DTI investigates leak in hostile Arco bid for Aran

The Department of Trade and Industry has begun interviewing witnesses about the alleged leaking of inside information ahead of a pounds 161m hostile takeover bid for Aran Energy,a small Irish oil explorer, by the US giant Atlantic Richfield.

The DTI's investigation began in September last year when the Stock Exchange's surveillance team passed on the findings of its own inquiry for further investigation.

Atlantic Richfield was advised by the public relations company, Financial Dynamics, on the bid. But sources close to the investigation said yesterday that the role of Financial Dynamics, which has been involved in two recent controversies, was not the focus of the DTI's investigation.

Financial Dynamics, which is chaired by Tony Knox, is part of a current DTI investigation into the alleged leaking of inside information ahead of financial results from one of its clients, Caradon, and the firm was also publicly rebuked by the Takeover Panel for giving an improper profits forecast to an analyst at the height of the recent Kvaerner bid for Amec.

Nick Miles, Financial Dynamics' chief executive, said yesterday that the firm had not been contacted by the DTI about the Atlantic Richfield (Arco)/Aran investigation.

The London Stock Exchange has rarely commented publicly about the fate of its insider dealing investigations.

Yesterday it said it had investigated dealings in the shares of Aran ahead of an announcement on 21 August, 1995, of an offer from Arco Irish Holdings Inc. "On the 21st September 1995 the exchange passed its information on to the DTI for its consideration," a spokesperson said yesterday.

Exchange officials are reported to have spoken last August to a small Irish stockbroking firm that is said to have bought 150,000 Aran shares on behalf of a client on 18 August, the last day's trading before the bid was launched the following Monday. The takeover bid was also trailed in one of the Sunday newspapers.

The late trade in Aran was at Ir45p. On the Monday Aran shares rose when the Ir60p-a-share bid was announced. They closed the week at Ir65p, creating a profit of Irpounds 30,000.

The DTI has warned witnesses to its inquiry that they face possible criminal prosecution if they talk about the investigation.

The Stock Exchange's senior management told a House of Commons select committee hearing on Monday this week that around 50 such cases are passed onto the DTI each year. The exchange's responsibility is to discover who traded when and where.