Concerns raised by former Independent News & Media (INM) chief executive Robert Pitt and former chief financial officer Ryan Preston, in protected disclosures made in 2016, were central to the appointment in 2018 of inspectors Sean Gillane SC and Richard Fleck, whose report was published on Wednesday.
The central charge was that the then INM chairman, Leslie Buckley, was looking after the interests of his associate, the then majority shareholder, Denis O’Brien, to the detriment of the company’s shareholders generally.
The following are the main topics covered in their report.
Island Capital
In 2015, when INM was considering selling its shareholding in Australian media business APN, O’Brien was also considering the sale of APN shares he held by way of his Isle of Man company, Baycliffe.
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O’Brien told Buckley he thought his company Island Capital, which was to represent Baycliffe, should also represent INM. Buckley agreed but did not mention this to INM’s board or senior management.
When they later became aware of the arrangement, Pitt and INM director Jerome Kennedy sought advice from Davy Finance and solicitors McCann Fitzgerald, given the relationship between O’Brien and Island Capital.
Meanwhile, following another conversation with O’Brien, Buckley asked Preston to make a €4 million provision for payments to Island Capital and three other parties. Preston did so.
Following the sale of the INM and Baycliffe APN shares, O’Brien sent an email to Buckley stating: “Leslie don’t mention Cosi deal [sic] to anybody thanks Denis.” Buckley said those in INM needed to “handle it very carefully”.
A few days later, Davy and McCann Fitzgerald said the payment to Island Capital would have to be publicly disclosed, and it did not go ahead. Nor did the other payments suggested by O’Brien.
The inspectors decided it would not have been in accordance with good governance for INM to have engaged the services of Island Capital, unless the engagement had been approved by the INM board.
Buckley’s failure to report the Island agreement to the board “was inconsistent with his responsibility as a director to disclose material facts”, they found, but he did not agree the deal “with the intention of benefiting Mr O’Brien to the detriment of INM’s shareholders”.
The Newstalk sale
The inspectors investigated the role played by Buckley in 2016 when INM was considering buying radio station Newstalk, then O’Brien’s.
Discussions took place but were not reported to the INM mergers and acquisitions committee or the board. Financial advisers engaged by both sides came up with very different valuations for Newstalk.
In their protected disclosures, Pitt and Preston said Buckley put improper pressure on them to increase INM’s valuation of Newstalk.
The inspectors found that Buckley should not have become involved to the extent he did, regarded the purchase of Newstalk as a strategic opportunity, and intended to put pressure on Pitt and Preston to advance the deal, but that it was not improper pressure.
The search of INM emails
As part of a cost-cutting exercise in 2014, Buckley engaged Derek Mizak, of DMZ IT, to search for a missing email he believed might provide an opportunity to terminate the contract INM had with a long-time legal adviser, Simon McAleese, who is now a Circuit Court judge. Buckley approved the use of a company called TDS, and data from INM’s server was sent to a facility in Wales.
In early 2015 the data search was widened. Mizak compiled a list of 19 names he maintained might have information about the McAleese contract, according to the inspectors.
The people listed included two barristers who had worked for the Moriarty tribunal, which investigated the awarding of the State’s second mobile phone licence to O’Brien’s Esat Digifone, as well as a lawyer who worked for Cable & Wireless, a competitor business to O’Brien’s Digifone group in the Caribbean.
As the inspectors put it, “a number of such persons of interest could not have had any involvement in or information about the renewal of the legal services contract between INM and Simon McAleese, solicitors”. The inspectors decided Buckley initiated the email search because he was concerned about the terms of the McAleese contract.
They said they were not persuaded by Mizak’s explanations as to how he came to generate the 19 names. They decided it “would not be appropriate to speculate” on how the list of 19 persons of interest, or any other lists, were compiled.
They concluded that O’Brien’s knowledge of what was going on was limited to the McAleese contract issue, and he was not aware that the scope of the Mizak inquiry had widened. O’Brien, they decided, agreed to pay for the work because Buckley told him it would be embarrassing for Buckley to have to explain to INM the costs were incurred as part of a cost-cutting exercise.
O’Brien, the inspectors said, “provided a table setting out the position regarding each of the names on the list, ie, whether he knows the person or not and whether the person could be viewed as ‘contra’ to him. On the basis of that evidence, Mr O’Brien submitted that to characterise the list as an ‘anti-O’Brien list’ would be erroneous.”
Protected disclosures
The inspectors investigated the treatment by INM of the protected disclosures made by Pitt and Preston. They decided the directors’ approach to the protected disclosure legislation was incorrect and their conduct “fell below that to be expected of directors of a limited company”.
Confidential information
The inspectors decided Buckley had provided confidential information to O’Brien but that O’Brien did not misuse this information.
In August 2016, Buckley signed a memorandum agreeing not to disclose confidential INM information without authorisation.
“It is clear that Mr Buckley’s disclosure of confidential information to Mr O’Brien after August 2016 was not in compliance with the company’s policies and, in particular, the terms of the memorandum that he signed,” they said.
Companies Acts
The inspectors decided that, while the Data Protection Acts had been breached, and confidential information disclosed, this did not amount to breaches of Section 748 of the Companies Acts, as contemplated by the order under which they were appointed.
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