Ireland’s biggest insider trader case opened on Wednesday, as Fyffes began action against former director Jim Flavin.
The issue surrounds the sale of a 10 per cent stake in the company by DCC, headed by Flavin, in February 2000. The sale made by DDC subsidiary Lotus Green, a Netherlands-based investment company, brought DCC a profit of e85m (£59.6m) - the difference in its purchase price in 1981 and its sale price in 2000.
At the time both Fyffes and DCC appeared happy with the sale. The stake was damaging the Fyffes share price and DCC felt Fyffes was no longer integral to its business. But Fyffes filed the suit 20 months later.
In the interim the stock exchange had conducted its own investigation into the sale and informed the director of public prosecutions (DPP) of its findings. Legal advisers warned Fyffes that it could be counter-sued by investors who bought the shares from DCC, if the DPP took action against Flavin.
The shares peaked at e4 just four days after DCC had sold the last of its three tranches for e3.90. Then six weeks later, Fyffes issued a profit warning, and a 25 per cent loss in shares was announced within two days.
Fyffes’ counsel will seek to prove Flavin had access to price-sensitive information and that he personally authorised the sale. He has denied direct involvement, insisting the transaction was conducted by Lotus Green, set up primarily for this purpose.
His counsel is expected to argue that at the time in question, Fyffes was issuing share options to its own employees and one of its ex-directors was selling shares. And that, if board members had information at the time that trading was below earlier expectations, the market should have been informed immediately, not six weeks later.
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