Stock exchange: Serious questions remain about the independence of the Irish Stock Exchange as the regulator of the market and about its even-handedness following the High Court ruling in the Fyffes-DCC case.
The exchange and some of its most senior officials were intimately involved in the case from its very beginnings in 2000, soon after DCC realised €85 million on the €106 million sale of its Fyffes shares. In a judgment yesterday that brought the central case to a conclusion, Ms Justice Laffoy ruled that the DCC share trades were not illegal.
However, the questions about the conduct of the stock exchange arise from related but separate proceedings that took place before the Supreme Court last January. These questions are all the more important because they touch on the exchange's management of a possible case of insider dealing.
The Supreme Court heard of a sustained campaign by DCC and its advisers to secure the assistance of the exchange in undermining its own original report into the share trades.
At issue for the exchange is the nature of its response to that DCC initiative in a series of private meetings that were held in 2002 and 2003. While information about such meetings is rarely aired in public, Fyffes set out a minutely detailed account before the court.
The exchange had sent its original report to the Director of Public Prosecutions (DPP) sometime in late 2001, prompting the Garda Bureau of Fraud Investigation to start an inquiry into the share trades.
DCC believed the exchange's referral of the report to the DPP was contrary to the principals of natural justice, as the company had only one opportunity to make representations to the exchange. Thus the company set out in February 2002 to persuade the exchange to change its mind.
It was alleged by Fyffes that DCC's objective in taking this course was to damage the civil case against it by Fyffes. The DCC strategy was devised by its professional advisers, who included Donal O'Connor of PricewaterhouseCoopers (PwC), Alvin Price of William Fry Solicitors and Peter Crowley of Investment Bank of Ireland (IBI).
The court heard that the strategy was discussed with Tom Healy, chief executive of the Irish Stock Exchange, in October 2002. A note kept by Mr O'Connor recorded Mr Healy as saying he would be happy to see "the whole issue go away".
According to Fyffes, it was agreed at this meeting that expert reports commissioned by DCC on the price-sensitivity or otherwise of the information held by DCC at the time of the share trades would be sent to the exchange. Crucially, the information would be given to the exchange in a way that it could be returned if Mr Healy thought the reports would be unhelpful to DCC's case. Fyffes alleged that "Mr Healy recognised that if the stock exchange conclusion [ about the expert reports] was not positive from DCC's perspective, DCC would not want the information to be circulated widely as it meant they would be playing their hand in advance" of the Fyffes action.
At the same time, Mr Healy was reported to have confirmed "that if he received information from DCC which now led him to the view that the 'information' was not price-sensitive, he would pass this conclusion to the DPP".
It was never disputed by Fyffes that it was entirely proper for DCC to seek to defend its interests in the way that it did.
However, Mr Healy has never explained why the exchange, as the independent regulator of the market, was apparently prepared to pass new information to the DPP if it was likely to help DCC's case, but would return the information to DCC if it was unlikely to help its case.
A reasonable question arises as to whether this was an appropriate course of action to take for the very body responsible for sending a report to the DPP in the first instance.
It can also be reasonably asked whether this was appropriate from the perspective of the exchange's relationship with Fyffes, another listed company, which strongly believed that the DCC trades were illegal. In this context, would the exchange send information to the DPP if it was likely to damage Fyffes case or return the information if it helped its case?
Mr Healy had no comment yesterday on any aspect of the case. A spokesman for the exchange also had no comment. It is believed a statement may be forthcoming, but not before Christmas.
Serious questions also arise for the deputy chairman of the exchange, Brian Davy, who is also chairman of Davy Stockbrokers. DCC wanted the board of the exchange to assess the case, but the exchange chairman, David Kingston, told DCC in February 2003 that the board had decided it had no function in the case.
Still, the Supreme Court heard of a memo written by DCC chief executive Jim Flavin in May 2003 which reported on a phone call to Tom Healy from Mr Davy a week previously. According to the memo, Mr Davy was seeking Mr Healy's view of the expert opinions on the alleged price-sensitive information.
The memo said Mr Healy told Mr Davy that the DPP wasn't sure what to do but that it wanted to do the right thing. Mr Healy said he was surprised he had not received the reports from DCC, which he would pass to the DPP. "Tom said to Brian that he was very clear in what his advice would be to the DPP if the DPP sought it on the reports."
If the exchange board had already concluded that it had no role in the case, why was Mr Davy making phone calls about it to Mr Healy? Mr Davy did not return a call yesterday and the spokesman for the stockbroker - who is the same public relations consultant that acts for the exchange - had no comment.
