Babcock settles insider dealing action

Babcock & Brown has settled an action in Australia alleging insider trading against Robert Topfer, the director who orchestrated its €2.36 billion takeover of Eircom.

The investment fund paid out "just over A$1 million" (€595,433) to settle claims about the conduct of its successful bid for Australian firm Commander Communications, according to a report in the Australian newspaper.

The fund made the settlement in respect of its own role and that of its executive director Mr Topfer, who joined the board of Eircom after the buyout.

Babcock had said it would vigorously defend the allegations by businesswoman Jacqueline Fraser, wife of a major shareholder in a firm that was part of the Commander transaction.

However, the Australian quoted Babcock spokeswoman Kelly Hibbins saying it agreed to settle the case "to get it off our plate". Ms Hibbins said there had been no admission of liability. The cost of defending the action generally outweighed the prospect of defending it, she said. A Dublin spokesman for Babcock declined to comment further.

Ms Fraser's claims related to deals involving Fixed Wire Holdings, a firm in which her husband Tony Fraser was a major shareholder. Fixed Wire owned RSLCOM, the vehicle through which Babcock & Brown gained control of Commander.

In a claim alleging insider dealing, breach of fiduciary duty and misleading and deceptive conduct against Babcock and Mr Topfer, Ms Fraser had alleged the fund bought her 22.5 per cent stake in Fixed Wire for a tenth of what it was worth. Neither she nor her husband knew that Babcock was in talks to buy Commander at the time of this deal in October 2002, she claimed.

The sale valued their stake at A$1.23 million, or A$23,333 per share. Babcock then sold the shares to Commander at A$300,000 each, a sale worth A$13.5 million. Ms Fraser claimed that other Fixed Wire shareholders and directors knew about the negotiations to sell the company to Commander and that she and her husband knew nothing of the talks.

When Australian telco Telstra sold its stake in Commander to Babcock that year, the fund's interest RSLCOM via Fixed Wire meant it could engineer control over Commander.