DCC chief executive Jim Flavin did not have price-sensitive information about Fyffes when the company sold its 10.5 per cent share in the fruit importers, the High Court has been told.
Expert witness, Michael McGrail, a partner in the accountancy firm of PricewaterhouseCoopers (PWC), Dublin, said he had analysed Fyffes' documentation and it did not support the Fyffes claim that Mr Flavin had price-sensitive information.
Mr McGrail is the first of a number of expert witnesses giving evidence on behalf of DCC, two of its subsidiaries - a Dutch company, Lotus Green (which owned the 10.5 per cent Fyffes) and S and L Investments, DCC House, Stillorgan, Co Dublin - and Mr Flavin who are defending an action brought by Fyffes.
Fyffes' claim concerns the sale of DCC shares in Fyffes on three dates in February 2000 for €106 million. Fyffes allege the share deals, which yielded a profit of €85 million were organised by DCC and Mr Flavin in breach of "insider dealing" provisions of the Companies Acts.
Fyffes claims the defendant had price-sensitive and confidential information regarding Fyffes trading performance at the time of the share deals on dates from February 3rd to February 14th, 2000. It is alleged that Mr Flavin had significant and highly confidential information not available to the market at the time indicating "a decline" in the underlying trading performance of Fyffes.
The defendants deny the claims and plead that Lotus Green dealt in the shares in a proper manner; that Mr Flavin had no involvement other than passing on to Lotus Green unsolicited bids for the shares.
Mr Flavin has already given evidence that he rejects the claim that information sent to him in January 2000 about Fyffes trading performance for the first quarter of the fiscal year 2000 was price sensitive.
Fyffes claims it was price sensitive because it disclosed a negative trading performance by the company for that quarter which cast doubt about its ability to meet its half year targets.
Yesterday, the 69th day of the hearing, Mr McGrail gave evidence on a report which he prepared for DCC regarding Fyffes claim. He said the two documents where it was alleged the price-sensitive information was, were, the Fyffes November 1999 management accounts and its December 1999 summary trading report.
Mr McGrail said he reviewed Fyffes documentation from November 1995 to May 2000. He said an analysis of Fyffes first quarter showed Fyffes analysis to be unpredictable and of volatile nature. A key feature to emerge from the PWC analysis was the immateriality of the first-quarter profits in relation to Fyffes full-year profits.
Mr McGrail also told the court that despite the volatility and unpredictability of Fyffes first quarter profits, Fyffes management had been able to formulate consistently accurate views of the annual profits of the company in its annual budgets.
Mr McGrail said that in his analysis PWC had compared the alleged price-sensitive information with Fyffes analysis of profits for the first quarter of 2000 which was discussed at the Fyffes board meeting on December 9, 1999. The analysis included a draft report prepared by Mr Frank Gernon, Fyffes group finance director which was dated March 23rd, 2000 (subsequent to the sale of the shares and the resignation of Mr Flavin as a Fyffes director).
In that draft, Mr Gernon had referred to a hand-written note of his own which he used to brief Fyffes board members at a December 9th, 1999 meeting. (In that note he had said that January 2000 could be behind budget).
Mr McGrail said that the financial information prepared by Mr Gernon for the Fyffes board was similar to if not more pessimistic than that which subsequently became available to Mr Flavin through the alleged price sensitive information.
In his report to the court, Mr McGrail said that in addition to financial information, the alleged price-sensitive information also contained a brief commentary about different segments of Fyffes businesses. It also stated that the forecast shortfall in January was due to weak banana prices. The summary provided no indication that the financial information represented a change in Fyffes financial or commercial prospects.
Mr Paul Gallagher SC for Fyffes, in cross examination, said Mr McGrail had told the court that in August 2004 PWC was requested by DCC solicitors to prepare a report in relation to Fyffes' claim. But Mr McGrail had given evidence, he said, that he also prepared a report in 2002 pertaining to the same Fyffes claim. That earlier report was not mentioned in Mr McGrail's report opened in court. Mr McGrail said he believed the 2002 report was privileged.
Mr McGrail agreed his involvement in the 2002 report was not identified in the report before the court. He was not sure but he believed his role as an advisor to Fyffes was consistent with the role of an independent expert.
He would have seen the instruction given to him by solicitors in August 2004 as being the preparation of reports specifically for the current case whereas the 2002 report resulted from instructions received from DCC.
He agreed that PWC were auditors to DCC, had been involved in DCC's flotation and involved as tax advisors to Lotus Green.
Mr Gallagher asked if Mr Flavin was of the view that that Fyffes "first quarter" was not material to its annual profits. Mr McGrail said Mr Flavin obviously had focused on the alleged price sensitive information and his (Mr Flavin's) view would have been that the first quarter was not one of the main profit earning periods for Fyffes.
PWC had then gone away to try to establish their own view as to the relevance of the first quarter.The hearing before Ms Justice Laffoy continues today.
