High Court hears INM reject 'culture of deference' claim towards Denis O'Brien

By Ann O'Loughlin

Independent News & Media has strongly rejected suggestions of a “culture of deference” within the media group towards its major shareholder Denis O’Brien.

There is also “no basis” for suggestions by the State’s corporate watchdog that former INM chairman Leslie Buckley appeared to have had “untrammelled” influence in the company, Paul Gallagher SC said.

Those suggestions are of immense concern to INM and to its directors who are very experienced people of “unimpeachable integrity”, he said.

Their stewardship of the group was recently endorsed at a general meeting of shareholders, he added.

Mr Gallagher has begun submissions on behalf of INM opposing the application by the Director of Corporate Enforcement (ODCE) Ian Drennan for the appointment of inspectors to investigate a range of concerns over the conduct of INM’s affairs.

Those concerns include an alleged data breach during which data was removed from INM over a period from October 2014 and interrogated by third parties outside the jurisdiction.

Other concerns included the circumstances of a proposed acquisition by INM of Newstalk Radio from a company of INM’s major shareholder, Denis O’Brien, at an allegedly substantial overvalue and the proposed payment of a €1m “success fee” to Island Capital, another company of Mr O’Brien’s, following the sale of INM’s shares in the Australian media group APN.

While neither the Newstalk sale nor fee payment proceeded, the ODCE had a range of concerns about them.

Today, Mr Gallagher said what was said in former INM CEO Robert Pitt’s protected disclosure concerning the alleged data breach was based on what Mr Pitt claimed he was told by INM Information Technology director Gerry Wilde.

INM had been criticised by the ODCE over its reaction when it became aware of the alleged data breach but its response included the establishment of an independent review, he said.

It was important the court understand the context which was a serious dispute between Mr Pitt and Mr Buckley and that Mr Pitt had made a serious allegation about Mr Buckley.

A procedure had to be followed and there was a very thorough investigation by the Independent Reviewers who were people who were “self-evidently” independent and whose integrity was not questioned.

Throughout all of this, INM had taken legal advice and approached the matter based on advice and in a very thorough manner. That was “very different” from the picture the ODCE presented of its response.

Former Chairman of Independent News & Media, Leslie Buckley (left), and Denis O'Brien.

The powers given to the ODCE are so broad and their consequences so serious that it has ramifications for whether the court should appoint inspectors, he said.

Earlier, Brian Murray SC, for the ODCE, said the ODCE had received recent correspondence from solicitors for Mr Buckley saying the only data exercise he was involved in was a cost-reduction exercise.

There was also correspondence on behalf of parties allegedly involved in the removal and interrogation of data from INM to the effect that the matter should be dealt with by the Data Protection Commissioner, whose probe into it continues.

Denis O’Brien has also engaged in correspondence with the ODCE and that correspondence was before the court, counsel said.

Mr Murray argued inspectors are necessary to investigate a range of matters concerning the alleged data breach.

He said the ODCE wants to know who benefitted from the data exercise, why was an invoice in that regard issued to Island Capital and paid by Blaydon Ltd, another company of Mr O’Brien’s. He also wants to know whether copies were made of the data, why was data destroyed and if any of those involved sought to mislead INM or Deloitte when it was asked by INM to prepare a report.

There were also issues about whether the reaction of INM’s Board to the data issue was appropriate.

Mr Justice Kelly asked was there a legal question as to whether this was a “cost-cutting exercise”, as Mr Buckley has claimed, in the context a €650,000 legal services contract for Simon McAleese Solicitors.

The judge asked if there was evidence whether Mr McAleese was ever subject of discussion, saying he would have thought there would have been a discussion with him about reducing his costs.

Mr Murray replied: “Absolutely”.

That, counsel added, would roll into the broader question of what is meant by cost-cutting exercise and what exactly were they expecting to discover in the emails that would allow costs to be cut.

Other issues related to what work was done by Island Capital related to the APN transaction and why had it, and INM director Paul Connolly, withdrawn claims for fees.

The ODCE also wants to know what was meant by the “Cosi deal”, referred to in a text message exchange between Mr Buckley and Mr O’Brien.

Other questions were whether the identity of Mr Pitt was wrongfully disclosed outside INM after he had made a protected disclosure.

There is substantial evidence of matters of concern, such as to meet the criteria under the Companies Act, for inspectors to be appointed.

INM, he said, has argued inspectors would deter recruitment of talent, talented staff might leave, lenders might not provide loans or may only do so only on uneconomic terms, journalists may feel constrained in their reports and clients and suppliers may take business away.

Those arguments have to be seen in the context of INM being a solvent company with substantial cash assets, he said. INM had also not differentiated between the alleged impact of inspectors and the impact on it of the ongoing DPC probe, its litigation against Mr Buckley, potential litigation by persons affected by the alleged data breach and operating in a difficult trading environment.

The hearing continues.

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