A last minute guilty plea to insider trading by former Gunns boss John Gay has been hailed as a major boost to enforcement of corporations law and a warning to the nation’s company directors. Sources: The Australian, ABC News, AAP, News.com, ABC
The former chairman changed his plea to guilty minutes before a jury was to be selected.
Gay is one of the most senior Australian executives charged with insider trading and the amount involved in the offending transaction of $3.1 million, is believed to be the highest.
Corporate governance experts said success in the case was a major fillip for the Australian Securities & Investment Commission’s crackdown on insider trading.
“There is no doubt this is an important development,” Ian Ramsay, director of the Melbourne-based Centre for Corporate Law and Securities Regulation, said.
“ASIC experiences difficulties in bringing successful insider trading cases but in recent years its success rate has improved and this guilty plea has added to that.
“People can lose confidence in the integrity of the market through insider trading, so it’s important for ASIC to continue its focus.”
Gay pleaded guilty to selling 3.4 million shares, worth $3.1m, on December 2 and 4, 2009, while possessing an unreleased report outlining a 139% profit dive and a 103% fall in year-to-date earnings.
The court was previously told Gay sold the 3.4 million shares after a conversation with his doctor about reducing his debt levels because he had a terminal illness.
In February 2010, Gunns reported a 98% plunge in December-half earnings to $420,000; its share price fell from 88c to 68.5c.
Prosecutors argued Gay was in possession of inside information he should have known was not generally available and that, had it been so, a reasonable person would have expected it to have materially affected the value of Gunns’ shares.
Gay faces imprisonment for up to five years and a fine of up to $200,000. These are the maximum penalties applicable when Gay was charged in November 2011 but fall substantially below those now applicable.
Gay has been bailed by Justice David Porter to reappear on Wednesday, August 14, for sentence.
Legal firm Maurice Blackburn is trying to revive a class action by shareholders who claim Gunns breached its disclosure obligations in 2010.
But shareholder activist Stephen Mayne is sceptical about whether it will go ahead.
“In the case of Gunns, there’s no one left to sue because they’ve gone broke,” he said.
There has been no movement on the class action since Gunns entered administration last year, owing $750 million.
