Less than 12 pages of financial data central to insider dealing case

AT the heart of the insider dealing action taken by Fyffes against DCC lies less than a dozen pages of financial information.

Contained on those pages are figures about Fyffes trading performance in late 1999 and early 2000, which the fruit importer says was so confidential that, were it released to the market, its share price would fall substantially.

It is this information, the company alleges, that prompted former shareholder DCC and its chief executive Jim Flavin (then a director of Fyffes) to sell the 10% stake that DCC held in the company, in breach of the insider dealing provisions of the 1990 Companies Act.

At stake is the €85 million profit that DCC made from the disposal.

For Fyffes to be successful in the action, it needs to prove two things:

* that Jim Flavin was in possession of price sensitive information that would materially affect the Fyffes share price

* that Mr Flavin dealt or procured others to deal in the shares when they were precluded from doing so.

In December 1999, Fyffes' management were celebrating a record year of profitability.

However, trading difficulties were beginning to emerge. Its banana division, which accounts for only a quarter of group turnover, but around 70% of annual profits, was heading for a serious dip in sales and profits. Its main customers British supermarkets were engaging in a price war and this was hurting Fyffes who were forced to accept lower prices.

Internal documents circulated to senior executives made grim reading. For November 1999, sales were some €10m behind target and it was running a loss of €2.3m.

In January, more internal accounts were given to the directors. The situation had not improved. Sales were still running below the previous year (€11.3m in December) and the company was still losing money.

By the end of January 2000, Fyffes needed to make €91.8m in profits in the nine remaining months of its financial year just to match what it had done in the previous year.

Fyffes has called several eminent accounting and

financial experts to prove accounts for November and December 1999 and the trading report for January were price sensitive.

Fyffes have highlighted March 20 as the day which proves information given to the directors was price sensitive. When the firm disclosed its 2000 results would be behind the previous year, it shares fell almost 15% on that day and a further 9% the following day.

DCC has strenuously denied the claims by Fyffes. It contends investors were well aware of the trading problem in 1999/2000. Several of Fyffes competitors had issued profit warnings and it was a well known that banana prices were under pressure.

And, DCC's legal team said, if the information was so confidential, why did the company not disclose this to investors on the day it released its 1999 annual results on December 14?

DCC has produced its own international experts to dispel Fyffes' claims that Mr Flavin dealt in the shares.

Professor Richard Taffler, an international accounting expert called by DCC, said the core business was "not directly the key driver" of the Fyffes share price surge in early 2000 with the market more interested in Fyffes' dotcom venture, worldoffruit.com.

DCC also says that another director of Fyffes, John Ellis, had sold shares before DCC offloaded its stake. Why that director was not the subject of legal action, they asked.

On the issues of dealing, DCC's legal team says Mr Flavin acted as a "conduit" for the "unsolicited" offers that were made for the company's shares in Fyffes. When to sell was the decision of the board of Lotus Green (whose directors include DCC finance director Fergal O'Dwyer) in Holland. Lotus Green had been set up in 1995 to avail of a tax break in the Netherlands so that DCC would not have to pay capital gains tax in Ireland when the Fyffes shares were sold.

DCC's counsel told Judge Laffoy to "treat with caution" tapes of conversations between Mr Flavin and dealers in Davy and Goodbody Stockbrokers.

These tapes, DCC say, "can be apt to mislead". The company has produced witnesses to reject claims by Fyffes that Mr Flavin was heard dealing on the tapes.

A ruling by Ms Justice Laffoy is not expected until October at the earliest.