THE TRIBUNAL RESUMED AS FOLLOWS AFTER LUNCH:
MR. COUGHLAN: Between 13 May 1995 and Thursday 16 May 1995, when the second GSM licence was issued to Esat Digifone, there appears to have been considerable activity within the Department, within the consortium, between the members of the consortium and between the consortium and the Department. These activities, which I will return to in detail, appear to have been directed to three main matters.
Firstly, the finalisation of the provision of the draft licence and in particular, Article 8 of the licence which governed transferability of shares in Esat Digifone after the issue of the licence.
Secondly, the Department’s apparent concern regarding the financial capacity of Esat Digifone Limited to fund the mobile telephone network, and in particular, whether there was sufficient and sound underwriting in place to meet the financial commitments of Esat Telecom/Communicorp to Esat Digifone in the event that Esat Telecom/Communicorp experienced financial difficulties.
The Department’s focus was whether IIU/Mr. Dermot Desmond had the financial capacity to meet its obligation to underwrite 33% of Esat Telecom’s financial commitments to Esat Digifone and as to whether Telenor would ultimately underwrite all financial commitments to Esat Digifone if the need should arise.
Thirdly, the presentation and handling of material at a press conference arranged to coincide with the grant of the licence to Esat Digifone on the 16th May, 1996, and in particular, the following issues:
A. The ownership of Esat Digifone and whether it was consistent with the ownership of the consortium as submitted in the Esat Digifone application on the 4th August, 1995;
B. The involvement of IIU Limited/Mr. Dermot Desmond as a shareholder in Esat Digifone Limited;
C. The financial capacity of Esat Telecom to meet its obligations to Esat Digifone.
On Monday 13th May, 1996, there was a meeting between Mr. Knut Digerud, Mr. Owen O’Connell, solicitor, Mr. Martin Brennan, and Mr. Fintan Towey at the Department. Mr. Owen O’Connell kept an attendance of the meeting and appears to have subsequently arranged for the preparation of a formal typed report of the meeting. There is no record of this meeting within the Department files, and the Tribunal was not informed of the meeting by the Department or the departmental officials. The Tribunal only became aware of this meeting when Mr. Owen O’Connell furnished the Tribunal with a voluntary narrative memorandum and produced relevant documents to the Tribunal. Mr. Owen O’Connell’s formal record of the meeting states as follows:
“This minute records a meeting held at 12.30pm on Monday 13th May, 1996, between Knut Digerud, Chief Executive Esat Digifone Limited, Owen O’Connell, William Fry Solicitors, Martin Brennan, Principal Officer, Department of Transport, Energy and Communications and Radio Development Division, Fintan Towey, Assistant Principal Officer, Department of Transport, Energy and Communications, Telecommunications and Radio Development Division.
“The meeting was held in Martin Brennan’s office at the Department of Transport, Energy and Communications, 44 Kildare Street Dublin 2, and the subject under discussion was the imminent grant to Esat Digifone Limited of the second GSM licence.
“After an exchange of courtesies, the meeting began with KD handing a number of letters to MB with copies thereof to FT. Martin Brennan and Fintan Towey scanned the letters, with Martin Brennan noticeably pausing to read closely the letters concerning IIU.
“He noted that Farrell Grant Sparks were IIU’s auditors and commented that he would like to have known this fact earlier. (This was generally taken to be a reference to Greg Sparks’ position as programme manager to An Tanaiste, Dick Spring). Martin Brennan then said that he would send the documents to the Department’s in-house accountant and also to an accountant in the Department of Finance who was awaiting them. He said there may well be requests for further information and/or clarification of the letters, but it was quite likely that more information would be required in relation to IIU, specifically ‘more than a statement that they have money — i.e., what money?’
“There was some general discussion about the purpose and manner of the presentation of the letters, all of which was acknowledged by Martin Brennan and Fintan Towey.
“Fintan Towey made the point that the bid had referred to 20% of the company being placed with the “blue chip institutions” (acknowledging that the institutions in question were not identified). He queried IIU’s intentions in regard to placing of its holdings. Owen O’Connell replied that IIU was a financial institution and qualified under the bid description, so the placing question should not arise and that while it might place its shares in future, if queried now on the point by journalists, might reply that recent turmoil over the licence made such a placing unlikely, for market reasons, for some time (stressing that this was not Owen O’Connell’s view but was based on comments made by Michael Walsh).
“Fintan Towey said that a new draft of the licence was imminent and especially that Article 8 thereof would be amended. He said that a new draft of Article 8 had been received late on Friday last, the 10th May, from counsel and was now with a parliamentary draftsman who wished to shorten it. Martin Brennan said that the thrust of the new Clause 8 was that all changes of ownership would be subject to ministerial approval but that the grounds for objection by the Minister were specified in the clause and had been taken largely from the recent EU directive on mobile personal telecommunications.
“After a brief discussion between Martin Brennan and Fintan Towey, Fintan Towey left the room to obtain a copy of the latest draft. Knut Digerud and Owen O’Connell were permitted to review the draft (which extended to two pages) but not to do so at length or in detail or to take copies. After this review, Owen O’Connell raised the point that one of the paragraphs referring to ministerial consent being required for a private placement of shares could be interpreted as requiring such consent for a routine issue of shares consequent on a financing round. The point was also made that the clause should distinguish between existing shareholders (who were presumably acceptable to the Minister, and thus not require comment on acquisitions of shares by them), and new third-party shareholders. After some discussion these points were acknowledged by Martin Brennan and Fintan Towey, who said they would look at the matter further. Apart from this, Knut Digerud and Owen O’Connell indicated that as a very preliminary view, and subject obviously to both detailed examination of the clause and discussion with the shareholders and colleagues, there did not seem to be any fundamental difficulty.
“Martin Brennan asked whether the banks named in one of the letters given to him (ABN-AMRO and AIB) would consent to their names being used in an announcement of the granting of the licence. Having checked the matter with one of his colleagues, Owen O’Connell indicated that the banks would so agree, subject to no statement concerning them being made which was inconsistent with the letter of 2 May given by them to Martin Brennan and that any written press release or similar statement which referred to them would be subject to prior clearance with them.
“The meeting moved on to a discussion of events in the immediate future. It was indicated by Martin Brennan and Fintan Towey that they were about to engage in “feedback meetings,” these being meetings with unsuccessful applicants for the second GSM licence for the purpose of giving them reasons for their failure to obtain the licence. It was felt that it might be somewhat insensitive to grant the licence while these meetings were underway and that accordingly, the proposed date for grant of the licence was Thursday next, 16 May. Martin Brennan also said that the Department had written to solicitors for the Persona consortium informing them of their intention to grant the licence and that if Persona consortium wished to challenge this, they should do so through the courts. However, no response had been received.
“Martin Brennan added the Department’s view that the licence had expired as a live issue for the press, and the Minister and the Department were very anxious not to revive it by injudicious statements being made — by anyone — at the press conference.
“Martin Brennan said that it was the Minister’s wish to announce the grant of the licence at a press conference co-attended by Esat Digifone. Great stress was repeatedly laid on the need to prepare extensively and exhaustively for this press conference, and it was stressed that the journalists present would have been briefed in a hostile way by “others” (this clearly being a reference to unsuccessful consortia). Martin Brennan said he wished to have Esat Digifone identify key questions likely to be asked at a press conference, to draft answers to them and to explain to the Department the reasons for those answers. He would also then wish to arrange a meeting between the Minister for Transport, Energy and Communications and Knut Digerud, together with one or two others, at which the progress of the press conference would be discussed/rehearsed.
“Martin Brennan indicated that there had been discussions within the Department as to whether shareholders should participate in the press conference, and if so, to what extent and in what way. At this point Knut Digerud made a strong point to the effect that Digifone saw itself as an entity independent of its shareholders, that it had premises, employees, funds and a viable business in its own right, and that there were issues likely to be raised at a press conference which would not necessarily be a matter for the company but rather matters for its shareholders. Fintan Towey conceded this as a “fair point” and acknowledged that the company would be at liberty during the press conference to refer questions concerning its ownership to its shareholders. Martin Brennan interjected to say that in such a case, the Minister would wish to know what response the shareholders would make when the questions were put to them. Martin Brennan stressed the need to have a number of “definite clear and acceptable statements for use at the press conference” and he outlined a number of “obvious questions” as follows:
“A. Is this the same consortium as that which applied?
“B. Can the Denis O’Brien side of the consortium stand up (adding that either Denis O’Brien or Knut Digerud should answer this question);
“C. Will Telenor support the project to the end? (To this query, Martin Brennan added that it was sensitive in nature as it would have to be answered in such a way as not to imply any doubt in the Department as to Communicorp’s financial strength).
Owen O’Connell made the point that within reason (and certainly short of telling any lies) Esat Digifone was willing to be guided by the Department as to the conduct of the press conference and would follow policy lines laid down by the Department; Esat Digifone also expected the Department to have some input as to the answers to questions to be given by it, i.e. would coordinate such answers with the Department. This was acknowledged by Martin Brennan and Fintan Towey.
The meeting ended with Martin Brennan reiterating that it was “virtually certain that we would have to get more information on IIU, some numbers”.
“The meeting concluded at 1.10pm; its tone throughout was cordial, and it concluded amicably.”
Now, according to Mr. O’Connell’s record, Mr. Martin Brennan and Mr. Fintan Towey attended the meeting. Mr. Martin Brennan has informed the Tribunal that regarding the meeting at the Department on the 13th May, 1996, he accepts that in general, Mr. O’Connell’s contemporaneous record appears reasonable, although his view is that it is clear that in some respects Mr. O’Connell is recording his impressions. Mr. Brennan does not have a record to contrast with it. Mr. Brennan has informed the Tribunal, the identity of the attending officials is recorded on the record; the purpose of the meeting is recorded on that record to advance issues pertinent to finalisation of the licence and to prepare for a public announcement, and the matters under discussion also appear to have been recorded in that record. Mr. Brennan has further informed the Tribunal that regarding the identification of questions likely to be raised at the press conference, this was done by collective brainstorming; Mr. Lowry always prepared thoroughly for “public appearances” and the Department knew well what Mr. Lowry expected. The Department were conscious too that while the arrival of IIU on the scene met the conditions of the competition, it would be new information and needed to be carefully presented. Mr. Martin Brennan has summarised that the fact that the Department pressed these issues does not mean that the officials had been asked to do so in advance. Mr. Martin Brennan recalls that Mr. Denis O’Brien was rehearsed by his team in much the same way as Mr. Lowry.
Mr. Fintan Towey has informed the Tribunal that the report prepared by Mr. O’Connell would seem to be an accurate record.
Apart from the information with which the Tribunal has been furnished by Mr. Brennan regarding the meeting of the 13th May, 1996, Mr. Brennan has informed the Tribunal that he has no specific recollection of any further dealings between the Department and Esat Digifone regarding preparation for the press conference. There are no other documents whatsoever on the Department’s files regarding the dealings between Esat Digifone, the Department and Mr. Lowry in connection with the press conference. The Tribunal has largely been dependent on Mr. O’Connell’s file and on files produced to the Tribunal by Telenor for an insight into the manner in which these dealings proceeded.
It appears that following the meeting with Mr. Brennan and Mr. Towey at the Department on Monday, 13th May, Mr. Knut Digerud and Mr. Owen O’Connell attended a meeting with Mr. Neville O’Byrne, solicitor for IIU, Mr. Michael Walsh of IIU, Mr. Paul Connolly of Esat Telecom, Mr. Gerry Halpenny, solicitor for Esat Telecom, Mr. Arve Johansen of Telenor, and Mr. Arthur Moran of Matheson Ormsby Prentice, solicitors for Telenor, and that they reported the outcome of the meeting with the Department. Mr. Arthur Moran kept an attendance of that meeting which has been made available to the Tribunal by Telenor.
It’s a short attendance, and it’s headed “Telenor,” and it’s dated 13/5/96. It states “RB”, which may be a reference to Rolf Busch, who was an internal lawyer in Telenor. “Neville O’Byrne, me, MW” — Michael Walsh, “PC”, Paul Connolly — “GH”, Gerry Halpenny, “AJ”, Arve Johansen, “AM”, Arthur Moran. “Knut Digerud, Owen O’Connell.” “Report by Knut Digerud on meeting with Department Martin Brennan by two brief review by Department official will want more re IIU draft licence, paragraph 8 — Owen O’Connell to minute any transfer or allotment needs consent of Minister.”
Counsel “is assisting in the draft, joint press conference — date when would IIU discuss with the press. Key questions to be available and answers and reasons.
“Thursday — hand over licence subordinated loans IIU — what money is being used? — Department wants to know
“Shareholders’ Agreement and side letter articles
“convertible subordinated loan note DIBOR plus 2% — gross up value of notes prior to conversion repay in 12 months or convert
no vote — tax charge conversion at option of holder after grace period or one see the licence.”
It appears from information made available to the Tribunal by Mr. Owen O’Connell that on Monday 13th May, there was a telephone conversation between Mr. Denis O’Brien and Mr. Michael Lowry. The Tribunal has been informed by Mr. O’Connell that Mr. O’Brien told him about the telephone conversation on the following day, Tuesday 14th May, 1996.
Mr. O’Connell has produced to the Tribunal his contemporaneous note of what Mr. O’Brien told him on that occasion, which records.
“DOB/Lowry call yesterday “Getting there, slowly but surely,” Called last night re auto dialers — meeting today Loughrey and Lowry re this.”
Mr. O’Connell has informed the Tribunal that he does not know whether this was a summary of Mr. O’Brien’s view of the overall position in regard to the licence or a statement made by Mr. O’Brien to Mr. Lowry or vice versa. Mr. O’Connell’s note also records that a meeting had been arranged for Tuesday 14th May, 1996, between Mr. Denis O’Brien, Mr. Michael Lowry and Mr. John Loughrey, Secretary General to the Department. There is no record of Mr. O’Brien’s telephone conversation with Mr. Lowry on the 13th May within the Department files, nor is there any record of any meeting between Mr. O’Brien, Mr. Lowry and Mr. Loughrey on Tuesday 14th May 1996. If such a meeting took place, the Tribunal has not been informed about it other than through the note of Mr. O’Connell and has not yet received a statement or memorandum of intended evidence from other people in relation to this.
It appears from Mr. O’Connell’s documents that the meeting which was arranged for Tuesday 14th May proceeded. Mr. O’Connell has a note which indicates that that meeting did proceed on the 14th May, 1996. He has informed the Tribunal that on Tuesday, 14th May, he met Mr. O’Brien, who briefed him on the meeting he had with Mr. Lowry and Mr. Loughrey. According to Mr. O’Connell’s note, the following matters were the focus of the meeting:
– Mr. Lowry’s request for information concerning IIU and the availability of finance;
– Mr. Michael Lowry’s requirement that the shareholding of Esat Digifone on the day the licence was granted had to be 40:40:20, but subject to a possible change of ownership to 45:45:10 at a later date;
– Discussions regarding Article 8 of the licence, i.e. the provision for change of ownership after the licence was issued;
– Discussion regarding the forthcoming press conference at which the grant of the licence would be announced and the apparent agreement as to the need for a rehearsal.
Mr. O’Connell’s note reads:
“14/5/96. DOB re meeting Lowry/John Loughrey
“Minister — haven’t got information — wants financial information IIU. MW” — appears to be a reference to Michael Walsh — “to go to the Department for a private meeting.
” – Letter that finance is in place from the underwriters DOB — underwriters are Telenor plus IIU; will satisfy tomorrow
“lot of frustration/pressure.
“All by 11.00 tomorrow, Lowry “Will check with sec.” And hold DOB/Leslie Buckley” has to be 40:40:20 on day
“DOB — Article 8, very tough, can do nothing. Shares amongst parties; will not allow Telecom parties to reduce shareholding
“Loughrey to meet OO’C/Martin Brennan tomorrow A M.
“Minister informed of 45:45:10 very quickly Lowry “Let ink dry”.
“Public announcement. Lowry wanted last week. Do everything in one go. Deflect attention away from ownership. Discuss business infrastructure, contracts, roll-out plan, employment,” I don’t know what the next two words are — “contracts” — “hold off buying phones – to public, etc. Must be phenomenally well briefed on bid document and tender. OO’C to be present and to answer questions. Legal ownership issue expressly — especially important.
At the meeting in the Department on the previous day, Monday 13th May, to which I have already made reference, Mr. Digerud furnished the Department with a letter from Esat Digifone dated 13th May, 1995, addressed to Mr. Martin Brennan. There were seven enclosures with that letter comprising letters of commitment and certifications regarding the constitution of Esat Digifone Limited, the intentions of the shareholders and the financial capacity of the shareholders to meet their commitments to Esat Digifone Limited and to the underwriting requirements of the Department.
This is from Mr. Digerud; there were enclosures in respect of Telenor. I’ll read the letter.
“Dear Mr. Brennan,
“I refer to our recent meeting and to your request for information concerning this company. I confirm that I am a director and Chief Executive of Esat Digifone Limited.
“I enclose the following:
“1. Letter from Telenor Invest AS concerning support for the project.
“2. Copy of a letter from Arthur Andersen and Co. in Oslo concerning the ownership and finances of Telenor Invest AS.
“3. Letter from Chris McHugh, Secretary of International Investment and Underwriting Limited.
“4. Letter from Farrell Grant Sparks financial advisers and auditors to determine Dermot F Desmond, beneficial owner of International Investment and Underwriting Limited.
“5. Letter from Paul Connolly, director, Communicorp Group Limited, concerning its ownership and interest in Esat Digifone Limited.
“6. Letter from KPMG, auditors to Communicorp Group Limited.
“7 letter from ABN-AMRO Bank concerning our financial facilities.
“Confirmation will be given on or before the grant of this licence that the company is owned as to 40% each by Telenor Invest AS (a wholly-owned subsidiary of Telenor AS) and Esat Telecommunications Holdings Limited (a wholly-owned subsidiary of Communicorp Group Limited) and as to 20% by IIU Nominees Limited (holding on behalf of Mr. Dermot Desmond). IIU Nominees Limited is a wholly-owned subsidiary of International Investment and Underwriting Limited (which in turn is also wholly-owned by Mr. Desmond).
“I hope the above is of assistance.
On that day, there was also, with that letter, a letter enclosed from Telenor International signed by Mr. Arve Johansen, the Chairman. And it’s addressed to the Department, and it reads:
“Dear Mr. Brennan,
“I refer to our meeting on Friday, 3 May 1996, and your request with respect to confirmation of Telenor’s commitment to supporting the Esat Digifone project.
“Thus, I can confirm the long-term commitment of Telenor Invest AS to this project and its determination that Ireland’s second GSM network is successfully constructed, launched and operated.
“Telenor is, as you will see from the enclosed documentation, fully capable of financing its share of the necessary investments in order for Digifone to implement a GSM network in Ireland and in compliance with the licensing terms. Furthermore, Telenor is both capable and willing to increase its financial commitment if necessary. Such increase in financial commitment would require that Telenor reach agreement with other interested parties as to its implications for Telenor’s influence over Digifone and its operations.
“For your further reference please also find attached some extra information related to Telenor and its international activities over the last months.
Now, also attached to Mr. Digerud’s letter were two documents relating to IIU. The first one was a letter signed by Mr. Chris McHugh, the company secretary, on IIU notepaper. It’s headed “Strictly Private and Confidential,” and it’s addressed to the Department, and it’s re Esat Digifone Limited.
“International Investments and Underwriting Limited (IIU) is 100 percent beneficially owned by Dermot F. Desmond.
“The directors of IIU are:
“Yours faithfully, Chris McHugh, “Company Secretary.”
And there was also attached a letter from Messrs. Farrell Grant Sparks, accountants. It’s addressed to the Department, it’s dated 7th May, 1996, and it’s re Esat Digifone Limited.
“We act as financial advisers and auditors to Dermot F. Desmond. We confirm that Mr. Desmond is the beneficial owner of 100% of International Investment and Underwriting Limited (IIU).
“We are informed that Mr. Desmond/IIU have undertaken to invest and/or underwrite an equity investment of up to £40 million in Esat Digifone Limited. We confirm that Mr. Desmond (IIU) is in a position to make this investment and to make the underwriting commitment.
There then is a letter attached, also from KPMG relating to Communicorp Group Limited, which states:
“We act as auditors to Communicorp Group Limited. We have been asked by the directors of the company to write to you to confirm the following matters in connection with their joint application through Esat Digifone Limited for the second GSM cellular mobile licence:
“1. The company has appointed CS First Boston as exclusive agent for the purpose of a private placement in its subsidiary, Esat Telecommunications Holdings Limited. The placement is being offered in the USA to a limited number of institutional investors.
“2. The amount of funds expected to be raised in the placement is at least IR£22 million.
“3. The placement process is at an advanced stage and is expected to be completed shortly.
“4. The company has, in addition, entered into an agreement with International Investment and Underwriting Limited (IIU) dated 29 September 1995 under which IIU has undertaken to arrange underwriting for the company’s proposed interests (through its subsidiary Esat Telecommunications Holdings Limited) in Esat Digifone Limited. IIU have confirmed that they have arranged the underwriting.”
And then there is a handwritten note, which appears to be a departmental note, and it reads:
“Appears to cease once Shareholders’ Agreement is signed (clause 17.11) but superseded by underwriters’ agreement and Shareholders’ Agreement and letters from Telenor and IIU.”
Now, these documents appear to have been provided to the Department in response to the Department’s concern voiced at the meeting on the 3rd May 1996 to which I have already referred and in particular, its request, according to Mr. Arve Johansen’s memorandum of the 4th May 1996, that Telenor should agree to commit to underwriting the entire of the capital requirements of Esat Digifone if the need should arise.
They also appear to have been the documents which were discussed at the meeting of the 3rd May, 1996. They were handed over, it appears, on the 3rd May and discussed at the meeting of the 13th May.
As already mentioned, the Department’s concerns regarding the financial capacity of Esat Digifone appear to have been rooted in the financial weakness of Esat Telecom/Communicorp which weakness had been identified in the course of the evaluation process. These concerns appear to have come to the fore during the four days prior to the granting of the licence.
Mr. John Loughrey, in a memorandum of intended evidence which he has provided to the Tribunal, has characterised his concerns and the actions which he took in the following terms, and I quote:
“In the week or so before the award of the licence on the 16th May, 1996, I set out to satisfy myself that the arrangements between the three partners in the licence were such that the business plan would not be jeopardised in any way on the financing side. Such arrangements were put in place and they were entirely satisfactory.
“My concern prior to the issue of the licence was that the business plan put forward by the consortium would be financed in such a way as to facilitate the rapid roll-out of the effective competition to Eircell, thereby benefiting both the economy and the consumers at the same time. I believe that the steps taken by me and by the Department in general to assure ourselves that this would be so were both sufficient and satisfactory. In short, while the question mark could be posed as to the then robustness of the financing ability of Communicorp Limited, the specific undertakings given by Telenor and IIU to take up any shortfall on a pro rata basis in the event of Communicorp not being in a position to finance fully its portion of the development cost was more than adequate. Equally, from a common-sense point of view, it is quite clear that Telenor on its own could have bankrolled the whole project quite comfortably so that the Department never felt that somehow the project was being jeopardised in any way because Communicorp did not have a Triple A financing rating. Similar arrangements and assurances would have, in all probability, been required in the event of licence negotiations with quite a number of the other bidders had they been in the competition.
“While no doubt I may have discussed the matter with Martin Brennan, who for the most part was out of the loop at this point as the prime responsibility had passed to both the Telecoms Regulatory Division headed by Sean McMahon, and Sean Fitzgerald, my primary focus in resolving any outstanding issues was with Donal Buggy who, while an intrinsic part of the Project Group, worked directly to me as key financial adviser and worked in the room alongside my office. It is with Donal Buggy I would have had the most of the discussions on this matter. Equally, I would have consulted with Sean McMahon, who headed up the licence negotiations.
“The Department was quite clear that in granting the licence to the Esat Digifone consortium, that the implementation of the requirements of the licence should be facilitated by a clear financing plan. In the lead-up to the granting of the licence, we needed to satisfy ourselves as to the robustness of the financing plan. I had Donal Buggy research the financing of the implementation of the project. He produced a written assessment with supporting documentation, in particular the agreement of Telenor and IIU to take up on a pro rata basis any possible shortfall by Esat gave us sufficient comfort on this aspect.”
And I there end reference to the quotation from the memorandum furnished by Mr. John Loughrey.
It appears from the documents and information available to the Tribunal that at the direction of Mr. John Loughrey, Mr. Martin Brennan requested Mr. Donal Buggy, a chartered accountant on secondment to the Department from PriceWaterhouse and who had been a member of the GSM Project Group, to carry out a financial analysis on the financial strength of Telenor and IIU Limited/Mr. Dermot Desmond to take over Communicorp/Esat Telecom’s financial commitments to Esat Digifone in the event that Communicorp experienced financial difficulties.
Mr. Donal Buggy has provided the Tribunal with a memorandum of intended evidence in which he has set out details of the instructions which he received, the steps which he took, the information available to him, and the conclusions which he reached. In that regard, he has informed the Tribunal as follows, and again I want to quote from Mr. Buggy’s memorandum.
“As far as I recall, I first became aware that the 20% shareholding in Esat Digifone Limited held by IIU Limited was to be held beneficially for Mr. Dermot Desmond on or about 13th May, 1996, when Mr. Martin Brennan asked me to give him some financial advice on the composition of the Esat Digifone consortium and the financial strength of IIU Limited and Mr. Dermot Desmond.
“My involvement in the steps taken by the Department to satisfy itself as to the financial capacity of Esat Digifone Limited prior to the issue of the licence revolved around the request by Mr. Martin Brennan that I carry out a financial analysis of the financial strength of Telenor/IIU Limited/Mr. Dermot Desmond to determine if they had the financial capacity to take over Communicorp/Esat Telecom’s financial commitments to Esat Digifone in the event that Communicorp/Esat Telecom experienced financial difficulties. My involvement in this matter commenced on or about 13th May, 1996, and finished on the 15th May 1996 with my memorandum to the Secretary of the Department dated 15th May, 1996. This memorandum, dated 15th May, 1996, includes details of the exercise that I performed and my conclusions. As far as I recall, Department of Finance was not involved in the exercise that I performed, but I do not know whether or not my findings were communicated to the Department of Finance.
“The only meetings and contacts that I had with representatives of or professional advisers to Esat Digifone or any member of the consortium in relation to financial issues in the period prior to the granting of licence took place in the period 13th May 1996 to the 15th May, 1996, as part of the preparation of my memorandum to the Secretary of the Department dated 15th May, 1996.
“I am uncertain as to the specific days between the 13th and 15th May on which each of these meetings took place. But as far as I recall, I attended meetings with the following:
— Mr. Pearse Farrell of Farrell Grant Sparks
— Mr. Michael Walsh of IIU Limited
“I met with each of these people separately and on all occasions I was accompanied by Mr. Martin Brennan, and each meeting took place in Mr. Brennan’s office.
“The matter under discussion in each case was the financial strength of IIU Limited/Mr. Dermot Desmond and the ability of IIU Limited/Mr. Dermot Desmond to underwrite the funding commitment of Communicorp/Esat Telecom. I kept some handwritten notes of these meetings, all of which have been produced to the Tribunal. The outcome of these meetings is detailed in my memorandum to the Secretary of the Department dated 15th May, 1996.
“As far as I recall, the information records and documents on which I based my memorandum dated 15th May 1996 to the Secretary of the Department in relation to the financial strength of the Esat Digifone consortium are as follows:
– Letter from ABN-AMRO Bank to Mr. Martin Brennan
dated 2 May 1996
– A letter from Farrell Grant Sparks to Mr. Martin Brennan dated 7 May 1996
– Letter from Arthur Andersen to Mr. Owen O’Connell dated 8 May 1996″
That relates to Telenor.
” – A letter from KPMG to Mr. Martin Brennan dated 9 May 1996″ that I have just referred to, and which refers to Communicorp/Esat Telecom
” – Letter from Esat Digifone to Mr. Martin Brennan dated 13 May 1996
” – A letter from Telenor Invest AS to Mr. Martin Brennan dated 13 May 1996″ — which I have just referred to —
” – A letter from Mr. Chris McHugh of IIU Limited Mr. Martin Brennan dated May 1996″ — to which I have just referred
” – Letter from Communicorp Group Limited to Mr. Martin Brennan dated 13 May 1996
” – A letter from Anglo Irish Bank Corp to Mr. Martin Brennan dated 15 May 1996
” – Letter from Farrell Grant Sparks to Mr. Martin Brennan dated 15 May 1996″ — which I have just referred to.
And I now end reference to the memorandum furnished to the Tribunal by Mr. Donal Buggy.
Much of the documentation which was available to Mr. Donal Buggy in carrying out this analysis had been furnished to the Department under cover of Mr. Knut Digerud’s letter of the 13th May, 1996. In addition, Mr. Buggy had available to him a letter from Anglo Irish Bankcorp and a letter from Farrell Grant Sparks, financial advisers and auditors to Mr. Desmond, addressed to the Department for the attention of Mr. Martin Brennan and dated 15th May, 1996. This letter recorded that Mr. Dermot Desmond/IIU had undertaken to invest and/or underwrite an equity security of up to £40 million in Esat Digifone Limited and recorded their confirmation that Mr. Desmond/IIU were in a position to make this investment and to make the underwriting commitment. Farrell Grant Sparks also set out in that letter valuations of the principal assets which they confirmed were in Mr. Desmond’s beneficial ownership.
It’s from Farrell Grant Sparks re Esat Digifone Limited.
“We act as financial advisers and auditors to Dermot F. Desmond. We confirm Mr. Desmond is the beneficial owner of 100 percent of International Investment and Underwriting Limited (IIU).
“We are informed that Mr. Desmond/IIU have undertaken to invest and/or underwrite an equity investment of up to £40 million in Esat Digifone Limited. We confirm that Mr. Desmond/IIU is in a position to make this investment and to make the underwriting commitment.
“We are also authorised to confirm that Mr. Desmond is the beneficial owner of the following principal assets:
“Various marketable securities valued in excess of £10 million.
“Principal unquoted investments at cost; “International Investment and Underwriting Limited (IIU): £13 million London City Airport and associated companies: 25 million pounds 44% of Pembroke Capital Limited: £9 million.” Bringing it to a total under that heading of £47 million.
“Cash at bank: £15 million. William Fry client account re investment in Esat Digifone Limited: £5 million,” bringing the total there to £20 million. And then to the bottom of the page, a grand total of £77 million.
“We trust that that is the information you require. Should you have any queries, please contact me.”
And it’s signed by Pearse Farrell.
Mr. Martin Brennan, who appeared to have played a role in this analysis as the person who made the request to Mr. Buggy and who attended meetings between Mr. Buggy and Mr. Pearse Farrell of Farrell Grant Sparks and meetings between Mr. Buggy and Mr. Michael Walsh of IIU, has informed the Tribunal in his memorandum of intended evidence as follows:
“It is clear that as the date of issue of the licence approached, there was a close review of the financial standing of the “licencee”. Clearly some problems had been signalled in the evaluation process, but they were not regarded at that time as disabling. I have no doubt that Mr. Loughrey took a hands-on role at this stage and that it was he that instigated that analysis by Donal Buggy. My recollection of being involved was in the interface with Michael Walsh who was reluctant to provide any written evidence in support of the financial strength of Dermot Desmond in IIU Limited. I certainly remember speaking to Mr. Walsh and telling him that the absence of such evidence would jeopardize our ability to issue the licence, and I was instrumental in procuring his efforts to secure the letter from Anglo Irish Bank and the letter from Farrell Grant Sparks.”
I should state here that the letter from Anglo Irish Bank was that letter that confirmed that there was £10 million available from them for investment in the project.
In the course of its inquiries regarding this analysis and the certification provided by Farrell Grant Sparks, the Tribunal requested Mr. Pearse Farrell of that firm to assist it as follows:
A. To provide a detailed narrative account of precisely what was discussed at any meeting or meetings with the Department leading up to the grant of the second GSM licence to Esat Digifone on the 16th May, 1996, and to present the Tribunal with documents in the power, possession or procurement of Farrell Grant Sparks bearing on or arising out of such discussions.
B. To the extent that Farrell Grant Sparks provided assurances to the Department in respect of the financial strength of IIU and/or Mr. Dermot Desmond (including in particular the contents of a letter dated 15th May, 1995, from Farrell Grant Sparks to the Department) that Farrell Grant Sparks identify the precise basis for such assurances, including the nature and source of all information relied upon by it in providing same and to produce to the Tribunal all documents available to Farrell Grant Sparks regarding such assurances.
The Tribunal indicated in its request that it anticipated that Farrell Grant Sparks would require a waiver of confidentiality from IIU Limited and from Mr. Dermot Desmond to enable it to respond to the Tribunal’s request and that the Tribunal intended to seek such waiver from IIU Limited and Mr. Dermot Desmond.
IIU and Mr. Dermot Desmond have declined to provide a waiver of confidentiality to enable Farrell Grant Sparks to assist the Tribunal as requested, and in the circumstances, the Tribunal would intend pursuing the inquiries to which I have just referred with Mr. Farrell in the course of its public sittings.
The working papers generated by Mr. Donal Buggy in the course of his analysis have been made available to the Tribunal. These comprise four handwritten documents which have been reconstituted by the Tribunal in a typed format. The working papers include handwritten notes of Mr. Buggy’s meetings with Mr. Michael Walsh on the 15th May, 1996, and with Mr. Pearse Farrell on, it appears, the 14th May, 1996.
The note is reconstituted.
“Esat Digifone, 13th May, 1996
“Telenor Invest AS, 40%, £20.8m
Esat Telecommunications Holdings Limited 40%: £20.8m IIU Nominees Limited/Dermot Desmond 20%, £10.4m.
“Total share capital, 100 percent, £52m.
“Telenor — very big financially successful
“1995 — profits before tax, £210 million
turnover 2 billion
no balance sheet
very good credit rating from both Moody’s and Standard & Poor
Arthur Andersen — “will be able to fund the £20.8 million required.”
“IIU — 100 percent owned by Dermot Desmond Farrell Grant Sparks — invest and/or underwrite up to £40 million.
– Confirm in a position to do this
” – Not stated what they are underwriting, specifically Communicorp
” – Very little information on which to assess financial strength
“Communicorp — owned 65.2% by Denis O’Brien 34.8% by Advent International. Owns 100 percent of Esat Telecom Holdings Limited Financing commitments underwritten by or through IIU Appointed CS First Boston for private placement in ETH
“Expected to raise at least £22 million — not yet completed.
“Debt financing, ABN-AMRO Banking and AIB plc bridging finance of £25 million project finance of up to £78 million subject to banks normal due diligence.
“Due diligence of Dermot Desmond’s personal wealth Escrow account, interest bearing.
“Cash flow required per business plan, is 108.4 million by end of year 3 Share capital of 52 million and loans of 72 million by end of year 4.
“8.30am Wednesday 15/5/96
“No dilution below 80% — stick to 40:40:20 note DTEC satisfied, cruising altitude is reached.
“IIU confirm underwriting Esat.
“Cash balance of DD, but what about liabilities
“conditions under licence agreement roll-out targets will require capital to remain in the business
“could 5 financial institutions stand behind DD
“shouldn’t be seen to be treating an individual different from a company — therefore need to fall back on fact that we don’t have a track record
“is there a joint and several liability — no — use “big” brother
“escrow until money put into company by both parties can’t withdraw no dividends
“monitoring conditions — quarterly accounts (including cash flow) to regulator
“meeting with Michael Walsh
“Telenor — undoubted ability to bankroll the project
“need to ascertain ability of other parties to bankroll their share
“share capital going in as follows:
“£0.75 million, £3 million subscribed so far, today £5 million, could be £6.3 million” then there is a note “£15 million licence fee
“37 million in 1996 compared to 52 million per business plan.
“8.30 meeting with Michael Walsh 15/5/96
“Letter from Telenor underwriting up to 66 2/3% and up to a hundred percent (clause 14)
“Letter from IIU underwriting up to 33 1/3%.
“Bank confirmation on behalf of IIU stating £10 million available of all of 1996 — includes £5 million to be paid over today — what about when Denis O’Brien comes up with the funds?
“Letter outlining in general the assets supporting DD’s financial position
“also confirmation of revised capital requirement — from Esat Digifone — no
“GSM II meeting with Pearse Farrell — 14/5/96: 10.30am.
” — resident abroad assets spread out worldwide. Logistically difficult before you get to confidentiality. — track record over the years (NCB etc.)
” — £20 million in a bank at present but leaving it there for up to 12 months is costly
“imagine that IIU is highly capitalised but can’t comment on it definitively
” — need to clarify that IIU are underwriting Communicorp as per agreement of 29/9/95″
It appears from Mr. Buggy’s notes that as regards the financial capability of IIU Limited/Mr. Dermot Desmond the following were his views: Firstly, that there was very little information on which to assess the financial strength of IIU or Dermot Desmond.
Secondly, that Mr. Dermot Desmond was resident abroad.
Thirdly, that Mr. Desmond’s assets were spread out worldwide.
Fourthly, that this gave rise to a logistical difficulty before even addressing the issues of confidentiality.
Fifthly, that Mr. Farrell imagined that IIU were highly capitalised but could not comment on that definitively.
On the basis of his analysis, Mr. Buggy produced a formal typed memorandum on the 15th May 1995 which was addressed to Mr. John Loughrey in which he set out the results of his analysis.
Now, the Tribunal is reading this out to contrast it with the handwritten notes and working notes of Mr. Buggy.
It’s to the Secretary, and it is marked “noted thanks” and it seems to be the 16/5/1996, so it may have been received by Mr. Loughrey on the 16th.
“From Donal Buggy Planning Unit, re GSM II licence, Financial strength of licencee, draft 15 May 1996.
“Mr. Martin Brennan and I have been involved in various discussions in respect of the financial strength of the members backing the Esat Digifone consortium over the last two days, and detailed below is my understanding of the current position and an assessment of the consortium’s financial strength.
“These discussions have been with a number of parties, but principally Mr. Michael Walsh, a director of International Investment and Underwriting Limited (IIU).
“The business plan of Esat Digifone, as submitted with their application in August 1995, states that the share capital will be £52 million, all of which will be raised in year 1. We now understand that after further analysis of the cost of providing the infrastructure, Esat Digifone are satisfied that an amount slightly less than IR£ 52 million is required and that this will be phased in as follows:
“To date: 3 million
“Upon signing the licence: 15 million August 1996: 10 million
“November 1996: 8 million.
“Sometime in 1997/98: 10 million.
“Total: £46 million.
“Under the Shareholders’ Agreement each of the parties have four months after the date of each call on share capital in which to come up with the funds or else they will be in default, and they are only allowed 3 delays in total before they are also considered to be in default and excluded from increasing their investment any further.
“The underwriting agreements have been revised in the Shareholders’ Agreement so that in the event that any one party defaults, the other two parties will underwrite the defaulting investment in their agreed share proportions. This means that if Esat Telecommunications Holdings Limited (ETH) defaults, Telenor and IIU will provide the funds in the ratio of 66.6% and 33.33%. In the event that both ETH and IIU default then the Shareholders’ Agreement provides for Telenor taking on 100% of the financial commitment.
“Under these underwriting agreements, the maximum exposure (based on the original estimated share capital of 52 million) of each consortium member is as follows:
“Telenor: 100 percent or £52 million
“Esat Telecommunications Holdings: 40% or £28.8 million (assuming other parties are strong)
“IIU: 33.3 percent or £7.3 million.
“Telenor is a very strong company, based on their 1994 annual report, which shows net assets of IR£1 billion. Therefore, they appear financially strong enough to carry 100 percent of the share capital (£52 million) if necessary.
“Esat Telecom Holdings are currently in the process of arranging a private placement in the US. This is expected to raise at least £22 million. The process is at an advanced stage but not yet finalised, therefore we cannot rely on it at this particular time.
“As a result we must ensure that the parties underwriting Esat Telecom Holdings shares are financially strong enough to support their portion of ETH’s shares along with their own investment.
“We have already seen above that Telenor are strong enough, and IIU is discussed below.
“IIU are 100% owned by Mr. Dermot Desmond (DD) and therefore in looking at IIU’s financial strength we are essentially looking at DD. According to Mr. Walsh, IIU are only in existence since August 1995, and therefore no financial statements have been produced for the company to date.
“In order to finance its own investment and underwrite its portion of ETH’s investment, IIU/DD must have finances of IR£17.3 million (being 33.3% of 52 million). While DD is known to be a very wealthy person, this alone is not considered enough information on which to proceed.
“To ascertain if DD has sufficient finances to support this project, we discussed the matter with Mr. Michael Walsh. He informed us that DD had already put three-quarters of a million into the company and has put up another 5 million this evening in advance of signing the licence.
“In order to satisfy us on the remaining £11.55 million, we received the following:
” – a letter from Anglo Irish Bank confirming that DD has £10 million available to invest in Esat Digifone (including the 5 million put in this evening) and that this will remain available for the whole of 1996.
– An updated letter from Farrell Grant Sparks which confirms that DD is worth at least 40 million and which outlines in general terms some of the unencumbered assets totalling some 77 million which DD owns and which supports their opinion that he is capable of financing up to £40 million of this
– Letters from Telenor and IIU stating that they are underwriting ETH’s investment in the project, in the ratio 66.6% and 33.3%.
– A final version of the Shareholders’ Agreement
“On this basis, I consider that the financial strength of DD has been confirmed to the extent that it can be relied upon to finance its own investment in Esat Digifone and underwrite its agreed portion of ETH’s investment.
“We also reviewed the debt financing position of Esat Digifone and received a letter from ABN-AMRO Bank which confirmed that along with AIB Plc, it had agreed to provide bridging finance of up to £25 million to Esat Digifone and that draft terms for project finance had been agreed which would provide up to £78 million subject to the bank’s formal due diligence. This appears to satisfactorily cater for Esat Digifone’s debt financing requirements.
“Based on the discussion documented above and the letters received from the various parties as outlined above, the shareholders in Esat Digifone appear to have enough financial strength to ensure that Esat Digifone is financed in line with the expectations under the business plan, and the required debt financing appears to be available to the company.”
And it’s signed by Donal Buggy.
The Tribunal, in the course of its public sittings, will inquire into how Mr. Buggy concluded that on the basis of the discussions documented in his memorandum and the letters received from the various parties, that the shareholders in Esat Digifone appeared to have sufficient financial strength to ensure that Esat Digifone was financed in line with the expectations under the business plan and the required debt financing which appeared to be available to the company, in particular having regard to the following observations recorded in his memorandum:
A. That Esat Telecom Holdings (Communicorp) were currently in the process of arranging a private placement in the US which was expected to raise at least £22 million, and that while the process was at an advanced stage, it was not yet finalised, and therefore the Department could not rely on it at that particular time.
B. That as a result, the Department had to ensure that the parties underwriting Esat Telecom/ Communicorp’s liabilities were financially strong enough to support their portion of Esat Telecom’s share along with their own investment.
C. That IIU Limited, which was the entity which was underwriting 33.3% of ETH’s liability, had only been in existence since August 1995 and that therefore no financial statement had been produced for the company to date.
D. That in order to finance Esat Telecom’s investment, IIU, in addition to funding its own investment, would have to have available finance of £17.3 million;
E. That Mr. Dermot Desmond had the financial wherewithal to meet that contingent liability on the basis of a letter from Anglo Irish Bank confirming that he had £10 million available to invest in Esat Digifone and what purported to be a statement of Mr. Desmond’s assets which was unvouched and which did not contain a statement of his liabilities.
In particular, the Tribunal will inquire into whether Mr. Buggy had any further dealings in connection with the production of his memorandum of the 15th May 1996 with any other departmental official or any other person.
The Tribunal will also inquire as to the circumstances in which the Department considered that it had sufficient comfort, based on Mr. Buggy’s analysis and based on the documentation available to him, regarding the financial strength of Esat Digifone to enable Mr. Michael Lowry to issue the licence to Esat Digifone on the 16th May 1996 and the role, if any, of Mr. Michael Lowry in this determination, bearing in mind that it appears from Mr. O’Connell’s note of Mr. O’Brien’s briefing of his (Mr. O’Brien’s) meeting with Mr. Lowry and Mr. Loughrey on the 14th May 1996, that Mr. Lowry had a direct involvement in these matters.
While Mr. Donal Buggy was conducting his financial analysis, the efforts of the Department and Esat Digifone to finalise the draft licence and to finalise arrangements for the forthcoming press conference were continuing. On Thursday 15th May, 1996, Mr. Owen O’Connell met Mr. Martin Brennan, Mr. Fintan Towey and Mr. Donal Buggy at the Department. Mr. O’Donnell kept a handwritten note of the meeting which he has made available to the Tribunal. And the note reads as follows:
Again, this has been reconstituted. It’s a memo from Owen O’Connell, dated 15th May 1996.
“Client: Esat Digifone.
“Department communications — M. Brennan, F. Towey, Donal Buggy. Friday if necessary; 3.30 Thursday
“TE big price decreases tomorrow (off record)
“world communications day 17 May
“Bill O’Herlihy per Minister
“when did Telenor late April/early May — the left-hand columns seems to be questions posed by Mr. Martin Brennan, and the right-hand column appears to be responses.
“When did Telenor — late April/early May Knut Digerud phone calls late April, meeting Oslo early May.” It seems to be a reference to when Communicorp and Telenor became involved with each other.
“Parties talking 2nd half of April. Double dealing re SW Bell.
“Pain in the ass” comment company owned 50/50 — intention to place/float 20%, strong supporting letters were available from a lot of blue chip investors.
“In normal course when project became real, negotiated but deal available, which we now have. IIU not in original.
Comfort Min. favourably disposed re letter
ref: P1 Shareholders’ Agreement recital ref: 4 shareholders
“Dress rehearsal with Minister sometime after 1.00 some hour side.
45:45:10 “Cruising altitude” This appears to refer to an ultimate change in the share configuration of Esat Digifone.
“In normal trading circumstances, debt/equity around 50%; in start-up phase more fluctuation because of capital spend, will tend a little more towards equity, especially in early phases.
MB (Martin Brennan) (save Minister, needs our help)
whether same project as won competition.
Martin Brennan not keen on Denis as speaker (not attribution)
first conference — Denis O’Brien we’ll be lowering prices 25% in three years. Focus of attack couldn’t have won competition on this basis. Application was stronger than that.”
“Prepare better answer, get correction in launch commitment per bid. Good presentation in price area. Consider (although not in application) 10 second billing units, oral presentation. DOB 1 second billing by end year 1. Different packages, different consumers, 25% simplistic more complex exciting things to shake up market, e.g. per second billing early on (if Esat Telecom). Attempt to correct — complaint/innuendo — 25% in three years, he couldn’t have won competition on the basis (not enough — another consortia reducing 30 — 33% within a year of launch.
Why only signed now — was licence delayed to put money in place. Leslie a speaker? Department — delay all on our side
what is impact of delay on launch — will there be delay (especially if different) geographical and quality coverage — stress this.
Everyone knows contract Christmas market critical and intend to demonstrate seriousness for that.
Question — 16 June deferment: 23 June original closing. If no deferment could we have bid.
Comfort now as to how Minister will act in given circumstances in the future.”
It appears from the documents produced to the Tribunal by Messrs. Matheson Ormsby Prentice, solicitors for Telenor, that Mr. O’Connell then attended a meeting with Mr. Gerry Halpenny, solicitor for Esat Telecom/Communicorp, Mr. Michael Walsh of IIU, Mr. Barry Maloney, Mr. Knut Digerud, Mr. Peter O’Donoghue and Mr. Arthur Moran to report on his meeting with the Department. Mr. Arthur Moran kept an attendance of this meeting, which records as follows:
CHAIRMAN: I think it might have been Paul Connolly rather than Peter O’Donoghue.
MR. COUGHLAN: I beg your pardon, Sir. I think it’s probably Peter O’Donoghue. But anyway, I think that is so.
On the same day, Thursday 15th May, 1996, Mr. Owen O’Connell received from a Ms. Eileen Gleeson of FCC public relations advisers, a draft press release, together with a series of anticipated questions which she had prepared for the forthcoming press conference. Mr. O’Connell has informed the Tribunal that the handwritten annotation on the page bearing the questions were made by him and recorded his thoughts on possible answers.
“FCC Communications Limited,
15 May 1996, to Owen O’Connell from Eileen Gleeson.
“Attached is a draft press release which would be sent out today if we get approval from the Department to do so (which is not at all definite. The Minister’s advisers thought it a good idea, but I think that Loughrey does not). Anyway, regardless of whether it is today or tomorrow, we need to agree the details for publication on ownership and funding anyway.
“Could you look through the attached. I also prepared questions which might be asked on the issue.
“Denis asked me to go to your office at 1:00pm to discuss the release and the questions which will be asked of the Esat Digifone people at the press conference — in the interest of everyone being “on the same line”, it is very important that this practice session is undertaken.
“See you in a while then.
Then the draft press release, which was prepared by this firm, dated 15th May, 1996.
“Esat Digifone shareholding details.
“In advance of the formal signing of the licence to operate Ireland’s second mobile telephone network tomorrow, Esat Digifone has confirmed details of its shareholding structure as follows:
“Esat Telecom Holdings Limited (a wholly-owned subsidiary of Communicorp) holds 40% of the shares; Telenor Invest, the Norwegian telecommunications operator, holds 40% of the shares, and International Investment and Underwriting Limited (IIU) holds the remaining 20% of the shares. The owner and Chairman of IIU and therefore the beneficial owner of this 20% shareholding at this time is Mr. Dermot Desmond.
“IIU has stated that the shareholding or part thereof may be placed with additional investors at some future time. This will be reviewed when Esat Digifone is operational towards the end of this year.
“The shareholders as listed above have each contributed to the investment made in the network to date, and each will discharge its financial responsibilities to the entire investment required for the project, which is in the order of £120 million. This capital will be provided by equity from the shareholders and by debt financing which is being arranged by AIB and ABN banks.”
And then there is, it’s changed — as “As joint lead banker and AIB bank.
“Each shareholder has given to the Department of Transport, Energy and Communications details of its ability to provide all of the necessary funding. The Department has stated that it is satisfied with the details of ownership and funding which it has received.”
Then there were questions or anticipated questions prepared by this firm, and Mr. O’Connell has informed the Tribunal that the handwritten annotations on these typed questions are his.
“Questions:” — now, we have reconstituted these, and we have put in the question first, and the annotation then has been reconstituted.
“When were these shareholding details made known to the Department?
“Proposed Answer: “Martin Brennan 50% owners by 2 Esat and Telenor disclosed intention re 20% with the bid i.e. general operators percentage.”
“Was IIU mentioned in the bid document as one possible shareholder — i.e. were they one of those who gave letters of commitment?”
“Proposed Answer: IIU to say no. Department have said already expressions of interest given. Bid was confidential in that respect, i.e. backers’ identities were not revealed.”
“Question: Who underwrote finance as detailed in the bid, described as ‘acceptable blue chip investors’ by the Minister?”
“Proposed Answer: Financial details are confidential; Minister satisfied with the particulars (as are we). Martin Brennan Advent are invidious to name those not in consortium.”
“Question: Are the Department satisfied with the level of information which you have provided?”
“Proposed Answer: Yes. Otherwise we wouldn’t have the licence/won the competition.”
“Question: “Will the shareholdings that you have announced today stay at those levels for the future?
“Proposed Answer: No arrangements for change; licence has consent provisions by Minister.
“Question: Will there be any possibility for private shareholders investing in the company?”
“Proposed Answer: Refer 12% in bid. There is the word ‘likely’ crossed out “Possibly in the future, no immediate plans. ”
“Question: Is there any possibility of flotation at any stage in the future?”
“Proposed Answer: ^ ditto.
“Question: What is the breakdown ratio on equity and debt financing involved?”
“Proposed Answer: “Between 50:50 and 40:60 and 60:40.”
“Question: How much capital has been provided by shareholders to date?”
“Proposed Answer: Up to now all activities funded from equity up to and including signing licence. Enough for licence fee and capex to date” — that’s “capital expenditure”, I presume.
“Question: Is all the debt financing in place — from whom?”
“Proposed Answer: Arrangements in place to draw down as required confidential sufficient in place, letter to Minister from AIB and ABN-AMRO re balance.”
“Question: “What role will the fund raising exercise currently underway in the US play in the Digifone financing?”
“Answer: It will play a role, but not wholly devoted to Digifone.
“Question: How is that fundraising going — what is the timetable, what are you trying to raise, where will the money go?”
“Proposed Answer: Going well, pretty soon, rest confidential.
“Question: “What is the timetable of capital investment required for the Esat Digifone project, when and what amounts will be necessary over the next few years?”
“Proposed Answer: “Confidential/commercially and competitively sensitive.”
“Question: What participation will Dermot Desmond or his company have in the operation of the company?”
“Proposed Answer: Board representation, money as investor, no active operational role.
“Question: Do you regret the fact that the ownership and funding details of this project have become such a focus, and do you think that this could have been avoided by earlier disclosure of the facts?”
“Proposed Answer: They say that there is no such thing as bad publicity.”
“Question: “Why is it only now that you are prepared to confirm what most people were speculating for some time?”
“Proposed Answer: This is the appropriate time and place. Up to now discussions with the Department were ongoing and disclosure would have been improper — only now we have become licence holder.”
“Question: Has Denis O’Brien contributed his share of the equity?”
“Proposed Answer: Make or break legally and politically. Company to answer; accurate; if fudge, no lies.”
Ms. Gleeson’s fax to Mr. O’Connell suggests that there may have been contact, direct or indirect, between Ms. Gleeson and Mr. Lowry’s advisers on the one hand, and between Ms. Gleeson and Mr. John Loughrey or the Department on the other hand. She suggests that Mr. Lowry’s advisers believed that it was a good idea to issue a press statement, whereas Mr. Loughrey did not share that view. Ms. Gleeson’s fax further records that Mr. O’Brien had requested Ms. Gleeson to go to Mr. O’Connell’s office at 1:00pm on Thursday 15th May, 1996, to discuss the draft press release and the proposed questions. It is not clear to the Tribunal as of now whether such a meeting took place. It appears that Mr. O’Connell sent a draft press release to Mr. Martin Brennan on the following day, Thursday 16th May, 1996.
As I have already mentioned, there is no indication from the departmental files as to whether similar efforts were being made by the civil servants to prepare for the forthcoming press conference. Mr. Martin Brennan has indicated that he has nothing more specific to add to his comments on the meeting of the 13th May, when it appears that this matter was first mooted. Mr. Fintan Towey has informed the Tribunal that he has a general recollection of some questions and answers being prepared.
Mr. Owen O’Connell has informed the Tribunal that he attended a dress rehearsal for the press conference at the Department at 11.55am on the Thursday, 16th May, 1996. Mr. O’Connell kept a note of the dress rehearsal, but the note does not record the identity of the persons who were in attendance. As Mr. O’Connell notes a contribution which he attributes to Mr. Denis O’Brien, it is likely that Mr. O’Brien was present.
The note is:
“Esat Digifone, licence negotiations, rehearsal for press conference, 16th May, 1996.
“It’s from OO’C, client: Esat Digifone matter. Licence negotiations.
“Rehearsal for press conference.
“When did Telenor and Esat get together (re delay) 2nd half crossed out, April 1995.
“Whether ready to put in bid?
“Certain 9 May: ‘April’ is answer.
“Were ready 23rd June, felt penalised, better prepared.
“Team disappointed. Add 500K to cost (keeping team together); one new competitor. Arve
“Delay in licence — Government/State
“DOB contribution — I wish to scotch the persistent rumours on this. The licence fee has been paid; millions have been spent by the company to date, almost entirely out of shareholders’ funds, little or no bank funding to date, all of Esat Telecom Holdings’ share of the funds have been paid. Arrangements among the shareholders have been concluded to everyone’s satisfaction and are working.
“Is this the same consortium as that which applied?”
That completes the note.
During these four days from Monday 13th May 1996 to Thursday 16th May 1996, negotiations continued between the members of the consortium with a view to resolving a number of issues in connection with the Shareholders’ Agreement, but primarily the following two issues:
“1. Esat Telecom Holding’s desire to increase its shareholding from 40% so as to improve its prospects of raising funding through Credit Suisse First Boston.
“2. The Minister’s requirement that the capital configuration of Esat Digifone be restored from 37.5/37.5/25 to one of 40%:40%:20% so as to be consistent with the bid document.
“In addition to these two issues, it would appear that Esat Telecom Holdings did not at that time have funds available to meet the initial call of IR£6 million on its 40% shareholding to capitalise Esat Digifone to enable it to pay the licence fee of IR£15 million.”
It appears that these issues and other issues were not finally resolved until Thursday, 16th May, 1996, when the Shareholders’ Agreement and a series of side letters were executed by the parties. It appears from the documents which have been produced to the Tribunal that these issues were resolved on the following terms:
Firstly, IIU Limited agreed to transfer 20% of its shareholding, i.e. 5% of the shares in Esat Digifone as to 2.5% each to Telenor and Esat Telecom for £2.7 million, being £1.375 million each. It appears that ETH was unable to fund this payment, and from the Share Purchase Agreement concluded between the parties dated 16th May, 1996, it appears that IIU agreed to defer payment until the 30th May, 1996, and that as security, Esat Telecom provided a charge over part of its shareholding in Esat Digifone. This latter security arrangement was formalised in a side letter dated 16th May, 1996.
I am going to refer to an agreement, a Share Purchase Agreement dated 16th May, 1996, and I wish to refer to a portion of it. It’s between IIU Nominees Limited and Esat Telecom Holdings Limited —
CHAIRMAN: I think, Mr. Coughlan, you have probably fifteen minutes or so. I am very anxious that we finish today, perhaps from everybody’s concentration point of view, not least your own, and thinking also of the stenographer, a seven- or eight-minute break is probably not a bad idea.
THE TRIBUNAL THEN ADJOURNED FOR A SHORT BREAK AND RESUMED AS FOLLOWS:
MR. COUGHLAN: I was about to make reference to certain portions of the Share Purchase Agreement entered into between IIU Limited and Esat Telecom Holdings Limited on the 16th May 1996.
“Whereas: The Vendor is the registered owner of the number of shares in the capital of Esat Digifone Limited as set out in Part 1 of the First Schedule hereto and have agreed to sell to the Purchaser the shares specified in Part II of the First Schedule hereto (hereinafter referred to as the ‘Shares’).
“B. The Purchaser has agreed with the Vendor to purchase 11 of the shares for the consideration and upon the terms and conditions hereinafter set out and accordingly it has been agreed that these presents shall be entered into.
“Now it is hereby agreed as follows:
“1. Sale and purchase: The Vendor agrees as registered owner to sell and the Purchaser agrees to purchase the Shares on the Completion Date (as hereinafter defined) hereof free from all liens, charges and encumbrances and with the benefit of all rights and advantages thereto belonging or accruing for the consideration hereinafter specified.
“2. Consideration: The consideration for the sale and purchase of the shares shall be £1,375,000.
“3. Completion: The Completion of the sale and purchase of the Shares shall take place on the 16th May, 1996 at the offices of William Fry Solicitors, Fitzwilton House, Wilton Place, Dublin 2, whereupon the Vendor shall hand to the Purchaser or as it may direct duly executed stock transfer forms in respect of all the Shares together with the relevant share certificates.
“4. Payment of consideration. The Purchaser shall deliver to the vendor on the 20 May 1996 a bank draft for the amount of the consideration herein before specified in respect of the Shares.
“5. Security: As security for the Purchaser’s obligation to pay the consideration referred to in paragraph 4 above, the Purchaser shall enter into a Deed of Charge in terms agreed prior to the execution hereof between the Vendor and the Purchaser.
The next document is the security arrangement from Esat Telecom Holdings to IIU Limited entered into the 16th May 1996, headed “Shareholders’ Agreement dated 16th May 1996.” This is a side letter.
“We refer to the Agreement and we write to acknowledge that you have entered the Agreement in your own right and that the contractual and other liabilities imposed on you under the agreement are liabilities on your own behalf and not on behalf of any third party.
“We also refer to the Deed of Equitable Mortgage entered into between yourselves and Esat Telecom Holdings Limited on the 16th May 1996 in respect of 75,000 shares in Esat Digifone Limited.
“We hereby confirm that insofar as such Mortgage is concerned and insofar as the enforcement is concerned, the provisions of clause 13 of the Agreement are hereby waived, provided always that should you wish to dispose of the shares the subject of the mortgage, any such disposal will be subject to the provisions of the Agreement and the Memorandum and Articles of Association of Esat Digifone Limited unless you exercise the right contained in the Mortgage to take full beneficial ownership of the shares in satisfaction of the amounts owing to you.
“Yours faithfully, for and on behalf of Esat Telecom Holdings Limited”
Secondly, the parties agreed that the existing shareholders should have pre-emption rights in the event of any shareholder proposing to dispose of shares. By a side letter, also dated 16th May, 1996, it appears that a special right may have been conferred on Mr. Dermot Desmond as the beneficial owner of the shares held by IIU Limited whereby he was entitled to transfer one tranche of his shares free of the pre-emption rights on a once-off basis. This letter, which was signed by all the parties and addressed to Telenor and Esat Telecom Holdings, stated as follows, and it refers to the Shareholders’ Agreement dated 16th May 1996.
“Refer to the agreement and in particular to the provisions of clause 12.2.
“In accordance with our discussions, we are writing to you to confirm that the shareholding of 20% in Esat Digifone Limited (the Company) held by us as registered owner is beneficially owned in the following manner.
“Name: Dermot F. Desmond. Percentage: 100 percent.
“This letter is further to record our agreement that any transfer of the beneficial ownership listed above will be subject to the terms and conditions regarding transfer contained in the Agreement and the Memorandum and Articles of the Company save and except that the shares beneficially owned by Mr. Desmond may be freely transferred on a once-off basis without the requirement to abide by the terms and conditions of the Agreement or the Company’s Memorandum and Articles provided that if we offer shares to either of you, we will make an offer of an equal amount on equal terms to the other party. If, at the time of the share transfer, Esat Telecom Holdings Limited and Telenor Invest AS do not hold equal amount of shares in the Company, the offer shall reflect the parties’ pro rata shareholding.
“Finally, you, either alone or in concert with other parties, agree not directly or indirectly to purchase shares or interests in shares in Esat Digifone Limited from any party holding such shares or interests from any placement exempted from the shareholders’ pre-emption rights, or to acquire shares or interests in any party directly or indirectly holding such shares or interests in Esat Digifone without offering to the other shareholders of Esat Digifone the opportunity to participate in the purchase on equal terms and pro rata to their shareholdings in the company.
“Each of us accept that each and every other shareholder in Esat Digifone is a beneficiary of the commitments we have undertaken in this letter and may take any action including action before the courts to claim right according to this letter.
“To signify your agreement please sign the enclosed copy letter and return it to us.”
It’s signed by IIU Nominees Limited, Arve Johansen, I think, Telenor, and Denis O’Brien on behalf of Esat Telecom Holdings Limited.
Thirdly, the parties further agreed that the £6 million to be contributed by Esat Telecom Holdings Limited to Esat Digifone for the payment of the £15 million licence fee by Esat Digifone to the Department would be met pro rata by IIU paying £2 million and by Telenor paying £4 million. That is of course open. The net effect of this arrangement was that the £15 million licence fee was funded as to £5 million by IIU and as to £10 million by Telenor. The arrangement was also formalised by a side letter dated 16th May, 1996.
“IIU Nominees Limited”, and it’s addressed to Telenor and Esat Digifone Limited (the Company). And it reads:
“A. We refer to the Agreement and to the terms thereof specifically relating to the mechanism for handling a default by any of the parties thereto in relation to the provision of Capital (as defined in the Agreement).
“B. At a Board Meeting of the Company held on the 16th May, 1996, the Board resolved to call for a Capital contribution of £15 million in respect of the acquisition of the GSM licence. Esat Telecom Holdings Limited indicated that it would not be able to meet this capital call and accordingly, under the provisions of clause 14 of the Agreement a meeting was called to discuss alternative methods of providing the shortfall arising from this default amounting to IR£6 million.
“C. Pursuant to that meeting agreement has been reached between us” — that is, between IIU and Telenor — “in accordance with the terms of the Agreement as to the provision of the shortfall of £6 million in accordance with the following terms:
“1. IIU will contribute £2 million of the shortfall.
“2. Telenor will contribute £4 million of the shortfall. (The Telenor contribution)
“3. The terms upon which the IIU Contribution and the Telenor Contribution will be invested in the Company are that each of IIU and Telenor will be issued with a loan note in respect of the said contribution in a standard form confirming firstly the principal amount: Secondly an interest rate of 2% over the Dublin Interbank Offered Rate to Allied Irish Banks plc for funds of an amount equivalent to each of the said contributions on a one-month basis set out on the date of the said contributions and reset monthly thereafter. Interest will be payable on the notes monthly in arrears and if unpaid, will be compounded with the principal and will itself bear interest. Interest will accrue from day to day;
“4. The notes will have a repayment date on a date which is four months after the date of the distribution, i.e. the 16 September, 1996;
“In the event that the company does not make the repayment on that date aforesaid, we shall either have the option at our unanimous agreement to extend the repayment date or to procure the conversion of our contribution into ordinary £1 shares in the company on a pound-for-pound basis taking into account any unpaid capitalised interest which has accrued in respect of the contributions aforesaid. If IIU and Telenor are unable to reach agreement in accordance with the terms of this clause by the 16th September, 1996, the contributions shall be converted into ordinary shares accordingly.
“6. In the event that the Company is unavailable to repay and we are unable to convert the contributions as specified in paragraph 5, then we agree to negotiate together so as to convert our contributions into a quasi-equity instrument on standard and usual terms which will effectively treat the contributions as an equity investment in the Company and will carry the rights of an ordinary share save in respect of voting rights. The intention is to create an instrument which would have the same commercial value in all respects as an ordinary equity share carrying voting rights. In the event that we are unable to agree on the format of the aforesaid instrument, then we agree to refer the matter to an independent chartered accountant agreed between us or appointed by the President of the Institute of Chartered Accountants in default of agreement. The said Chartered Accountants so agreed or appointed, acting as an expert, will fix the terms of the instrument taking into account the provisions of the agreement and of this letter.
“The capital call made on IIU for £3,000,000 and Telenor for £6 million at the Board meeting referred to in paragraph B have or will be contributed to the Company on the same terms as the IIU Contribution and the Telenor Contribution herein set out.”
And it’s signed for IIU by Michael Walsh, and it’s signed for and on behalf of Telenor by Arve Johansen.
The Department’s requirement that Esat Telecom Holdings’ obligation to contribute to the capital of Esat Digifone should be underwritten was met on the 16th May, 1996, by a side letter from Telenor and IIU addressed to the Department in the following terms.
“16th May, 1996. Department of Transport, Energy and Communications.
“Esat Digifone Limited, the company.
“Telenor Invest AS and International Investment and Underwriting Limited hereby confirm that in accordance with the terms of the Shareholders’ Agreement governing the Company, they have agreed to make good or to procure that there is made good directly to the Company pro rata to their shareholdings in the Company, any shortfall which may arise in respect of the financial commitment of Communicorp Group Limited (through its wholly-owned subsidiary Esat Telecom Holdings Limited) to the equity requirements of the Company limited to the amounts specified in the Business Plan lodged with the tender.
“We believe that you have already been provided with satisfactory assurances concerning the ability of the undersigned to meet their foregoing commitments.”
And it’s signed by Arve Johansen on behalf of Telenor and Michael Walsh on behalf of IIU.
It will be recalled that in his memorandum of the 15th May, 1996, Mr. Donal Buggy in reciting the underwriting arrangements between the parties at the third bullet point on the first page of his memorandum stated as follows:
“The underwriting arrangements have been revised in the Shareholders’ Agreement so that in the event that any one party defaults, the other two parties will underwrite the defaulting investment in their agreed share proportions. This means that if Esat Telecom Holdings Limited defaults, Telenor and IIU will provide the funds in the ratio 66.67%:33.33%. In the event that both ETH and IIU default, then the Shareholders’ Agreement provides for Telenor taking on 100 percent of the financial commitment.”
The Tribunal has been unable to identify any such provision relating to Telenor in the Shareholders’ Agreement, nor has the Tribunal been able to identify any document within the departmental files or within the files of any of the other parties which could ground such an enforceable agreement.
On the basis of the above arrangements, the Minister issued the second GSM licence to Esat Digifone on the 16th May, 1996. The press conference which had been arranged proceeded. There is no record or transcript of the press conference in the departmental files. The sole record available to the Tribunal is a handwritten note which was taken by Mr. Owen O’Connell and is dated 16th May, 1996.
“16/15/1996, from OO’C Esat Digifone, matter: Licence negotiation.
“Question why so long 1st hand, very comprehensive — very comprehensive complex process, prudent plus cautious process.
DOB whether 120 million has changed from previous hundred. Plan said 124 million total investment 50 million” — I really can’t make out too much else of this particular note of the press conference at the moment. It’s a short note.
The Tribunal will inquire in the course of these public sittings as to how the Minister issued a licence to Esat Digifone at a time when Esat Telecom Holdings Limited, a member of the company holding 40% of the shares, had no finance available to it either from its own resources or from third-party funds to enable it to contribute to the initial call of £4 million to fund the payment of the licence fee and:
1. Where Esat Telecommunications Holdings’ ability to fund the licensed company was dependent on the outcome of a bond placement in the United States by CS First Boston which Mr. Donal Buggy, in his memorandum of the 15th May, 1996, to Mr. John Loughrey had characterised as: “A process — we cannot rely on at this particular time”.
2. Where the sole underwriting for 33.33% of the liability of Esat Telecommunications Holdings Limited to contribute to Esat Digifone was provided by IIU Limited, a company which had only been incorporated in August, 1995, and for which no financial statements were available.
The Tribunal will inquire, in the course of its public sittings, as to what were the true facts concerning Esat Telecommunications Holdings Limited financial position as at and prior to the 16th May, 1996. It will then be a question for the Tribunal as to the extent to which the Department was aware of those facts. If the Department were not aware of the true facts, the Tribunal will inquire as to whether this was due to any intervention on the part of or to influence exerted by Michael Lowry or, to the extent to which it is relevant, whether it was due to some other factors.
The Tribunal will also wish to inquire into the true facts surrounding the identity of the consortium, that is to say the identity of the applicants for the licence and the true facts surrounding the ownership proposals as required by paragraph 3 of the RFP. In this connection, the following questions will need to be examined in the course of the Tribunal’s public sittings.
A. Who were the true applicants behind the Esat Digifone application?
B. Were the true facts concerning the identity of the applicants known to the evaluators, and if these facts were not known to the evaluators, was this due to any intervention on the part of or any influence by Michael Lowry?
C. (1) What were the true facts concerning the ownership of either the Esat Digifone consortium or the licencee proposed by that consortium, and were those facts truly stated in the application evaluated by the evaluators as part of the GSM competition process?
C. (2) What was the state of knowledge of the evaluators concerning those facts as at the date of receipt of the application, at any time during the course of the evaluation process, at the date of the announcement of the result, at any time during the licence negotiations and at the date of the issue of the licence?
D. If the true facts were not known to the evaluators, the Tribunal will once again wish to inquire whether this was due to any act or intervention on the part of or due to any influence exerted by Mr. Michael Lowry. If it appears that at any time the true facts, whether in relation to the financial position of Esat Telecom Holdings Limited or Communicorp or the facts surrounding the question of ownership or identity of the applicants set out above were in fact known to any of the evaluators, the Tribunal will wish to inquire whether due consideration was given to these facts in the carrying out of the evaluation and/or in the negotiation of the licence conditions and/or in the issue of the licence and whether, once again, the conduct of any of the evaluators was influenced by or was the result of any intervention on the part of Mr. Michael Lowry.
There seems to be no disputing the fact that Mr. Dermot Desmond, through his vehicle IIU, was a member of the consortium to which the licence was issued. As part of the inquiries mentioned above, the Tribunal will wish to inquire whether Mr. Dermot Desmond or IIU, although a part of the consortium to which the competition result was awarded, that is the licence issued, in fact avoided the evaluation process and whether this was a result of any intervention on the part of or as a result of the exertion of any influence by Mr. Michael Lowry.
Now, as has been the practice at this Tribunal, and I will go on in a moment to conclude my Opening Statement, people participating in the Tribunal always have inquiries made of them by the Tribunal if they wish to have anything added to the Opening Statement, and in that regard, Mr. Michael Lowry’s counsel has asked me to include the contents of a statement of Mr. Lowry at this stage in the Opening Statement, Sir, so I intend to do that.
“Statement of Michael Lowry in response to letter of John Davis, solicitor to the Tribunal, of the 16th October, 2002.
“This statement is one of a large number of responses that I and my legal team have made to requests for information received from the Tribunal in recent weeks in connection with the forthcoming module investigating the decision to award the second GSM licence to the Esat Digifone consortium.
Whilst I am obviously disappointed that the Tribunal’s process remains incomplete, in another sense I welcome the opportunity presented by this new phase to dispel what I believe to be an entirely unfounded rumour and innuendo surrounding this matter.
It is now six years since I resigned my post as Minister for Transport, Energy and Communications. The passage of time has obviously prejudiced my recollection of points of details, dates and sequence of certain events, contacts and meetings. Moreover, the reality of the current module is that it largely concerns matters that would have been dealt with at an official rather than ministerial level.
Thus, in the majority of cases, I am quite certain that I would have been at no stage familiar with the matters raised by the lengthy schedule appended to the letter of Mr. Davis of the 16th October, 2002. Subject to this disability, I am of course concerned that I put my position on the record of the Tribunal, and I say as follows:
“1. Prior to my appointment as Minister for Transport, Energy and Communications, a significant amount of preparatory work had been accomplished by the outgoing Government as outlined in the Aide-Memoire issued from the Office of Minister for Transport, Energy and Communications on the 9th November, 1994.
“2. The GSM competition was launched on the 2nd March 1995 following Government approval of the competitive framework proposed. The closing date was set for the 23rd June, 1995. Summary information, including the selection criteria, was publicised widely.
“3. The full competition documentation became available to the public from the 2nd March 1995 on payment of fee of £5,000. The evaluation criteria has also been made available to a specially constituted Cabinet Sub-Committee. The eight evaluation criteria by which the applications were to be assessed were listed in an explicitly indicated descending order of priority.
“4. The competition was managed by a specially created Project Team led by the Department of Transport, Energy and Communications which also included representatives of the Department of Finance and Andersen Management International (AMI), Copenhagen-based consultants who were recruited following an international tendering procedure. AMI were acknowledged specialists in the matter of international competitions for telecommunications franchises. As Minister, I was appraised in general terms about the progress of the Project Group.
“5. I understood that the weighting model for the evaluation criteria which respected the descending order of priority and the detailed approach of the evaluation were initially agreed by the Project Team on the 18th May 1995 – over a month before the planned closing date for receipt of applications, and kept strictly confidential to the Project Team only. In the Department of Transport, Energy and Communications knowledge of these weightings was strictly limited on a need-to-know basis. I did not at any time seek to know nor was I made aware of the marking system to be applied.
“6. On the 27th April, 1995, I was informed by my Department officials that the European Commission had serious objections to the licence fee element of the competition (an ‘auction’ based fee but without any fee imposition on Eircell). The competition was suspended on the 16th June 1995, when it became apparent that negotiations with the Commission would entail some change in the rules of the competition and had, therefore, to be concluded before the competition could be closed. Time would have to be allowed to enable prospective applicants to take the changes into account.
“7. Following discussions with the Commission, a compromise proposal was put on the table whereby applicants for the licence would bid a fee in the range of £5 million to £15 million while Eircell would pay a fee of £10 million. The compromise proposal was made on an ad referendum basis by representatives of the Project Team and was subsequently approved by me as Minister. The consent of the Minister for Finance was also obtained and the revised fee arrangements were agreed by Government on 4 July, 1995. I wish to make it clear that it was not on my initiative that the licence fee was capped.
“8. On receipt of the Commission’s formal clearance for the revised fee structure on the 14th July 1995 by letter from Commissioner van Miert of that date, all prospective applicants were advised of the new arrangements and the new closing date of 4 August, 1995 for receipt of applications.
“9. I now understand that a slight revision to the weightings for the evaluation criteria was agreed by the project team on the 27th June 1995 and again kept absolutely confidential. This change was to reflect the revised licence fee arrangements agreed with the European Commission. Again I wish to state clearly and unequivocally that I, as Minister, did not seek nor was I given details of the revised weighting model or the evaluation approach.
“10. Six applications were received on the 4th August, 1995. Details of the applications were announced publicly. I did not at any time assist or support any particular competitor.
“11. I understand the evaluation of applications took place in the period 4 August to 25 October 1995. Each evaluation criterion had been developed in advance into a series of detailed indicators against which all of the applications were ranked. The detailed evaluation under each criterion was carried out by discrete sub-groups of the Project Team, drawing upon the expertise required for different aspects of the evaluation. The final result was determined by aggregating independently determined scores of each applicant under each criterion by reference to the weighting model. The Project Team’s decision was a unanimous one. Esat Digifone had the highest score, and this is fully documented in the evaluation report prepared by the consultants and approved by the Project Team.
“12. As Minister, I was formally advised of the recommendation of the Project Team by the Secretary of the Department. Their recommendation was accepted by me. I was informed by the Secretary that the recommendation required the approval of the Minister for Finance, which was subsequently given. I in turn briefed the leaders of the Government Parties and was given permission to announce the result. This recommendation was subsequently endorsed by the Government.
“13. It is my understanding that all applicants had equal access and opportunity. This competition was conducted in an objective, fair and impartial manner with strict adherence to competition procedures and rules.
“14. I did not have any meetings or discussions with the Project Team.
“15. I did not have any discussions or meetings with Andersen Management International.
“16. I did not interfere or influence the outcome of the competition. My only concern was to ensure that the deadline of the 31st October was met, although there was, as I indicated at the time, an advantage to announcing the result immediately to end speculation and, ironically, to prevent the creation of a vacuum which could have caused the decision to be revisited with the likely consequence of litigation.”
As I say, Mr. Lowry’s counsel has asked us to include that in the Opening Statement, and we have done so.
While in the course of this lengthy Opening Statement I have identified a large number of issues upon which the Tribunal proposes to focus its inquiries, it should be understood that the Tribunal will not be confined to the examination of these issues.
In the course of the Tribunal’s inquiries, it is likely that other issues will arise, and from time to time the Tribunal will no doubt wish to redirect its focus or to add to the issues into which it will be necessary to inquire.
Finally, I should indicate what prompted the institution of this portion of the Tribunal’s inquiries.
The Tribunal initially examined the second GSM licence process in April of 1999. This was a limited examination of the process and was conducted shortly before the Tribunal’s first public sittings involving evidence in connection mainly with Mr. Michael Lowry. Nothing emerged from that limited examination or from the evidence given at those sittings which, at that stage, would have prompted further scrutiny of the licensing process.
It was not until further inquiries, prompted by information initially in the public domain concerning what has become to known as the $50,000 Telenor/Esat payment to Fine Gael, that the Tribunal decided to review the information to hand in relation to the second GSM licence and to institute further inquiries in relation to same and in relation to the various individuals involved. Of course it is to be remembered that it was around this time also that the Tribunal obtained information from Investec Bank privately, and that information was not, at that time, in the public domain. And this also prompted the Tribunal to revisit a matter and to continue its inquiries.
Those inquiries initially took the form of an examination of the money trail. On this occasion a second money trail, distinct from the money trail or trails examined in the course of the first public sittings dealing with the Terms of Reference affecting Mr. Michael Lowry.
That examination led the Tribunal to look at apparent connections or relationships between a number of individuals and a number of entities involved in or associated with the second GSM licence. Had the information which then came to hand been available to or made available to the Tribunal at an earlier point, it could have been dealt with in 1999, or at least at a date much closer to the date upon which the events which are now being examined actually took place.
That completes my Opening Statement, Sir.
CHAIRMAN: There wasn’t one matter in relation to the succeeding Minister —
MR. COUGHLAN: As I say, it is a matter which I did refer to, and for completeness’ sake, particularly in relation to the information which is now available to the Tribunal and which I have outlined in as brief a format as I could possibly do in this Opening Statement, there is also a letter on the departmental files responding to queries obviously raised by Mr. Robert Molloy TD, as he then was, and signed by Mr. Alan Dukes, TD, Minister for Transport, Energy and Communications on the 6th December, 1996. Of course it is to be said at this stage that Mr. Dukes had just taken over as Minister in that Department. But the letter reads:
“Mr. Robert Molloy TD, Dail Eireann, Dublin 2.
“There appears to be considerable confusion abroad about the precise situation regarding ownership and investment in Esat Digifone. I hope the following information will clarify the matter for you:
“The Esat Digifone application was on behalf of a consortium owned as to 50% each by Telenor Invest AS and Communicorp Group Limited (the holding company for Esat Telecom). The application disclosed that, if it was successful, 20% would be placed with financial investors. A list of potential investors was submitted, all of whom are ‘blue chip’ institutions. The Minister and Department are specifically precluded from naming these, but there was no room for doubt as to either their bona fides or their financial capacity.
“I can, however, confirm that the names being speculated upon in the last few days were not on this list.
“At the licensing stage, several months later, Esat Digifone was in a position to announce that it had placed the 20% with IIU Nominees Limited, and it was certified to the Department at that time that Mr. Dermot Desmond was the sole beneficial owner of the 20%. Adequate evidence of his capacity was disclosed. Mr. Desmond is still the exclusive beneficiary of the IIU shareholding.
“On the 19th April, when the Department held a press briefing, the fact that it was not in a position to give final definitive information on the placement of the 20 percent minority shareholding may have reduced the clarity of the exchanges. My information is that when the licence was issued shortly thereafter, the precise situation was clearly stated.
“If I can be of any further assistance to you, within the constraints of the binding confidentiality arrangements, I would be delighted to do so.
“Alan Dukes, TD.”
The Tribunal has not as yet of course spoken to Mr. Dukes about this, but as I have indicated, he had only just taken over as Minister in the Department. But the Tribunal, in relation to departmental officials, will conduct inquiries as to how this letter came to be drafted.
CHAIRMAN: I’ll take you in a minute, Mr. McGonigal.
I should first of all, Mr. Coughlan, express my gratitude to you and the other members of the legal team for the long hours of hard work, indicating a vast amount of documentation and convening a very large number of meetings to put your very considerable, indeed monumental Opening together. Thankfully, the Opening Statements of some 28 hours or thereabouts are not yet the norm in our legal or Tribunal processes, but I think that in this exceptional instance, it would have been extremely difficult to embark upon hearings without an enormously thorough opening. Indeed, I think the evidence could have been well incomprehensible to the public and other persons if there had been either no opening or only a very perfunctory one, and I think that common sense should dictate, as indeed I remarked in July last, that there should be a clear willingness to adopt the considerable amount of agreed or uncontroversial matters alluded to in the opening, and that as regards those matters in which there may be likely to be some controversy, that a considerable degree of focus has been put upon them in the course of the opening remarks.
I do have to remind all persons present, however, that as in previous shorter openings, what has been stated is not evidence. It is not something upon which any conclusions can be based, and it is merely an attempt to summarise what appears are the principal matters of evidence that are likely to be led in evidence over ensuing months.
It would be wrong and unfair that there be any unwarranted or unfair allegations against any persons based on those opening remarks, and it is only when evidence has been heard and tested, and a report in due course delivered, that in fact any finality can be brought to the process with which we are concerned.
Indeed, it is not unsurprising that the Tribunal, not for the first time, has received in recent days some measure of correspondence by way of complaint in relation to what is contended to be certain matters of unfair or selective or biased media reportage. The response of the Tribunal, as in similar instances in the past, has been largely threefold.
Firstly, to point out that any persons unjustly wronged by damaging untrue facts or comments that exceed the bound of what may be acceptable is entitled to avail of his or her remedies under the law of defamation.
Secondly, that this Tribunal does not have a function in censoring or muzzling the press or the comments that are made in the media on the events that are being examined in this forum.
Thirdly, it would appear to be the relatively clear experience from other forums that where investigations are embarked upon into matters of comment or unauthorised leaks, it is an almost invariable practice that any member of the journalistic profession will decline to name his or her sources. I may not necessarily empathise with that long-established convention in every connotation of the Tribunal’s work, but I understand and appreciate it. And having been a very young barrister at the time of the quite celebrated case many years ago of the distinguished RTE journalist Mr. Kevin O’Kelly, I have no desire, as a Tribunal Chairman or a judge, to be involved in any potential replication of those particular circumstances.
I do however reserve the entitlement, as the Sole Member in charge of the processes that take place here, to take action in any extreme circumstances of comment or reporting or other media matters. However, I readily accept that what is taking place in this Tribunal concerns matters of very considerable public importance and interest. It further concerns matters of very considerable economic aspects with obvious public dimensions, and it is readily understandable that there will be a robust and vigorous comment and investigative journalism carried out into those matters.
I do not propose to address at any length the question that was mentioned at the very outset of these sittings of unauthorised or selective leaking of information to members of the journalistic profession. It is an undoubtedly unwanted and unsought side effect of compliance with the rules that were most recently laid down by the Supreme Court in the case of Haughey and others against Moriarty and others, that by virtue of the Tribunal being required to serve the essential matters of evidence in advance of hearing on interested persons, this may often mean that quite a wide number of persons will be served with material confidential information in advance of sittings. And it accordingly is the case that there have been a considerable number of unauthorised disclosures of confidential information by persons to members of the media.
As I have indicated, the jurisdiction or powers of the Tribunal in this regard are limited, though I have indicated I do reserve powers for any particular extreme contingency that may arise. I did ask Mr. Coughlan, in the course of his opening remarks, to deal in part with this aspect where, as in the instance relating to certain matters disclosed to the Tribunal by Mr. Mark FitzGerald, the ambit of persons served with the relevant information was extremely small. And as on previous such situations in the past, the Tribunal is examining the situation resulting from that particular matter.
I am satisfied, insofar as I am satisfied of anything in the course of this process, that no leaks take place either from myself or from any members of the Tribunal legal or administrative team. And it remains an unwanted but perhaps inescapable fact of life that there are going to be the type of leaks that have been commented upon that certainly do not assist the investigative or other work of the Tribunal.
Indeed, it has been the experience in the past that members of the media have, on occasion, informally and in a good-humoured way expressed exasperation to persons working in the Tribunal at the very absence of any such leaks.
In the context of the remarks that have been made at some considerable length by Mr. Coughlan, I do propose to give an opportunity, just as it has been availed of by counsel for Mr. Lowry, to any person who feels that there may have been any degree of apparent imbalance or other matter that may give rise to disgruntlement to seek to have a further picture conveyed.
Because of the particular hour that we are now at in the course of the sitting, it would be my preference that as in previous cases, if any extensive matters are being canvassed in that regard by legal representatives of any person, that this be done by way of conveying those matters to the Tribunal who will immediately on resumption of sittings see that those matters are duly highlighted. But I am not going to shut out anyone who may feel that he or she has a duty to a client, and if anybody wishes to urge any matters at this particular stage consistent with what I have said about what I feel is a need for some brevity at this hour, of course I will hear that.
Just before perhaps Mr. McGonigal may wish to raise something, Mr. Coughlan, I understand you did have some discussion with representatives of other persons as regards —
MR. COUGHLAN: And we indicated that people would be in a position perhaps to commence evidence on Tuesday next, I think.
CHAIRMAN: Does that fairly reflect matters, Mr. Nesbitt?
MR. NESBITT: It does, Mr. Chairman. Our first witness will be available on Tuesday at the time directed by the Tribunal.
CHAIRMAN: And there has been a fair amount of new material, and to actually embark tomorrow morning might give you less than a full opportunity to digest.
MR. NESBITT: I think that would be difficult to do, given the amount of distance travelled since the opening.
CHAIRMAN: We will be commencing on Tuesday morning with one of your more substantial project team witnesses.
MR. McGONIGAL: The only matter I wanted to raise, Mr. Chairman, it had been my intention, if Mr. Coughlan had finished earlier and before he had dealt with all of the things that he dealt with today, to seek some time to make a statement on behalf of Mr. O’Brien in relation to some of the matters that have been raised. And it is still my intention to do that, but I would be happy to make such a statement on Tuesday, if that was convenient to the Tribunal.
CHAIRMAN: Certainly, Mr. McGonigal.
MR. McGONIGAL: I don’t anticipate —
MR. COUGHLAN: In the first instance, Mr. McGonigal could give the statement to the Tribunal legal team and we will incorporate it into the Opening Statement, it being the Tribunal’s Opening Statement, but I can discuss that with Mr. McGonigal.
CHAIRMAN: I’ll leave you to discuss that with Mr. Coughlan in the first instance, but you are happy not to give —
MR. McGONIGAL: I am happy not to delay you this evening, Mr. Chairman, and Tuesday will do fine.
CHAIRMAN: In view of that additional aspect and the need to get what we can achieved in the remaining week before Christmas, I’ll say half ten on Tuesday next. Thank you.
THE TRIBUNAL THEN ADJOURNED UNTIL TUESDAY, 17TH DECEMBER, 2002 AT 10.30AM.