`Credible story' sought for MMP group audit, High Court told

The founder of Master Meat Packers group, Mr Paschal Phelan, gave instructions that "a credible story" should be prepared in the event of accountants Coopers & Lybrand (C&L) getting the go-ahead for an audit of the MMP companies, according to a document read to the High Court yesterday.

The document, a written summary of a meeting attended by Mr Phelan and others in November 1987, stated that Mr Phelan said C&L should not be allowed spend time at MMP factories and only a one-day visit to factories was to be sanctioned. It added it was "agreed unanimously" that "no benefit could be gained from having the C&L report completed and used as a basis for comparison against the audited figures".

A discussion document regarding the proposed C&L audit also stated C&L might request to count stock "which would certainly reduce any scope that we may have to make at year end to alter its value".

It also noted the MMP auditors, Arthur Andersen, would have to be notified of the C&L proposal "and when their turn comes to conduct the audit, they will leave no `stone' unturned and would probably request to examine C&L's report".

The document stated that, on disposal of the MV Bandon, a sum of $250,000 was received "and it was not lodged in the company's funds. This item would be a highly contentious one for examiners and it is our opinion that it should be lodged forthwith or adjucted accordingly via directors' loan".

The document further noted the difference between published results and C&L's examination "will have to be explained".

Mr Dermot Gleeson SC, for beef baron Mr Larry Goodman, said C&L had stated later it had not encountered anything in the course of its review which undermined the accounts given to it by the management of MMP but it indicated some adjustments would have to be prepared. Mr Gleeson said he understood there was a finalised C&L report but he would inquire into that.

Counsel read a large number of documents when continuing his outline of Mr Goodman's case yesterday in the actions between Mr Phelan, Mr Goodman and others.

Mr Phelan has claimed Mr Goodman conspired to force him out of the beef processing industry by secretly controlling a 50 per cent stake in MMP. He is suing Mr Goodman for £30 million (€38 million) damages and interest and claims that, without his knowledge, he was "sold out" by his former partner in MMP, a Jordanian businessman, Mr Zakariah El Taher, to Mr Goodman.

For the purpose of the court proceedings, Mr Goodman accepts he owned and controlled MMP since 1987 but both he and Mr Taher deny any wrongdoing. Mr Taher alleges Mr Goodman acted to defraud and damage Mr Phelan with a view to eliminating Mr Phelan and MMP as competition to Goodman International or with a view to establishing a monopoly in the Irish beef industry.

The court has heard Mr Taher's shares in MMP were held by a Liechtenstein entity, Master Meats Anstalt (MMA), and these were allegedly sold to another Liechtenstein entity, Tarsas Anstalt, belonging to Mr Goodman.

Yesterday, Mr Gleeson read documents dating back to 1986 which, counsel said, indicated the relationship between Mr Phelan and Mr Taher was fraught before Mr Goodman came on the scene.

Mr Gleeson said there was "a history of open warfare" between Mr Phelan and Mr Taher and Mr Phelan had attempted to rid himself of Mr Taher long before Mr Goodman was involved and before Mr Taher's shares were allegedly sold in 1987.

Mr Gleeson said it was being contended Mr Goodman had engineered an awful fight and bad blood between the MMP partners but this was not the case.

A letter written shortly before the shares sale of 1987 stated Mr Phelan and Nasser El Taher had disagreed irreparably on how MMP should be run and that Mr Phelan was weary of all the problems, arguments and twisting of circumstances and wanted a termination of the partnership.

This contradicted the claim that Mr Phelan wanted to stay with MMP. There were also endless recriminations and exchanges after the 1987 share sale.

Counsel read other documents which he said indicated the MMP group was losing money in 1987 and 1988. He said the picture of the group's finances which was given to its bankers was "rosier" than the reality. There was a much worse version of events of which the bank was unaware.

He said management accounts for the 32 weeks to August 1987 showed a net loss of £1.4 million. This compared with a £2.12 million profit for the previous year.

Mr Gleeson said the loss was sustained when MMP was under the management of Mr Phelan and when Tarsas had little or no involvement. By August 1987, there was a very sorry state of affairs in MMP and it was no wonder Mr Phelan was seeking an exit.

Just a month later, a letter of September 21st 1987 stated Mr Phelan no longer wished to stay with MMP and wanted to know the terms on which Mr Taher would acquire his shareholding.

Counsel added a handwritten note of December 1987 stated "time was of the essence" and referred to "making plenty of losses at this stage".

Mr Gleeson said the MMP group was under pressure in the late 1980s as a result of falling cattle numbers due to lower milk quotas, narrow margins and high interest rates.

He said documents from 1987 indicated it was clear MMP would need an equity injection to compensate for high bank borrowings and an investor with a long-term view. This, counsel said, was the company which was being offered for sale by Mr Phelan in 1988.

He said the value of Mr Phelan's shares in 1988 was £2.75 million and all the valuers were in and around that. In retrospect, this was an overpayment, counsel said.

The hearing before Mr Justice Murphy resumes on Tuesday.