Concert party law needs changing, say Suter inspectors

INSPECTORS appointed by the Department of Trade and Industry to investigate dealings by Suter, the engineering company, David Abell, its chairman, and others, believe that the law on concert parties needs to be changed.

The inspectors, Anthony Evans and Brian Worth, found no evidence of a concert party - an agreement between investors to deal together - which should have been disclosed under the Companies Act.

But they said there were connections between Mr Abell and other investors including the late Christopher Selmes, Christopher Moran, who was expelled from the Lloyd's insurance market, and Michael Somerset-Leeke, a former stockbroker.

The inspectors said there was obvious evidence for a David Abell 'fan club' led by Mr Somerset-Leeke, whose clients frequently bought shares in Suter targets. 'We do not consider there to be evidence to suggest that this fan club overstepped the mark and became a concert party', they said.

The inspectors were appointed in July 1988 to investigate the ownership of six companies - James Neill, FH Lloyd, Francis Industries, Mersey Docks and Harbour, Metal Closures and Winchmore - in all of which either Mr Abell or Suter had bought shares.

Welcoming the conclusion, Suter's directors said: 'The long investigation period has had an adverse effect upon Suter and the board is pleased that this shadow has now been removed.'

Suter's shares have underperformed the rest of the stock market by 60 per cent since the investigation began.

The inspectors said: 'We recommend that consideration be given to amending the law to bring within the definition of concert party situations where two or more persons are in association and their actions are designed to enable one of them to be in a position to acquire shares in the target company at the time of his choosing.'

Concert parties have to be disclosed so other investors can appreciate the size of a potential acquirer's stake. Non-disclosure allows members of a concert party to acquire shares cheaply.

Mr Somerset-Leeke told the inspectors that both Mr Selmes and Mr Abell were active share dealers. 'If you put the two active dealers together over a drink or over dinner or whatever else they are bound to exchange ideas. I am sure they dealt on each other's ideas.'

The inspectors studied the case of Metal Closures, where Mr Abell bought shares for four months. His last purchase was made at 9.20am on 8 January 1987, followed 20 minutes later by Suter's first purchase in the same company.

Realising there could a conflict of interest, Mr Abell wrote a memorandum dated 7 January. Mr Abell said it should have been dated one day later but the inspectors looked upon this 'with a great deal of scepticism'. The inspectors found two versions of the note.

Mr Abell's statements to the inspectors on whether Metal Closures was a bid target were 'not consistent.'

They also found that what Mr Abell told them and Christopher Hird, who made a television programme called The Insiders, was inconsistent with an affidavit sworn by Mr Abell in an effort to prevent the programme being broadcast.

The inspectors were also concerned by the 'persistent presence' of Coni Gilbert and Sankey, the now-defunct stockbroking firm, and Mr Somerset- Leeke, its senior partner, in 'all these matters'.

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