High Court Inspector exonerates Jim Flavin

Brendan Burgess

Brendan Burgess

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The report's [broken link removed]go to 84 pages on their own. Here is the key bit about Jim Flavin

Mr. Flavin - Deliberate Wrongdoing or Dishonesty?

11.3.86 I have concluded, on the basis of all the evidence which I have heard from all of the witnesses and from Mr. Flavin himself, that there was no deliberate wrongdoing or dishonesty on his part.

11.3.87 Although he was ultimately held by the Supreme Court to have dealt (contrary to his assertion) and to have been in possession of price sensitive information when he dealt, his was an error of appreciation and judgment: judgment as to what the Supreme Court would find as a matter of law to constitute ‘price sensitive’ information within the meaning of Section 108 of the Companies Act, 1990.

11.3.88 His conclusion that he was not in possession of price sensitive information had a rational, if legally wrong, basis. There were a number of reasons which, objectively speaking, were relevant to any consideration as to whether he was or was not in possession of price sensitive information.

11.3.89 Mr. Flavin, DCC and all of the individual directors and officers
accept, as they must, that the Supreme Court found as it did. Nonetheless, it is relevant to report that none of the directors or advisers or the stockbrokers for the institutional investors who purchased the sales were of the view that the information was price sensitive. I
think this belief was, and continues to be, genuine, and not merely because it suited them. As Mr. Kyran McLaughlin remarked in his evidence “This was an unfortunate set of circumstances.”

11.3.90 The findings of Ms. Justice Laffoy (cited above) that Mr Flavin did not use the information in dealing and, further, that the information did not in any way motivate the share sales are findings which I believe have been surprisingly overlooked. They, together with the finding that Mr Flavin did not communicate the confidential information contained in the trading reports to any person, are important findings both generally with regard to the reputation of Mr Flavin and DCC, but also in the context of my investigation into the 2000 share sales. My findings reflect the honesty and integrity of Mr Flavin and, indeed, all of the officers and directors interviewed by me and highlight the fact that, while what might be described as a “perfect storm” in February 2000 which ultimately led to a finding that Section 108 had been breached by Mr Flavin, DCC and S & L (but not Lotus Green), the transactions were not tainted by dishonesty or deliberate wrongdoing.

11.3.91 The evidence of the independent witnesses, Mr. Barrett and Mr. McLaughlin, both of whom acted for the purchasers of the shares, is compelling and striking in confirming that as far as they were concerned Mr. Flavin and the DCC Group conducted its business with honesty and integrity.
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[broken link removed]


Another interesting extract from the report

“No finding of mine can repair the reputational damage to both DCC and Jim Flavin. At least, however, the suggestion that the dealing was intentionally wrongful, or that it was evidence of dishonesty on the part of Jim Flavin and of a culture of disrespect for the companies code in DCC, can be dispelled.”
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The damage done to Jim Flavin has been immense. The shareholders have lost out as well, by losing such a good guy from the company, even though the company has done well without him.
http://www.irish-lawyer.com/journal/2010/1/19/jim-flavin-gets-some-justice.html (<br /> Good analysis on Irish-Lawyer.com)

I was a shareholder in Fyffes at the time. The fundamental trading figures were simply not an issue for determining the share price. It was all aobut the WorldofFruit.com and how many zillions that was going to earn from the company. In common with most dot com stocks, trading losses or even reduced profits were just not a concern.

Statement of interest: I was a shareholder in DCC at the time and still am.
 
It might be the case that he was taking advantage of the dot.com bull run, but if he did have insider information that could have influenced the price then was he not duty bound by law to not transact in those shares? I don't believe there is room here for nuance.

Also, the absurd and persistent suggestion made by Mr Flavin that the sale of the Fyffes shares was not instructed by him (but by a Dutch entity acting independently) ranked for me as a new low. I think the ease at which he seemed able to make this claim and the clear assumption on his part that he would get away with it suggested that he might not be alone in Irish business in acting like this. That perhaps is the real painful reading here.

It is genuinely difficult to read this report as being independent when its conclusions seem to be stuffed with 'opinions' from other insiders who make a living out of exactly what happened in this case - lawyers, tax consultants, Flavin's stockbrokers etc.
 
There seems to be a distinction drawn here between

(i) having the knowledge and
(ii) engaging in dealing based on the knowledge

There is no doubt that he had the knowledge.
There is some doubt that he engaged in dealing based on the knowledge.

Other parties approached him to sell the shares we are told.
Should he not sell the shares merely because this knowledge was available to him?

My understanding is that he couldn't disclose the knowledge without incurring a breach of trust.
I also understand that releasing this knowledge would have devalued the shares owned by DCC.
In other words he was twice damned if he revealed what he knew.

He was also bound to act in the best interest of his company.
He was in receipt of a fair offer for the shares and to refuse to sell them might have been seen to act against his company by not taking a profit.
If that had ocurred and the shareholders found this out they might have referred him to Paul Appleby and he might have been answering complaints by them.

If my assumptions are correct then he was required to sell the shares and say nothing.

Only if it was the case that there were other,compellign reasons for him not to sell the shares could he have credibly retained them without censure of his own shareholders.
The fact that neither purchaser claims grievance in this regard and both made the approach to him first suggests the report is fair and balanced.

No direct connection to either company although I know one person who works for DCC - not yer maun.

FWIW

ONQ.
 
My understanding is that the Supreme Court thinks there was insider dealing but the High Court Inspector disagrees. Naturally so, we in Ireland don't have such things as insider dealing or any white collar crime for that matter. Everybody is far too honest. And nobody will ever go to jail for any white coller crime whatsoever.
 
I understand this differently.

The Supreme Court found as a matter of fact that there was insider dealing.

The High Court Inspector found that it was not deliberate wrongdoing or intentional dishonesty.

He also found that Jim Flavin understands and adheres to the highest standards of corporate governance.

The fact that a lot of business leaders have behaved badly, does not mean that all our top executives are corrupt.
 
I was discussing this today with a client with bank connections [who raised it] and he was more inclined to the negative view so we tossed it back and forth.

We agreed that the issue centred on whether or not there was a history of approaches to sell shares previously which were rebuffed.

If there was, but this time [with the insider knowledge] Flavin sold, then it seemed that a case could be made that he did so with the benefit of that knowledge.

That's not to say he couldn't have decided to sell if he hadn't the knowledge, but without it that would be happenstance if the shares later fell.

ONQ.
 
Brendan said:
I understand this differently.

1. The Supreme Court found as a matter of fact that there was insider dealing.

2. The High Court Inspector found that it was not deliberate wrongdoing or intentional dishonesty.

3.He also found that Jim Flavin understands and adheres to the highest standards of corporate governance.

4. The fact that a lot of business leaders have behaved badly, does not mean that all our top executives are corrupt.
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<numbers added for brevity>

Names and personalities aside, on reflection this dosn't seem to make any sense, although I accept your summary is accurate.

If 1. is true and it is an offence then 2. cannot be , 3. falls and 4. is a non-sequitur.

Murder and manslaughter are separated by premeditation and intent.

Is it being suggested by this Report that the shares were sold accidentally, or that such a huge transfer of assets was done "in the heat of the moment"?

ONQ.
 
1. The Supreme Court found as a matter of fact that there was insider dealing.

2. The High Court Inspector found that it was not deliberate wrongdoing or intentional dishonesty.


If 1. is true and it is an offence then 2. cannot be
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Why not?

He decided to sell the shares. He did not consider it to be insider dealing. Therefore he was not doing wrong deliberately and he was not being intentionally dishonest.

He knew the law very well. He was trying to adhere to the law.

Let's be absolutely clear, the High Court judge agreed that it was not insider dealing. This is not a black and white legal issue - it is a matter of opinion. The Supreme Court judges found that it was insider dealing and this will inform people in possession of such information in future.

He made an error of judgment.
 
Don't get me wrong Brendan,

I'm not trying to be moralistic on this one.

I am trying to understand the hierarchy of decisions and legal implications.

The Supreme Court judges decision cannot be subverted by a High Court ruling

Thus, I fail to see how lesser institutions can issue this Report which says this now.

ONQ.
 
There is no difference between the two rulings.

Both accept that there was insider trading.

The Supreme Court did not rule on the motivation behind it.

The High Court Inspector did.

Read again a barrister's explanation on Irish Lawyer.com. He explains the technical nature of the offence.

http://www.irish-lawyer.com/journal/2010/1/19/jim-flavin-gets-some-justice.html

Brendan
 
Brendan, I'm struggling with your view that this is a simple case of an error of judgement. I think Flavin deserves a bit more credit than that...

The law is quite simple, and for good reason, that you can't transact in shares when you have insider information. To suggest that Flavin did not know he had insider information is a moot point I think. Parsing this into the degree of influence this had on share prices seems to me to ignore the the law. Approaches by other parties made to a party who has insider information should not exonerate the latter from his duties under law.

You haven't commented on DCC's (Flavin's) tax avoidance scheme in Holland, which patently could never have worked. The fact that tax consultants and lawyers concocted and aided such nonsense gives me little confidence in the views of such 'experts' given in Shipseys report. The fact that Flavin clearly knew it was a nonsense gives me little confidence in him.
 
I don't accept the 'damned if you do, damned if you don't' explanation. If this was the case, it was entirely predictable as a result of the position he had entered. He should therefore (given all the expert advice available to him) made sure he wasn't put into this position.

Some interesting comments from today's Irish TImes letters page are worth sharing;
Madam, – Who is Bill Shipsey to tell us that Jim Flavin has no case to answer? (“Flavin deal an ‘error of judgment’, Fyffes inquiry concludes”, January 20th).
Surely it is a matter for the Director of Public Prosecutions to prosecute Mr Flavin and let a jury decide if he has done something illegal. Justice would be seen to be done. At present it appears that Mr Flavin has got away with thumbing his nose at the Supreme Court. – Yours, etc,
CJ ROBINSON,
Pinewood Crescent,
Dublin 11.
Madam, – I wonder if a new legal defence has been created in Irish law by the findings of yesterday’s Shipsey report, which found that, contrary to the facts and the clear breaches of the law and regulations, a genuinely held belief of no wrongdoing is now a good defence in law. Or is this just shipsey-wash? – Yours, etc,
OLIVER WALDRON,
Golf Gardens, Rio Real,
Los Monteros,
Marbella, Spain.
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roland said:
You haven't commented on DCC's (Flavin's) tax avoidance scheme in Holland, which patently could never have worked. The fact that tax consultants and lawyers concocted and aided such nonsense gives me little confidence in the views of such 'experts' given in Shipseys report. The fact that Flavin clearly knew it was a nonsense gives me little confidence in him.
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I have not seen this mentioned in the report which did surprise me.

The way it was portrayed in the media made it appear like tax evasion.
This happened some years ago.
The Revenue would have conducted an audit.
I had expected them to be named in the Tax Defaulters list.

However, the legislation was changed very shortly after the DCC transaction, so maybe the Revenue also felt that it was a technical offence, if indeed there was any offence.

Brendan, I'm struggling with your view that this is a simple case of an error of judgement.
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that was the conclusion of Shipsey who spent months investigating it.
 
The Supreme Court has ruled that there was insider trading. This is illegal. I don't care whether Flavin didn't or did know it was wrong, what he did was illegal. A person with such a position has a responsiblity to ensure that they don't insider deal and have the resources to seek good advice in order not to do so even in error.

Take these two scenarios

a) If I buy a car in the North and bring it South and don't pay VRT because I don't know that's illegal and I didn't do it deliberately to avoid the law then now is that a defence? Tell that to customs and excise.

b) If I in error don't declare all my income on my tax return, say I received 1K for a job and forgot about it (genuinely forgot to put it in the return when doing the calculations which can easily happen) revenue are in no circumstance not going to penalise me. It's not a defence.

But maybe now that we have this new defence from the High Court we can all benefit from it. But of course this new defence doesn't apply to the little people.
 
Complainer said:
I don't accept the 'damned if you do, damned if you don't' explanation. If this was the case, it was entirely predictable as a result of the position he had entered. He should therefore (given all the expert advice available to him) made sure he wasn't put into this position.

Some interesting comments from today's Irish TImes letters page are worth sharing;
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Absolutly right complainer, they sum it up very nicely.
 
Bronte said:
Take these two scenarios

a) If I buy a car in the North and bring it South and don't pay VRT because I don't know that's illegal and I didn't do it deliberately to avoid the law then now is that a defence? Tell that to customs and excise.

b) If I in error don't declare all my income on my tax return, say I received 1K for a job and forgot about it (genuinely forgot to put it in the return when doing the calculations which can easily happen) revenue are in no circumstance not going to penalise me. It's not a defence.

.
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I am not sure that I understand your point here. Both examples you give are criminal offences for which you could go to jail. You will not be prosecuted for either. In fact, I would guess that in case b) you won't be penalised either because of the size of it.

It is popular to say that there are two laws - one for the big people and one for the small people. The reality is that there is a criminal law for serious criminal offences and many small offences such as the oversight you mentioned are not prosecuted at all.

But perhaps you would like to see our jails filled up with everyone who made an error of judgment?

Brendan
 
I see two laws, I see wrong doing by politicians and bankers in particular (people in powerful positions) but I never see any of them going to jail for anything. It never happens, but I do know that plenty of small time debtors have gone to jail in the last year so yes I think there is one law for the rich and one for the poor.

If I'm incorrect prove me wrong rather than asking me to prove it the other way round.

In Ireland it seems to me that those in positions of power can subvert planning laws, receive expenses without receipts, hire consultants on amazing salaries, appoint friends and political allies to boards and quangos, run billion euro bodies (FAS) that are completely incompetent, get loans from banks without any paperwork, have regulators dining with bankers and when the going gets tough a fall guy is found who rides off into the sunset with a bribe for silence of a lump sum addition to pension, none of this is illegal. We have bankers moving money around willy nilly and loaning vast sums of money to developers on a phone call fueling the property bubble and then those same bankers giving outrageous loans to borrowers to purchase houses built on these same sites so the borrowers will be mortgaged for life to pay the builders who in turn pay the bank. And very soon now we'll have the banks turning the screws on those same mortgage holders with higher interest rates to pay back NAMA.

We have had two ex taoishigi have bank loans written off when in financial difficulty and I wonder how many current politicians have the same situation currently.

The powerful circle in Ireland of which Flavin is a member are too cosy, be that politicans, bankers, developers, directors & judiciary. It leads to complete corruption. That is what we have in Ireland complete and utter corruption.

Here now in this case the Supreme court has found wrongdoing but once again somehow it's ok because sure it was an error of judgement.

If the Supreme court has found that someone was doing insider dealing, and that is an offense under the law and the person should get punishment for that.

We now finally have one clear case of white coller crime and once again nothing so it makes me angry.
 
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Regardless of the detail of Shipsey's report, at the end of the day, it comes down to Shipsey's opinion and interpretation of the facts.

If this happened in the USA, he would be coming to the end of his time in jail about now.
 
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