Ireland’s largest publishing firm, the stock market-listed Independent News and Media, has been thrown into crisis amid serious allegations by the State’s corporate enforcer that include claims of governance misdeeds and email hacks.
The allegations touch on three areas:
It is alleged former INM chief executive Robert Pitt was put under pressure by ex-chairman Leslie Buckley to buy the national broadcaster Newstalk at an inflated price. Newstalk is a private company owned by the most significant shareholder in INM, businessman Denis O’Brien.
Mr Buckley has long been a lieutenant of Mr O’Brien and was his nominee on the INM board. Following an expensive tussle with the media firm’s previous owner Tony O’Reilly, Mr O’Brien wrestled and secured a significant stake of just under 30% in INM.
The controversial acquisition of Newstalk didn’t proceed, but as the row flared inside INM in late 2016, Mr Pitt used a whistleblowing law to approach the State’s governance enforcer, the Office of the Director of Corporate Enforcement.
Mr Pitt’s protective disclosure led to a year-long preliminary investigation by the ODCE and formed the basis of its application to the High Court by ODCE director Ian Drennan. The ODCE wants the court to appoint inspectors who can investigate the matters thoroughly.
Apart from the furore over the proposed Newstalk acquisition, there are two other allegations that touch on potentially serious matters concerning Mr O’Brien and INM, which, as a listed firm, has public shareholders around the world.
In late 2014, a copy of emails and data of INM computers going back many years was provided, with the alleged approval of Mr Buckley, to a surveillance firm called Trusted Data Solutions and shared with a number of other firms and parties.
It is alleged the bill for any work involving the search of the information on the computers was subsequently paid for by an Isle of Man-based company, Blaydon, which is allegedly linked to Mr O’Brien.
The emails of 19 people with links to INM, including former and existing employees and journalists, as well as lawyers who worked for the Moriarty Tribunal, were signalled out under the alleged data hack.
Some of the 19 people whose information was allegedly breached have complained they were never informed about the matter.
In early April, the State’s data watchdog, the Data Protection Commissioner, said it was investigating the allegations of a data breach.
The third area of the ODCE’s initial investigation involves INM and Mr O’Brien and their sale of shares in Australian media firm APN three years ago.
Mr Pitt questioned an invoice from Island Capital for fees related to work the advisory firm said it had done for INM in the sale of INM’s stake in APN. Island Capital was owned by Mr O’Brien.
APN was one of the international ventures pursued by Tony O’Reilly when he controlled INM.
Such ventures came unstuck when the global crisis struck in 2007, but by 2015 both INM and the now new INM significant shareholder, Mr O’Brien, thought it opportune to sell down their stakes in APN.
For INM, the sale of its 18% realised over €121m and, in short shrift, the media firm had shifted from indebted crisis to clear all its debts and went on to start building up large cash reserves.
In a separate transaction and at the same time in March 2015, Mr O’Brien sold his 12% in APN, a stake he had built in previous years through his private company Baycliffe. The dispute over any payment for the Island Capital invoice raged for several months at the media firm with different views taken in the dispute.
Mr O’Brien turns 60 on Thursday. He acquired a significant part of his wealth by winning the State’s mobile phone licenses in the mid-1990s, a business he subsequently built out and sold at a huge profit.
The circumstances surrounding the State’s competition for the licence was the subject of the Moriarty Tribunal, which reported seven years ago. In 2001, Mr O’Brien lost out to Tony O’Reilly, who then controlled INM, in the bidding war with huge international hedge funds to buy out Eircom, under a hugely leveraged transaction.
Mr O’Brien went onto found Digicel, a Caribbean and Pacific mobile firm with sales in over 30 regions, which, like many telecoms, grew by taking on substantial borrowings.
At $6.5bn (€5.27bn), Digicel’s debt is enormous. In a major setback to plans to pay down around $1bn of that debt burden, he pulled an initial public offering, or sale of shares, in Digicel on the New York Stock Exchange in late 2015.
It raised the major question of whether he has missed the boat to pay down a large chunk of Digicel’s debt and fight off competitors in its home patch.
At the time, Mr O’Brien said Digicel’s revenues were healthy and the company did not need funding.
Digicel is in the early stages of a process of refinancing a hefty chunk of its debt. Mr O’Brien’s stake in INM, of just under 30%, came about after a tense battle with Mr O’Reilly.
Mr O’Brien spent around €500m in buying the INM shares.
At €30m, his INM stake
is currently worth only a fraction of that investment after a plunge in the company’s share price.
He has long been an adviser to Mr O’Brien and has helped run his mobile phone firms.
He resigned from INM in recent weeks. In a statement on April 6, he said: “I am
appalled at the widespread circulation and sharing of the ODCE’s court document containing the most serious and damaging of allegations relating to my tenure as chairman of INM plc.
“I believe that due process and fair procedures have been completely and wholly disregarded in this instance. I have consistently maintained a position of not commenting in the midst of an ongoing statutory process, but on this occasion, I am compelled to do so.
“I will continue to co-operate fully with the ODCE and will robustly defend my position against each and every allegation. I am advised to reserve my position.”
He was poached over three years ago as the new boss at INM from Tesco in the Czech Republic.
The 47-year-old was the first boss of a prominent stock market-listed firm to use Irish whistleblowing law. He had also worked in Beijing and with PwC in the Czech Republic.
After agreeing on a severance payment, he resigned from INM in October 2017.
The board of the media firm said last week (on April 11) that it was investigating a “data security incident” at the firm that occurred in 2014 and that it was co-operating with the Data Protection Commissioner.
“The data security incident involved a number of INM’s backup tapes, containing backup copies of electronic data stored on INM’s servers as at 2014, being provided to a third party service provider on the instructions of the then-chairman of INM.
“The INM board only became aware of this incident in August 2017 and promptly notified the Data Protection Commissioner on learning of the matter at that time,” it said.
The statement also said: “INM has now seen documentation in the context of the ODCE court application which suggests that the data may have been restored and searched more extensively and for a different purpose.
“INM does not know whether any such searches were in fact undertaken or for what purpose but based on the limited information currently available to INM it seems possible that they were.”
INM shares have lost 38% of their value in the past year and it is valued on the stock market at little more than €110m. With at least €91m in the bank, the company has no debt.
That means investors are concerned the costs associated with any new investigation led by court-appointed inspectors could be very costly for the firm.
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