A director of an Irish company supplying a supermarket chain in Moscow had to flee Russia because he feared for his life from people involved with mafia-type groups there, a court heard yesterday.
In an affidavit in the High Court, Mr Michael Coughlan, with an address at Inniscarra, Co Cork, a director of Steamline Ltd, said his company had been a supplier to a Moscow supermarket chain which was partly Irish-owned. He said there was a complete takeover of the chain, Garden Ring Supermarkets Ltd, by Russian interests who diverted the entire business to themselves.
Mr Coughlan said he had to flee Russia in 1996 because he feared for his life from mafia-type persons. This was at a time when many other Western businesses there were experiencing similar difficulties. He and his fellow directors of Steamline could not have foreseen this turn of events.
He said help had been sought from the Moscow police and from the British and Irish embassies there, but so far it had not proved possible to recover any of the supermarket property.
The affidavit was read at the opening of a case in which Musgrave Ltd, trading as Supervalu Centra Distribution, of Ballycurreen, Airport Road, Cork, is seeking an order under the Companies Act to restrict Mr Coughlan and two other directors of Steamline from operating as company directors.
The other two directors are Mr Brendan Flannery, Model Farm Road, Cork, and Mr Kieran Walshe, Fairyfield, Parteen, Co Limerick.
Mr Paul Sreenan SC, for Musgrave's, said Steamline had since 1993 bought goods from his client, which were sent to Moscow supermarkets. But in August 1996 a due diligence report carried out on the Moscow supermarket chain found either £2 million or $2 million had been pilfered from the Moscow business.
At a meeting with Musgrave's in November that year, Mr Coughlan said he knew Steamline was "gone" in the previous August. But after that date Steamline continued to trade with Musgrave's and incurred two significant debts, amounting to about £80,000, counsel said. The company was wound up in July 1996.
During July 1996 Mr Coughlan went to Moscow, but found he was unable to continue to supply his Russian supermarket partners and had to flee the country.
It was Musgrave's case that the directors of Steamline became aware of serious irregularities in the Moscow supermarkets in August 1995 yet continued to trade. It was not until November that year that they informed Musgrave's of the true situation.
In an affidavit, Mr Michael Walsh, director and secretary of Musgrave Ltd, said it was apparent that Mr Coughlan knew from August 1995 that Steamline had serious financial difficulties. Nonetheless, he permitted it to continue trading, and Musgrave's had not yet had its account with Steamline discharged.
In his affidavit, Mr Coughlan said he and other Steamline directors had acted honestly and responsibly at all times in the conduct of its affairs. The results of the due diligence exercise conducted in the Moscow supermarkets did not become available until mid-October 1995.
On November 21st, 1995, Musgrave's was informed of what had occurred in Moscow. Musgrave's demanded immediate payment of £199,097 and said if the money was not paid within 21 days his company would be wound up.
Mr Coughlan said it was not until after June 1996 that it became clear the supermarket business in Moscow could not survive. The collapse of the Irish interest had nothing to do with the intrinsic viability of the business but was a consequence of a bizarre and totally unexpected series of events.
The Russian signatories to the supermarkets' account had refused to countersign any directions to pay, and funds to discharge the supermarkets' liabilities had been misappropriated by one of the Russian partners.
Between October 1995 and April 1996 the directors of Steamline honestly believed the business of the company could be saved. From the moment difficulties with the Moscow supermarket business became apparent, he believed, they took all steps as responsible directors would take to prevent the company from taking any further credit, and to repay in an orderly fashion the company's existing debts.
He did not know in August 1995 that Steamline had serious financial difficulties. These did not become apparent to him or his fellow directors until October/November 1995.
In an affidavit, Mr Brendan Flannery said he and the other directors acted honestly and responsibly at all times in the conduct and management of Steamline.
Also, in an affidavit, Mr Kieran Walshe said at no stage during his involvement with Steamline, before its liquidation, had he any reason to believe or suspect it was insolvent.
The hearing continues next Tuesday.