brien's 40 per cent interest.

Mr Loughrey said he believed he knew at the time that Mr O'Brien did not have the funds for his share of the licence fee. He was not sure but he believed he would have seen this from figures presented in Mr Buggy's note.

"I was certainly conscious in the broadest sense that Mr O'Brien wasn't in a position to make his contribution" to the early requirements of the consortium, he said.

In the note it was stated that Esat Telecom was to raise funds in the capital markets, but this exercise had not been completed yet and the note had not put any value on what Esat Telecom was bringing to the consortium.

"Their contribution was put at nil," Mr Loughrey said.

Although Mr Buggy was correct in making this assumption, Mr Loughrey said, he did not believe it was a realistic one.

"From the moment Mr O'Brien had the licence in his hip pocket it would only be a matter of time before he had access to the capital markets," he said. The only question would be the terms. He knew that Mr O'Brien would be able to raise the funds he needed "unless he set the bar idiotically high and I knew he was too astute a businessman to do that".

The Republic was at the time the last duopoly mobile-phone opportunity in Europe, and Mr O'Brien's effort to raise funds could have been oversubscribed 10 times. He believed Mr O'Brien's placement of shares in the US would be successful, "even though I thought he complicated his approach to the capital markets unnecessarily."