Question was 'misunderstood'

ANALYSIS: The chief executive of DCC plc, Mr Jim Flavin, arrived back from a two-week holiday in January 2000 to discover there was new interest in Fyffes shares, the High Court was told yesterday. Colm Keena reports.

During January, a Fyffes team was in Europe and the US making presentations to potential investors and, according to DCC, creating "unprecedented demand for its shares".

Internet stocks were all the rage. Fyffes had big plans for its internet fruit portal, Worldoffruit.com. Mr Flavin believed the price was being driven by the internet project.

The shares were selling at €1.60 at the beginning of December 1999. By the end of January 2000, they were at €3.30.

Brokers from Davy and Goodbody stockbrokers had international institutional investors who were interested in buying into Fyffes. DCC had a 10 per cent stake.

According to letters from William Fry solicitors, for DCC, read out to the court, it was after a firm offer was made to Mr Flavin that brokers were told to contact a Dutch subsidiary of DCC and deal with it directly.

The subsidiary was Lotus Green, a company with a majority of Dutch directors but which was structured in such a way that, in effect, no major decision could be taken without the agreement of an Irish DCC executive who was on the board. In early 2000, the Irish director who was on the Lotus Green board was Mr Fergal O'Dwyer.

According to the 2001 letter from DCC's solicitors to Fyffes' solicitors, read out in court yesterday, it was after Mr O'Dwyer contacted a fellow Lotus Green director in the Netherlands, that a board meeting was held to discuss the possible sale of the Fyffes' shareholding.

Mr O'Dwyer contacted the Dutch director after he had been contacted by Mr Flavin, who had in turn been contacted by the brokers.

By way of his membership of the Fyffes board, Mr Flavin was privy to confidential trading information concerning Fyffes in early 2000.

Both he and DCC say the information he had was not price sensitive. Furthermore, they say Mr Flavin did not carry out the Fyffes share deal and did not communicate the information he had to Mr O'Dwyer or Lotus Green.

Lotus Green was set up with the sole purpose of holding the Fyffes shares and so benefit from Dutch tax law, which allowed Lotus Green to sell the shares but not incur a tax bill. For the scheme to work, Lotus had to be located in the Netherlands and manage and control the shares.

A Lotus Green board meeting held on the morning of February 3rd, in Amsterdam, resolved to sell the shares if an offer of €3 per share, or more, was made.

During the day, Mr Flavin had a number of conversations concerning the possible sale of Fyffes shares by DCC, including ones with Mr Ronan Godfrey, head of the equity desk at Davy Stockbrokers, tapes of which are available.

Mr Paul Gallagher SC, for Fyffes, read out transcripts of some of these conversations yesterday as part of his ongoing opening statement.

Mr Godfrey and Mr Flavin discussed the potential deal and Mr Godfrey made a firm bid at €3.20 per share. Mr Flavin said he had no authority to do the deal and that people from the Netherlands would be in contact. A Lotus Green director, Mr Diepenhorst, then called Mr Godfrey and confirmed the deal without discussing any details.

The two stockbroking firms were paid 0.5 per cent commission each from the first sale, which involved a consideration of €57.3 million. Two subsequent deals were handled solely by Goodbody.

Some weeks after the share deals, Fyffes issued a trading statement and the share price fell sharply. The stock exchange initiated an inquiry and, in a reply to it in September 2000, DCC said the persons who had been involved in the February 2000 share deals were the directors of Lotus Green, Mr Flavin and Mr Michael Scholefield, the then DCC company secretary.

In August 2004, following a review with its lawyers, DCC wrote to the stock exchange saying it had misunderstood the question it had been asked. The persons who had conducted the deal were the directors of Lotus Green. Mr Flavin and Mr Scholefield were not involved.