Tuesday 19 March 2019

Watchdog's bid for inspectors came as 'bolt from the blue' for INM, court hears

The Director of Corporate Enforcement Ian Drennan. Photo: Steve Humphreys
The Director of Corporate Enforcement Ian Drennan. Photo: Steve Humphreys
Shane Phelan

Shane Phelan

THE application by the corporate watchdog to appoint inspectors to Independent News & Media (INM) came as "a bolt out of the blue", was "inherently unfair", and caused "significant damage" to the company's share price, the High Court has heard.

A lawyer for INM told the court that despite the Office of the Director of Corporate Enforcement (ODCE) conducting a 14-month-long inquiry, which the company had fully cooperated with, no prior notice was given of the application.

Paul Gallagher SC said the company learned of a number of matters, including critical information about a major suspected data breach, on March 23 - only on the day the watchdog indicated it would be seeking the appointment of inspectors.

ODCE director Ian Drennan wants the High Court to approve the appointment of inspectors, with far-reaching powers, to investigate a range of corporate governance issues at the country's largest media group. This is being opposed by INM, which is taking judicial review proceedings in a bid to halt the application. Opening those proceedings before Mr Justice Seamus Noonan, Mr Gallagher said INM had not been afforded fair procedures.

He said that although Mr Drennan had a duty to afford INM the right to make representations, the ODCE director had not done so.

Among other issues, the ODCE wants inspectors to investigate a "data interrogation" allegedly directed by former INM chairman Leslie Buckley.

Journalists Brendan O'Connor and Sam Smyth are among 19 people whose names are feared to have been searched for in the data.

The ODCE is also concerned that "inside information" may have been shared by Mr Buckley with INM's largest shareholder, Denis O'Brien. The ODCE has also raised concerns over the content of whistleblower disclosures about a proposed deal for INM to buy Newstalk, and the manner in which those disclosures were handled by INM.

Mr Gallagher said Mr Drennan expressed "serious criticism" of INM but the company had not been in a position to address some of the concerns as it was not made aware of them prior to being notified of the application.

He said, for example, that INM was not previously aware of the existence of a spreadsheet containing 19 names discovered by the ODCE in connection with the suspected data breach.

This had been in the possession of the ODCE since October 2017, but was disclosed it to INM only last March.

The failure to disclose it earlier was "very damaging" as it prevented INM from informing the people involved and from reporting the matter to the Data Protection Commissioner earlier than it did. Mr Gallagher said it was "extremely damaging" for a media company, where the trust of the public in its employees was "of paramount importance".

The barrister also said the "inside information" issue had not previously been brought to the company's attention.

He described as "factually wrong" a claim by Mr Drennan that INM's first reaction to a protected disclosure by former chief executive Robert Pitt was to discuss terminating his employment.

He said Mr Drennan's decision to seek the appointment of inspectors had "very serious" consequences for INM in terms of reputational damage and damage to INM's share price.

He said INM had a very high standard of corporate governance procedures and would have assured the ODCE of this if it had been made aware of the concerns earlier. He said that although the ODCE had considered INM's response in recent weeks, it was still going ahead with the application.

The case continues today when Brian Murray SC will address the court on behalf of the ODCE.

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