The action by the liquidator of MMI Stockbrokers Limited (MMI) alleging fraud against seven former directors of the company is "dead" and the liquidator is in "utter disarray" and does not know what to do next, the High Court was told yesterday.
The reality is that it would be impossible for the liquidator, Mr Tom Kavanagh, to proceed with his action against the directors, listed for March 21st next, because he has "no evidence, no witnesses and no case", said Mr Michael Collins SC, for director Mr Oisin Fanning.
Instead, the liquidator was seeking an adjournment so he could pursue "fishing expeditions" in "exotic" locations like sunny Jersey in the hope of turning up something unidentified and to "save face", counsel said.
Mr Brian O'Moore SC, for three other former directors - Mr Paul Boucher, Mr John Curran and Mr Peter O'Byrne - claimed the liquidator's proceedings were being driven by Mr Bob Holt, who became a director of MMI after the seven defendants sold their interest in the company in December 1998. Mr O'Moore said Mr Holt was "looking to scapegoat" others for the problems of MMI.
All seven former directors are strongly opposing the liquidator's application to adjourn the March 21st action against them. The three other defendants in the action are Mr Colm O'Reilly, Mr Tim Murphy and Mr Cian Kelly. The hearing of the application concluded yesterday and Mr Justice Kelly will deliver his decision tomorrow.
The liquidator has claimed that sums totalling some £1.9 million were debited in four transactions without authorisation from an IBI Nominees account and another held by Jersey-based Cater Allen Nominees Limited and credited to the benefit of two directors of MMI - Mr Oisin Fanning and Mr John Curran - and some 20 others associated with these. The liquidator claims there was insufficient funds in the Cater Allen account to meet the transactions and that the Jersey company owes £430,000.
The liquidator has further claimed that Cater Allen has undergone a "mystifying" change of attitude regarding the transactions and was now saying it was satisfied with them.
In submissions yesterday, Mr Collins said Cater Allen had set out its position regarding the transactions in letters dating from October 1998 to October 1999. Cater Allen and IBI Nominees had never alleged fraud. Cater Allen had told the liquidator at the beginning that it had received cash statements from MMI and could not reconcile these at present with its own records and needed to make inquiries.
Following those inquiries, Cater Allen had told the liquidator last January it was satisfied with three transactions for amounts totalling some £1.1 million. Cater Allen had also made it clear last December that it had no claim in the liquidation. There was no change in Cater Allen's attitude of the type alleged by the liquidator, who was trying to create an aura of wrongdoing. The only complaint Cater Allen had made was that MMI was reckless in that it had overweighted certain oil stocks and also took out options on these, Mr Collins said.
Despite this and despite having been told the Central Bank had allowed MMI to recommence trading after a period of suspension in 1998 and that Ernst and Young had completed a due diligence report of MMI without raising any alarm bells, the liquidator had chosen to proceed with the action, counsel said.
Even if £430,000 were owed, the liquidator held some one million shares in Dana Petroleum, which were worth some £260,000 and belonged to Cater Allen. The liquidator also held other shares to which Cater Allen was entitled and this would greatly reduce the sum owed, if any such was owing, and might even leave monies owed to Cater Allen. In any event, this was a debt collecting exercise which had nothing to do with Mr Fanning.
Outlining the background to the matter, Mr Collins said the defendant directors had sold their shares in MMI in early December 1998. MMI was involved in high risk oil exploration stocks and the defendants had run into problems with clients not meeting their liabilities. The new owners injected capital but ran into similar problems and the liquidator was appointed in March 1999.
Mr Collins said the deficit in the company had nothing to do with misappropriation of funds but rather clients' failure to meet their liabilities.
Counsel added there were never any funds missing from the MMI client account. Monies were moved around but remained in the client account. This was not a row about missing money, although it had been represented as such and his client had been shocked to see one media report headlined "MMI - Missing Money International".
He said the liquidator had also alleged that at the time of the impugned transactions, Cater Allen's account was substantially in deficit, with the implications funds were misappropriated, when the account was actually very substantially in surplus. It seemed the liquidator was unable to read the company's books.
Because of such damaging publicity, his client had looked for the earliest possible opportunity to vindicate his good name through an early trial, Mr Collins said. An adjournment now would leave the allegations hanging fire.
Mr O'Moore for Mr Boucher, Mr Curran and Mr O'Byrne, said that, instead of making frank disclosure to the court about the real situation, the liquidator had instead "played a game of blackguarding" the defendants in the hope they would "crumble and settle". Counsel for the other defendants endorsed the submissions of Mr Collins and Mr O'Moore. Replying, Mr John Gleeson denied there were no grounds for an adjournment. He said there was never any intention on the liquidator to mislead the court and no evidence of any ulterior motive in bringing the action.
