Business leaders must stand up and be counted, writes Arthur Beesley, Senior Business Correspondent
Businessman Michael Buckley will go before the Irish Association of Investment Managers (IAIM) today to answer questions about the stance of DCC's directors on the Supreme Court ruling against the firm's executive chairman Jim Flavin.
The court found that Flavin illegally held insider information when DCC took a profit of €85 million in 2000 on the sale of its stake in Fyffes, the fruit group. In defiance of that ruling, DCC's board has given Flavin unanimous support.
A former chief executive of AIB, Buckley is the senior independent director on the board. Its members include a clutch of eminent retirees - former Bank of Ireland chief Maurice Keane and former CRH chief Tony Barry - and other figures, including Róisín Brennan, chief of the Bank of Ireland subsidiary IBI Corporate Finance.
We already know what Buckley is likely to tell the IAIM, which oversees corporate governance in listed companies. From its statements, we know the board is relying on a narrow aspect of the High Court ruling in which Miss Justice Laffoy said the evidence was not open to the interpretation that Flavin used the information.
The Supreme Court was silent on that issue. However, Ms Justice Denham made it perfectly clear in her judgment it is "not lawful for a person who is connected with a company to deal in any shares of that company if by reason of his connection he is in possession of information that is not generally available and which is likely materially to affect the price of those shares".
As a director of Fyffes at the time, Flavin held trading reports which were not generally available and which constituted bad news for its business. Fyffes issued a profit warning six weeks after DCC sold the shares and its share price fell by 25 per cent.
The IAIM will have to decide whether it should accept the "full support" of DCC's board for Flavin or reject it on the strength of a ruling from the highest court in the land.
The body will presumably be mindful when reflecting on the case of its own objectives. These include the promotion of the investment industry, ensuring best standards throughout the industry, and the promotion of Ireland as a centre for fund management.
On the face of it, any IAIM endorsement of the stance of the DCC board would be at odds with each of those objectives. After all, the board is giving succour to a person who was in breach of the law when making a huge profit for his company on the stock market. Best practice it is not.
Still, the IAIM has no statutory power in relation to its oversight of companies.
The case has already come to the attention of the Director of Corporate Enforcement and the Director of Public Prosecutions. Whether either proceeds with action against DCC in light of the Supreme Court ruling remains to be seen.
The regulator of the market in the first instance is the Irish Stock Exchange, which has declined to comment publicly on the Supreme Court ruling.
However, Supreme Court proceedings between Fyffes and DCC in 2005 served to highlight an extraordinary degree of contact between senior business figures and the very body in charge of the market.
The court heard of a sustained campaign by DCC and its advisers to secure the assistance of the exchange in undermining its own original report into DCC's sale of Fyffes shares.
Fyffes alleged it was agreed between DCC and the exchange that DCC's expert reports on the price-sensitivity or otherwise of the information held by DCC at the time of the transactions would be given to the exchange in a way that they could be returned if the exchange thought they would be unhelpful to DCC.
Former exchange chief executive Tom Healy later insisted he had never offered to "vet" documents from DCC in a way that might help the firm undermine a Garda inquiry into the deals.
After a change in the law in mid-2005, responsibility for the investigation of possible market abuses moved to the Financial Regulator. Such powers are not retrospective, so the regulator has no role in the Fyffes-DCC affair.
In any future insider dealing cases, the regulator can impose a maximum fine of €2.5 million as an administrative sanction. The law also provides for criminal penalties of fines of up to €10 million or 10 years' imprisonment.
While the level of fines seems small when compared with the €85 million profit that DCC made on the Fyffes transactions, the fact that the law now allows for imprisonment for a decade suggests that insider dealing is a very serious business indeed.
But there has been nothing but silence from the business world at large on the Supreme Court ruling. "We're not in a position to comment on the basis of the information we have," said business lobby Ibec yesterday.
It is very bad indeed for the reputation of Irish business generally when not a single individual is prepared to criticise the DCC board's positition.
After all, Mr Justice Fennelly said in his ruling a week ago that trading on secret or privileged information is now recognised for what it is: "a fraud on the market". In spite of all that, it appears Irish business wants to look in the opposite direction. That can only be of assistance to the DCC board in its efforts to wash away the Supreme Court ruling.
Will the IAIM stand up to the company today?