Examination of Witnesses (Questions 318
- 339)
WEDNESDAY 15 JULY 1998
MR T G BARKER,
MR PETER
BUTTON AND
MR SIMON
NEATHERCOAT
Chairman
318. Good afternoon, Mr Barker, Mr Button and
Mr Neathercoat—ah, spelt differently on my crib sheet to
yours, but which is the right one?
(Mr Neathercoat) This one [indicated].
319. Well, they are both pronounced the same
way anyway, so it does not make any difference. Thank you very
much indeed. Mr Barker, shall we direct our questions to you in
the first instance?
(Mr Barker) Yes.
320. And if you wish you can bring your colleagues
in; we will invite you to do so.
(Mr Barker) Yes, certainly.
321. Before I ask you the first question, may
I just draw your attention to the written submission you sent
to our Clerk, Mrs Mulley, in which you say at the top of the second
page: "We are not convinced there is any particular conflict
in the biotech sector between medical regulatory requirements
that interim drug testing information be kept confidential and
the disclosure obligations imposed by listed companies by the
rules of the Stock Exchange." I understand that. Then you
go on to say: "In our view the issue facing biotech companies
is slightly different and can be allied with junior oil/gas exploration
companies ...". Is it really your view that there is no ethical,
medical, humane or personal input into a medical company and that
there is no difference between carrying out clinical trials with
people to carrying out test drills in Bakku for oil?
(Mr Barker) No, certainly not, Mr Chairman. We entirely
accept that the businesses are very, very different and I certainly
would not wish anybody to suggest what has been just suggested.
I think the point we were making was rather a different one and
that was simply that the outlook for many junior exploration companies
is extremely uncertain in the same way that the outlook for the
success of the particular projects of the emerging pharma-companies
is also very uncertain. That was the only point of similarity
which we were making.
322. Possibly an unfortunate analogy, I would
have thought, but I will leave you to reflect on that after this
particular session. Mr Barker, would you consider it normal practice
to attend a meeting between a shareholder and a member of staff
of a company you work for, with the company being involved in
setting up that meeting? In other words, there was a meeting organised
by Perpetual with Dr Millar which I believe members of your company
attended. Is that a usual thing to do?
(Mr Barker) Yes, it is not unusual for us to attend
meetings with our institutional clients who wish to talk to us
about the affairs of a corporate client. It is unusual certainly
for somebody to turn up unexpectedly and we made it clear at the
beginning of the meeting that what was said to us at that meeting
would have to be disclosed to our corporate client.
323. I am sure that your company is one of very
high standards and ethics. Were you at all uneasy about the fact
that Dr Millar was present rather than one of the main Board directors
or a non-executive director? I do not imagine it is the way that
you would like your staff to operate. If a non-director went to
talk about serious business of Kleinworts, I do not think you
would particularly like it. Were you a little uneasy when it happened
the other way round?
(Mr Barker) No, as you say, it is very unusual which
was why we were anxious that the point should be made to Dr Millar
at the beginning of the meeting that anything which he said at
that meeting would have to be passed on to British Biotech. I
was not at the meeting myself, but both my colleagues here today
were and I believe that Dr Millar was asked to just reflect on
that before the meeting continued.
(Mr Neathercoat) Yes, he was.
324. I am delighted to hear that. I think that
makes it a far more regular meeting. My final point then, before
we go to Dr Turner: were Kleinwort Benson—if I may miss
out Dresdner—what do you want us to call you? DKB, or your
bank, it is a long name—were Kleinwort Benson aware of the
allegations being made by Dr Millar prior to that meeting?
(Mr Barker) No, we had no knowledge of them whatsoever.
Chairman: Thank you very much indeed. Dr Turner?
Dr Turner
325. At that meeting, what role did Kleinwort
Benson play between yourselves, Perpetual and Dr Millar?
(Mr Barker) I am afraid I did not catch that, could
I ask you to repeat the question?
326. At the meeting between yourselves and Perpetual
and Dr Millar what part did Kleinwort Benson play in that meeting?
(Mr Barker) The part we played was as banking and
broking advisers to British Biotech. We attended the meeting and
our role was almost 100 percent a listening role to hear what
Perpetual and Dr Millar had to say, to take careful note of what
was said and to report it to British Biotech.
327. Which you did?
(Mr Barker) Which we did.
328. Did you know before the meeting what its
primary purpose was?
(Mr Barker) No, as I understand it, we had no inkling
before the meeting what the purpose of the meeting was to be.
Dr Jones
329. And it would be normal for you to telephone
the company and tell them the meeting had taken place?
(Mr Barker) Yes, certainly, because we would be very
concerned attending a meeting about a corporate client without
them being aware that we were attending such a meeting.
Dr Turner
330. Meetings of this nature, are they fairly
unusual in your experience?
(Mr Barker) They happen not that often, but yes, over
the years we do have meetings like that.
331. And it is usually because somebody is worried?
(Mr Barker) Yes, it would usually be because somebody
wanted to pass some sort of message to the company and they regard
us as being, in a sense, an interface between our institutional
clients and our corporate client.
332. Right, now having attended that meeting
and learnt what you did, what was your assessment of the case
presented to you by Perpetual and Dr Millar?
(Mr Barker) Well I think it was too early to form
an assessment. We had a meeting with the chairman of the company
and one of the non-executive directors within 24 hours. We told
them what we had heard at the meeting, we produced in due course
for them a note of the meeting. We said that we thought that step
one was to investigate these allegations very extensively and
we also said that we thought it would be appropriate to ask a
firm of lawyers to conduct an investigation of the allegations
for the benefit of the Board. We also said, I think at that meeting
but it might possibly have been at a subsequent meeting, that
clearly we would have to be prepared to inform shareholders fully
of the results of any investigations which would be appropriate
to bring to the attention of shareholders.
333. Did you take any actions yourselves to
investigate the validity of Dr Millar's claims?
(Mr Barker) No, we on the one hand encouraged the
appointment of a firm of lawyers. On the other hand, we did assist
the company in the preparation of the circular which went to shareholders,
particularly in terms of what matters it covered and how the various
issues were dealt with in the circular. What we did not do, and
indeed it is not our responsibility to do, nor would we be qualified
to do because we are not ourselves scientific advisers or scientifically
qualified, was to assess directly the points raised by Dr Millar.[1]
Our concern was to advise the company to make sure that these
allegations were very thoroughly examined both by the lawyers
where appropriate and by the Board.
334. Do you think there is actually a general
issue here—you are obviously merchant bankers so you cannot
be expected to make scientific judgments, yet you are involved
in commercial matters that depend on scientific outcomes—so
do you feel that there is, if you like, a scientific information
gap within your own structure here?
(Mr Barker) I do not think so. For instance, as Mr
Yerbury mentioned, we do have, as other organisations, people
within the organisation who are scientifically qualified and when,
for instance, we are raising money for a company in a sector like
this—and we have led four or five issues for this company
alone and also led equity issues for another six biotech companies
on the London Stock Exchange—we would almost invariably
employ a firm of scientific consultants who would satisfy us on
the particular questions which we required them to investigate.
So where we feel we do not have the scientific knowledge to answer
a particular question, we will make sure that we get the necessary
advice.
335. But you did not think of invoking your
scientific consultants in this case?
(Mr Barker) We did not, but I think the essential
difference is that when we raise money for a company it is a prospectus
which we put our name to and we are seen by the market as sponsoring
the issue. This was not the case with the circular which the company
produced; it was the company's circular, not our circular.
Mr Beard
336. Did you feel when you took this client
on, British Biotech, you were fully aware of the risks that were
inherent in the company?
(Mr Barker) Yes, very much so. We took them on—I
think the first issue that we did for them which was a private
placement, it was not then listed, was in 1989 and we did another
issue for them in 1991. We brought them to the public market in
1992 and it was in fact the first, I think I am right in saying,
emerging pharma-company to be brought to the London market and
I think we and investors generally have always been very cautious
of the high level of risk there is in investing in such companies.
337. When did you become aware that the risk
was probably surpassing what you originally expected to a point
where you had this rather extraordinary meeting?
(Mr Barker) Well, I did not—perceptions and
anticipations change from week to week and obviously all companies—I
say obviously, but most companies—when they go to the market
with an issue set off with high hopes, not all those hopes are
fulfilled. This company had already had disappointments with the
Batimastat announcement I suppose, what, 3 years ago now and equally
by the beginning of this year the announcement made in relation
to Zacutex was also obviously a disappointment. So I think it
is difficult to pin down a particular moment in answer to your
question.
Dr Jones
338. Very quickly. Had Dr Millar declined to
continue with participation in the meeting, would you have still
informed British Biotech of your presence?
(Mr Barker) That is a question I find very difficult
to answer. I think if he had said: "Well, now I understand
the rules of the game I do not want to continue with the meeting"
we actually would have said: "Well in that event we will
ignore what has happened and not tell our client". But as
I said, it is difficult because we always take the view that we
have to be completely open with our clients about all matters
which we hear.
339. Should you not have refused to continue
with the meeting?
(Mr Barker) No, I do not think so. I think so long
as he was clear what the rules were there was no reason for us
not to have the meeting.
1 The scientific allegations not the commercial allegations Back
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