Friday 18 August 2017

Adviser had 'conflict of interest' in pub merger

Stock image
Stock image

Tim Healy

WELL-known publican Frank Gleeson has accused his former financial adviser of having an alleged “palpable and unashamed conflict of interest” because he acted for both sides during a merger of two chains of Dublin pubs, hotels and restaurants.

Patrick Burke - who is now chief financial officer of Delaware USA-registered company, EMI-MR Investments - represented Mr Gleeson when the Mercantile group merged with the Capital group in February 2016 to form Ardan Advisory, Mr Gleeson says in a sworn statement to the Commercial Court. Mr Gleeson says he was appointed chief executive of the merged company's operating entity, Mercantile Entertainment Group, because of his long experience in the industry.

Following a dispute with Ardan's 70pc majority JT Magen (Capital Bars) LLC and Danu Advisory Partners, Mr Gleeson has brought proceedings claiming they are conducting the affairs of the company in a manner oppressive to him as 30pc shareholder.

The principals in Danu are Leonard Ryan and Michael O'Rourke who founded the Setanta Sports TV business in the 1990s, along with Mark O'Meara an accountant and investment banker with Bank of Ireland, Mr Gleeson says.

JT Magen is a New York-based construction firm primarily owned by Kerry-born businessman Maurice O'Regan, along with Michael and John Breslin, who previously owned a scaffolding business in the US, he says.

Among his claims are that there has been "a centrally co-ordinated and orchestrated campaign of oppression against me" in conjunction with Mercantile, which he says they control.

It is also in conjunction with EMI-MR, which has brought separate proceedings seeking a €4.6m judgment against Mr Gleeson over loans to him in 2016. Mr Gleeson says that during 2016, it became apparent the majority shareholders had grown intent on undermining his position as ceo, through measures including that he did not get monthly management accounts.

He says that Patrick Burke, who formerly worked for Grant Thornton, had been his trusted adviser on financial matters for six years. But, it has since transpired, Mr Burke also acted on behalf of the Breslins in connection with the merger, he says.

Mr Burke, he says, is now cfo with EMI-MR, which is suing Mr Gleeson, and is also on the board of Ardan. He believes Mr Burke's role in the newly merged entity "in which he sought to act on both sides of the pre-merger transaction represents a very significant conflict of interest" in circumstances where the majority shareholders were seeking to take advantage of "an overarching scheme designed to oppress and undermine my interests". Mr Gleeson also claims a number of things occurred through 2016 which were part of the process of marginalising him and undermining him. These included an attempt to remove "hard-working and experienced" finance director, John Feeley, and replace him with former Anglo Irish Bank ceo David Drumm.

This suggestion was put to him by Mr Burke, on behalf of Michael Breslin, Mr Gleeson says.

He regarded this as "bizarre and misconceived in the extreme" because of Mr Drumm's lack of experience in the hospitality industry.

An "extraordinary development" took place on November 4 last when Mr Burke advised Mr Gleeson that "Mr Breslin had reached the conclusion that I had been my own boss for too long and Mr Breslin was unable to continue to work with me".

As a result of "the growing realisation" the merger was not working, discussions began about a potential de-merger but when they did not work out, he says, a "campaign of commercial aggression designed to cow me into submission" began.

Mr Gleeson was put on "garden leave" on December 21 last and the judgment proceedings by EMI-MR over his loans followed shortly afterwards. He says Mr Burke "appears to be one of the driving forces behind the strategy of shareholder warfare being waged against me".

Mr Gleeson's proceedings alleging shareholder oppression were admitted, on consent, to the Commercial Court by Mr Justice Brian McGovern, who urged the parties to consider mediation.

Irish Independent

Also in Business