MORIARTY TRIBUNAL: It would have been particularly "embarrassing" for the stockbroker Mr Kyran McLaughlin to discover that his firm of stockbrokers, Davys, had been replaced by Mr Dermot Desmond, the Moriarty tribunal was told.
The tribunal was hearing evidence from a former non-executive director of Esat Digifone, Mr John Callaghan, concerning the make-up of the Digifone consortium around the time of the 1995 competition for the State's second mobile-phone licence.
In September 1995, Mr Desmond's IIU Ltd did a deal which saw it take up a 25 per cent shareholding in Esat Digifone.
The deal meant that three financial institutions, which were to take up 15 per cent of Digifone, were out.
These financial institutions, AIB, Investment Bank of Ireland, and Standard Life, had been arranged by Mr McLaughlin and Davys was to be involved in organising the placing of Digifone shares.
"I would say the most embarrassing thing for Mr McLaughlin was that it was IIU," Mr Callaghan told Ms Jacqueline O'Brien, for the tribunal. He said IIU had been set up "against the financial establishment" and that Davys would have been seen as part of the establishment. The replacement of Davys by IIU could have been seen as a case of Davys "dropping the ball," he said.
Mr Callaghan said the deal negotiated with Mr Desmond was much better than the arrangement that had been in place with the financial institutions.
"Dermot Desmond and IIU are lighter on the ground, and more flexible, and smarter than the institutions," he said.
In a letter to Mr Denis O'Brien, the founder of Esat Digifone, after the coming on board of Mr Desmond, Mr McLaughlin asked a number of questions about how IIU came to replace the institutions. He asked if IIU had information available to it that was not available to the institutions at the time they were replaced. In a subsequent conversation, Mr O'Brien said no-one had any inside information during the licence competition.
The tribunal has heard that Mr Desmond became involved when he and Mr O'Brien began discussing Mr O'Brien's affairs on the way back from a football match on August 10th, 1995.
On August 11th, 1995, Mr O'Brien sent a fax to Mr Desmond. Mr O'Brien proposed Mr Desmond would have the right to take up 15 per cent of Esat Digifone in return for providing a bank guarantee for £3 million for Mr O'Brien, and for taking on some of the licence bid costs. Mr Desmond would also be paid £300,000 by March 31st, 1996.
On September 29th the two sides signed a deal whereby, among other matters, Mr Desmond's company would get 25 per cent of Digifone in return for underwriting Mr O'Brien's 40 per cent stake in Digifone.
The IIU stake in Esat Digifone was reduced to 20 per cent before the licence was issued in May 1996.
The tribunal adjourned until Tuesday afternoon, when Mr O'Brien is to resume giving evidence.
