It is important to stay up to date with the latest news in the legal field, as there are always changes. Here is a recent interview from 2GB that will surely be of interest to any who are interested in the Australian law field.
Ross: Welcome back to Monday News Voice. News out today, one of the most controversial business figures of the past ten years, finally had his final come opens. The former chief executive of the timber and pulping company Gunns Limited based in Tasmania, certainly Tasmania’s biggest company in its time, John Gay admitted to Insider Training.
What he’s admitted to is effectively saying that he sold 3.4 million shares in Gunns, worth about 3 million bucks on the second of September, December rather going back into 2009. Yet, at the same time he had a management report that he understood, suggested that the company was about to slump traumatically into loss.
That will give you some background on this. You might have been aware that Gunns was going to put up a $2.4 billion pulp mill in Tasmania, highly controversial for both the state government plus also Gunns. There was a massive campaign against this pulp mill, but at its peak, this company employed 1,200 people and had profits annually of $105 million a year.
The business was founded in 1875, and collapsed with debts of more than $750 million and now John Gay has changed his play on the eve of the trial for Insider Trading and will be sentenced next week. Juliette Overland from the University of Sydney’s Business Law School is with me now. Many thanks for your time Juliette.
Juliette: Thank you Ross, it’s a pleasure to be with you.
Ross: This is amazing as this probably is the most prominent scalp, corporate scalp that is has claimed, but certainly the pull of John Gay is one of the most incredible business stories.
Juliette: Yes, it’s a very interesting story, isn’t it Ross? It sounds really interesting to see that such as seeing the person has now admitted to Insider Trading in these circumstances especially after the charges with this board at the end of 2011. He has consistently said, “Not guilty.” right up until the trial has just been about to start.
Ross: The man is 70 years old now and effectively they’re suggesting the defense will argue later. He had a prostate cancer diagnosed, it’s a range of different bits and pieces, but the thing that obvious now is that he’s pleaded guilty to Insider Trading. Again, it’s a lesson to every other corporate executive, but every other individual who might at some stage be holding some more information but they simply can’t trade with it.
Juliette: That’s exactly right. It will be very interesting to see how this hearing goes next week, because it’s certainly reported that, he is planning to argue the leniency because if the bill held and certainly being said that he’s going to be emphasizing that he’d traded to get his state in order, because of his diagnoses.
It’s not to take advantage of the insider information, but we can’t get away from the fact that Insider Trading is prohibited regardless of the reason why you trade. He has admitted today that he ought to have known that their information was price sensitive and he’s pleading guilty.
Ross: I was going to say that there are a couple of things he had to come out of a stick. Number one is the bit of background that I gave today, I said that his offending occurred when the maximum penalty for Insider Trading was imprisonment for five years and or a fine of $220,000 so that’s what he faces.
Since then the maximum penalty has been increased to imprisonment for ten years and or a fine of $765,000 or three times the total benefit derived from the offense whichever is greater. In other words if he was trialed under the current loss, given the fact that was $3 million bucks, he could technically be fined $9 million, plus given ten years in jail. It is now, a very significant crime in Australia right?
Juliette: That’s exactly right. In one way he’s lucky, if we can use that word, that the sentences were increased after that relevant period. The longest sentenced we’ve ever seen is John Hofmann who in 2011, I’m sure you remember, you watched it, the 4.5 years, although, that was reduced on appeal to three years. That’s was on the very previous ratio with a maximum of five years as well.
It will be very interesting to see the approach that the court takes particularly with someone who’s so prominent like John Gay, such seeing the person and so closely involved with the company in who’s said he was actually trading and the emphasis that might be placed to him next week at the sentence in court.
Ross: It’s very funny. I could remember Juliette going all the way back, look this shows our old day, at that time the person who’s up and I can’t remember the exact details of it, but I can just remember being there and hearing it all. Just simply everybody just shrug their shoulders and said this is impossible to prove. We just simply can’t prove this.
For so many years in Australia, it was seemed to me that the body of understanding is to prove an Insider Trading case was just not only impossible and most people simply walked away. However, and this is the important thing also, toady ACCC made the release said this, “Since 2009, ACCC has prosecuted 28 Insider Trading actions, of these nine individuals were successfully prosecuted, sixteen met their fine loss, and three guilty place and are awaiting sentence, and four individuals are awaiting trial and are consistent with admitting charges, and five were unsuccessful. You got to say since then, even though they may not be striking often, they certainly had been striking fairly successfully.
Juliette: Look they have and I am certain they have been making a concerted effort in this area in particular, I think they have to be given some credit for that, because ACCC has certainly been suffering significant criticism in previous years. It has to be admitted as well, but most of those are guilty pleas. We still don’t still see a great number of people who plead not guilty, eventually be sent guilty, although that is increasing all the time too. It is a difficult offense to prove.
I think ACCC does deserve some congratulations for the hard work that they have been putting in this area. It will be interesting to see how it continues to progress out with prosecution in the next few years as well in this area and if continue to maintain this momentum that they’ve got.
Ross: It’s going to be fascinating to watch it. The Supreme Court will hear those sentences in submissions for John Gay, the former chairman of that company Gunns from August. Remember the company, they’ve gone bankrupt, was founded in 1975, otherwise I would say, it’s a very, very old company. Juliette Overland is a senior electorate with the Universities of Sydney’s Business Law School. Juliette we appreciate your time here on Monday news.
Juliette: You’re very welcome, it’s my pleasure. Thank you, Ross.
Yes with Insider reading often a topic of conversation, it will be interesting to see how this turns out. We will keep you posted on this blog about any updates.
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