‘Leslie. This storm will pass. Denis’: The INM controversy
Affidavit shows texts between former chairman Leslie Buckley and Denis O’Brien
Businessman and INM shareholder Denis O’Brien and former INM chairman Leslie Buckley. File photograph: Bryan O’Brien
Robert Pitt was 44 years old and chief operations officer of Tesco in the Czech Republic when Independent News & Media (INM) announced, in July 2014, that he was going to take over as its new chief executive.
“The board is delighted to announce the appointment,” said the chairman of Ireland’s largest newspaper publisher, Leslie Buckley
“The news publishing sector faces many challenges and Robert Pitt, whose extensive experience includes change-management and digital strategy, is well equipped to lead INM into the future.”
It hasn’t quite worked out as Buckley envisaged. Over the past three years Pitt and Buckley have been party to a number of serious disputes, all of them involving INM’s largest shareholder, businessman Denis O’Brien, whose nominee Buckley was on the INM board.
Disclosures by Pitt about the disputes with Buckley have led directly to an application that is to be mentioned on Monday before the president of the High Court, Mr Justice Peter Kelly, for the appointment of inspectors to INM. It is a disaster for one of the State’s premier media organisations, publisher of the Irish Independent and Sunday Independent, the Evening Herald, other titles, and a news website.
Even if the application from the Director of Corporate Enforcement, Ian Drennan, is not approved, what has emerged already from the affidavit he has filed is hugely damaging to INM’s reputation, and will continue to cost INM dearly in terms of legal and other fees. It also raises serious questions about media ownership in the State.
In the affidavit, which has yet to be opened in court, Drennan says he has “very significant concerns” about the role played by Buckley as O’Brien’s nominee on the INM board. “It cannot be,” he said, “that a nominee chairman/director is permitted to override the interests of the company to further the interests of the nominating shareholder.”
What his inquiries to date at INM had uncovered, he said, suggested, at the very least, that the interests of the company and the other shareholders had been put at risk of prejudice by Buckley’s interactions with O’Brien.
Although Pitt’s appointment was announced in July 2014, he was not in a position to take up the role until later that year. In the meantime INM was run by a committee comprising Buckley and non-executive directors Triona Mullane, Allan Marshall, and Terry Buckley (no relation to Leslie).
In October 2014, around the time Pitt was to take over from the committee headed by Buckley, the backup tapes from the INM server were given to a company in Wales called Trusted Data Solutions. It appears these tapes contained information, including emails, going back years. One of the matters Drennan wants investigated by High Court inspectors, is why this happened.
Access to the tapes, according to Drennan’s affidavit, was given to a number of companies and individuals, some of whom also supply cybersecurity and physical security services to O’Brien’s telecoms operation in the Caribbean, Digicel. Buckley is a vice chairman of Digicel.
The bill for the interrogation of the data was not paid for by INM but rather by an Isle of Man company called Blaydon. As was revealed by this newspaper in November 2017, as part of its Paradise Papers coverage, Blaydon is beneficially owned by O’Brien, though its ownership is not apparent from its company filings in the Isle of Man. The company has had bank accounts here since 2011 through which large sums of money, sometimes up to €2 million a month, are transacted, with instructions coming from O’Brien’s offices on Grand Canal Quay, Dublin.
In January, when O’Brien was in Davos, Switzerland, at the World Economic Forum, he declined to comment when asked by The Irish Times if he had paid for work relating to the apparent data breach.
Buckley told Drennan the removal of the tapes was part of a cost-cutting exercise wherein he was examining the background to the contract INM had with the law firm, Simon McAleese & Co, which provided defamation advice to the media group’s main titles.
McAleese had been providing defamation advice to INM for years, long before O’Brien spent a whopping €500 million investing in INM shares, that have since largely lost their value, and thereby replacing Anthony O’Reilly as INM’s largest shareholder. The McAleese contract has since ended and has not been renewed.
Drennan is not satisfied by Buckley’s explanation and has stated in his affidavit that the purpose of removing the data remains unclear. In the material his office collected during its investigations is a list of “persons of interest” about whom it appears, the INM data was “interrogated” for “hits”. Among the names searched for were two barristers who acted for the Moriarty tribunal, which published a report in 2011 that was enormously damaging to O’Brien’s reputation.
Buckley told Drennan’s office that the INM board knew about the October 2014 data exercise but the board has said that this was not the case. In 2017, when Pitt first queried what had occurred in 2014, the board made a report to the Data Protection Commissioner, Helen Dixon. Drennan has said this report underplayed what had occurred.
In his affidavit Drennan noted that there is a particular sensitivity associated with data arising from the work of journalists. The apparent data breach seems likely to have involved highly sensitive material about sources of information for journalists at INM coming into the hands of third parties. Drennan does not say so but obviously the data could involve sources such as government ministers, politicians generally, members of An Garda Síochána, civil and public servants, and people involved in commerce and civil society organisations.
Within months of Pitt taking up his post, a dispute arose over a proposed €1.5 million payment by INM to a company owned by O’Brien.
During early 2015, INM was involved in selling its interest in an Australian media group called APN. On the day the deal was completed – March 18th – Pitt and INM director Jerome Kennedy received an email from Buckley containing a proposal from Island Capital, a company owned by O’Brien, that it would be paid a fee of 0.9 per cent (approximately €1.5 million) from the proceeds of the APN sale, in return for the work it had done. Pitt, it appears, did not believe Island had done any work on the deal.
Pitt responded to Buckley saying that Island Capital had added no value to the transaction and that if such a fee was to be paid, it would have to be publicly declared given INM’s status as a publicly-listed company and the link with O’Brien. On receipt of this advice, according to Pitt, the fee “was pulled”.
According to Drennan “it is obviously of concern that there was even consideration of payment of a fee to Island Capital in circumstances in which Island Capital may not have provided any services warranting such a fee.”
Two years later the matter was considered by independent reviewers appointed by the INM board.
They concluded that, contrary to what Pitt had said, Island Capital had in fact done work of significant value. They had, they said, been persuaded by the evidence of Kennedy in this regard.
Drennan, in his affidavit, said that while he noted the conclusion of the independent reviewers, “what is not clear from report is the basis on which the independent reviewers preferred the evidence of Mr Kennedy over Mr Pitt”.
In the affidavit Drennan also quoted some text messages between O’Brien and Buckley that were exchanged in March 2015, on the morning after Buckley had sent his email to Pitt and Kennedy.
At 8.48 am O’Brien texted Buckley: “Leslie, don’t mention Cosi deal to anybody thanks Denis.”
Four minutes later Buckley responded: “Denis mentioned it to Jerome and Robert yesterday so to get their buy in but was not specific We in INM need to handle it very carefully Leslie.”
O’Brien responded immediately: “OK. Let’s talk later thanks.”
Last year, according to Drennan, Buckley was asked about this exchange. He said that the reference to a “Cosi deal” might have been to an outdoor advertising deal then being considered by O’Brien in China, or may have been to discussions Buckley and O’Brien were having as to the role to be played by APN director Ted Harris, after INM had sold its stake in the Australian company.
“With reference to either possible explanation,” Drennan said in his affidavit, “why the chairman would consider it necessary to get Mr Pitt’s or Mr Kennedy’s “buy in”, is unclear.”
Asked about the reference to “we in INM need to handle it very carefully”, Buckley said this was a reference to how he and O’Brien were anxious that Harris had a continuing role at APN post the exit of INM.
O’Brien was not asked about the exchange by Drennan as he is not an officer of INM and Drennan had no right to ask him for information. Nor has he responded over the past two weeks to media requests for comment about what is happening at INM. If inspectors are appointed, they will have the power to question O’Brien or order him to produce documents if they believe he has relevant information.
In or around September 2016, a proposal was made to INM that it buy the Newstalk radio station. The station is one of those owned by O’Brien by way of his Communicorp group, which also includes 98FM and Today FM. Newstalk is loss-making but it was considered by INM that the transaction could involve interesting “synergies” with its newspaper and online news operations. Where a chasm existed between the two sides, however, was over the price.
INM got advice from Davy stockbrokers who suggested the station could be worth around €12 million, possibly €14 million. Communicorp had a valuation from Dublin corporate finance operation IBI, that the station could be worth up to €35 million. According to Pitt and INM chief financial officer Ryan Preston, they were being pushed by Buckley to approve the deal at the higher price, even though it was more Buckley’s form to push executives to reduce the price they were paying for services or assets being bought by INM.
Texts quoted in the Drennan affidavit include one between Buckley and the chair of Communicorp, Lucy Gaffney, who is a long-time business associate of both Buckley and O’Brien and was a former director of INM, where she was an O’Brien nominee. The text was sent on September 19th, 2016, soon after the proposed sale was first mooted.
“Hi Lucy I met with Robert when I got back this afternoon and there won’t be any announcement this week as he is gone away to consider after my chat with him. Very enthusiastic about the meeting last week but understandably concerned about the price required Leslie.”
Pitt had strong concerns about the price being proposed and discussed the matter with INM’s advisers, Davy (see panel on page 1). At one stage, according to Drennan’s affidavit, it was suggested by Buckley that Davy could be pressed to increase its valuation of Newstalk (this did not happen). It is also stated that, during one meeting when Buckley was pressing his senior executives to go with the deal, he said: “Do you not get it lads?”
In the event the deal did not go ahead. In November Pitt approached Kennedy and said he was making a protected disclosure about the matter. Kennedy, according to Drennan, wanted at first to treat the issue as a human resources problem. But Pitt made an internal INM protected disclosure.
On December 5th, Preston also made a protected disclosure. His was made to INM director Len O’Hagan, and it supported what Pitt had said in relation to the Newstalk issue.
On the valuation that had been put on Newstalk by IBI, Preston said he thought it was “crazy” and that the logic used to support the valuation was “bordering on insulting”. He even thought the Davy valuation was “excessive”.
The Protected Disclosures Act of 2014 is designed to protect so-called whistleblowers who draw attention to apparent problems in the workplace. The Act prohibits sacking or retaliating against employees who make qualifying disclosures. As well as being the law, INM had its own policies on whistleblowing and the protection of those making qualifying disclosures.
On November 11th, 2016, Pitt made an internal INM qualifying disclosure to INM non-executive director Kennedy. According to Drennan, Kennedy at first wanted to treat the matters raised as a human resources issue, but Pitt did not believe this was an adequate response.
Also on November 11th, according to Drennan’s affidavit, Buckley sent a text to O’Brien saying that he would go with “plan A” in relation to the dispute that had erupted within INM between Buckley and Pitt over the proposed Newstalk deal.
O’Brien’s response, at 21.40, was brief: “Leslie super Munster win.. thanks for text.. go with Ed Molloy?? Regards Denis.”
Forty minutes later Buckley responded in turn: “Thanks Denis and great win Regards Leslie.”
Molloy is a well-known and highly regarded management consultant. The mediation never went ahead.
The INM board created a subcommittee of its members comprising Terry Buckley, Jerome Kennedy, Allan Marshall, and Len O’Hagan. It was called the Disclosures Committee and it considered Pitt’s statement and heard from Buckley. The committee met over two days in late November and concluded on the second day that nothing had been disclosed by Pitt that raised serious concerns for the company. It then, according to Drennan, citing a note kept by INM solicitors McCann Fitzgeralds, immediately addressed itself to getting rid of Pitt.
According to Drennan’s affidavit, O’Hagan sent a text to Buckley on November 28th saying: “I know its galling for us but I believe we now have to write the cheque and be done with him.”
Buckley responded: “I have our legal people working on it.”
O’Hagan responded: “Good call. Len.”
The next day Buckley sent a statement to Gaffney, the Communicorp director, noting that, following questions from The Irish Times, news of a dispute was now in the public domain. “Now that it is out, the pressure goes on Pitt.”
On December 11th, by which time Preston had also made an internal INM disclosure, O’Brien sent a text to Buckley; “Leslie. This storm will pass. I know it is awful for you... but we need to play the long game. This will put pressure on the two malcontents... Ultimately we have to get them out and pay them. Best regards. Denis.”
Buckley responded; “Dear Denis Thanks and I agree with your comments. I had a good meeting with Paul and I agree with both of you that it will take longer than I had hoped... Rgrds Leslie”
Buckley has said he will 'robustly defend my position against each and every allegation'
Pitt was unhappy with the decision of the disclosures committee and, after he had threatened legal action, it was agreed that an independent reviewer would be appointed look into his disclosure. David Byers of McCann Fitzgerald suggested that Brian O’Moore SC might conduct the review, and the board agreed. Pitt and Buckley, for obvious reasons, were not part of this selection process but, according to Drennan, within minutes Buckley knew of the outcome. He immediately contacted O’Brien, even though the review was about a proposed sale that would, according to Pitt, have excessively rewarded O’Brien at the expense of INM.
“Is against me in a case that Declan Ganley and Comcast are taking re the mob licence,” O’Brien said in a reference to O’Moore’s role in litigation over the 1996 mobile phone licence award that had been won by O’Brien’s Esat Digifone, and lost by a consortium involving Ganley. “Avoid if possible”
The following day Buckley discussed the issue with Byers of McCann Fitzgerald. According to Byers note, Buckley objected to O’Moore acting as an independent mediator on the basis that the barrister had acted for a company that had a case pending against a business in which Buckley was a shareholder, called Nualtra.
Byers, according to Drennan’s affidavit, said this was the type of situation that barristers handled all the time, but it was nevertheless agreed that INM would “pursue other options.”
In time the committee appointed David Barniville SC, now a High Court judge, and Stephen Kingon, a former managing partner of PricewaterhouseCoopers in Northern Ireland, to conduct the independent review. Drennan, in his affidavit, expresses concern about the role apparently played by O’Brien in “vetoing” O’Moore.
O’Brien and Buckley discussed the controversy and the appointment by way of texts on December 11th and December 12th. Buckley’s response on December 12th to a text from O’Brien read:
“Hi Denis. All ok. I met Brian Harmon this morning and he is very helpful. The non-execs [non-executive directors of INM] are meeting at 6 pm this evening to hopefully agree Business Person plus lawyer who will do the review. Nigel is finishing the statement that I will send to you despite Management not wanting to this Regds Leslie.”
Brian Harmon is a public relations adviser who has been providing advice to O’Brien since the early 2000s. He provided advice to and attended alongside former Anglo Irish Bank chairman, Seán Fitzpatrick, during the 126-day criminal trial that ended with the banker being declared not guilty in 2017 of alleged offences investigated by the ODCE. The conduct of the ODCE investigation was criticised by the trial judge and created a controversy that called into serious question the agency’s competence and fitness for purpose. The pall from the debacle still hangs over the agency and the INM investigation is its highest profile action since then.
In the event, the independent review failed to resolve the “stark conflict” between what it was told by Pitt and Buckley, and could not advance the matter because it was a review, not an inquiry, and the reviewers did not feel it was appropriate for them to cross-examine anyone. It is important to remember that the proposed Newstalk sale never went ahead.
The independent review was established in December 2016 and reported to the INM board in August 2017. Meanwhile, Pitt had, in late November 2016, made a protected disclosure to the ODCE and Preston had met with Drennan at Drennan’s request. The fact that there was a rift at the top level of INM and that the topic was the price to be paid for Newstalk in a proposed deal that never went ahead, was also by then publicly known.
In late 2015, INM received an invoice from Trusted Data Solutions, the company that had been involved in “interrogating” the data taken from the INM server in 2014. Pitt queried the invoice as it did not appear to relate to any work done for INM. The bill was subsequently paid by Blaydon. It is not known when INM became aware that Blaydon was owned by O’Brien.
The tensions within INM were still very live when the board met on August 9th, 2017 and approved the special committee’s recommendation that it accept the report of the independent reviewers. Pitt complained that the reviewers had not conducted any cross-examinations but the board noted the reviewers’ position that this was not required given their assigned role. Buckley said it was clear the accusations made against him had not been upheld. Pitt said his actions in relation to APN had saved INM €1.5 million. He said he and Preston had acted in good faith and without malice.
On the day after the board meeting, Pitt made an additional disclosure to the ODCE about the apparent data breach.
In October 2017, Pitt, who had negotiated a substantial severance deal, announced he was leaving INM. In January of this year it was announced that Buckley was to stand down. He left his position on March 31st last. Also in January four new directors were named for the INM board, with Murdoch MacLennan, the former chief executive of the Telegraph Media Group in the UK, taking over from Buckley. Preston remains with the media group.
The board is receiving legal advice on the Drennan application from Paul Gallagher SC, Shane Murphy SC, and McCann Fitzgerald. During the week the company secretary wrote to those on the “persons of interest” list notifying them that their data on the INM server may have been the subject of an “unauthorised” breach that happened on the instructions of Buckley. It was a very clear statement of a position on the part of the company against the former chairman appointed by the group’s largest shareholder.
Buckley has said he will “robustly defend my position against each and every allegation”. Drennan has said his concerns about INM persist, even though the central figure in the issues highlighted in his affidavit, has resigned. INM has felt constrained legally from commenting about the allegations set out in the Drennan affidavit but no doubt will in time respond through the court.
Requests for comments from INM, O’Brien, Gaffney, Davy, IBI, and Island Capital, met with no response.