Mr Denis O'Brien told stockbroker Mr Kyran McLaughlin that Mr Dermot Desmond's IIU Ltd had "no inside information" at the time it got involved in the Esat Digifone consortium.
Mr John Coughlan SC, for the tribunal, continuing with his opening statement, read out the memo of a meeting held in Mr McLaughlin's office in J&E Davy stockbrokers and attended by Mr O'Brien. According to Mr McLaughlin's memo, he raised the issue as to whether IIU "may have had inside knowledge of Esat's probability of success" when it made its investment. The issue was of concern to three banks which had been replaced by IIU.
The memo recorded Mr O'Brien as having responded that "IIU had no inside information, no one had". The meeting took place on August 12th, 1996.
Mr McLaughlin had been involved in securing commitments from AIB, Bank of Ireland, and Standard Life, that they would commit £8.5 million to Esat Digifone if it was awarded the licence. However during the licence competition Mr McLaughlin was asked to get the institutions to withdraw. Mr McLaughlin was told by Mr John Callaghan, of Esat Telecom, that Mr O'Brien had been advised that the financial element of the Digifone bid was not strong enough to enable it win the licence. IIU subsequently became involved in the Digifone consortium and made a stronger commitment than that which had been made by the banks.
Mr McLaughlin wrote to Mr O'Brien about this development on November 22nd, 1995, after Digifone had won the competition and after the media had reported IIU's involvement. He asked why the investors he had sourced were not invited to make commitments along the lines offered by IIU, especially as IIU had become involved after the issue of the price to be paid for the licence had been capped at £15 million. He also asked if information was available to IIU which had not been available to the investing group.
There was no response to the letter. On July 4th, 1996, Mr McLaughlin wrote again. He said it would be very helpful to him if he knew Mr O'Brien's response to the matters he had raised. The more publicity there was about IIU's involvement, the more the banks wanted to address the issue, he said.
The meeting in Mr McLaughlin's office then took place. Mr Callaghan and Mr O'Brien attended and Mr McLaughlin outlined the banks' concerns. They felt that IIU was not as financially strong as they were, and that IIU had become involved after the £15 million cap was set on the fee. There was also a concern that IIU would sell on its stake at a substantial premium.
Mr McLaughlin's memo recorded him being told that Digifone had been informed that it needed a firm financial commitment backed by a bank for the 20 per cent of the consortium which had been earmarked for investors, and for the 40 per cent which was owned by Mr O'Brien's Communicorp. Digifone "knew no normal institution" would give such a commitment.
The memo also recorded Mr O'Brien and Mr Callaghan saying IIU was likely to sell its 20 per cent back to the existing shareholders, and that if Esat was to sell shares on the market in January 1997, as planned, Davys would be used if there was any Irish interest.
