Evidence touches on rivalry of brokers

Fyffes' broker Davy was miffed when Goodbody got the contract in late 1999 to raise finance for the worldoffruit.com venture, writes Colm Keena.

The evidence of Fyffes chairman Mr Carl McCann yesterday touched on rivalry between Goodbody and Davy stockbrokers.

Goodbody was pleased when it got the contract in late 1999 to raise finance for Fyffes' worldoffruit.com project. Davy, broker to Fyffes, was miffed, and Mr Kyran McLaughlin of Davy later made this clear to Mr McCann.

Davy and Mr McLaughlin were also a bit miffed when Goodbody became involved again when, in late January/early February 2000, it became obvious that DCC plc was going to sell its large stake in Fyffes. There was huge interest in the stock as a result of the dotcom phenomenon and both brokers saw a prospect of earning substantial fees.

Davy was broker to both DCC and Fyffes. Mr Jim Flavin was chief executive of DCC and a long-time non-executive director of Fyffes. Mr McCann said Mr Flavin skilfully played Davy off against Goodbody in order to maximise the return on the share sale.

Mr McCann said Mr Flavin, a director of Fyffes, had asked Davy to become involved in the sale of a substantial shareholding in Fyffes and to not tell Fyffes about the sale, even though Davy was broker to Fyffes. He has earlier expressed the view that Davy "took sides" in the affair, because Davy was miffed in relation to the worldoffruit fundraising.

On February 3rd, Mr McCann was in London meeting potential investors in worldoffruit when he got word that DCC was selling its stake in Fyffes. In the middle of speaking about this great new Fyffes venture, it emerged that one of the company's major shareholders was bailing out.

Worse was to come. DCC in time sold the bulk of its shareholding in Fyffes for €106 million. A few weeks later, on March 20th, Fyffes issued a "pretty horrible" profit warning. At its annual meeting on that day, Mr McCann said, Goodbody's food sector analyst, Mr Liam Igoe, was "as white as a ghost". Fyffes share price fell by a quarter within two days. "This was deadly serious stuff," Mr McCann said. The stock exchange, he said, was "a cruel place".

A lot of angry investors in Ireland, Britain and the US were soon making their feelings known. Brokers were getting very negative calls and Goodbody's asked Fyffes to speak to the people who'd lost out.

Mr McCann recalled one particular "negative" conversation with a fund manager in Denver. "She was complaining that the share price had gone down and that she'd lost a lot of money."

Memos by Mr Carl McCann and his father, Mr Neil McCann, concerning conversations with Mr McLaughlin at the time of and subsequent to the DCC sales, give contrary indications as to whether Mr McLaughlin said the sales had been initiated by Mr Flavin or by Davy. The point could be a key one in the case as the defendants say Mr Flavin merely passed on interest in the shares to a DCC subsidiary.

Mr McLaughlin will be called as a witness by DCC. Mr Michael Cush SC, for DCC, said yesterday that Mr McLaughlin's evidence will be that one of the memos is wrong, and that he never said to the McCanns that Mr Flavin initiated the sales process.

Mr McCann said he believes the memos are accurate. He used what he said he feared might be a silly analogy. "At a dance you might wonder who made the first move, was it the girl who made eyes at somebody, or the guy who came over?"

Mr Cush said Mr McLaughlin would say he never suggested that Mr Flavin initiated the process, and that he did not volunteer the idea that Mr Flavin might have a problem in relation to the sale.

Mr McCann, for his part, stuck to his recall of a meeting he and his father had post the DCC sale in the Davy offices with Mr McLaughlin.

Nearing the end of his cross-examination of Mr McCann, Mr Cush said that everything Fyffes did in the run-up to the February sales was inconsistent with the idea that the company had price-sensitive information. He referred to:

the granting of share options;

giving permission to a Fyffes executive to trade in shares;

encouragement in a letter from Fyffes post the sale of the first tranche of shares by DCC, for DCC to sell off the remainder.

Mr McCann said the company did have price-sensitive information at the time.

The granting of permission to sell shares to Mr John Ellis was a mistake, the granting of share options was decided by the remuneration committee which was chaired by Mr Flavin and the letter of encouragement was a "clumsy letter" that should not have been sent.

Mr Cush said everything Fyffes said in the period from December 1999 up to and including communications with the Dublin and London stock exchanges in the wake of the March 20th profit warning, was inconsistent with the idea that Fyffes had price-sensitive information in January 2000.

Mr McCann said that at the end of January 2000, the position was very clear.

Ms Justice Laffoy will, in time, give her view on that statement.