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Ruling by PCC on request to reopen investigations into share dealings at the Daily Mirror in 1999/20

Ruling by PCC on request to reopen investigation into share dealings at the Daily Mirror in 1999/2000

In May 2000, the Commission severely censured the Mirror newspaper, its editor, Piers Morgan, and two journalists, Anil Bhoyrul and James Hipwell, for serious breaches of the financial journalism provisions of the Code of Practice in connection with the newspaper’s “City Slickers” column. In view of the unsatisfactory state of affairs revealed by its investigation the Commission decided to refer the terms of its adjudication to the Chief Executive of Trinity Mirror plc (the parent company of MGN Limited, the newspaper’s publisher). The intention of this was to ensure that responsibility for observance of the Code was clearly established. In 2005, Mr Bhoyrul and Mr Hipwell, who had written the column, were convicted of criminal offences relating to share dealing. Mr Hipwell is currently appealing against his conviction.

The Commission found that Mr Morgan had breached the Code of Practice by purchasing shares in a company, Viglen Technology plc (“Viglen”) which had been recently tipped by his newspaper. It also concluded that Mr Morgan had not taken sufficient care to ensure that his staff were acting in accordance with the Code and that his conduct, including the breach in relation to Viglen, had fallen short of the high professional standards demanded by the Code.

The adjudication can be found on the Commission’s website (Click here). Its inquiry had been established in February 2000 following considerable media comment and speculation about the Slickers column and the activities of the journalists concerned. Six subjects were singled out for investigation, four of them relating to Mr Morgan. The Commission made it clear that it was only concerned with the operation of the Code of Practice by newspapers and magazines and not with breaches of the criminal law which were being investigated by the Department of Trade and Industry (DTI). It did not find it necessary to decide whether Mr Morgan knew anything about the decision by Messrs Bhoyrul and Hipwell to tip Viglen on the day after he invested £20,000 in Viglen shares.

In November 2005, during Mr Hipwell’s trial, it was revealed that Mr Morgan had made three purchases of Viglen shares on behalf of himself and his wife on 17 January 2000 in amounts totalling £67,000, of which the third cost nearly £20,000. The Slickers column tipped the share the following day, after which its price rose by over 100%.

In February 2006, Roy Greenslade, a former editor of the Mirror and who was then a media columnist with the Daily Telegraph, wrote to a number of individual members of the Commission to ask for their help in persuading the Commission to reopen the City Slickers complaints. He said he had established that, on the day it was publicly disclosed that Mr Morgan had bought Viglen shares, the editor had told the Trinity Mirror management that the total cost had been £67,000. Mr Greenslade claimed that, despite this knowledge, several Trinity Mirror directors – whom he named – had conspired to give false evidence to the Commission by telling it that the cost to Mr Morgan had only been £20,000. Mr Greenslade said that “the implication must be that Trinity Mirror, by minimising Mr Morgan’s share-buying, was attempting to avoid an even more severe adjudication from the PCC and, of course, an even greater outcry from the rest of the media. In other words it was a corporate cover-up in order to preserve Mr Morgan as editor despite his flagrant abuse of his position”.

Mr Greenslade also said that he would contest what he said was “the current PCC line,” that “the Commission delivered a damning verdict on Mr Morgan’s activities and also used its most severe sanction by deciding to refer the terms of the adjudication to the Chief Executive of Trinity Mirror.” In January 1994, the Commission announced that in future it would bring instances of severe or calculated breaches of the Code of Conduct to the attention of publishers. Mr Greenslade said that the reference simply referred to the terms of the adjudication, did not mention Mr Morgan by name, refer him to the publishers or make any suggestion that he should be disciplined. Mr Greenslade maintained that the reference to the Chief Executive by the Commission would have been in stronger terms if the true position had been known. The Commission deals with this contention below.

Although the only fact he was challenging was the figure of £20,000, Mr Greenslade urged the reassessment of all the complaints as other discrepancies might be found. He said that in advance of his revealing the full story in public he wished to give the PCC the opportunity to investigate the matter to ensure that the Commission was not brought into disrepute.

The Commission’s general approach is that it will not usually reopen a complaint or an investigation unless it can be shown that new evidence had come to light, which could, if known earlier, have materially affected its decision. There are clearly practical difficulties in reopening an investigation where, as in this case, the adjudication is nearly six years old and where the Commission is being asked to rely on assertions or inferences which are unaccompanied by any corroborative evidence. The Commission has no legal powers of subpoena or disclosure, and witnesses may no longer be available or have forgotten many of the relevant facts. It is unsurprising that a number of people involved in dealing with this matter in 2000 had a poor recollection of the detail involved.

The Commission’s finding that Mr Morgan had committed a breach of the Code in purchasing shares which had been recently tipped in his newspaper did not depend on the amount or value of the shares bought.

When it considered the matter in 2000, the Commission was told that a detailed and wide ranging investigation, commissioned by MGN, had already been carried out by the City solicitors, Messrs Lovells. A DTI inquiry was ongoing. The Commission felt that the unsatisfactory state of affairs at the newspaper – including the conduct of Mr Morgan - ought to be specifically dealt with by the management. It therefore referred the whole of the adjudication, which clearly included the position of the editor, to the Chief Executive of Trinity Mirror.

The formula used in the only previous case where there had been a referral, also involving Mr Morgan, did not contain any suggestion that the editor should be disciplined. In his book, “The Insider” (p.285), Mr Morgan says of the Commission’s decision in the City Slickers case that it was “only the second time that this ultimate sanction has ever happened.” In a recent letter to the Commission, MGN conceded that the PCC had levied its greatest sanction against Mr Morgan in giving its decision in 2000.

Several factual assertions made by Mr Greenslade in his submissions to the Commission appeared to be incorrect. For example, he claimed that the “false evidence” was presented to the Commission in the name of one director of Trinity Mirror, drafted by another director on the orders of a third, all of whom he named, saying, “I cannot, of course, reveal my sources for this information, but I stress that I do have multiple sources and I am convinced it is cast-iron.” In fact, no evidence was ever submitted in the name of the director mentioned on any of the issues considered in relation to the 2000 investigation. The major part of the material submitted had been drafted by a firm of City solicitors and presented as such.

On the basis of the matters set out above, the Commission would have refused the request to reopen its adjudication. But an examination of the Commission’s original file indicated that MGN had had access to the broker’s records and transcripts of his telephone calls with Mr Morgan at a very early stage and therefore must have known the true value of the shares sold when it gave evidence to the Commission. The Commission decided to write to MGN asking it to confirm that it was aware of the total value of the Viglen shares purchased by Mr Morgan before the adjudication was issued in May 2000 and, if so, why the true facts were not revealed to the Commission.

MGN’s reply

In a detailed reply on behalf of MGN, the Group Legal Director, who had been involved in the submission of evidence in 2000, said that Mr Morgan had been immediately interviewed about an article in the Daily Telegraph on 2 February 2000. This had been the first public allegation that he had purchased Viglen shares worth £20,000. Mr Morgan agreed that he had bought Viglen shares, on behalf of himself and his wife, on 17 January 2000, which he later confirmed had a total value of some £67,000. As a result, Messrs Lovells were commissioned to conduct a wider independent investigation into the City Slickers column and to interview a number of people concerned. From early February, MGN were also involved in providing information to the DTI, which became concerned with the matter.

When civil or criminal proceedings are probable, the Commission needs to consider whether to suspend its own inquiries. Its then Chairman, Lord Wakeham, and its then Director, Guy Black, were anxious that the Commission should speedily investigate what appeared to be “a scandal” in its area of competence and report its conclusions about any breach of the Code of Practice to the public as soon as possible. MGN said that it had always given strong support to the Commission, and was willing for an Inquiry to take place which would necessarily be confined to examining possible breaches of the Code. There was agreement that any criminal or other proceedings would have to take precedence and that material or information might become available which could not be passed to the Commission. This did not mean however that parties to a complaint were at liberty to mislead the Commission if such problems arose.

MGN told the Commission that, together with its solicitors, it came to believe in 2000 that Messrs Bhoyrul and Hipwell were not telling them the truth about their own behaviour and that they were changing their stories by introducing “facts” they had learned from newspapers (some of which were incorrect) or the investigation itself to bolster their credibility. At first the two journalists had exonerated Mr Morgan from any insider dealing, but as it became likely that disciplinary action was to be taken against them, they began to implicate him. In particular, it was alleged that he had told Mr Bhoyrul that he had bought £20,000 of Viglen shares after being informed the Slickers column was going to tip the company the following day. It seemed surprising that Mr Morgan had only mentioned the one purchase to Mr Bhoyrul, namely the amount which had been reported in the press, but not the others which were not in the public domain.

MGN told the Commission that it almost became a touchstone of the veracity of Messrs Bhoyrul and Hipwell as to whether they could show independent knowledge of the total of £67,000. If they could, it would also indicate whether Mr Morgan was telling the truth when he denied any pre-purchase conversation with them about Viglen. It was therefore decided to keep the higher figure confidential. Meanwhile, Messrs Lovells had concluded that they could not find any credible evidence that would demonstrate that Mr Morgan had prior knowledge that his newspaper would tip Viglen the day after he had bought the shares.

After DTI inspectors were appointed, notices were served on MGN which stated that the terms of their appointment and all details concerning their investigation were confidential and should not be disclosed. MGN had already provided the DTI with full details of Mr Morgan’s share dealings since he had become editor, as well as Messrs Lovells’ Report in respect of which privilege had been waived. According to MGN, the inspectors became interested in the reasons for continuing to keep the figure of £67,000 confidential, though in the event it was not mentioned again until it was disclosed during Mr Hipwell’s trial.

Mr Morgan was not charged with any criminal offence. But he was given a severe reprimand by MGN and a written warning in relation to his management of the newspaper and the lack of internal controls. It was made clear to him that if any further evidence was uncovered the matter would be reopened and, if appropriate, his employment could be terminated.

MGN said that it realised that there might be a problem in disclosing the figure of £67,000 to the Commission. In view of possible civil proceedings following the dismissal of Messrs Bhoyrul and Hipwell, and the ongoing criminal investigation, it was within its rights to ask the Commission to suspend its inquiries in relation to Viglen. It judged, however, that if it restricted its evidence to the amount already in the public domain, it would make no difference to the question of whether the Code of Practice had been broken and would enable the investigation to proceed.

Accordingly, when MGN came to give evidence on the Viglen matter, it enclosed a report prepared by its solicitors which Lovells had extracted from their main report, and which was limited to the purchase of the tranche of shares which had been bought for some £20,000. MGN knew that the Commission believed that this was the totality of the Viglen shares purchased by Mr Morgan, but did nothing to correct that view, while being careful not to make any statement which was false in response to further inquiries by the Commission.

MGN strongly contested the suggestion that it had engaged in a corporate cover-up to present false evidence to protect Mr Morgan. It believed that the suppression of the true figure might still lead to important information being revealed. At all stages it had been advised by its solicitors, Messrs Lovells, who had been brought in to conduct an independent inquiry. It had waived privilege in respect of the Lovells Report. It could have required the Commission to suspend its inquiries but had continued to cooperate with it. It had given every assistance to the DTI inspectors and prosecution authorities, and had fully informed them about its reasons for keeping silent about the extent of Mr Morgan’s purchases.

The Commission’s evaluation

MGN made complete copies of the Lovells Report dated 17 February 2000 available to its Director and solicitor for examination. What follows is an analysis of some of the material it contained.

The Viglen shares were tipped in the City Slickers column on 18 January 2000. Throughout, Mr Morgan has denied that he was aware that they were to be tipped when he and his wife bought some £67,000 worth of shares the previous day. As a result of the information given in the Hipwell trial, it is now known that the Morgans made three separate purchases of Viglen shares. At 12.33pm, shares to the value of £12,805.12 were bought in the name of Mr Morgan’s wife utilising a personal equity plan. At 12.45pm, Mr Morgan used his own personal equity plan to buy Viglen shares to the value of £36,074.05. Then at 3.28pm, Mr Morgan spent a further £18,275.25 on Viglen shares through brokers, Kyte Securities. It is this third purchase which has been described as the £20,000 tranche of Viglen shares. MGN and its solicitors knew the time of the first two purchases because they inspected the contract notes concerned, but the time of the third was not provided to them at the time and only ascertained at a later stage.

On 2 February, the Daily Telegraph published a story reporting that Mr Morgan had confirmed that he had bought £20,000 worth of Viglen shares on 17 January. He was immediately interviewed about the matter by his employers. He volunteered that, in addition to the £20,000 worth of Viglen shares, he and his wife had purchased some £35,000 or so through their PEP accounts. Messrs Lovells were thereafter employed to conduct a wide examination. When Mr Morgan was interviewed on 3 February, he now confirmed the total sum of £67,000 but placed the time of his three telephone calls to purchase the shares at about noon. The extracted document sent to the Commission and dated 17 March 2000 refers to the third telephone call as being made “at about midday” but contains a note in brackets following, stating “Mr Morgan later confirmed that this call in fact took place after 3pm”.

Mr Bhoyrul’s story changed a number of times. When interviewed on 3 February, he said that he did not consider tipping Viglen the next day until he had had a message from a contact about 5pm. He did not speak to Mr Morgan at that time or later. When interviewed on 11 February, he disclosed that he had bought 3000 Viglen shares on 17 January between 12pm and 2pm as a result of a tip about some imminent big news. When Mr Hipwell came back from lunch about 3pm he advised him to buy some as well. As a result of another tip later in the day, Mr Bhoyrul decided to tip the share and wrote the story at 5.35-5.40pm. He did not tell Mr Morgan that he had bought Viglen shares, nor did he know that Mr Morgan had bought Viglen shares.

Mr Hipwell also changed his story several times. When interviewed on 3 February, he denied he owned any Viglen shares. He had not spoken to Mr Morgan on 17 January. He first heard that a Viglen story was to break at about 5pm on that day. When interviewed on 15 February he said that, at about 3pm on 17 January, Mr Bhoyrul suggested that he might want to buy some Viglen shares as Mr Morgan had bought “twenty thousand” and he (Mr Bhoyrul) had also bought some. Mr Hipwell said that he then purchased 20,000 shares (rather than shares to the value of £20,000) around 3pm so that Mr Morgan and Mr Bhoyrul must have bought their shares earlier than that. It was only at 5pm that a decision was taken to tip Viglen the next day. He confirmed that he had had no discussions with Mr Morgan on 17 January.

Messrs Lovells devoted a section of their Report to Mr Hipwell’s justification for his Viglen share purchase which puzzled them. At first sight, they said, there was a certain logic in the correlation between Mr Hipwell’s 20,000 Viglen shares and Mr Morgan’s £20,000 worth of Viglen shares. But Mr Hipwell’s account was inconsistent with Mr Bhoyrul’s statement that he was unaware that Mr Morgan had bought Viglen shares on 17 January and Mr Morgan’s denial that he had told Mr Bhoyrul that he had bought any Viglen shares. Mr Bhoyrul could not, on that account, have known how many Viglen shares Mr Morgan had bought. Messrs Lovells concluded that Mr Hipwell’s account of his conversation with Mr Bhoyrul was unlikely to be true. “In any event Mr Morgan had bought neither 20,000 Viglen shares nor £20,000 worth of Viglen shares. He (together with his wife) had – unbeknownst to anyone other than those closely concerned with the investigation and its emerging findings – bought approximately 35,000 shares equivalent to approximately £67,000 worth.”

MGN told the Commission that this analysis by the solicitors had been the origin of the strategy that it was now to employ. MGN believed that a reference to information that had been held confidential would establish whether Mr Morgan had been involved in insider trading. It had informed the DTI Inspectors of its thinking. It therefore asked its solicitors to prepare a document limited to the £20,000 purchase which was then sent on as evidence to the Commission.

The Commission considers that the logic behind MGN’s strategy was weak. Even if MGN could show that someone had knowledge of the amount which had been kept confidential, it would not necessarily follow that Mr Morgan could be shown to be involved in insider trading. Other explanations might be possible. Mr Morgan had denied that he ever knew that the Slickers’ column would tip Viglen the next day. He had explained the reasons why he and his wife had invested a large sum of money on the shares. He had not attempted to cash in the shares to take a quick profit. Any prosecution would probably have had to depend on the evidence of Messrs Bhoyrul and Hipwell, who had changed their stories several times and subsequently were themselves convicted.

On the other hand, the Commission has seen no evidence to lead it to disbelieve that MGN’s strategy was indeed pursued by the company at the time, even though the reasons for it may have been flawed. The strategy could be traced back to the Lovells Report, and MGN said it had explained the position to the DTI Inspectors to whom they had fully disclosed all the relevant material it had, including the Report. The company had acted on the advice of their lawyers throughout, and Lovells had seen no problem in producing a further Report dealing with the £20,000 purchase, labelled as such, and giving this to the Commission.

There did not appear to be any evidence to support the contention that the motive for not revealing the higher figure was to try to protect Mr. Morgan or to minimise the Commission’s criticisms. Had this been the case, MGN could have achieved its objectives simply by asking the Commission to abandon its investigation into the Viglen issue in view of the conflict of evidence, the possibility of civil proceedings and the DTI inquiries as to possible criminal offences.

Nonetheless, it was a matter of regret to the Commission that MGN had – for whatever reason – submitted a partial account of Mr Morgan’s share dealings to the Commission which had the effect of misleading it. The company should have explored other means of achieving what it wanted to do rather than pursuing this course.

There was a further criticism to be made. The true amount of the Viglen purchases made by Mr Morgan became public in November 2005, and was given a wide circulation in the media. In view of the continuing interest in the discrepancy between the figures, it would have been sensible if MGN had approached the Commission and made a public statement after the end of the criminal trials explaining why it had not been able to provide the true figure in 2000. As it did not, it should not be surprised that there was speculation, accurate or not, as to the reasons for the discrepancy and its own silence.

The Commission has decided that there are no grounds to reopen its 2000 adjudication. The value of Mr Morgan’s Viglen purchases was irrelevant to its findings on that occasion. As a result of the inquiries it has made, the Commission has not found evidence to suggest that directors of MGN had conspired to present untruthful evidence to the Commission to protect Mr Morgan and to minimise the Commission’s criticisms.

It was of importance to know why MGN did not tell the Commission about the total value of the Viglen shares bought by Mr Morgan, as non-disclosure affected the integrity of the PCC’s work.

In 2000, the extent of Mr Morgan’s shareholding was primarily a matter for his employers and the DTI. The Commission was mainly concerned with identifying the serious breaches of the Code of Practice at the Mirror and to ensure that MGN acted swiftly to deal with the situation. The Commission acknowledged that MGN had acted rapidly in dealing with an unpleasant situation and had instituted necessary inquiries and changes. Messrs Bhoyrul and Hipwell had used their position to enrich themselves. Mr Morgan, as editor, had totally failed to control the situation, while buying shares in a way which flouted the Code. The Commission’s forthright condemnation of what was happening remains clear and unambiguous and is unaffected by MGN’s omission.

7/5/06



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