Solicitor advised firm of 'breach of good faith'

MORIARTY TRIBUNAL: Esat Digifone's dealings with Mr Dermot Desmond's IIU Ltd involved a "clear breach of good faith" with the Department of Transport, Energy and Communications, the tribunal heard.

The statement was made in a letter written by Mr Arthur Moran, a solicitor with Matheson Ormsby Prentice, to Mr Pers Simonsen, an executive with the Norwegian firm Telenor, in October 1995. Telenor was a shareholder in Esat Digifone, the consortium in which Mr Denis O'Brien's Communicorp held an equal stake.

Asked by Ms Jacqueline O'Brien, for the tribunal, what he had meant by the statement, Mr Moran explained that in September 1995 a letter was sent to the Department stating that IIU was underwriting all the non-Telenor shares in Esat Digifone. However, a separate "side letter" written on the same date contained "materially different facts", and this was not sent to the Department.

This side letter assigned all IIU's rights and responsibilities in relation to Esat Digifone to Bottin Investments International Ltd, a company also associated with Mr Desmond but not registered in the State. The Department was not made aware of this at the time.

Mr Moran was asked by his clients, Telenor, if what had occurred was so fundamentally illegal as to make the Digifone deal with IIU "null and void".

He responded that what had occurred was a "clear breach of good faith" with the Department, but was not illegal.

He agreed that the Department was being told that IIU was assuming responsibilities in relation to Esat Digifone, though it appeared that IIU was not assuming any obligation at all. He also agreed that it was surprising that all the agreements made were not sent into the Department at the time.

He told Ms O'Brien he was not aware that the invitation for bids for the mobile phone licence required bidders to disclose the ownership of the proposed licensee.

In the event the September 29th deal was superseded. The shares held by IIU were held for Mr Desmond. Mr Moran agreed with Mr Eoghan Fitzsimons SC, for Telenor, that a letter issued by the Department on May 16th, 1996, indicated that the Department's primary interest was that Telenor and Esat Digifone retained control of Esat Digifone.

Mr Moran told Ms O'Brien that a statement by Mr Simonsen on October 10th, 1995, that the competition result could be announced within two to three weeks, was a "good guess" rather than a statement based on any particular knowledge. The announcement, on October 25th, came as a surprise, Mr Moran said.

Prior to the licence being issued, Mr Moran warned his clients about the possibility that Mr O'Brien could get control of Esat Digifone by doing a deal with Mr Desmond. Mr Desmond was "a dealer" and if "the price is right" would be happy to do a deal with Mr O'Brien. "Indeed it is not inconceivable that there is already an understanding in place as to what would constitute an acceptable price," he wrote to Telenor. He recommended that it be stipulated that Telenor be able to keep track of who IIU was holding shares for at all times.