David Norris (Independent)

I listened with great interest to Senator Boyle's contribution and wish to make a couple of comments on it. The inquiry should be held in public. This is our money. There has been a failure and it has been at the top. We know the people involved; we do not need to identify them and know that largely they are still there. I am not looking for what Senator Boyle called a circus or a star chamber. I know well historically how they operate. That is not what we want in a democracy. However, we want answers and need them in public.

I do not believe the Abbeylara judgment is directly relevant and I am supported in this opinion by a distinguished professor from Maynooth who specialises in this area and who made it perfectly clear to the people on television within the past week. He made the clear point which I had already thought of myself - I was very glad to be sustained in this view by so distinguished an academic - that an Oireachtas committee was perfectly competent and responsible to take decisions in the finding of facts. There is a difference between the finding of facts and the determining and apportioning of guilt and this is where the Abbeylara judgment is relevant. I do not believe it would be impeded by an inquiry carefully established - not to be a star chamber because that would be wrong and not a court of law because that would transgress, apart from anything else, against the separation of powers - to examine matters of fact.

I am also concerned about the dating of the terms of reference as we understand it. The Government has been very clear about this. There will be a cut-off point which will ensure we will never know because it will neither be disclosed in private nor in public exactly what threats were used by the bankers which forced the Government into taking the crisis action it took and, in particular, into the rescuing of Anglo Irish Bank which, as I said at the time, was a great mistake. The Minister of State, Deputy Mansergh, has said there was a systemic failure in the bank which could lead to a systemic failure in the banking system. "Systemic" is just jargon. I do not believe for one second that if Anglo Irish Bank had been allowed to collapse, the Irish banking system would be any worse off and that we would have incorporated the element of moral and prudential risk. The people concerned are going to be at it again and we only need to look at America where they are at it again already. The ethos and the profiteering still obtain but at least in America they have open inquiries, bankers are hauled up and seen by the public and the proceedings are recorded in public. In Britain, at the Iraq inquiry, former Prime Ministers, senior Cabinet Ministers and senior advisers are giving evidence in public and seen nightly on television. I do not understand why we cannot do this. The Committee of Public Accounts or some other specially constituted committee would be capable of undertaking this work on our behalf.

The Minister of State makes an attempt to be honest about the situation and accepts that the international context provides only a partial explanation but he frontloads it as if it was the principal explanation. With regard to the constitution of the inquiry, he invokes the notion of a wise man or woman - I imagine it is probably more likely to be a wise man, funnily enough, which I do not find very satisfying, as we are relying on some unspecified person. In order to have confidence, we need to know exactly who this person will be and what their qualifications are. I do not like the idea of relying on one person selected by the Minister.

With regard to the role of the Oireachtas, the Minister of State says the Committee of Public Accounts would need greater expertise than it possesses. That was also true of the DIRT inquiry. The committee is able to summon witnesses, bring in expert advice and witnesses. I am worried that this is a further downgrading and bypassing of the Oireachtas in a manner that the public will see as deeply duplicitous. This is all of a piece with the financial ethos that still prevails in this country which is worrying for ordinary citizens.

Within the last week I had a communication from a constituent who had sent a round robin letter on this subject. He signed himself as "a voter". As always when a person signs a letter as "a voter", I reply by saying I do not believe he or she is a voter and that he or she should prove it. However, I do not care because I take up issues on their merits, not whether I might get a vote or two out of it. The person concerned wrote back and said he was a voter, that he was, in fact, a former colleague of mine, a retired member of the staff of the College of the Sacred and Undivided Trinity near Dublin. He drew my attention to a matter which was very worrying and which impacted on this whole matter of banking. He is raising the matter of the Flavin-Fyffes-DCC case and asks if it is all right to put the opinion of a lower court and a court inspector above that of the Supreme Court. This is worrying. The outcome of this calls our entire financial ethos, the financial system and regulation into considerable question. This is a case of a gentleman. It is no longer sub judice so I can talk about it. It is a matter of historical record. He was a director of both DCC and Fyffes. As a director of Fyffes he came into information about the possible future value of the shares. He unloaded a considerable quantity of shares, thus making a vast profit. The question was whether this was insider trading. A decision was made on the matter by the Supreme Court. The judgment of Mr. Justice Niall Fennelly was as follows:

It used not to be considered any sort of sin to profit financially from the use of secret, private or privileged information. That was how fortunes were made. Now things are different. To trade on the use of inside information is recognised for what it is. It is a fraud on the market. The insider who exploits his access to the special knowledge he enjoys for the purposes of the company in his capacity as executive or director of a company commits a crime. He may be made, additionally, to answer for the profits he has made.

The deal involved in this case concerned €108 million. The question to be considered by the court was the negative trading information that was available to Mr. Flavin by way of his being a non-executive director of Fyffes, but not available to the market. Mr. Justice Fennelly said:

The appeal turns on the assessment of the likely price effects of a limited body of comparatively simple facts. In large measure, as I will be saying later, they are the sort of facts upon which common sense judgments and opinions can be formed without the input of an extraordinary degree of expertise.

In other words, the information possessed by Mr. Flavin could be analysed by someone who was not expert, an ordinary man in the street. It would be perfectly clear to an ordinary person that the shares were going to tumble in the market in the comparatively near future and it would be prudent to unload them on the basis of that information. The shares were sold by DCC in early February 2000 and on 20 March 2000 Fyffes issued a statement to the market on its trading situation. Over two days its share price fell by 25%. A 10% change is considered material for insider dealing cases. This case was two and a half times the required standard for insider dealing, yet Ms Justice Laffoy found that this event was not of evidential value. However, the Supreme Court judges disagreed with her.

Mr. Appleby applied to the High Court advising of his concerns on the matter. He sought the appointment of an inspector and the court approved the appointment of Mr. Bill Shipsey, SC. Mr. Flavin then resigned. The civil action taken by Fyffes only needed to show that Mr. Flavin, its former director, had dealt while in possession of information that was price sensitive. That was inarguable. As a director of both companies he unquestionably had that information. Mr. Shipsey's report found that Flavin's decision to trade while he was in possession of the negative trading information was a genuine error. The conclusion was that he had made an honest mistake. Mr. Shipsey stated: "Having questioned him at great length, I have concluded that Mr. Flavin genuinely believed he was not in possession of price sensitive information". I would call that a fool's pardon. It is difficult to believe that anyone in Mr. Flavin's position would not have been possessed of the necessary acumen. We were told by the Supreme Court that any ordinary person would be able to analyse the information. One did not have to be a director. We are talking about a man who traded over many years as a brilliant exploiter of the stock market, yet Mr. Shipsey thought he was not capable of coming to a conclusion on the matter. That is an extraordinary state of affairs.

The relevance to banking is given to us in an editorial in The Irish Times on last Wednesday, 20 January. The concluding paragraph is as follows:

There is a palpable sense from the testimony given to Mr. Shipsey that corporate Ireland's top echelons have closed ranks to protect themselves. It is understandable; Mr. Flavin was, they say, the epitome of Irish corporate probity. His peers cannot damn him without, in effect, damning themselves. But [here is the nub of it] they need look no further than the wreckage of the Irish banking system to realise the extent to which low standards in high places have damned us all.

After all this, a decision was taken by the Office of the Director of Corporate Enforcement to take no further action in regard to insider trading at DCC. That is an astonishing decision and requires explanation. How could it be that when the facts are established that this information was the kind contemplated by rules governing insider trading and it was in the possession of this man, nothing was done? Nothing has been done about this by the Office of the Director of Corporate Enforcement, the Director of Public Prosecutions, the Garda or the Financial Regulator despite the fact that DCC had to pay massive damages of €41 million and yet that was seen as merely some kind of error of judgment, an understandable misunderstanding.

That is the kind of thing that, in the same way as the banking scandals, has done immense damage to the reputation of this country in terms of the standards of corporate governance. The phrase "corporate governance" is bandied about often but in the context of this case and of the corruption of the banks, the fact that so many people are still in place makes them as bad if not worse than the bishops of the Roman Catholic Church who have taken a similar stance of digging in their heels. In this situation we were right to be concerned. We were right to demand answers and we were right to demand them in public.