Chairman's view of DCC input into sale of shares 'incorrect'

DCC chief executive Jim Flavin said chairman Alex Spain 'forgot' Lotus Green controlled Fyffes shares

When DCC chairman Alex Spain told a meeting of the group's board in March 1998 that the sale of the DCC stake in Fyffes was a matter for "executive discretion", he was "incorrect" and seemed to have "forgotten" that control of the sale of the stake had been transferred to a DCC subsidiary, group chief executive Jim Flavin told the High Court yesterday.

Mr Flavin agreed no other member of the DCC board had corrected Mr Spain at the time. However, Mr Flavin added, he himself had raised the issue at the next board meeting.

For tax reasons, DCC transferred the beneficial ownership of the Fyffes stake to a Dutch subsidiary of DCC, Lotus Green Limited, in 1995, the court has heard. DCC contends it was for Lotus Green to manage and execute any disposal of the Fyffes shares - something which was a long term strategy of DCC's.

When Paul Gallagher SC, for Fyffes, suggested the DCC board had concluded the sale was a matter for "executive discretion", Mr Flavin said he did not accept the board had made a decision to that effect.

He said Mr Spain had "probably loosely" made a comment to that effect. He agreed it had not been noted that the comment was made by Mr Spain but Mr Flavin said he believed Mr Spain had said it.

Regardless of what was noted about that meeting, the management and control of the disposal of the Fyffes shares had been delegated by DCC to Lotus Green, he said.

He added that the March 30th, 1998, meeting was a special annual meeting where the board discussed the budget for the coming year and reviewed its corporate development strategy. Part of DCC's long-term strategy was to realise more than £60 million from the sale of the shareholding in Fyffes.

He rejected a suggestion by Mr Gallagher that, if the sale of the Fyffes shareholding was exclusively a matter for Lotus Green, the DCC board could not have had this discussion.

Mr Flavin added that DCC always took the Lotus Green structures seriously.

Mr Gallagher was continuing his cross-examination of Mr Flavin in the long-running action by Fyffes alleging insider dealing in connection with the €106 million sale of the DCC stake in Fyffes in February 2000.

The action is against DCC, Mr Flavin and two DCC subsidiaries - S&L Investments Limited and Lotus Green Limited - who deny the claims and plead the sales were properly organised by Lotus Green.

Because of the courts' Easter vacation, the case, which has run for 48 days before Ms Justice Laffoy, was adjourned yesterday to April 5th.

Yesterday, Mr Gallagher took Mr Flavin through minutes of meetings of the Lotus Green and DCC boards from 1995 onwards.

On several occasions, Mr Flavin said Mr Gallagher was asking him questions about the operations of Lotus Green which he, Mr Flavin, was not in a position to answer but which would be addressed by directors of Lotus Green when they came to give evidence.

He said that when the beneficial ownership of the DCC stake in Fyffes was transferred in 1995 to Lotus Green, this meant little practical change for Fyffes in that Mr Flavin remained on the Fyffes board as a non-executive director.

However, the transfer did mean that the management and execution of the long-term strategy of the DCC board to exit Fyffes became a matter for Lotus Green. He believed all of the Lotus Green directors were aware of that strategy.

Mr Flavin agreed the minutes of the DCC board did not record that the whole logic of the transfer of the beneficial ownership of the shareholding in Fyffes was tax planning and said the minutes could have been more complete and accurate in that regard.

Mr Flavin said he could not recall whether he had instructed that Fergal O'Dwyer, chief financial officer of DCC, be co-opted onto the Lotus Green board as a director. He said that would be "totally logical".

Mr Gallagher said the Lotus Green board minutes also recorded one of the company's directors as asking who was on the board of Fyffes and being told "Jim" was.

Mr Flavin said he was not surprised the Lotus Green director was unaware that Mr Flavin was on the Fyffes board. He said Lotus Green did not need its own representative on the Fyffes board to manage and control the Fyffes shareholding

Asked about his view on the reasons for the surge in the Fyffes share price from under €2 in December 1999 to €4 at the end of February 2000, Mr Flavin said he totally disagreed with the views of Fyffes experts that this was due to Fyffes' trading performance and to the results returned by the company in its results statements of December 14th 1999.

He believed the views of the Fyffes experts were strongly influenced by hindsight and he was surprised they could be so absolute.

Mr Flavin said he was there at the time of the price surge and believed it was driven by market interest in Fyffes internet trading venture, worldoffruit.com. and Fyffes' own promotion of that.