Findings on Fyffes deal could take a year - Appleby

CORPORATE LAW enforcer Paul Appleby has indicated that any disqualification proceedings against people involved in DCC's illegal sale of its stake in Fyffes could be more than a year away.

Speaking in advance of hearings on his application to have High Court inspectors appointed to DCC and two of its subsidiaries, Mr Appleby acknowledged such inspectors would be "doing well" to have their work completed within 12 months if the court agrees to their appointment.

Only after such inspectors complete their work will he decide whether to initiate disqualification proceedings against anyone involved in the share transactions in 2000.

Crucial to his consideration, Mr Appleby said, will be whether the inspectors make any findings of misconduct.

DCC founder and executive chairman Jim Flavin abruptly left the business on Tuesday after Mr Appleby notified the company that he had initiated the process of asking the High Court to appoint inspectors. A full hearing of the case is scheduled for June 9th.

There was no comment from DCC yesterday on whether it will seek in court to prevent the appointment of inspectors or will accept Mr Appleby's intervention.

As investors digested news of Mr Flavin's departure from the company he established in 1976, DCC shares dropped more than 2.4 per cent in a rising market to close last evening at €14.99.

At the publication of his annual report yesterday, Mr Appleby said the Department of Enterprise, Trade and Employment will bear the upfront cost of any inspectorate but added that costs would be sought from DCC if findings went against the company.

He acknowledged his action was "certainly unwelcome" from DCC's perspective but stressed that an inspection would deal only with the particular issues raised by the Fyffes transactions.

He was not proposing an inspection into the company at large.

Mr Appleby indicated Mr Flavin's insistence last week that he would stay in his post until his scheduled retirement in July 2010 was of no significance to his deliberations.

He said he had made his decision two or three weeks ago and had been preparing the ground for his action since then.

"The advice I have is that a High Court inspection is by far and away the best option," he said. Such a route was preferred because matters heard during the High Court and Supreme Court proceedings between DCC and Fyffes were not "evidentially useful" to him. "There's no way we can use that evidence," he said.

"It is my considered view that in any further investigations, my office would also face substantial difficulties in acquiring a standard of evidence sufficient to ground any future enforcement proceedings."

If appointed, the inspectors would examine the work of "directors, managers and employees" who had an involvement in the illegal sale by three DCC companies of Fyffes shares in 2000.

The transactions were executed by Mr Flavin, then a Fyffes director, in the weeks before a profit warning from Fyffes led to a sharp decline in the the fruit-importer's share price.

Mr Flavin held information at the time of the sales, which was not widely available, about a deterioration in Fyffes' business or trading performance.

DCC would be the focus of the inquiry, Mr Appleby said. Asked whether any of Fyffes' activities would be examined, he said they would not but he indicated that he would be referring to that company in his affidavit to the court.

"Insofar as any further action is required, I will keep things under review . . . Obviously it's possible that some information may come to light which would warrant me to change that position."

Mr Appleby said his approach to the court on Tuesday wasn't technically an ex parte application, adding that he lodged papers fully in accordance with the Companies Act and served DCC with papers.

He did not anticipate significant difficulties in relation to DCC's Lotus Green unit due to its Dutch registration and believed its status as a subsidiary of DCC would ensure that it gave full co-operation to any inspection.

Asked if the tax treatment of the share trades would be examined, he indicated that this was not within the initial terms of reference he is seeking.

However, it would be open to inspectors to ask the court to amend their terms of reference if they found something outside their immediate remit which they felt should be examined.