A draft stock exchange announcement relating to the sale of part of DCC's stake in Fyffes was faxed from DCC to Fyffes chairman Neil McCann one hour before the sale was approved by a director of a Dutch-resident DCC subsidiary which is alleged by DCC to have organised the share sale, the High Court heard yesterday.
Fergal O'Dwyer, chief financial officer of DCC and the sole Irish director of DCC subsidiary Lotus Green, said he may have been aware the fax was sent to Mr McCann on the afternoon of February 3rd, 2000, prior to the share sale being approved by Tom Diepenhorst of Lotus. However, he could not remember.
He said there was no deal done when the fax was sent. There was "an offer made" which DCC chief executive Jim Flavin passed on to Mr O'Dwyer, who then rang Mr Diepenhorst. Mr O'Dwyer said the fax was just a draft.
Paul Sreenan SC, for Fyffes, said phone records showed that a draft stock exchange announcement was faxed to Mr McCann from DCC one hour before Mr Diepenhorst was contacted and a second draft announcement was faxed 10 minutes before the first effort was made from DCC to contact Mr Diepenhorst.
Mr Sreenan asked Mr O'Dwyer why there was a delay in contacting Mr Diepenhorst if, as DCC claimed, the deal depended on his confirmation.
Mr O'Dwyer said the requirements of Lotus in relation to the share sale had been outlined to brokers by Mr Flavin, who was acting as "a conduit" for Lotus. He could only surmise that, at the time the draft announcements were prepared for the exchange, the deal was coming together but there was no bid. There were no prices set out in either draft.
He denied a suggestion that he had held off on contacting Mr Diepenhorst to allow Mr Flavin inform Mr McCann of the deal.
Mr O'Dwyer said he had received the details of the transaction from Mr Flavin and passed these on to Mr Diepenhorst, who had been nominated that morning by the Lotus board to accept an offer of €3 or more per share for the Fyffes stock if that came through. He denied Mr Flavin was involved in the phone call to Mr Diepenhorst.
Mr Sreenan suggested that, when Mr Diepenhorst was contacted, there was nothing left for him to do except to formally confirm the transaction. Mr O'Dwyer said he had a quick discussion with Mr Diepenhorst and, while it was unlikely Mr Diepenhorst was going to change anything, if he did, he could have discussed this with Mr O'Dwyer.
The cross-examination of Mr O'Dwyer by Mr Sreenan continued yesterday, the 54th day of proceedings in which Fyffes alleges insider dealing in connection with the €106 million sale by DCC of shares in Fyffes over three days in February 2000. DCC, Mr Flavin and two DCC subsidiaries - S&L Investments and Lotus - deny the claims and plead the sales were properly organised by Lotus.
Yesterday, Mr Sreenan said that, despite the Lotus board passing a resolution on the morning of February 3rd, 2000, to accept offers of €3 or more per share for all or part of the Fyffes stake, and there being three share sales on February 3rd, 8th and 14th, 2000, some four million preference shares were still not sold although prices of €3 and more were available for more than a month from February 3rd.
Counsel said Mr Flavin had, in a draft memo prepared on July 11th, 2000, in response to a Sunday Independent article that raised questions about the sale of the Fyffes stake (which was not actually sent), said that DCC had retained the preference shares because it felt it should keep some investment in Fyffes until after the planned flotation of worldoffruit.com (Fyffes' e-commerce venture that was never actually floated).
Mr Sreenan suggested that the preference shares were not sold because the role of Lotus in relation to the share sales was "a formal one" - to pass a resolution mandating the sale. It was for Mr Flavin and DCC to sell the stock "as they saw fit" and the preference shares remained unsold because they had given no "green light" for that sale.
Mr O'Dwyer said that was not correct. He said Lotus had adopted a policy in relation to the sale of the first three tranches of the shareholding where they would sit back and wait for offers. That policy had worked in relation to the first three sales but did not work for the possible sale of the preference shares.
Mr Sreenan suggested that the exclusive purpose for setting up Lotus was for tax reasons and that Mr O'Dwyer was "obsessed" with maintaining a file to show that it was managed and controlled from the Netherlands.
Mr O'Dwyer said the establishment of Lotus "had a heavy tax end to it" but it was also set up against the background of restructuring DCC from a venture capital firm to an industrial group.
He agreed that he "may have been obsessed with paperwork". However, he said, the management and control of Lotus was by its board in the Netherlands. He denied that the primary management functions were carried out from Dublin. This was a real company with a real board and a real investment - the Fyffes shareholding - he said.
He said they had "taken advice generally" from PricewaterhouseCoopers "to ensure that the way we were handling ourselves did not go against tax". He agreed they had received advice that there should be as many board meetings as possible in the Netherlands to discuss as many matters of substance as practical regarding the involvement in Fyffes. He said these were "real" board meetings.
He agreed the minutes of the board meetings were typed at DCC House in Dublin based on his notes and observations. He was unaware whether the Lotus board had ever made any substantial changes to minutes.
The case continues today before Ms Justice Laffoy.
