DCC FOUNDER Jim Flavin has resigned as its executive chairman following a new legal manoeuvre against the company by the official enforcer of corporate law, Paul Appleby, who wants the High Court to appoint inspectors to investigate how it sold a major stake in fruit importer Fyffes in 2000.
Mr Flavin was found by the Supreme Court last summer to have engaged in illegal share dealing when selling Fyffes shares on behalf of DCC, a holding company with interests in energy, healthcare and distribution. DCC, which made a profit of €85 million on those deals, settled a long-running court action brought by Fyffes at a cost of €41 million last month. Allowing for legal and other fees, the total cost of the settlement to DCC was €50 million.
Mr Flavin's departure was announced last evening, hours after Mr Appleby, the director of corporate enforcement, made an ex parte application to the High Court to have inspectors appointed to DCC and its subsidiaries, Lotus Green and S&L Investments. With the backing of the entire DCC board, Mr Flavin had said only last week that he planned to remain in office until his scheduled retirement in mid-2010. DCC emphasised its position in a board statement which reiterated unqualified support for him for a fourth time.
But Mr Flavin's position came under serious threat last Thursday, when the trade body for institutional investors said it was "inappropriate" for him to remain in office. Following that statement from the Irish Association of Investment Managers, which had never previously called for the removal of a top-ranking executive in an Irish-listed firm, Mr Flavin is understood to have told the DCC board on Monday that he was considering his position.
The company called an emergency board meeting yesterday when it received notice from Mr Appleby that he had gone to the High Court.
Mr Appleby's application will not be heard until June 9th. "I can confirm that we have lodged an application this morning," Mr Appleby said last night. Declining to comment further, he said he planned to issue a press statement this morning when publishing his annual report.
According to DCC, Mr Appleby wants inspectors to "examine and define the transactions" through which the three companies acquired, maintained, transferred and disposed of their beneficial and legal interests in Fyffes between February 1995 and April 2000.
He wants inspectors to examine whether parts of the 1990 Companies Act "were breached by the three companies, their officers (including shadow directors), managers, employees, servants and agents at the relevant times and, if so, to identify the circumstances in question, the provisions involved, the persons in default and all of the associated evidence in each case".
He is also asking that inspectors "examine any related matters with the prior approval of the court given on consideration of an interim report from the inspectors". In addition, he wants the court to instruct inspectors to provide an interim report within six months of their appointment and at intervals of six months thereafter, without prejudice to their right to make a report to court at any time.
DCC said its board was taking legal advice in relation to Mr Appleby's application and was not in a position to make any further comment.
Last night, DCC said Mr Flavin had resigned because it was in the interests of the company and its shareholders, "due to the continuing uncertainty arising from the outcome of the litigation" with Fyffes.
"While I am resigning, I firmly hold the view that I have always acted honourably and in what I believe to be the best interests of the company and all its shareholders," Mr Flavin told the board.
The board appointed former AIB chief executive Michael Buckley as non-executive chairman with immediate effect. As senior independent director of the company, Mr Buckley was charged with dealing with DCC's shareholders on the issue of the Supreme Court ruling. "Jim Flavin has been the driving force within DCC plc, having founded the company in 1976, and has developed it into one of the most successful companies in Ireland," Mr Buckley said.
DCC managing director Tommy Breen was appointed chief executive with immediate effect.
