INM director quizzed over O’Reilly pay

A non-executive director of Independent News and Media said yesterday he stands by claims that a €1.87m departure payment to the company’s former chief executive Gavin O’Reilly was done with “undue haste”.

Paul Connolly was being cross-examined on the opening day of his action against INM over a 7-2 vote by the company’s board on Apr 19 to make the payment to secure Mr O’Reilly’s retirement as chief executive and director.

Mr Connolly, who was nominated in 2009 to the board by INM’s major shareholder Denis O’Brien, and re-elected in subsequent years, is seeking declarations from the Commercial Court that the payment was unlawful under the Companies Act because it should first have been approved by the shareholders.

Mr Connolly told his counsel, Michael Cush, it took about 45 minutes of discussion at the Apr 19 meeting before the vote in favour of Mr O’Reilly’s termination of employment package was taken.

There was, however, no discussion of the breakdown of how the €1.87m figure was arrived at, he said. It was very important that Mr O’Reilly should not only be removed as chief executive but as that he should also stand down as chairman of INM’s Australian division, APN, given that this was a core part of the group, he said.

It was also important he would no longer remain as a director of INM as this could be “messy all round” and a “clear departure” was what was required, he said.

He believed the level of payment should not have been anything higher than 12 months remuneration whereas what the board approved was 24 months. Mr O’Reilly had been chief executive for three years, a period during which the share value had “all but been wiped out” and where the company was in its second round of negotiations with the banks within a matter of years, he said.

It was important that they were not seen to “reward failure” and a compensation package of almost two years remuneration was “by any stretch a significant amount”.

He said while the amount of compensation was discussed at the meeting, the mechanics and timing of when it was to be paid was not. It was only later he learned that it had been paid out on the day of the meeting.

Under cross-examination by Paul Gallagher, counsel for INM, Mr Connolly agreed that it was following the appointment of James Osborne as chairman of INM last October that Mr Osborne made an independent assessment of the role of the chief executive and that this culminated in the Apr 19 board meeting.

He agreed the document presented to the board on Apr 19 stated the termination date would be the same date as the payment was to be made.

Asked did he still say, as he had in an earlier statement to court, that this was done with undue haste and that it was done deliberately to frustrate the proceedings he later took, he said he was still saying so.

When it was put to him by Mr Gallagher that this was a wild allegation, he said he believed the payment was made with undue haste.

In his witness statement, Mr Osborne says had a compromise agreement not been reached, the company would have “inevitably” been left open to litigation from Mr O’Reilly.

The agreement secured certainty of outcome for INM and extinguished what would have been prolonged and extremely expensive High Court litigation, he said.

The hearing before Mr Justice Brian McGovern continues.