McCann memo scrutinised

A memorandum written by Fyffes chairman Mr Neil McCann after a conversation with Mr Kyran McLaughlin of Davy Stockbrokers stated it was "quite clear" that Davy and Goodbody stockbrokers were stopped by DCC chief executive Mr Jim Flavin from talking to Fyffes around the time of controversial dealings in Fyffes shares in February 2000, the High Court has heard.

Part of the memo, dated July 18th, 2000, was read in court yesterday by Mr Paul Sreenan SC, for Fyffes, while counsel was re-examining Fyffes chief executive, Mr David McCann.

Mr Sreenan said the memo was from Mr Neil McCann to his son, Fyffes deputy chairman, Mr Carl McCann, and counsel wished to refer to it in the context of Mr David McCann having earlier told the court he believed Neil and Carl McCann had raised concerns with Davy stockbrokers about an investor presentation organised by Davy on January 31st, 2000, just days before the first controversial share sale of February 3rd, 2000.

Mr David McCann said he now believed that presentation was in fact arranged by Davy to facilitate the sale of DCC shares in Fyffes. The memo recorded Mr Neil McCann's account of a conversation with Mr Kyran McLaughlin. In that part of the memo which Ms Justice Laffoy directed could be read, Mr Neil McCann said: "I also asked about the presentation arranged at short notice by Davys and was this at the institution of DCC or was the decision made by Davy themselves." The memo recorded that Mr McLaughlin's answer was that "once the intention was clear, they would put the normal machinery into action".

The memo continued that it was "quite clear that Goodbody and Davy were stopped from talking to the company by Jim Flavin".

Asked about the memo, Mr David McCann said he understood the reference to "intention" was the intention by DCC to place the shares. Before February 3rd 2000, he said Fyffes had no idea what was going on. He had since regarded the January 31st presentation as part of the selling process for the DCC shares. He added that Mr Flavin did not advise the Fyffes chairman or receive clearance for the share dealings of February 2000.

The re-examination of Mr McCann concluded yesterday and Mr McCann departed the witness box after nine days. He was the first witness in the proceedings in which Fyffes claims that the €106 million share sales of February 2000 were organised by DCC and Mr Flavin in breach of insider dealing provisions of the Companies Acts. The claim is denied by DCC, Mr Flavin and two DCC subsidiaries.

They plead that the share sales were legitimately organised by the DCC subsidiary, Lotus Green Limited. The case entered its 15th day yesterday and the indications now are that it will continue into the summer.

Mr Jimmy Tolan, an executive director of Fyffes, yesterday afternoon became the second witness in the case. He gave detailed evidence about the nature of Fyffes business and the critical importance of the company's banana division to profits.

Mr Tolan described Mr Flavin as a very able, skilful, hands-on and experienced non-executive director who in 1999 had had a significant influence on the Fyffes board for some 19 years. He was seen also as the representative of the 10 per cent DCC shareholding in Fyffes and such was the influence of DCC that Fyffes would not contemplate any major transaction without DCC approval.

Mr Tolan said Mr Flavin was "someone in a different league" and knew the financial community, brokers and the stock market better than Fyffes did.

Mr Tolan outlined how 1999 had started very well for Fyffes but then the situation gradually deteriorated, leaving the company facing considerable difficulties by the end of the year.

At a board meeting on December 9th 1999, all board members present, including Mr Flavin, had before them a board pack including a summary profit/loss for the months to October 1999. The information in those documents was confidential and not available to the general public. Mr Tolan had made a presentation about internet companies.

At this stage, Fyffes had retained Goodbody Corporate Finance with the objective of raising $20 million (€15.2 million) for a minority shareholding in Fyffes internet business, worldoffruit.com. He and Mr Flavin had discussed internet valuations and Mr Flavin expressed the view that values would fall and that he would swap value for speed and certainty in relation to the proposed worldoffruit.com fundraising, he said.

Mr Tolan said it would be an overstatement to say the executive directors felt "confidence" about the outlook for 2000. He also had no recollection of Mr Flavin questioning the Fyffes executive directors about reasons for their "positive outlook".

Mr Tolan said the defendants had also claimed that the full board was happy to approve the preliminary announcement of December 14th, 1999, concluding with the words: "2000 will be another year of further growth for Fyffes" but that was not his recollection. He said a sub-committee was designated by the December 9th meeting to finalise the text of the December 14th announcement and he believed he did not see the final text until that announcement was made on December 14th.

He said the December 14th outlook statement had to be a forward-looking document. Asked whether the words true or accurate might be applied to it, he said a person could not be asked whether a forward-looking statement was true. This was akin to asking whether a view that it will rain in three months time is true. The outlook statement was dealing with a future event that was about to unfold.

In late January 2000, he received the trading statement for the two months to December 30th, 1999 and the forecast for January 2000. Mr Flavin should also have received these. The consequence of the documents was that Fyffes was at that point €13.9 million behind the previous year and €7.4 million behind budget. These figures - for the first three months of a financial year - were €10 million worse than the poorest figures recorded in the previous 10 years.

This information was confidential and not something of which the stock market was aware. If it had been made known to the public, he believed it would have led to a fall in the Fyffes share price. At this point, he felt that Fyffes needed to win two court cases it was involved in if it were to make its half-year targets for the financial year 2000.

The case resumes on Tuesday before Ms Justice Laffoy.