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Chestvale Properties LimitedHoddle Investments Limited

I N V E S T I G A T I O N U N D E R S E C T I O N 1 4(1) C O M P A N I E S A C T , 1990

F I N A L R E P O R Tby

JOHN A. GLACKIN, SOLICITOR( Inspector appointed by the Minis ter for Industry and Com merce )

DUBLINPUBLISHED BY TH t STATIONERY OFFICE

To be purchase* throufh any BuoucUcr or (Succty from theGOVFRNTEVT PUBLICATIONS SALF OFFICESUN AIMANCT HOUSt MOLESWORTH STREET DUBLIN 27.00

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I N D E X

PAGEPrincipal Nam es and Defini tions (v) - (xv)

1.0 Introduct ion

1.1 Rep ort sup plem enta l to Inter im Rep ort 1

1.2 Wa rrant 1

1.3 Inve stigation since Inter im Report 1

1.4 Ass istance from U.K. author i t ies to Depar tmentof Enterpr ise and Em ployme nt. 2

1.5 Rea sons for delay 2

1.6 Lim it ing factors in the inves tigation 4

1.7 Con fl icts of eviden ce 4

1.8 Se ction 11(2) Com pan ies Act 1990 5

1.9 Litiga tion in Ireland 6

1.10 Ch ron olo gy of relevant events 8

1.11 Basic qu estio ns 21

1.12 Ackn owledgem ents 23

2.0 UPH

2.1 Status of UPH vis-a-vis the Co mp anies 242.2 Th b n fi ia l w n rs f shar s in UPH 29

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3.0 Mr. Des m ond PAGE

3.1 Involvement of Mr. Desm ond throu gho ut 35

3.2 Mr. Des mo nd's evidence of not benef i t t ing 36

3.3 UPH sale to Mr. Sm yth as nom inee for Mr. De sm ond 37

3.4 Al lege d involve me nt of Spo rtsfield 39

3.5 Mr. Des mo nd's evidence regarding Mr. Doher ty 41

3.6 Fundam ental premises of Mr. Desm ond's evidence 43

3.7 Mr. Probe ts evide nce 443.8 Tracing of paym ent to accou nt of J. & N. Mc Ma hon

at AIB Bank (C.I.) Lim ited in Jers ey 46

3.9 Tracing of paym ent to accou nt of Lochlann Qulnn andMa rtin Na ugh ton at Ir ish Intercon tinental Bank Limited 48

3.10 Loan of 500,000 from Ansb ache r to Mr. De sm ond inJanu ary 1990 50

3.11 An sbac her Cred it Ap pl ication 003/20 53

3.12 Instru ctions to Mr. Sm yth on the pol icy of theCompanies 54

3.13 Dete rmination s re f inancial interest of Mr.Desmond and contro l by Mr. Desmond of thepol icy of the Com panies 55

3.14 Other f inding s relating to Mr. Des mo nd 56

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4.0 Determ inat ion o f Ow nersh ip o f Freezone PAGE

4.1 Ge nera l 62

4.2 Op t ion Ag reem ent dated 15th Jun e 1988 63

4.3 Loa n of 8,000,000 f rom Hi ll Sam uel Bank 664.4 Op era t ion of Freezone acc ou nt In TSB 69

4.5 Loa n to Mr . Probe ts by ICC 74

4.6 Loan to Freezone by Ansb ache r 76

4.7 Find ing that Mr . De sm on d is the t rue benef ic ia lowner o f Freezone and consequent ly was f inanc ia l l yin teres ted in the succe ss or fa i lu re o f the Com pan ies 78

5.0 J . & N . Mc M ah on

5.1 Gen eral 80

5.2 Co nne ct ion w i th bank acco unt in the U .K . 82

5.3 J.P. M cM an us 84

5.4 Cash w i thdraw als f rom Freezone acc oun t a t TSB 86

6.0 Paym ent to Ans bach er f rom Acc oun t a t UBS.Geneva in Swi tzer land in August 1989

6.1 Legal po si t ion in Swi tzer land 90

6.2 Determ inat ion that Mr . Desm ondcon t ro l led the acco unt a t UBS 91

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PAGE6.4 Ave rmen ts of Mr. Probets fa lse and

misleading g4

7.0 Patr ick Doh erty

7.1 Extent of Mr. Doh erty's Involvemen t with the

Companies 95

7.2 The ess enc e of Mr. Doh erty's eviden ce 96

7.3 Ana lysis of Mr. Doh erty's evidenc e 977.4 App arent confu sion and lack of unde rstanding

by Mr. Doh erty 98

7.5 Lack of awaren ess of aspec ts of the trans action s 100

7.6 Anom al ies appea r ing from evidence of Mr. Doher ty 103

7.7 Imp ortan t fai lure of Mr. Doherty to reco nci lewi th evidenc e of Mr. Desm ond 112

7.8 Find ings in relation to Mr. Doh erty 1138.0 Telec om Personnel

8.1 Findings In relation to Telec om pers onn el 1168.2 Find ings in relation to Dr. Sm urfit 118

9.0 Summary9.1 Dete rmina tions as to person s f inancial ly interes ted 1209.2 Dete rmination s as to control or material influence 120

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PRINCIPAL NAMES AND DEFINITIONS USED IN THIS REPORTAND/OR IN THE INTERIM REPORT

Name Descr ipt ionMr . Ahem Michael Ahern, executive In ICC Corporate Finance

Limi ted.AIB Bank (C.I)L imi ted

A bank in Jersey, whol ly owned by AIB p ic which hada bank account in the name ot J. & N. McMahon.

AIIM AIIM Nom inees Lim ited, a sha reholde r in UPH, asnom inee tor a registered prop er ty uni t t rust cal led TheAll ied Ir ish Property Fund.

Amarac Amarac L imi ted, Amarac Hold ings Establ ishment, anent i ty or nominee, associated in some way wi thFreezone and being the reference of an account inBank S candinave en Suisse, Geneva, in the nam e of M .Andre de Pfyffer Etude

An sb a ch e r Ansbacher Bankers L imi ted, lenders to Chestvale,Del ion, Freezone, Dagord and Mr. Desmond.

Ansley Trust A Channel Is lands trust , being the owner of A nsbach erand having among i t 's t rustees, M r. Mo loney, M . Andrede Pfyffer and Mr. Lipper.

Ay lesbury Aylesbury Secur i t ies p ic, a UK proper ty company.Mess rs. Aylm er & Whi te Jame s Aylmer and Ronan Whi te senior execut ives of

Woodchester Investment Bank ( former ly cal led Tr in i tyBank)

Bac chan tes Bac chantes Limited, ow ner of shares in UPH in trustfor Dr. Smurfi t .

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Name DescriptionBank ers Trust U.S. bank wh ich acted as repres enta tive bank of AIB

Bank (C.I.) Limited

Ban kinves t, Zurich A Swiss bank wh ich had lent m one y to Dedeir .

Mr. Barry Kevin Barry, senior executive of NCB Group anddirector of UPH.

Mr. Brunker Er ic Brunker , par tner in Con veya ncing Depar tment ofA & L Goodbody, acted for UPH.

Mr. Buckley Michael Buckley, forme r se nior execut ive andmanaging d i rector of NCB Group.

Bur tons Proposed jo int venture par tner of John Sisk & SonLimi ted, see Sisk/Bur ton.

Mr. Bourke John Bourke, accountant and former f inancia l adviserto the Magnier t rusts.

Cablel ink

Mr. Cavanagh

Cablel ink Limited, major i ty control of which wasacqui red by Telecom in June 1990 and the freehold ofwho se premises adjo in ing the JMO B si te was acqu i redby Telecom in July 1990.

Tom Cavanagh, set t ler and contro l ler of Convoy Trusta chari table trust which is the registered owner ofshares in UPH.

Chestvale Chestvale Properties Limited

Clayform Clayform prop erties (Wales) Ltd. a Welsh pro pert yho ld ing company.

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Name DescriptionMr. Flnnegan Jo hn Finnegan, pr incipal of Flnnegan M ento n Estate

Agents .

Mr. Fi tzgerald Liam Fitzgerald, Ma naging Director of FinancialCoursewear L imi ted, a subs id iary of Dedei r.

Ivor Fi tzpatr ick & Co. So l ici tors to Mr. De sm ond; involved In ob tainin g UPHas a she lf com pany f rom a com pany fo rma t ion agencybut not engaged as sol ic i tors to the company.

Fitzwil l iam Fi tzwi l l iam Trust Company, a company owned by NoelSmyth personal ly.

Freezone Freezone Investments Limited, registered in the Isle ofMan, registered owner of shares in Emmets andrecip ient of some of the proceeds of the sale of theJMOB si te to Telecom.

Mr. Gi lmartin Michael Gi lmartin, Senior Executive of Ir ishIntercontinental Bank.

A & L Go odb ody Sol ic i tors to UPH, JM OB and Mr. Grace.

Mr . Goodman

Mr. Grace

Laurence J. GoodmanTom Grace, partner in Craig Gardner CharteredAccountants and l iquidator of JMOB.

Ham i lton Os borne King Estate Agents, acted for JMO B.

Mr. Hal l Eam onn Hall , a sol ici tor in Te leco m.

Mr. Hann igan Ronan Hannigan, a sol ici to r in Noel Sm yth & Partnersand former d i rector of the Companies.

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Name DescriptionHardw icke L imi ted Propose d a jo int venture wi th Br i tish Land p ic;

subm it ted a tender in May 1989 to acq ui re the JMO Bsite.

Mr. Hassett Padraic Hassett, pr incipal of Hassett & Associates andshareholder in UPH.

Ms. Hewitt Paul ine Hewitt, employee of Noel Smyth & Partnersand former d i rector of Chestvale.

Hi l l Sam uel Lon don Hi ll Sam uel & Co. Limited , lenders to Freezone .

Hi l l Sam uel Ireland Hi ll Sam uel Bank ( Ireland) Limited , sub -partic ipan ts inloan to Freezone.

Hodd le Hoddle Investments L imi ted.

IC C

J. & N. McMahon

Industr ia l Credi t Corporat ion p ic.

Name of bank accounts in AIB Bank (C.I.) Limited andIn AIB, Croydon Branch, U.K.

Mr . Johnson Michael Johnson, Di rector of Telecom elected byTe lecom employees.

J M O B Johnston Mooney & O'Br ien L imi ted, former owner ofthe JMOB si te.

The JMOB Si te,the Site

Si te compr is ing 5.5 acres (approximately) atBal lsbr idge, Dubl in 4, form er ly own ed by JMO B andul t imately sold to Telecom.

Ms. Kenny Assumpta Kenny, sol ic i tor former ly in Noel Smyth &Partners.

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Name DescriptionMr. Kenn y Kevin Kenny, partner in Ernst & Yo ung, Cha rtered

Accountants In Cork and tax advisers to UPH and toMr. Cavanagh.

Len non Heather & Co. So l ici tors for Mr. Probe ts and Freezone.

Mr. Lewis Jos eph Lewis, resident of Lyford Cay, Bahamas andal leged beneficial owner of shares in UPH.

Mr. Up per Jerom e Uppe r , an Am er ican lawyer and at one t ime, atrustee of Ansley Trust and chai rman of Ansbacher .

L lpper Co nso r t ium A cons or t ium of investors wh o invested in proper ty inLondon, which included Mr. Smyth, and for whom Mr.Smyth acted as sol ici tor.

Mr. Mag nier Joh n Magnier , b lood stoc k owne r and trustee of Joh nMagnler fami ly t rusts for which Sulzano acted asnominee shareholder in UPH.

Ma nufac turers Hano ver U.S. Bank that acted as repres entative bank ofTrust Ansbacher .

Mr. Matthews Rober t Matthews, associate d i rector of Ans bache r .

Ms. Meehan I ta Meehan, d i rector of Teleco m and Chai rman of theTelecom Superannuat ion Fund Trustees.

Me zzanine Finance Am ou nts of 1,000,000 and US$1.5 m il l ion transfe rredto Ansbacher on 10th August 1989 and 7th December1989 respectively.

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Name Descriptionthe Minister the Minister for Industry and Com me rce and since

January 1993 the Minister for Enterpr ise andEmployment .

Mr. Moloney Gabr ie l J. Moloney, managing d i rector of Ansbacher .Messrs Mor iar ty &Mcln tyre

Michael Moriarty and Harry Mclntyre senior executivesof Bank of Ireland.

Mr . McC o r ma ck Patr ick McCormack, par tner in Palmer McCormack,Estate Agents.

Mr. Mc Dona gh Bernard McD onagh, forme r Secretary, Depar tment ofCommunicat ions, Chai rman of Telecom Inqui ry andnow Secretary of Department of Equal i ty and LawReform.

Mr . McGovern Fergus McG overn, chief execut ive of Telecom Elreann.

Mr . McManus J.P. McManus a bookmaker and b loodstock owner .

National City Dil lon& Waldron

Stockbrokers, subsequent ly changed i ts name to NCBStockbrokers .

NCB, NCB Group NCB Group L imi ted, a group of companies in thestockbroking, moneybroking and f inancia l servicesareas in Ireland.

Ms. O'Con nor Maire O'Connor , senior execut ive in NCB CorporateFinance Limited, part of NCB Group.

Mr. O'Co nnor Tom O'Conn or , par tner in the conv eyanc ingdepar tment of A & L Goodbody, acted for JMOB andMr. Grace as l iquidator of JMOB.

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NameMr. Padraic O'Connor

Mr. O'Dwyer

O'Mui re Smyth

Mr. O'Nei l l

Mr. Hugh O'Nei l l

Mr. O'Hal loran

Mr. O'Nual lain

Ms. O'Toole

Office Site

Opt ion Agreement

Mr . Osborne

Mr. Pairceir

Pegasus

DescriptionManaging Di rector , NCB Group.

John O 'Dwyer , a former em ployee of Dedei r.

Firm of archi tects, advisers to the Companies inrelation to the JMOB si te.

Dan O'Nei l l , Head of Telecom Property and ServiceQual i ty Department.

Sol ici tor formerly In Noel Smyth & Partners

Brian O'Hal loran, partner in Brian O'Hal loran &Partners, archi tects to Telecom in relation to the JMOBsite.

Rory O'Nual lain, senior executive of ICC.

Pauline O'Toole, senior lending m anager of Ans bache r .

Par t of the JMOB si te compr is ing approximately 3.5acres on which Telecom proposed to bui ld of f ices.

An opt ion agreement dated 15th June 1988 madebetween Mr. Probets and Mr. Desmond.

James Os borne, Par tner in Com me rcia l Depar tment ofA & L Goodbody, acted for UPH.

Seamus Pairceir , former chairman of UPH.

Pegasus Nominees L imi ted, a nom inee com pan yowned by Ansbacher .

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Name DescriptionPepper CanisterNominees

Mr. Probets

Messrs Quinn andNaughton

Mr. Rothw el l Eam onn Rothwel l , form er sen ior exec utive of NCBGroup.

Resident ia l Si te Part of JMO B si te com pr is ing approxim ately 2 acres,sold to Telecom but subject to opt ion to H oddle to buyback and Intended for use for resident ia l d evelopm ent.

Pepper Canister Nominees L imi ted, a nomineecompany owned by Ivor Fi tzpatr lck & Company andregistered owner of shares in UPH.

Col in Probets, resident of Guernsey, al leged lender offunds to Chestvale and al leged owner of Freezone.

Lochlann Quinn and Martin Naughton, beneficialowners of shares in UPH and lenders to Mr. D esm ond.

Sisk/Bu r ton Propose d jo int venture between Joh n Slsk & SonLimi ted and Bur ton Proper ty Trust ; sub mi t ted a tenderto Finnegan Menton in May 1989 to acquire the JMOBsite.

Dr . Sm urf it Dr. Michael Smurf i t, former Chai rman of Teleco m andbenef ic ia l owner of shares in UPH throu gh Bacchantes.

Smurf i t Par ibas Smurf i t Par ibas Investment Mana geme nt L imi ted,registered owner of shares in UPH in trust forJefferson Smurf i t Group Pension Fund.

Messrs . Rob inson& Smyth

Richard Robinson, former chief execut ive and FergusSmith, senior executive of Lombard & Ulster BankLimited

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Name Descr ipt ion

Mr. Walsh Gerard Walsh, Char tered Surveyo r , former man agingdi rector of Aylesbury and former act ing managingdirector of UPH.

Mr. Waters Tony Waters, mana ging d i rector of NCB Proper ty, par tof the NCB Group.

Mr. Wintle John Wintle, an Engl ish account and adviser to Mr.Pro bets.

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1 INTRODUCTION

1.1 Final Repo rt sup plem enta l to Inter im Rep ort

This report is supplemental to the Inter im Report del ivered by me tothe Minister tor Industry and Commerce on 30th July 1992 in which Iexplained in detai l the var ious transactions affecting the JMOB si te asI was co gniza nt of the m at that t ime . I do not intend to repeat tho sedetai ls ad longum but wi l l refer to them where necessary.

1.2 Warrant

As this is my Final Report, I have made determinations in accordancewith my Warrant as to who were the true persons who are or havebeen f inancial ly intere sted In the suc ces s or fai lure (real or app arent)of the Companies or able to control or mater ial ly to influence thepol icy of the Com panies. For conve nience pu rposes , I a t tach a copyof the Warrant of my appointment, dated 9th October 1991, atAppendix "1" to this Report.

1.3 Inve stigation since inter im Report

Since del ivery of the Inter im Report, I have continued the investigation.Verbal evidence has been obta ined from so me wi tnesses wh o were not

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avai lable to me before del ivery of the Inter im Report and I haveinterviewed som e wi tnesses again. I have examined fur ther f ilesproduced to me by var ious par t ies and have received submissionsfrom certain parties relating to the investigation general ly, the contentsof the Inter im Report and a draft f inal report on which this report isbase d. I l ist In Ap pen dix "2" attached to this Rep ort, the nam es ofthose persons who have adduced verbal evidence under oath, s incedel ivery of the Inter im Report.

1.4 Assistan ce from U.K. Author i t ies to the Depar tment

In the course of my investigation, i t became clear that certain evidencewas to be foun d in the United Kingd om . I therefore requ ested theDepar tment of Enterpr ise and Employment ( former ly Industry andCommerce) to request assistance from the appropr iate U.K.auth ori t ies. The Dep artment of Trade and Indus try ("the DTI") in theUni ted Kingd om we re able to obta in in format ion w hich the D epar tmentof Enterpr ise and Em ployment subseq uent ly passed on to me. Theassistance provided by the DTI proved helpfu l .

1.5 Reaso ns for delay

The com plet ion of the invest igat ion and ma king of the f inal repor t hastaken considerably longer than was envisaged by e i ther the Minister

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for Industry and Commerce or me when he f i rst appointed me on the9th October 1991.

Sect ion 3 of the Inter im Repor t descr ibed the m any H igh Cour t act ionsinvolved up to then, four of which were appealed to the Suprem e Cour tand at the t ime of my making the Inter im Repor t , two of the SupremeCourt appeals had been decided in my favour . I desc r ibe in paragraph1.9, the further progress made in f inal ising the court l i t igation matters.

Some of these l i t igat ion matters when commenced obstructed anddelayed the progress of the invest igat ion and the obta in ing by me ofthe evidence requi red to make the determinat ion requi red by mywarrant of appo intmen t. The var ious decisions on these m attersassisted me in progress ing the invest igat ion. Unfor tunate ly, fur therl i t igation outside this jur isdiction, which indirectly related to theinvest igat ion, caused fur ther ser ious delays.

The purpose of much of the l i t igat ion both in th is jur isd ict ion andoutside i t seemed designed to prevent the t ruth being ascer ta ined.This would have meant that many person s, wh o were Involved at som eor other stage of the t ransact ion af fected by the Companies wouldhave been lef t wi th outstanding aspersions . I cons idered th is unfa i rand decided that despi te the many obstacles, I should pursue theissues to f inal i ty, if I cou ld. The Minister agre ed with this dec ision .

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1.6 Lim it ing Factors in the Investigation

As noted by me in the Inter im Rep ort, I co ns idere d i t imp ortan t to tryto t race the procee ds in and out of the Com panies. My abi li ty to dothis was l imited to the extent that some of the inward investment ( theso cal led mezzanine f inance) appeared to come from bank accountsin Swi tzer land and Jersey and some of the proceeds of sale toTelec om Eireann wen t to a bank accou nt in Jersey. In addi t ion som eproceeds appear to have been d istr ibuted in the form of cash from anaccount of Freezone account at TSB in Grafton Street, Dubl in.However I am satisf ied that the evidence which I have been able toobtain, both in this jur isdiction and in the United Kingdom, issuff ic ient ly coge nt to enable me to make the determinat ions conta inedin this report.

1.7 Conf l icts of evidence

In the Inter im Report, I referred to a number of confl icts of evidenceand to som e anom alies In the evidence . I have not tr ied to reso lvethose conf l icts and anomal ies, save where I considered i t necessaryto do so to enable me to make the f indings and determinat ionsconta ined in th is rep or t .

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1.8 Sec tion 11(2) Com panies Act 1990

Sect ion 11(2) Comp anies Act 1990, whe n read In con junct ion wi thSection 14(5)(c) of the same Act, provides that an Inspector may at anyt ime In the cou rse of h is invest igat ion, wi tho ut the necessi ty of m akingan inter im report, inform the Minister of matters coming to hisknowledge as a resul t o f the invest igat ion, tending to show that anoffence has been com mit ted. I so in form ed the Minister dur ing myinvest igat ion. I do not consider it approp r iate in com plying wi th theterms of my warrant to elaborate on this matter nor to make areco mm end at ion in th is repor t to the Minister as to whether he s houldrefer this report to the Director of Publ ic Prosecutions forconsiderat ion of the issues ar is ing f rom i t .

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1.9 Litig atio n in Ireland

1.9.1 At Se ction 3 of the Inter im Report, I outl ine d the pro cee ding s that hadtaken place during the course of the investigation up to that t ime.There were four proceedings outstanding then and some progress hasbeen made since then in br inging these to a sat isfactory conclusion.

1.9.2 In parag raph 3.7 of the Inter im Report I outl ine d the pro cee ding s tak enby m e against the TSB. Freezone had appl ied to be join ed as a partyto those proceedings and to exercise contro l over the in format ion anddoc um enta t ion sou ght by me from the TSB. The High Cour t had foun din my favour but Freezone had lodged an appeal to the SupremeCo urt. This appea l is st i l l await ing hearing. I have requ este d Freezoneto lodge securi ty in this jur isdiction for legal costs as i t is an Isle ofMan registered com pany and th is is a matter which I wi l l be pursu ingif the appeal is not withdrawn.

1.9.3 In parag raph 3.8 of the Inter im Report I outl ine d the pro ce ed ingsbrought against me by Mr. Fi tzgerald, the Managing Director ofFinancial Courseware Limited, a subsidiary of Dedeir . The hearing ofthe action eventual ly came on before the High Court on the 4thFebruary 1993 when the proceedings against me were wi thdrawn andI obta ined an order for my costs. Cons equen t upon that, the appea lto the Suprem e Cour t against the in ter im order of Mr. Just ice Coste l lo

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is to be withdrawn by Mr. Fi tzgerald.

1.9.4 At parag raph 3.9 of the Inter im Repo rt, I outl ine d tw o sepa rateproceedings the f i rst o f which was ent i t led Freezone InvestmentsLimited -v- John A. Glackin, Gabriel Moloney and Ansbacher BankersLim ited ( the H igh Court 1992, No. 3269), and the sec on d, Col in Probe ts-v- John A. Glackin, Michael Quinn and Industr ial Credit Corporationpic ( the H igh Cou rt 1992, No. 3502). The f irst of these involved anappl icat ion for an in ter im in junct ion by Freezone to prevent A nsbach erfurn ishing to me documents requested by me and was refused by theHigh Court; thereafter I obta ined an order for sec uri ty for cos ts. In thesecond case an appl icat ion on behal f o f Mr . Probets seeking toprevent the ICC furn ishing to me documents requested by me waswith draw n. In relation to the f i rst action, I obta ined a further orderfrom the High Cour t f ix ing the amount of secur i ty that was to belodg ed by Freezone. That order has not been co mp lied with byFreezone al though i t is accepted by i t that there is now no furtherma tter at Issue save the ques tion of legal cos ts. Simi lar ly in theProbets p rocee dings, I subse quent ly ap pl ied for and obta ined an orderfor secur i ty for costs. This order has a lso not been comp l ied wi th. Iam advised that I am now enti t led to seek an order str iking out theseproceedings and seeking an order for the fu l l legal costs which Ip ropose to do .

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1.10 Chronology of re levant events

To assist in understanding the transact ions af fect ing the assets of theCompanies, I set out below the chronology of events, which I had setout in paragraph 1.3 of the Inter im Report to which I have made someminor a l ternat ions.

Br ie f Chrono logy12th Aug ust 1988: UPH incorporated as Dance Investm ents

Limited.

26th Au gus t 1988: Finnegan Me nton offer ( in trust)4,000,000 by way of indicative tender forthe JMOB si te.

24th Nove mb er 1988: New tender by Finnegan Me nton of4,400,700 for JMOB si te, accepted byJMOB.

Decem ber 1988/March Investors in UPH sub scr ibed for shares.1990:

5th Jan uary 1989: Sch eduled clos ing date for purc has e ofJMO B. Not com pl ied wi th.

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6th Februa ry, 1989: Me eting of Mr. Finnegan and Mr. Wa lshand discussion re plans for JMOB si te.

14th - 21 st February1989:

Spl i t in UPH between NCB and Aylesbury

28th February 1989: Liquidator app ointed to JM OB .

14th April 1989: A g r e e m e n t r e a c h e d b e t w e e n M r .Desm ond on behal f o f UPH and l iquidatorof JMOB to vary exist ing agreement sothat the purchase pr ice was reduced to4,000,000.

28th Apri l 1989: Finnegan M ento n sent out bro chu resseeking of fers to acqui re UPH contract forJM OB si te, wi th UPH to reta in"participation".

5th May 1989: Dr. Sm urfi t wro te to Mr. Finnegan and Mr.Hassett jointly and to Mr. Strudwick ofRyde International, stating that Telecomrequired a si te for a new corporate HQand seeking thei r assistance.

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17th May 1989:

9th June 1989:

19th June 1989:

3rd July 1989:

31st July 1989:

10th August 1989:

Mr. Smyth submit ted a proposal to D e smo n d o u t l i n i n g th e t yp e development that he thought couldcarr ied out on the JMOB si te.

Dr . Smurf i t proposed to Telecom bothat a si te be sought for a corporate and a sub-commit tee was formed ofSmurf i t and Mr. Johnson.

Mr. Smyth made an offer of 6.3 mi lfor JMOB si te, 4 mil l ion cash on 31/7and loan note of 2.3 mi l l ion payable1993.

A & L Goodbody sol ic i tors for UPH wnot i f ied that agreement reached wi thSmyth .

Time made of essence of agreembetween l iquidator of JMO B and UPH closing date refixed for 11th August 1

1 mil l ion received in account of N

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Sm yth & Par tners at Ansba cher f rom UBSin Geneva. This mo ney cam e throu gh anNCB account at Bank of Ireland from anaccount at UBS.

11th Aug ust 1989: Chestvale paid 4 mil l ion to l iquidato r ofJMOB who executed a deed ofconveyance of the JMOB si te in favour ofChestvale. Chestvale borrow ed 3 mi l lionfrom Ansbacher and used 1 mi l l ion inNoel Sm yth & Partners acc oun t. Escrowagreed until 1st Sep tem ber 1989. UPHhad been promised a loan note forIR2,300,000 but this was not d el ivered onthat date. The deed of conv eyan ce toChestvale was executed by the l iquidatorof JMOB as vendor but was p laced inescrow unti l 1st September 1989.

15th Au gus t 1989: Mr. Finnegan sho we d JM OB si te to Dr.Smurfi t .

1 8th Au g u s t 1 98 9: D r . Sm u r f i t se n t a n o t h e r j o i n tmemorandum to Mr. Finnegan and Mr.

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1st September 1989:

6th September 1989:

September - December1989:

16th October 1989:

17th October 1989:

24th October 1989:

Hassett stat ing that he requi redinformat ion before the end of the year .

Escrow per iod expi red and deed ofconveyance del ivered to Mr. Brunkersol ici tor for UPH. Diff icult ies with taxstructure of the t ransact ion noted.

Telec om Board Me eting. Before or aftermeet ing Mr. Johnson was asked to lookat the Crampton si te .

Agreement reached between UPH andChestvale to reduce purchase pr ice f rom6,300,000 to 5,800,000.

Mr. Finnegan sent a fee note to UPH forsale of si te to Chestvale.

Mr. Finnegan showed JMOB si te again toDr. Smurfit.

Dr . Smurf i t wrote to Telecom PensionFund Trustees re sale of Gaiety Centre

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and purchase of s i te for Telecomcorporate HQ.

27th Oc tobe r 1989: Loan of 1,300,000 arrang ed by Me ssrsQuinn and Naughton for Mr. Desmond inrelation to A.C.T.

Mid Nove mbe r 1989 Mr. Desm ond of fered the JM OB si te toClayform for 6,300,000 and wrote toAnsbacher to say that he had agreed tosell i t for 5,800,000 to a U.K. property picwhich he subsequent ly ident i f ied asClayform.

29th No vem ber 1989: Mr. Des mo nd visi ted Dr. Sm urfi t inBlackrock Cl in ic and d iscussed the JMOBsite.Mr. Johnson visi ted Dr. Smurfi t inBlackrock Cl in ic and both vis i ted JMOBsi te, Crampton si te and Sweepstake si te .

30th No vem ber 1989: Dr. Sm urfi t wro te to Mr. De sm ond offer ing7.5 mil l ion for 4.5 acres of JMOB si te.Dr . Smurf i t wrote to Fergus McGovern

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t e em be r 1989:

7th December 1989

9th December 1989

enclosing copy of his letter to Mr.Desmond.

Dr. Smurf i t wrote to Mr. McGovernrequesting him to visi t the si te with Mr.Desmond.Pension Fund trustees repl ied to Dr.Smurfi t rejecting his suggestions butproposing an al ternative.Ansbacher sanc t ioned a revised loan of ferto Chestvale of 4.5 mi l l ion and issued afaci l i ty letter confirming this but whichwas dated 29th November 1989.

US$1,500,000 sent to Chestvale accountat Ansbacher but lodged ul t imately to anacc ount of Del ion at the same bank . Thismoney came via Banker 's Trust, New Yorkfrom an account in the name of J. & N.McMahon at AIB (CI) Limited in Jersey.

Declarations of Trust sworn by Mr.Hannigan and Ms. Hewitt the registeredholders of the two issued shares in

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1 t ee m be r 1989:

21st December 1989:

22nd December 1989

2nd January 1990:

9th January 1990:

Chestvale to the effect that they heldthese shares In trust for UPH.

Telecom board meet ing author isedmana gement to enter in to negot iat ions forpurchase of JMOB si te.

Mr. Desmond wrote to Mr. McGovernsett ing out purchase opt ions.

Declarations of Trust sworn by Mr.Hannigan and Ms. Hewitt to the effect thatthe said two shares in Chestvale wereheld in trust for UPH since Incorporationof Chestvale.

Execut ive commit tee meet ing of Telecomnot i f ied of proposed purchase of JMOBsi te for a corporate HQ.

Mr. Desmond wrote to Mr. McGovernstating that the best pr ice he could obtainwas 9.4 mil l ion for the entire si te with abuy back o pt ion to the vendo rs of par t for

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10th January 1990:

11th January 1990:

17th January 1990:

16th February 1990:

17th and 23rdFebruary 1990:

a resident ia l development.

Telecom board meet ing author isemanagement to enter in to negot iat ions tacqui re the JMOB si te "on best terms".

Mr. McGovern not i f ied Mr. Desmond thahe accepted the terms in the letter of 9tJanuary 1990.

Ansbacher agreed to advance loan o500,000 to Mr. Desmond secured by aunder taking from Mr. Smyth to d ischargthe loan out of the proceeds of sale of thJMOB si te to Telecom.

Ar t ic le publ ished in I r ish Independensuggest ing the involvement of MDesmond and Dr . Smurf i t in consor t iumnegot iat ing sale of JMOB si te to Telec om

Denials and apologies publ ished in Ir ishIndependent.

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20th February 1990:

12th March 1990:

12th April 1990:

18th April 1990:

Mr. Desmond wrote to Mr. McGovernsuggesting "shelter options" in case offai lure to obtain planning permission.

Dr. Smurfi t , Mr. McGovern and Mr. O'Nei l lo f Telecom Proper ty Depar tment met anddecided to proceed wi thout a condi t ionthat the purchase be subject to obta in ingplanning permission.

Del ion and UPH signed agreement forDel ion to acquire Chestvale shares fromUPH.

Chestvale agreed to sel l JMOB si te toDel ion in consideration of Del ion takingover Chestvale l iabi l i t ies of c.5 mil l ion.Del ion agreed to sel l to Hoddle i t 'scontractual interest in the JMOB si te, inconsiderat ion of Hoddle taking overDel ion's l iabi l i t ies to Ansbacher andpaying 300,000 costs incurred by Dei ion.Effect of the two contracts andsubsequent borrowing by Del ion was to

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increase the base pr ice for tax purposesto 9,300,000.

19th Ap ril 1990: Sale by UPH to Delion of Ch estv aleshares completed and debenture ( loannote) of Delion to UPH for 2,750.000payable on 11th Au gus t 1994 "guaran teed"by Ansbacher , handed over to UPH.

3rd May 1990: Ans bach er lent DM24 5000,000 to Delionand Chestvale; loan from Ansbacher waspaid off by Del ion.

7th May 1990: Hoddle executed two contracts wi thTelecom for sale of JMOB si te foraggregate pr ice of 9.4 mi l l ion.

29th June 1990: Sale to Telecom com pleted as Teleco mpaid balance purchase money and took aconvey ance of the Off ice Site. Teleco mdid not take a conveyance of theResidential Si te but granted an optionback to Hoddle in respect of that part ofthe JMOB si te; the legal estate in i t ,

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remaining in Chestvale.

19th July 1990 Request by Mr. Des mo nd to TSB tosupply tor col lection on 23rd July 1990,IR100,000 cash.

23rd July 1990 IR100,000 withd rawn in cash by Mr.Desmond from account of Freezone atTSB, Grafton Street, Dubl in.

26th July 1990 Ansba cher instructed by Mr. Desm ond topay the sum of US$1,579,990 to accountnumber 04-057-960 Ref. Montezuma atBankers Trust, Chu rch Street Station,New York and the sum of IR2,431,170 tothe account of Freezone at TSB, GraftonStreet, Dublin.

30th July 1990: Loan arrang ed by Mes srs Quinn andNaughton repaid. Ansbacher com pl iedwith instructions given on 26th July 1990.

30th July 1990 TSB reque sted by Mr. Des mo nd to sup ply400,000 cash for col lection.

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31st July 1990 !R400,000 withdrawn in cash fromaccount of Freezone at TSB, GraftonStreet, Dublin.

9th Octob er 1991: My appointm ent as Inspector .

11th Oc tober 1991: Balance of proc eed s of sale of JM OB si teto Telecom paid out of the jur isd ict ion toPatr ick Doherty.

16th Oc tober 1991: Dermot Des m ond 500,000 loan repaid toAnsbacher .

29th Apri l 1992: UPH loan note disc ou nte d and cash paid.

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1.11 Basic que stions

The br ief chronology In paragraph 1.10 outl ines the sequence ofevents which g ive r ise to the fo l lowing q uest ions, the answers to whichenable me to make the determinat ions requi red by the Warrant.

Q.(1) Was UPH financial ly interested in the suc ces s or fai lure ofthe Companies?

Q.(2) If so, wh o were the true pers ons wh o were so f inancial lyinterested through UPH?

Q.(3) Who was the cl ient of Mr. Sm yth for wh om he agree d topurchase the JMOB si te in June 1989?

Q.(4) Who were the true persons who advanced the sum of1,000,000 on 9th August 1989?

Q.(5) Was the cl ient of Mr. Sm yth the true perso n f inancial lyinterested in the success or fai lure of Chestvale at 11thAugust 1989 or were the true persons di fferent?

Q.(6) Did the true perso ns wh o were f inancial ly interested in thesuccess or fai lure of Chestvale change after 11th August

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1989 and i f so, when and who became the true persons sofinancial ly interested?

Q.(7) Wh o were the true persons who advanced the sum ofUS$1,500,000 to Chestvale and ultimately to Delion inDecember 1989?

Q.(8) Wh o bene fi tted from the paym ent of US$1,579,990 fromAnsbacher to the account number 04-057-960 Ref.Montezuma in New York on the 30th July 1990?

Q.(9) Who were the true persons who benef i t ted f rom paym ent ofIR2,431,170 to the account of Freezone at TSB?

Q.(10) W ho wa s paid the su m s of IR100,000 and IR400,000 incash that were wi thdrawn from the Freezone acc ount in TSB?

Q.(11) We re the true perso ns f inancial ly intereste d in the suc ces s orfai lure of Hoddle, the same as those of Chestvale?

Q.(12) Wh o were the true persons who were able to contro l ormater ia l ly in f luence the pol icy of the Companies?

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1.12 Acknowledgements

I wish to again acknowledge the pat ience, assistance and suppor tottered me by my partners and col leagues in Gerrard, Scal lan &O'Br ien and by the counsel who represented me in Cour t when thatwas required . I wo uld l ike to thank in particular Claire Cal lanan an dmy secretary Margaret Di l lon for their t ime and effort and theconscient ious way in which they per formed thei r tasks throughout theinvest igat ion.

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2 . 0 UPH

2.1 Status of UPH vis-a-vis the Com panies

2.1.1 The or igin al agreem ent betwe en UPH and Mr. Sm yth in Jun e 1989 wfor the sale on of the UPH interest in the JMOB si te for 6,300,000, be satisf ied by the payment of 4,000,000 on behalf of UPH to tl iquidator of JMOB and the issue of a bank guaranteed loan note UPH for 2,300,000. UPH did not get the loan note as arranged on tdue date, 11th August 1989, when they assigned their interest in tJMOB si te, but d id get an under taking from Noel Smyth & Par tneSol ici tors to hold the t i t le deeds of the JMOB si te in trust for i t .

2.1.2 Mr. Sm yth argu ed that unti l Apri l 1990, Chestva le was a su bsid iary UPH and ac cording ly UPH was f inancia lly in terested in the succe ss fai lure of Ches tvale. Mr. Barry, a direc tor of UPH argue d that UPH hno enti t lement whatsoever to any profi t or loss that could be mafrom the subsequent resale of the si te and that UPH did not benefinancial ly in any way from the sale of the property by the cl ient of MSm yth to Telec om E ireann. It is my opin ion that nei ther the a gree meof June 1989 nor the undertaking by Mr. Smyth, made UPH financiainterested in the success or fa i lure of the Companies, as the purpoof the requi rement for the bank guarantee and then a personundertaking by Mr. Smyth was to avoid UPH having to take any r isk

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the success or fa i lure of the Companies.

2.1.3 Howe ver this was al tered in Dec em ber 1989. On 9th Dece mb er 1989,Mr. Hannigan and Ms. Hewi t t the registered owners of the two issuedshares in Chestvale, and who held the shares as nominees in theircapaci ty as employees of Noel Smyth & Par tners, each swore aDeclaration of Trust to the effect that they held the share registered intheir name in trust for UPH. Su bse que ntly as requ ired by the s ol ici torsfor UPH and at the request of Mr. Smyth, they each swore an amendedDeclaration of Trust on 22nd December 1989 adding that they eachheld the share in Chestvale in trust for UPH at al l t imes sinceincorpo rat ion. Despi te argumen ts to the contrary by Mr. Smy th andhis submission on thei r behal f that there was good and suff ic ientreason for changing the said Declarations of Trust, I do not accept thatthe adde d stateme nt in these Declarat ions was correc t , as on balance,the evidence avai lable to me clearly indicates that pr ior to 9thDecember 1989, the shareholders did not hold the shares in trust forLJPH, but rather for the client of Mr. Sm yth. Inde ed, M r. Sm yth 's fi lesshow draft minutes prepared in or about 11th August 1989 for a boardme et ing of Chestvale to approve the transfer of the two issued sharesto NCB Nominees and Dedeir respectively.

2.1.4 How ever, the next issue is whe ther from the 9th Dece mb er 1989, thedate of the f i rst declarations of trust, Chestvale was effectively a

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subsidiary of UPH, and i f so, whether UPH then became financial lyinteres ted in the succ ess or fai lure of Chestvale. I have examined inthis regard the f i les of UPH, of their sol ici tors A & L Goodbody and ofNoel Sm yth & Partners, sol ici tors for Ches tvale, and I f ind that theintention of al l the parties as reflected in their actions after 9thDecember 1989 indicate that i t was a subsidiary, and these actionsculm inated in the transfer by UPH to D el ion of the share s in Che stvaleon 1 9th Ap ril 1990. In fact, i t was an ess entia l part of the tax p lan nin gfor UPH, that Chestva le be i ts sub sidiary. Unless this transfer of 19thApri l 1990 was a sham (and the eviden ce indicates th at i t was not) ,there w ou ld have to have been a transfer of the beneficial interest inthe two issued Chestvale shares from the cl ient of Mr. Smyth to UPH,so that UPH co uld then transfer that beneficial interest to Del ion. I f indthat, al though there was not a formal wri tten transfer, there was aneffective transfer, so that from 9th December 1989, the date of the f i rstdeclarations of trust unti l 19th Apri l 1990, Chestvale was effectively asubs id iary of UPH. The formal agreeme nt for the t ransfer of shares inChestvale from UPH to Del ion was signed on the 12th Apri l 1990 andthe transfer was effected on 19th Apri l 1990.

2.1.5 To determ ine whether UPH was cons equen t ly f inancia lly in terested inthe success or fai lure of the Companies, i t is necessary to analysewhether UPH was at r isk that i t might not receive the bank guaranteedloan note. The intention of the parties after 9th Decem ber 1989 was

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that UPH would sel l i ts interest in Chestvale, which owned the JMOBsite, to D el ion. Del ion was to pay for this interest by furnishing a loannote to UPH for 2.750.000, payable on 11th August 1994 and whichwas to be guara nteed by a bank. The bank wh ich ul t imatelyguaranteed the loan note, Ansbacher, did not agree to do so unti l 22ndJanuary 1990 and did not in fact issue the guarantee, which waseffected by way of a deed of cove nant, unti l 19th Apri l 1990. By letterof the 22nd January 1990, Ansbacher informed Chestvale that i tunderstood that on receipt of the sale proceeds of the JMOB si te, thesum of IR2,750,000 would be placed on deposit and l iened to thebank to secure the guarantee and in the me ant ime, pe nding receipt ofthe said proceeds, the guarantee would be secured by the exist ingf ixed charge over the JMOB si te. This faci li ty, o ffered by A nsbach er ,was not acce pted by Chestvale. The offer by Ansb acher of 22ndJanuary 1990 fol lowed the submission to i t of a letter from Mr.Desm ond to Telecom of 10th January 1990, end orse d wi th acce ptanceby Mr. Mc Gov ern on behalf of Telec om . If An sba che r had not beensat isf ied that Telecom would purchase the JMOB si te, I am sat isf iedthat i t would not have guaranteed the loan note issued by Del ion andUPH wo uld have rema ined f inancial ly intereste d in the succ ess orfai lure of Ches tvale. Mr. Des mo nd gave evide nce to me that heunderstood that Ansbacher had agreed to guarantee the loan note assoon as they had security over cash of c. IR2,000,000, i.e. themezzanine f inance, which was on deposi t wi th them since 21st

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2.2 The beneficial owners of shares in UPH

2.2.1 The true perso ns wh o were f inancial ly intereste d in the succ ess orfai lure (real or apparent) of Chestvale through UPH are set out inAppendix 3 at tached hereto.

2.2.2 I referred in the Inter im Report at paragra ph 2.3.11 to my do ubts abo utJo se ph Lew is being the beneficial owne r of shares in UPH. I do notbel ieve that Joseph Lewis was the beneficial owner of shares in UPHand in so far as his name is noted in the re cord s, I f ind that he w asact ing as a nom inee for som e other person. My reasons for th is f indingare:

( i) the only l isted share holder in UPH wh o has not satisf ied me asto his shareholding is Mr. Lewis;

( ii ) I have received no evidence of any con tem poran eou s wr i t tencommunicat ion wi th Mr. Lewis re lat ing to h is proposedinvestment in UPH;

( ii i) de spite a num ber of reques ts he has fai led to pro du ce anyevidence that funds invested in UPH and which came from anaccount in Union Bank of Switzer land in Geneva on 15th June1989 were his;

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( iv) the nam e of Jo se ph Lewis was used under the reference L indiscussions about the of fshore tax basis of the t ransact ion inSeptember 1989 - see paragraph 7.2.16 of the Inter im Report.Mr. Desmond informed me in evidence that he had suggestedthe use of Mr. Lewis name at that stage as he understood thatan of fshore resident was requi red for tax reasons.

(v) Mr. De sm ond also inform ed me in eviden ce that Mr. Lewis hadnever previously invested through h im or through NCB and thatthe reason he asked Mr. Lewis to invest in UPH was so that Mr.Lewis might ask Mr. Desmond at some t ime in the future toparticipate in investments that might be made by Mr. Lewis.

I f ind this latter point part icular ly di ff icul t to accept bearing in mindthat, as I explain later, Mr. Desmond, as the cl ient of Mr. Smyth, moreor less contemporaneously wi th the above request to Mr. Lewis,bou ght the JM OB si te f rom UPH. If Mr . Des mo nd really wanted to beseen by M r. Lewis as doing him a favou r, by gett in g him to invest inUPH, then i t is reasonable to expect that Mr. Lewis would be involvedwith Mr. De sm ond in the purchas e from UPH, but he, Mr. Lewis, hasindicated that he had no knowledge of th is; Mr . Desmond has said he,Mr. Lewis, was not involved; and there is no evidenc e that he was.Mr. Lewis through Bahamian lawyers has insisted that he is thebenef ic ia l owne r and I a t tach copies of my corre spo nde nce wi th h im

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and his lawyers as App end ix 4 to this repo rt. As appears from th iscorrespondence, Mr. Lewis has fa i led to produce any evidence to me.

2.2.3 The que stion ar ising then is who was the pr incip al of Mr. Lewis. Ispecif ical ly asked Mr. McManus i f Mr. Lewis acted on his behalf or ashis nom inee in relation to the Com panies or UPH. Mr. M cM anu sde nied that Mr. Lewis had so acted. Mr. Mc Ma nus inform ed m e inevidence that Mr. Lewis spoke to him about the investment in UPHbefore it was made and asked h im what he thou ght. Mr . M cM anusinformed me that he repl ied that he found Mr. Desmond to be verytrustw or thy and that h is fi rm had a very goo d track reco rd but that Mr.Lewis co uld m ake up his own mind . Nev ertheless, I f ind that Mr. Lewisis holding the shares in UPH as nominee or in trust for Mr. McManusfor the fo l lowing reasons:

( i) in a conte mp orane ous docu me nt refer ring to the shareho ldersof UPH, which was based on informat ion g iven by Mr. Desmondto Lombard and Ulster Bank, Mr. McManus is stated to be asha reho lder in UPH. I apprec iate as wi l l appear later, (seeparagraph 3.21.( i i i ) post) that Mr. Desmond misrepresented tothe banks that certain persons were participants in thetransactions, but I am advised that Mr. McManus is a particular lyclos e pe rsonal fr iend of M r. Des m ond and I f ind i t di ff icul t toaccept that he would misrepresent his fr iend in this way, unless

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it was true.

( ii ) In an interview between Mr. Sm yth and Mr. Mo riarty of Bank ofI re land, based on informat ion g iven to h im by Mr. Desmo nd, Mr.Smyth said that there was some over lap between theshareholders of UPH and Messrs Desmond, Magnier andM c M a n u s .

( ii i) I have ma de a dete rmina tion that Mr. Mc M anus did partic ipatein the purchase by Mr. Desmond, the cl ient of Mr. Smyth, f romUPH, using the name J. & N. McMahon - see Section 5 of thisreport, despite his denial of such involvement.

2.2.4 l also referred in the Inter im Report at paragra ph 2.3.14 to the claim ofGerard Walsh to a sha reholding in UPH. Mr. Wa lsh was sp ecif ic in hisevidence to me about the promise made to h im by Mr. Desmond.When asked by me to expla in why Mr. Desmond would have made th ispro m ise of a 10% sha reholding in UPH and how i t could beimplemented, Mr. Walsh repl ied that the value at which FindlaterHouse, the f i rst property bought by UPH, was to be reflected in theUPH accounts, was 500,000 greater than i ts actual cost, because avaluat ion had been received which just i f ied the increased f igure. Thisdi f ference was to be accounted for by a corporate f inance fee ofIR500,000 to be charged by NCB to UPH, and which fee was to be

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cap ital ised tor 50% of the ordinary shares in UPH. These ordina ryshares were then to be divided between Padraic Hassett, the estateagent who had introduced Mr. Desmond to the Findiater Houseproper ty and who was to get 5%; Mr. Walsh who worked on theacquisi t ion and in particular in gett ing bank f inance for the purchasebased on a higher valuation than was paid for the property who wasto get 10%; and NCB who were to receive the balance of 35%.Although not referred to in evidence by Mr. Desmond or Mr. Barry ofUPH, nor in the Placing Memoranda circulated to prospective UPHshareholders, a corporate f inance fee of IR437,880 ( inclusive of VATand dis burs em ent s) was in fact cha rged by NCB to UPH and a fee of61,500 ( inclusive of VAT) was charge d by Mr. Hasse tt. These feesamounting to 499.380 were capital ised in the audited accounts as partof the acqu isi t ion cost of Findiater House. Mr. De sm ond in hissubsequent evidence agreed that i t was charged and argued that i twas justi f ied . Mr. Barry in his evidenc e to me stated that there w assome connect ion be tween the NCB/Mr . Desmond subscr ip t ion fo rshares and the Findiater House purchase. The capital isation referredto by Mr. Walsh did not take place as envisaged by him but eventual lyin March 1990, NCB, Mr. Desmond and Mr. Hassett subscribed in cashfor 50% of the ordinary shares in UPH. The share register of UPHrecords that these shares were al lotted for cash in March 1990 and noton 31st May 1989 as stated by me in paragraph 4.5.8 of the Inter imRepor t .

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2.2.5 Wh en aske d by me wh y he did not pursue his claim for shares in UPHunti l September 1991, Mr. Walsh repl ied that he always bel ieved thatMr. Desmond was hold ing the shares in t rust for h im and was notdisabused of this bel ief unti l NCB made a publ ic statement inSeptember 1991 in response to press enqui r ies, in which they namedthe beneficial ow ners of the UPH shares. Wh en Mr. Walsh saw thisand saw that his name was not included, he says that he immediatelyconta cted Mr. Desm ond and dem anded his shares. Mr. Desm ondmaintains that Mr. Walsh, in only making this claim to the shares inSeptember 1991, without having raised the issue at any t ime since heleft UPH in February 1989, sho wed his lack of bona f ides . How ever,on ba lance I f ind the exp lanation of M r. Wa lsh plausible an d hisevidence on this issue credible and consistent with the actions ofrelevant parties.

2.2.6 I co ns equ en tly f ind that Mr. Walsh is enti t led to 10% of the ordinaryshares in UPH and that Mr. Desmond, through Pepper CanisterNominees, holds those in t rust for Mr. Walsh.

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3.0 Mr. Des mon d

3.1 Involvemen t of Mr. Desm ond throu gho ut the t ransact ions

From an early stage of my investigation and in particular on myreading the Telecom Report, i t was clear that Mr. Desmond was aperson who had some involvement, f rom the ear l iest stages of thetrans actio ns, wh en UPH fi rst acqu ired an interest in the JMO B si te,unti l the latter stages when the JMOB si te was sold to TelecomEireann.

3.2.1 Mr. De sm ond 's eviden ce of not bene fi tt ing

I in terviewed Mr. Desmond on a number of occasions and whi leack now ledging that he d id have som e ro le in the var ious t ransact ions,he stated clearly in his evidence to me on a number of occasions andin the course of aff idavi ts sworn by him in var ious legal proceedingswhich are described by me in Section 3 of the Inter im Report, that hedid not benefi t in any way from the transactions involving theCompanies and Telecom Eireann, other than in his capacity as ashareholder in UPH and perhaps through gain ing goodwi l l w i th Dr .Smurfi t and with Telecom Eireann, by acting as an intermediarybetween Chestvale as vendor and Telecom as purchaser .

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3.2.2 From the corre spo nde nce wi th Mr. Desm ond's sol ic i tors in re lat ion tothe making of f inal submissions and, or , the adducing of fur therevidence, whi le not so expl ici t ly stated, I bel ieve i t is clear that Mr.Desmond does not accept or agree wi th my determinat ions, as theyrelate to him. I acc ordin gly co nside r it app ropriate that I mak e hisopin ion in this rega rd clear at an early point in this re port. Wh i lerepeated requests were received from Mr. Desmond's sol ic i tors tohave access to al l information given to me which related to my f indingscon cern ing Mr. Desm ond, and for an extension of t ime wi th in which tomake submissions, I d id not consider that there were adequate orsuff ic ient groun ds for acceding to those requests. I am satisf ied thatMr. Desm ond has had a fu ll oppor tun i ty to adduc e fur ther evidence tome and to make fur ther submissions on the extracts f rom the draf trepor t which were furn ished to h im on the 25th June 1993. However ,save in respect of two matters, he has not done so.

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3.3 UPH sale to Mr. Smyth as nominee of Mr. Desmond

3.3.1 I set out in Sec tion 5.2 of the Inter im Report, an analysis of evide nceadduced to me, relating to the attempt by UPH to sel l on their interestin the JMOB si te after mid-Apri l 1989 and stated in paragraph 5.2.12that par t ies, who had submit ted tenders to UPH, were substant ia lprop erty c om pan ies. In early June 1989, Mr. Des mo nd, on behalf ofUPH, noted an agreement subject to UPH board approval to sel l thesi te to Hardwicke Limited / Br i t ish Land for 5,750,000 plus 10% of theprof i ts of the development, subject to a minimum of 500,000, to bereceived not later than the 3rd anniversary of the deal. Howe ver inparagraph 5.2.10 of that report, I stated that Mr. Smyth, at the requestand on the instruct ions of Mr. Desmond, subsequent ly made a formaloffer to Mr. Barry of UPH for 6,300,000, wh ich offer was acce pted . Ialso stated that Mr. Smyth's evidence was that on 19th June 1989, thedate he made the offer and thereafter, he considered his cl ient to beMr. Desm ond . In paragra ph 5.2.15 of the Inter im R eport, I note d thatMr. Desmond conf i rmed to me in evidence that Mr. Smyth made theaforesaid offer to UPH on his, Mr. Desmond's, request.

3.3.2 Ac co rdin gly I f ind that the cl ient of Mr. Sm yth at 19th Jun e 1989, whe nMr. Sm yth made the of fer to UPH to p urchase the JM OB si te, was Mr.Desmond and accordingly that f rom the t ime that UPH accepted th isoffer at the end of June 1989, Mr. Desmond was the beneficial owner

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of the agreement to acquire the interest of UPH in the JMOB si te.

3.3.3 I co ns idere d the eviden ce of Mr. Barry, wh o was a direc tor of UPH andMr. Pairceir who was the Chairman of UPH at that t ime and amsatisf ied that they were not aware that Mr. Desmond was the cl ient ofMr. Smy th, on whose behal f, the of fer of 19th June 1989 was acce pted;a l though Mr. Barry acknow ledged that he was aware that Mr. D esm ondhad some Involvement in t ry ing to assist the f inanc ing of the purchas efrom UPH.

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3.4 Al leged involvement of Spor tsf ie ld

3.4.1 In Sec tion 5.3 of the Inter im Rep ort, I analys ed the evide nce thenavai lable to me relating to the period between 19th June 1989 and 11thAugust 1989 and in particular evidence relating to a proposed reversetakeover of Spor tsf ie ld by a consor t ium of investors led by Mr. Smyth.

"3:4.2 l state d in parag raph 5.3.3 of the Inter im Repo rt that Mr. De sm ond 'sevidence was that Mr. Smyth and h is consor t ium, including cl ients ofMr. Desmond, would be acqui r ing the JMOB si te and transferr ing i t toSpor tsf ie ld, together wi th other proper t ies that were to be transferredby var ious par t ies, for the purpose of the reverse takeo ver . I notedalso in the same paragraph that Mr. Desmond stated in evidence thathe had informed the NCB execut ives who were deal ing wi th thereverse takeover of Sportsfield of this proposal and that Mr. Barry ofNCB and UPH was also aware of i t.

3.4.3 in sub seq uen t paragrap hs, I note d the evide nce of NCB exec utivesinvolved in advising Spor tsf ie ld o n th is t ransa ct ion, each of who m andMr. Barry, stated in evidence that they were not aware of a proposal toinclude the JMOB si te among the proper t ies to be transferred in toSpo rtsfield. In the same paragraph 5.3.3,1 also noted the evide nce ofMr. Sm yth that th is proposal was som ething that had been co nsidere d,but that i t was not something that was to happen for a considerable

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length of t ime after August 1989.

3.4.4 In thes e con fl icts of eviden ce betwe en Mr. De sm ond on the one partand Mr. Smyth and NCB execut ives and documentary evidence on theothe r, I f ind that I can not a ccep t the version given to rne by Mr.Desmond and that, whereas Mr. Desmond may have had someintention of transferr ing his interest in the agreement with UPH on toSpor tsf ie ld at some t ime in the future, that th is was not the in tendedmethod for f inancing the complet ion of the purchase of the JMOB si tefrom the l iquidator which was scheduled for the 31st July 1989 andwh ich was then pos tpo ne d unti l 11th Aug ust 1989. Rather, asdes cr ibed by me at som e length in Sect ion 6 of the Inter im R epor t , theintent ion was to f inance the purchase mainly by bank borrowings andhence the appl icat ion to var ious banks as descr ibed in that sect ion.It would seem that in the period from the latter part of July unti l 8th/9thAugust 1989, Mr. Desmond may have intended to act as an agent forsom e investors including h imsel f. However as these " investors" werenot defini tely a greed at that t ime, I f ind that Mr. Des mo nd was the s olebenef ic ia l owner of the contractual in terest to acqui re the JMOB si tepursuant to the agreement between Mr. Smyth and UPH of June 1989.This remained the posit ion at least unti l the 8th or 9th August 1989when according to the evidence of Mr. Desmond, he arranged for Mr.Doher ty to purchase the JMOB si te, wi th the assistance of mezzaninef inance from Mr. Probets, through h is company, Freezone.

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3.5 Mr. Desmond's evidence regarding Mr. Doher ty

3.5.1 I exp lained at parag raph 5.3.16 of the Inter im Report that I had not hadan opportunity of interviewing Mr. Doherty pr ior to issuing the Inter imRepor t to the then Minister for Industry and C om me rce and ad ded thatthe evidence of Mr. Doher ty might help to reconci le some of theconfl icts of evidence outl ined by me in the earl ier part of Section 5 ofthe Inter im R eport. I interviewed M r. Doh erty at length on tw o s epara tedays. 31st July 1992 and 4th August 1992 and received from hisso l i c i to rs some fu r ther cor respondence and documents .

3.5.2 The evide nce given by Mr. Doherty did not reco nci le the con fl icts ofevide nce referred to in Sec tion 5 of the Inter im Repo rt. To s om eextent, Mr . Doher ty 's evidence added to the confusion because i t d idnot in some impor tant respects corroborate the evidence of Mr.D e smo n d .

3.5.3 Mr. De sm ond 's eviden ce, as outl ined In parag raphs 5.3.8 - 5.3.14 of theInter im Report, is to the effect that when Mr. Desmond real ised thatMr. Smyth cou ld not complete the t ransact ion wi th UPH, he had to turnto Mr. Doherty about whom he knew very l i t t le and arrange for Mr.Doherty to take over Mr. Smyth's interest in the agreement with UPH;that he negotiated a deal between Mr. Probets as mezzanine f inancierand Mr. Doher ty, whereby Mr. Doher ty would promise in considerat ion

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of Mr. Probets, through Freezone, lending him 2,000,000, to p3,000,000 In three years t ime with accrued interest on the 2,000,0or to repay the 2,000,000 with the first 2,500,000 of net profreal ised on the JMOB si te; that Mr. Doherty was to, and did, signpromissory note for 3,000,000; that a letter of agreement was signby M essrs D oher ty and Probets; and that according ly Mr. Doher ty wthe true owner of Chestvale and that Mr. Probets via Freezone was tmezzanine f inancier .

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3.6 Fundamental premises of Mr. Desmond's evidence

3.6.1 The entire nexus of Mr. De sm ond 's evid enc e to me is bas ed on twofundamental premises which he repeatedly stated to me in h is swornevidence and in af f idavi ts sworn by h im in cour t proceedings:

( i) that he, Mr. Des mo nd, was not hims elf f inancial ly intereste d inany way in the success or fai lure (real or apparent) of theCompanies nor was he able to control or to mater ial ly influencethe pol ic ies of those Companies.

( ii ) that Mr. Probets ow ned Freezone wh ich prov ided al l themezzanine f inance for the purchase of the JMOB si te andreceived the US$1,500.000 and IR2,431,170, paid on the 30thJuly 1990, out of the proceeds of sale of the si te then in theacco unt of Delion at Ansba cher , as refer red to in the chro nolog yparagraph 1.10 supra.

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3.7 Mr. Probe ts evide nce

3.7.1 As explained In the Inter im Repo rt, Mr. Probets fai led to co ope rate withthe invest igat ion when requested by me, but d id produce a StatutoryDeclaration sworn by him on 23rd October 1991 (see Appendix 15 ofthe Inter im Rep ort) . In this declaration, ("the Probe ts De claration") M r.Probets purpor ted to corroborate the evidence of Mr. Desmond anddeclared that he agreed to provide mezzanine f inance of IR2,000,000for the funding of the purchase of the JMOB si te and added that hereached agreement wi th Mr. Doher ty to provide h im wi th themezzanine f inance. The Probets Declaration then stated that Mr.Probets arranged on or about 10th August 1989 for IR1,000,000 to betransferred to Ansbacher Bank and that he understood that that wasuti l ized to pay the depo sit on the purcha se of the pro pe rty. He statedthat on or about 7th December 1989, he arranged for US$1,500,000 tobe transferred via Bankers Trust , New York to Ansbacher Bank andthat on or about 30th July 1990, the sum of IR956,118 (circaUS$1,500,000) was transfe rred by Ans bach er to Bank ers Trust. Hestated that the or iginal deposit of IR1,000,000 together with interest,making a total of IR1,131,000, was transferred on or about 30th July1989 to an account of Freezone at TSB in Grafton Street, Dubl in andthat Freezone was a company of which he was the sole and absolutebene ficial ow ner. He stated that a further su m of 1.3m wastransferred from Ansbacher on or about 30th July 1989 to the same

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account of Freezone In the TSB and that this sum of 1.3m was, apartf rom interest , the agreed return to M r. Probets f rom Mr. Doher ty on h isarrangem ent for the provis ion of mezzanine f inance. He then s tatedthat ei ther personal ly, directly or indirectly through Freezone, heand/or Freezone was the only and absolute beneficial owner of themonies invested by way of mezzanine f inance in the purchase of theproper ty and was accordingly the owner of the prof i t earned.

3.7.2 As Mr. Prob ets refused to vo uc h any of the dec larations made by himor to give further detai ls, I sou ght to establ ish the verac i ty or oth erw iseof the declaratio ns ma de by him. I was able to estab l ish that theamounts refer red to by h im were transferred on or about the datesme nt ioned, a l though I establ ished that ar rangemen ts for the f i rsttransfer were made on 8th August 1989 and not on 10th August asdeclared by h im. I establ ished further that that f irst paym ent cam e toAn sba che r via an acco unt in UBS in Genev a. In add it ion, I esta bl ishe dthat there was no payment back to the account in UBS from theFreezone account at TSB to which the monies had been transferredfrom Ansbacher , nor was there any transfer f rom an account of theCompanies or of Del ion at Ansbacher to the account at UBS.

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3.8 Trac ing of pay m ent to acc oun t of J. & N. M cM aho n at AIB Bank (C.I.)Limited in Jersey

3.8.1 I then esta bl ishe d that the paym ent of US$1,500,000 wh ich wastransferred to Ansbacher in December 1989 via Bankers Trust , NewYork, came from an account in the name of J. & N. McMahon at AIBBank (C.I.) in Je rsey . I have also fou nd that the pa ym ent back toBankers Trust in July 1990 after completion of the sale of the JMOBsi te to Telecom Eireann went in to the account of J. & N. McMahon atAIB Bank (C.I.) Lim ited in Jerse y. As stated in parag raph 8.4.4. of theInter im R eport, I was inform ed that J. & N. M cM aho n was not a realname. As the real person who contro l led the J. & N. McM ahonacco unt was a person wh o was f inancia l ly in terested in the succ ess orfai lure of the Companies, i t was necessary to ascertain who is thatperso n or persons . No interest , prof it or com pen sat ion w as paid to theaccount of J. & N. McMahon at AIB Bank (CI) Limited in Jersey fromthe Companies or Del ion account at Ansbacher or the Freezoneaccount at TSB and hence I had to ascertain how this investment orloan was rew arded . The se issues are dealt with in Sec tion 5 of thisRepor t .

3.8.2 For the dec laration of Mr. Probets that he ei ther direc tly or thr ou ghFreezone, was the only and absolute beneficial owner of the moniesinvested by way of mezzanine f inance and the profi ts earned on i t , to

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be correct , Mr . Probets would have to be the real J. & N. McMahonand the true owner of Freezone.

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3.9 Tracing of paym ent to accoun t of Lochlann Quinn and Mart in Naug htonat Ir ish Intercontinental Bank Limited

3.9.1 In m y Inter im Rep ort and in particular in Sec tion 8, I explaine d that thesum of 2,431,170 from the proceeds of sale of the JMOB si te toTelecom Eireann was transferred to an account in the name ofFreezone at TSB , Grafton Street. I explained in paragraph s 8.6.3 - 8.6.5of the Inter im Report that the sum of IR1,300,000, part of theaforesaid sum of IR2,431,170 was transfe rred imm ediate ly to anacc oun t at Ir ish Intercontinen tal Bank in the name s of Loch lann Q uinnand Mart in Naughton, to comply wi th a personal obl igat ion of Mr.Desm ond to d ischarge the debi t balance in that accou nt. Mr .Desmond argued that this did not make him a beneficiary of part of theprocee ds of sale because i t merely increased the amou nt that he owedto Freezone. I do not accep t Mr. Des mo nd's argum ent in this rega rdand f ind that this payment of 1,300,000 did make Mr. Desmond abeneficiary of part of the proceeds of sale of the JMOB si te toTe l e co m.

3.9.2 I f ind how ever that, save for their interest thr ou gh UPH, neither Mr.Quinn nor Mr. Naughton were f inancia l ly in terested in the success or