A "strong culture of compliance" was fostered within DCC since the group was founded in the 1970s by its chief executive, Jim Flavin, the High Court was told yesterday.
Michael Scholefield, DCC compliance officer from 1995 to 2000, now managing director of DCC Corporate Finance, said he was consulted by Mr Flavin on February 1st 2000.
Mr Flavin asked him about any compliance issues that might arise in the context of a possible sale of the DCC stake in Fyffes, beneficial ownership of which was transferred in 1995 for tax reasons to the DCC Dutch-registered subsidiary, Lotus Green.
Mr Scholefield said Mr Flavin had informed him about trading information that Mr Flavin had received from Fyffes since its last board meeting on December 9th 1999, which information indicated that Fyffes profits were behind the previous year but were still in line with Mr Flavin's expectations following the December board meeting.
In considering compliance issues, Mr Scholefield said it was significant that the information Mr Flavin had received since the December 9th, 1999, Fyffes board meeting was in line with the information presented to that meeting. He believed that information would have been fully considered by Fyffes in drafting its outlook for the year in its preliminary results announcement of December 14th 1999.
Mr Scholefield said he was also conscious it was still early in Fyffes's financial year and he believed the market was up to date and informed on Fyffes's trading, due to the December 14th results announcement and the fact that Fyffes executive directors had since then been active in making investor presentations. He also believed the market was well informed that the banana business was volatile and experienced short term swings in profitability.
Mr Scholefield said he further believed the dramatic increase in the Fyffes share price from early 2000 was drive by strong investor interest in Fyffes proposals for an e-commerce subsidiary, worldoffruit.com.
Having considered all those matters and his conversation with Mr Flavin, he had concluded Mr Flavin did not have price-sensitive information. He was also aware that any decision regarding the Fyffes shareholding was a matter for the Lotus Green board, which was not in possession of any unpublished information regarding Fyffes.
Mr Scholefield was beginning his evidence on the 59th day of proceedings by Fyffes alleging "insider dealing" in connection with the €106 million sale of the DCC stake in Fyffes in February 2000. The action is against DCC plc, Mr Flavin and two DCC subsidiaries - S and L Investments Limited and Lotus Green Limited. The defendants deny the claims and plead the share sales were properly organised by Lotus.
Later yesterday, in cross-examination by Brian Murray SC, for Fyffes, Mr Scholefield said that, to the best of his recollection, he believed the first occasion he became aware of any prospect of the Fyffes shares being sold was during the conversation with Mr Flavin on February 1st 2000.
He had typed a note of their meeting himself and shown it to Mr Flavin later that day who, he said, might have suggested he amend one minor matter. He could not recall what that matter was. He had changed the document but could not recall what change he had made.
He agreed there was another version of the document that had the word "DCC" scribbled out in relation to a reference to "DCC Lotus Green Limited". He said the scribbling out of "DCC" was made on a copy of the document that was sent to the stock exchange and the alteration was made before the document was sent to the stock exchange. He made that alteration "on the spur of the moment" because it was plainly incorrect for the document to state "DCC Lotus Green Limited." He drew two lines through "DCC". He did not think he was altering the substance of the document in any way.
Asked what was the point in Mr Scholefield discussing with Mr Flavin on February 1st 2000 a transaction in which Mr Flavin was not going to be involved, Mr Scholefield said he supposed Mr Flavin was the only person who would have had information regarding Fyffes and he would have felt the need to talk to Mr Scholefield about it in line with normal compliance procedures. He could not recall if Mr Flavin had told him there had been approaches about the Fyffes shares, he could have.
Mr Scholefield said it did not occur to him that if Mr Flavin was discussing the purchase of the shares with someone else, that might have resulted in a situation where Mr Flavin himself was dealing. He did not know Mr Flavin had any role regarding the sale of the shares. He did not perceive it as relevant at the time to ask Mr Flavin what his role was in receiving any approaches, if Mr Flavin had said he had received such approaches, which he "may" have said.
He agreed he had noted Mr Flavin telling him Fyffes had had a reduction in profitability in the first two months of the financial year 2000, beginning November 1999. He did not recall asking Mr Flavin questions about that. He believed he did not do so because Mr Flavin had told him that information was in line with the information the Fyffes board had when it approved its preliminary results announcement in December 1999.
Mr Scholefield said he could not recall whether Mr Flavin had asked him for his view as to whether Lotus Green could deal in the Fyffes shares. He said he was trying to get a sense of the information Mr Flavin had and its significance.
He agreed he would have been aware the source of Mr Flavin's information was likely to be Fyffes' management accounts. Mr Scholefield said he did not ask to see those accounts or to examine figures. He agreed he was happy to rely on Mr Flavin telling him the information was in line with the information available to Mr Flavin at the time of the preliminary results announcement. He did not ask Mr Flavin was this the most up-to-date information he had received.
He had no concerns about compliance in relation to Lotus Green because he knew how Mr Flavin operated in terms of any information regarding Fyffes.
The case continues today before Ms Justice Laffoy.
