INM tells court of risks to the company if inspectors are appointed
Independent News & Media (INM) has told the High Court the appointment of inspectors would cause very significant risks to the company and its shareholders.
The country’s largest media group is opposing an application by the corporate watchdog for the appointment of inspectors to investigate a range of corporate governance issues, including a major suspected data breach in 2014.
Paul Gallagher SC, for INM, said the media group feared there would be a very serious risk of disruption to its business if the appointment is approved by the court.
INM is concerned its reputation will be affected and shareholder value will be damaged by an inquiry not directed at any current aspect of the company’s operations, he said.
Mr Gallagher was speaking on the third day of a hearing before the President of the High Court, Mr Justice Peter Kelly.
INM is opposing the appointment of inspectors, but the Office of the Director of Corporate Enforcement (ODCE) argues this is necessary as it has gone as far as it can with its inquiries using the powers available to it.
Mr Justice Kelly said there was no surprise in what Mr Gallagher was saying.
He said it was bad news for the ODCE to be conducting an investigation and even worse news for it to apply for the appointment of inspectors.
“It doesn’t work to the company’s benefit either commercially or financially for an application of this sort to be made,” he said.
The court previously heard INM had asked that if inspectors are appointed, their remit should be “tightly drawn” and should at a minimum not overlap with an ongoing inquiry being conducted by the Data Protection Commissioner and a potential inquiry being considered by the Central Bank.
The ODCE wants inspectors to investigate the “interrogation” of data taken from INM’s premises by an external company in 2014.
The interrogation was authorised by then INM chairman Leslie Buckley, who claims he was looking for information relating to a legal services contract he wished to renegotiate as part of a “cost reduction exercise”.
However, evidence uncovered the ODCE suggests the data interrogation was for another purpose and there are fears the names of journalists, barristers, and former INM directors and executives were used to search the data.
Invoices related to the data interrogation were discharged by a company owned by INM’s largest shareholder Denis O’Brien.
Mr Buckley was Mr O’Brien’s nominee to the INM board.
The ODCE also wants inspectors to examine claims senior INM executives were put under pressure by Mr Buckley to purchase Newstalk, a radio station owned by Mr O’Brien, for an inflated price.
It also wants then to investigate a proposal that a €1m fee be paid to Island Capital, a company owned by Mr O’Brien, following the sale of INM’s shares in Australian media group APN in 2015.
The Newstalk deal did not go ahead and no fee was paid to Island Capital.
The ODCE also believes inspectors are required to investigate concerns price sensitive “inside information” was shared by Mr Buckley with Mr O’Brien.
Mr Gallagher told the court that if inspectors were to be appointed their inquiry should be limited in its scope and not be the far-reaching investigation put forward by the ODCE, which would cause “immense damage”.
He said the court had the option of allowing the other bodies, the Data Protection Commissioner and the Central Bank, to carry out their investigations.
If these proved inadequate, that would not preclude a further investigation at that stage.
He said that if there were still matters outstanding, they would be discrete and could be dealt with at that stage.
The barrister said that while the Data Protection Commissioner did not have the power to hold oral hearings, she did have significant powers to conduct an investigation and had prosecutorial powers.
“We say this is a matter the Data Protection Commissioner could deal with,” he said.
Mr Gallagher said the ODCE had gathered a lot of information, including conversations between Mr Buckley and others which on the face of things contradicted Mr Buckley’s account of the data interrogation.
The ODCE could have given this information to the competent authority, the Data Protection Commissioner, at the time, but didn’t.
He said no explanation was given for this and the judge was entitled to take this into account when exercising his discretion.
In relation to concerns about “inside information” and market abuse regulations, he said the Central Bank had asked for papers and would decide if action was required.
Earlier this week, counsel for the ODCE suggested there had been a culture of deference within INM towards Mr Buckley and Mr O’Brien. This has been rejected by INM.
Mr Gallagher drew the court’s attention to two letters sent to Mr Buckley’s solicitors by a special committee of INM’s board in which he was challenged over responses given to queries from the committee.
One of those letters stated Mr Buckley’s interaction with the committee had fallen below the standards that would be expected.
It was claimed response by solicitors on Mr Buckley’s behalf did not answer questions posed.
One of the letters said Mr Buckley’s failure to respond gave rise to the risk that the ODCE would take some sort of action.
Mr Gallagher observed that the two letters were anything but deferential and it could be seen the committee had been dealing with a difficult situation.
The barrister also said the position of INM’s board had been one of seeking to get to the bottom of things.
He said the manner in which INM had complied with requirements for the production of records demonstrated the seriousness with which the board had dealt with such requests.
Mr Gallagher said that if Mr Buckley, while he was chairman, had done what was alleged, he had done so in breach of his duties, but he was not in control of the company.