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One line in particular stands out from the many colourful quotes that pepper the affidavit filed by Ian Drennan, the head of the Office of the Director of Corporate Enforcement (ODCE), in support of his application to get an inspector appointed to Independent News & Media (INM).
It comes from a conversation in late October 2016 between Leslie Buckley, the then chairman of INM, Robert Pitt, the then chief executive and Ryan Preston, the finance director. Buckley is trying to explain to them – unsuccessfully – why he thinks the company should pay €20 million more for the radio station Newstalk than their own advisers think it is really worth.
“Don’t ye get it lads?” an apparently exasperated Buckley is reported to have asked them.
“It” on this occasion would appear to be the notion that it was acceptable to overpay for the radio station, compared with a valuation which Pitt and Preston were comfortable with, because the beneficiary was Denis O’Brien, the largest shareholder in INM.
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According to the ODCE, Buckley was pretty clear with the two men that he felt the company should be run for the benefit of its two major shareholders; O'Brien and financier Dermot Desmond who own 29 per cent and 15 per cent respectively.
Drennan has sworn that Buckley told Pitt that O’Brien was entitled to a reward for bailing out INM in previous years. He said he was going to do the deal anyway and the price that Pitt and Preston were comfortable with was an insult to O’Brien and he was “not going back to Denis again on price”.
Protected disclosure
Despite all this Pitt and Preston manifestly did not get "it". Days later Pitt made a protected disclosure to the senior non-executive director of the company, Jerome Kennedy – a former managing partner of accountants KPMG.
As well as the Newstalk deal, he also raised a couple of other issues including editorial interference and efforts by Buckley to get INM to pay a “success fee” to a company owned by O’Brien called Island Capital following a transaction in 2015.
Kennedy’s initial reaction seems to have been to try to deal with it as a human resources matter. But Pitt was not just another disgruntled chief executive looking for a payoff.
A week later he made a disclosure directly to the ODCE, setting in train the events that led to last Monday’s hearing in the High Court.
Ten days after Pitt’s disclosure to Kennedy the board of the company finally took action. A “disclosure committee” was established, made up of Kennedy and three other independent directors: well-known Irish business figures Len O’Hagan and Terry Buckley, together with Allen Marshall, a veteran Australian newspaper executive.
The committee met over three days in November before reporting back to the main board which included Paul Connolly – a long-time associated of Denis O’Brien – and David Harrison, who was an appointee of Dermot Desmond. The final member was Triona Mullane, who was considered independent despite O’Brien being an investor in her company.
The board concluded that “there was no evidence of wrongdoing or of any issue which raises serious concern”and according to the minutes of the meeting, discussion then turned to getting rid of Pitt.
But things moved pretty quickly after that. With threats of legal action from Pitt and the revelation that the ODCE was investigating INM, the board moved to set up an independent review. But again the waters were muddied. According to the ODCE, O’Brien had an inappropriate involvement in the company’s response to Pitt’s disclosure to INM. He was consulted on a possible mediator at one stage and had actual influence on the choice of independent reviewers looking into potential transactions that would have benefited him.
The independent reviewers finally reported back last August but their review was inconclusive because they could not decide who was telling the truth, Pitt or Buckley. Pitt was unhappy with both the outcome and conduct of the review, but at that stage appears to have had enough and left the company with a significant settlement.
He also made an additional disclosure to the ODCE about a data breach which forms a significant part of the ODCE’s case for an inspector which was heard by the High Court this week and is being challenged by INM. He had raised the data breach with the independent reviewers but no action was taken.
Two questions
Based on the version of events set out by the ODCE in its affidavit and absent any response from the other parties there are really two questions that arise.
The first one is why didn’t a board made up of the great and good of Irish business take Pitt’s disclosure more seriously? In particular, why were they not more concerned that the chairman said he wanted the company run with the interest of certain shareholders as its priority. As the ODCE puts it: “They did not respond with sufficient concern and alacrity to very serious allegations.” Put another way: did the board get “it”?
The other question is why did Pitt and Preston shout stop? They could have gone along with Buckley on both the Island Capital and Newstalk deals and ignored the data breach. Both of their lives – and those of their young families – would have been easier, to put it mildly. Pitt would probably still be chief executive of INM and in the orbit of O’Brien. Instead he took him on.
Both Pitt and Preston have a couple of things in common. They are both a generation younger than the INM board. They both worked outside of Ireland for most of their careers. Pitt worked for Tesco and Lidl in Eastern Europe and before that he worked in China.
Preston is from Belfast and also worked for Tesco for most of his career, ending up as group finance director for Europe before joining INM.
Neither of them had worked in the tightly-knit upper echelons of corporate Ireland which O’Brien bestrides. Maybe that is why they didn’t get “it”.