DCC only has itself to blame for the close scrutiny it now faces
Not before time, wise counsel prevailed at DCC last week after Mr Justice Peter Kelly agreed to a request by the Director of Corporate Enforcement to appoint an inspector to investigate the affairs of DCC and two related companies. DCC had the option of appealing to the Supreme Court and, after pondering the issue overnight, decided not to.
Given that DCC had suffered a crushing reversal in the Supreme Court in its marathon legal tussle with Fyffes, the chances of Justice Kelly's ruling being reversed were slim and none. And as far as DCC is concerned, slim has left town.
DCC now joins the ignominious ranks of Dunnes Stores, Ansbacher Cayman and National Irish Bank in having a High Court-appointed inspector trawl through its affairs. But the company only has itself to blame.
When the Supreme Court decided a year ago that DCC and former executive chairman Jim Flavin had engaged in insider trading, the business world waited for the DCC board to find a scapegoat. And waited, and waited. Instead, in a number of statements, the DCC board effectively rebuffed the highest court in the land.
This head-in-the-sand attitude must surely have steeled corporate enforcer Paul Appleby's to send in an inspector. The process will be long and tortuous. Once the inspector, barrister Bill Shipsey, produces his report, Appleby may be in a position to pursue disqualification orders against some of DCC's directors and executives.
Paul Appleby is very thorough. Last week, Patrick Byrne, a former senior manager with National Irish Bank, was disqualified by the High Court for four years from involvement in management of a company. Byrne was the fifth scalp Appleby has secured, arising out of the inspector's report into NIB published four years ago.
Before appointing an inspector, the High Court had to be satisfied that DCC's affairs had been conducted in an unlawful manner. On this point, the only concession from DCC was that the company had failed to make proper notifications in 1995 when its shareholding in Fyffes was transferred to two connected companies for tax planning reasons. Appleby argued that the "suppression" of this "price sensitive information" may have constituted insider dealing. That's a novel issue on which Shipsey will have to draw his own conclusions.
DCC also contended that Appleby is on a fishing expedition. The Director had already publicly conceded that without an inspector's report, he wouldn't be in a position to pursue legal sanction against DCC principals.
In DCC's view, after an 87-day hearing in the High Court and the subsequent appeal, there is nothing left to investigate. Justice Kelly disagreed, noting that the inspector might uncover breaches of the Companies Act which were not disclosed in the earlier proceedings. He added that it is in the public interest for an inspector to uncover "culpability or responsibility" surrounding the Fyffes share sale transactions in 1995 and 2000.
In his application to the court, Appleby alluded to the fact that five people on the DCC board in February 2000 were also on the board in July 1995 when the first alleged instance of insider trading occurred. At the time of the Director's application to the High Court, three of them were still on the board. Some of these individuals, and others, may yet have cause to regret that Michael Buckley, DCC's senior independent director last year and now chairman, decided not to organise a firing squad after the Supreme Court ruling. Had he done so, Appleby might not have pressed the nuclear button.
Nick Mulcahy is editor of Business Plus magazine.