Concerns of the corporate watchdog about the extent of influence and control by Independent News & Media's major shareholder Denis O'Brien over the media group is an important issue in Tuesday's hearing of the application to appoint inspectors to INM.
The director of corporate enforcement Ian Drennan is expected to tell the court that neither the resignation last March of Leslie Buckley as INM chairman, nor several measures by the company, including its initiating legal proceedings against Mr Buckley, lessen his concerns about the conduct of INM's affairs.
In proceedings served on Mr Buckley last month, INM claims damages for alleged breach of fiduciary duty, negligence, breach of duty, misrepresentation, breach of contract and wrongful interference with INM’s economic interests. It is also seeking indemnities from Mr Buckley in its proceedings.
Mr Buckley has previously vowed to “robustly defend himself”.
INM will insist that that civil case, along with measures taken by its board and the continuing investigation by the Data Protection Commissioner into an alleged data breach at INM, all address the concerns of the Office of the Director of Corporate Enforcement (ODCE).
These measures, as opposed to inspectors, would not impact the day to day running of its business, it says. It also disputes the corporate watchdog’s claims that the board’s response to the issues of concern has been inadequate.
INM says the board has taken the matters raised by the ODCE very seriously and continues to do so but insists there is no evidence of unlawful conduct and no need for inspectors.
It has argued that Paul Connolly, Mr O'Brien's last remaining representative on the board, has resigned and that a future request by Mr O'Brien for a representative on the board will be considered by the board's corporate governance committee.
The ODCE maintains that the gravity of his concerns are such inspectors are warranted and necessary to get further information about several issues and his application will proceed this morning before the president of the High Court, Mr Justice Peter Kelly.
It is grounded on extensive affidavits from Mr Drennan and on behalf of INM, along with expert reports for both sides addressing information technology issues and the impact of the appointment of inspectors. There are also a large number of exhibits.
The ODCE’s concerns include the interrogation of data removed from INM; the duties of directors; INM’s compliance with the Protected Disclosures Act and the standard of governance of a public listed company over the period at issue.
The application for inspectors follows a year long investigation by the ODCE into issues raised in protected disclosures made in 2016 and 2017 by former INM chief executive Robert Pitt and INM chief financial officer Ryan Preston.
The disclosures included an alleged date breach during which INM data was exported from the jurisdiction over a period of months from October 2014 and “interrogated” by third parties in an exercise allegedly authorised by Mr Buckley and paid for by a company of Mr O’Brien’s.
A number of journalists and two senior counsel to the Moriarty tribunal were among 19 people allegedly subject of the data interrogation which Mr Buckley has said was part of a cost-saving initiative.
The ODCE’s concerns include whether the alleged data interrogation was part of a broader use of INM for the benefit of Mr O’Brien as major shareholder. He disputes the board’s insistence there is no credible suspicion of material wrongdoing against INM or any of its current officers or employees.
The ODCE has said he is concerned INM’s affairs are, or have been, conducted in a manner unfairly prejudicial to some part of its members and says he is relying on “multiple instances” demonstrating the influence of the major shareholder in the day to day affairs of INM.
In that regard, he has noted the proposed acquisition by INM of Newstalk Radio from Communicorp, a company of Mr O'Brien's and a proposed success fee payment by INM to Island Capital Management Ltd, another company of Mr O'Brien's. While neither of those proceeded, they nonetheless raise concerns, he says.
He also noted the vetoing of senior counsel Brian O’Moore for appointment by INM’s board as an independent reviewer of conflicting accounts by Mr Pitt and Mr Preston on the one hand, and Mr Buckley on the other, concerning discussions in 2016 about Newstalk.
Other concerns relating to Mr O’Brien’s influence arose from the receipt of information that appeared to fall within the definition of “inside information” under the Market Abuse Regulations. These examples suggested the interests of Mr O’Brien have been “prioritised” over those of other members of INM, Mr Drennan claims.
He maintains an investigation by inspectors who will have powers, including to take sworn evidence if necessary, is required to get further information about all the issues of concern.