A six-year investigation by Dublin’s High Court inspectors into allegations of wrongdoing at Independent News and Media (INM) has found its former chairman did pass confidential information to Denis O’Brien in a way that was not compliant with the company’s policies and the terms of a memorandum he signed in 2016.
The High Court yesterday gave permission for the Corporate Enforcement Authority (CEA), formerly the ODCE, to publish an 868-page report compiled by Sean Gillane SC and UK solicitor Robert Fleck, who investigated a series of claims that Leslie Buckley, while he was INM’s chairman, acted improperly in ways to benefit Mr O’Brien, his sometimes business partner who was then a 29.9pc shareholder in INM.
Mediahuis bought INM and its Irish newspaper business in 2019, and Mr O’Brien and Mr Buckley no longer have any connection with the group.
The High Court inspectors were appointed on September 6, 2018 following an application from the ODCE, which had made a preliminary investigation into allegations made by INM’s then former CEO Robert Pitt, and Ryan Preston, its chief finance officer, about Mr Buckley’s conduct as INM chairman. The executives alleged Mr Buckley may have broken company law in alleged efforts to use INM resources to benefit Mr O’Brien, INM’s largest shareholder.
While the inspectors’ report has made criticisms of Mr Buckley’s conduct on a number of issues, it has not upheld any allegations that he broke company law or tried to use INM resources to benefit Mr O’Brien to the detriment of INM’s other shareholders.
In relation to Mr Buckley’s sharing of confidential information from INM to Mr O’Brien, the inspectors found both men considered themselves “insiders” in relation to INM, which was then a publicly listed company.
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However, Mr Buckley’s disclosure of confidential information to Mr O’Brien after August 2016 was found not to be in compliance with INM’s policies and the terms of a memorandum he signed that month.
Mr Buckley maintained that his communications with Mr O’Brien, which detailed the fact that Mr Pitt and Mr Preston had made protected disclosures complaining of Mr Buckley’s conduct as chairman of INM, were not unlawful and a breach of market abuse legislation.
The inspectors found Mr Buckley’s explanations as to why he passed on the information were not consistent with the propositions he made that the communications were “made in the normal exercise of an employment, a profession, or duties, for the purposes of journalism or other form of expression in the media, or were justified having regard to the freedom of the press and/or freedom of expression”.
The inspectors rejected Mr Buckley’s submissions that nine communications of inside information to Mr O’Brien and his adviser about protected disclosures were justified.
They said they had not received any evidence or suggestion that Mr O’Brien took any steps that involved a breach of the confidentiality of the information contained in the communications that he received.
“We are therefore satisfied that Mr O’Brien did not misuse the information contained in such communications,” they said.
The inspectors also investigated Mr Buckley’s hiring of IT consultants to search INM’s IT systems for a contract with a solicitor that ultimately led to 19 persons of interest with no connection to the solicitor’s contract being subject to searches. The bills for the IT contractors were paid for by a Denis O’Brien company.
The inspectors said they were “not persuaded by the evidence given” by Derek Mizak, the IT contractor hired by Mr Buckley, as to the manner in which he generated the 19 names. Mr Mizak claimed the 19 names were generated by “open source intelligence”, but could not explain why they included the names of two lawyers from the Moriarty Tribunal and journalist Sam Smyth, who has written extensively about the tribunal that investigated the awarding of a mobile phone licence to Mr O’Brien’s company.
A Data Protection Commission investigation has concluded that the data interrogation breached data protection law, and INM has since paid compensation to a number of the 19 parties who took legal action against the company.
The High Court inspectors said that “bearing in mind the very serious nature of the allegation and the degree of care which we have to exercise in reaching a conclusion, we do not think it would be appropriate to speculate on how the list of the 19 persons of interest or any other lists was compiled”.
They concluded that Mr O’Brien’s knowledge of the data interrogation was limited to the fact that Mr Buckley was pursuing inquiries into the circumstances in which solicitor Simon McAleese’s contract was renewed in 2011 and that Mr Buckley had engaged external companies to investigate records.
They found no evidence that Mr O’Brien “was aware of the expansion of the ambit of the data interrogation that occurred after October 2014” in relation to the 19 persons of interest.
They said Mr O’Brien agreed to the payment of the invoices of Mr Mizak and another company working on interrogating INM’s data “because Mr Buckley told him that it would be embarrassing for him to explain to INM, in the context of a cost-cutting exercise, the nature and scale of the work undertaken”.
The inspectors also investigated Mr Pitt’s objection to a proposal from Mr Buckley that INM pay some €4m to Island Capital, an O’Brien financial advisory firm, and other parties linked to Mr O’Brien for their role in the sale of INM shares in Australian firm APN in 2015.
The inspectors concluded that given the relationship between Mr O’Brien and Island Capital, “it would not have been in accordance with good corporate governance for INM to have retained Island Capital to represent it in relation to the sale of its holding in APN or, after the event, paid a fee in recognition of its contribution in the course of the negotiations” without the proposed payment having been considered by the independent directors of INM and approved by the board of INM.
The report found Mr Buckley’s failure to report to INM’s board that he had reached an agreement with Mr O’Brien to make these payments “was inconsistent with his responsibility as a director to disclose material facts and matters to the management of INM and the INM board”.
It said Mr Buckley did not agree to the engagement of Island Capital with the intention of benefiting Mr O’Brien to the detriment of INM’s shareholders.
In relation to complaints from Mr Pitt and Mr Preston that Mr Buckley was trying to push for INM to buy the Newstalk radio station from Mr O’Brien’s Communicorp “regardless of the price”, the inspectors said Mr Buckley intended to put pressure, but not improper pressure, on the executives to progress negotiations.
Businessman Denis O’Brien. Photo: Artur Widak/Getty
The report said Mr Pitt and Mr Preston bear some responsibility for the misunderstandings that arose over the Newstalk deal because they relied on their interpretation of Mr Buckley’s comments. It said they should have raised their concerns at the approach Mr Buckley was taking and at what they perceived to be the inappropriate pressure he was imposing on them.
The inspectors said Mr Buckley should have ensured the opportunity to acquire Newstalk was passed to INM’s management to progress and left management to determine whether to proceed with the negotiations with Communicorp.
He should not have actively engaged with those representing Communicorp after it indicated it was willing to sell.
The inspector were satisfied that “Mr Buckley’s approach to the negotiations was not motivated by a desire to promote Mr O’Brien’s interests at the expense of the interests of INM’s shareholders generally”.
The inspectors criticised the INM sub-committee of directors that initially handled Mr Pitt’s protected disclosure that complained about Mr Buckley’s conduct.
They concluded that the sub-committee’s consideration of Mr Pitt’s disclosure was “fundamentally defective”.
During the giving of evidence by Mr Preston, it emerged there had been co-operation of him and Mr Pitt in relation to their decisions to make protected disclosures about Mr Buckley.
The inspectors said it was “inappropriate and misleading” for the men not to disclose such co-operation from the outset.
“In representing to us that their positions were entirely independent, when they were not, Mr Pitt and Mr Preston misled us,” the report said.
The inspectors said taking this position with the ODCE “was unsatisfactory, and unfair to Mr Buckley” and other parties.
While Mr Buckley and Mr O’Brien sought to challenge the integrity of Mr Pitt and Mr Preston in making their allegations, the inspectors concluded that, while certain facts or conclusions reached by them were not correct, “that did not occur because those matters were fabricated, exaggerated or invented”.
The inspectors were “satisfied as to Mr Pitt and Mr Preston’s bona fides in the expression of their concerns” and noted that Mr Pitt had been cross-examined for over 45 hours on 13 days, spread over 19 weeks.
In a statement issued this afternoon, Mr O’Brien welcomed the report and said all allegations against him had been shown to be “wrong and unfounded”.
He made critical remarks about the ODCE’s investigation and the decision to seek the appointment of the High Court inspectors.
“Once again, there must be real concern about the stewardship and approach of the ODCE,” he said. “The ODCE has previously been criticised for its investigative shortcomings resulting in the collapse of the Sean Fitzpatrick trial after 126 days in May 2017.
“A subsequent report by the Department of Enterprise, Business and Innovation into the collapse of that trial said that the findings of the trial judge ‘highlighted the importance of ensuring a robust, impartial and unbiased’ investigation process. Unfortunately, it appears that the ODCE has not yet learned this lesson, and its approach to this matter again warrants serious review.”
The CEA will now conduct a detailed examination of the report, including the inspectors’ analyses, findings and conclusions.
Until that examination has concluded and the CEA has determined what, if any, action is warranted on foot of the report’s contents, it would be inappropriate for the CEA to make any further comment.
In his statement, Mr Buckley said: “I note and accept the inspectors’ criticism of me in respect of certain governance issues.”
Mr Buckley said he is pleased that the inspectors’ report “contains no findings of dishonesty against me during my time as chairman of INM and demonstrates that I acted with integrity in the interests of all shareholders”.
“This process commenced in 2016 with a number of serious allegations arising from protected disclosures by both the CEO and CFO, relating to my role as chairman of INM,” he said. “All of these allegations were based on the false premise that I sought to promote Mr Denis O’Brien’s interests to the detriment of other shareholders. In particular, it was alleged that I attempted to defraud INM in order to benefit him in respect of the proposed acquisition of Newstalk and the disposal of INM’s shares in APN and, further, that I authorised the use of INM’s data in order to find information that might benefit Mr O’Brien. It is difficult to imagine more serious allegations against the chairman of a PLC. I welcome the rejection of these allegations by the Inspectors.”
In a message to its Irish staff, Mediahuis Ireland said: “We welcome the publication of the inspectors’ report and we are pleased that, after an extensive and detailed investigation, the inspectors found that the affairs of the company were not conducted unlawfully.
“We acknowledge that the appointment of the inspectors, and the issues they were asked to investigate, led to considerable publicity and commentary, and we know that the entire matter has been difficult for all of you, the company’s hard-working and diligent staff.
“Since acquiring the company in 2019, we have been committed to ensuring that we conduct our business responsibly and in the best interests of all those with a stake in the company’s future, including all those who work for Mediahuis.”