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Jan 11, 2013

Uncharted legal waters as coal hoaxer mulls jail, fines

Anti-coal protester Jonathan Moylan's fake press release fooled the market this week -- but will the stunt land him in jail? Sally Whyte examines the precedents and finds Moylan is in uncertain waters.

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Environmentalist Jonathan Moylan wanted to put pressure on ANZ and coal backers through his fake press release on Monday. But the focus may end up being on the corporate watchdog.

Speaking to Crikey, Moylan says it took a “couple of days” after the press release temporarily wiped $314 million off Whitehaven Coal shares for the Australian Securities and Investment Commission to find him at his camp in the Leard State Forest near Maules Creek in New South Wales. His computer and mobile phone were confiscated but charges have yet to be laid.

Whitehaven Coal, ANZ and investors could all take civil action, according to Associate Professor John Duns of Monash University’s Law Faculty, but with the 24-year-old activist unlikely to have the resources to pay up, eyes will turn once again to the regulator.

Moylan says he’s now “well aware” of the possibility of 10 years in jail and fines of up to $495,000, but he didn’t know about the possible consequences when he sent the fake release saying ANZ had pulled $1.2 billion of investment from Whitehaven Coal’s mine at Maules Creek. Asked if he would still have acted, Moylan avoided the question.

“I’m not someone with hundreds of thousands of dollars,” Moylan said about the prospect of fines and damages. He has been in talks with lawyers but doesn’t have representation yet.

“We’ll see what happens if it comes. I’ve said all along that I’ve been prepared to accept the consequences. I just have to deal with it as it comes up.”

Whitehaven Coal’s biggest shareholder Nathan Tinkler has not commented on whether he plans to take action against the activist.

According to Duns, Moylan could declare bankruptcy to avoid paying damages: “You’d think there’s not going to be much satisfaction in suing him personally.” However, while declaring bankruptcy protects a person from having to pay out if sued, it does not protect them from fines that come as part of a sentence.

Duns believes the combination of media attention, the unlikelihood of results in a civil action and the ASX’s resistance to unravelling Monday’s transactions mean ASIC will be under pressure to make an example out of Moylan and his fake press release.

ASIC is investigating Moylan under Section 1041E of the Corporations Act, which deals with making false or misleading statements. The act states a person must not make statements that “have the effect of increasing, reducing, maintaining or stabilising the price for trading in financial products on a financial market operated in this jurisdiction”.

According to Associate Professor Keturah Whitford at the Australian National University’s College of Business and Economics, Moylan could be charged under Section 1041E, but could also face civil action from stakeholders under Section 1041H of the Act.

There isn’t an Australian precedent to foreshadow the likelihood of conviction or possible sentences. Whitford says it’s “hard to predict sentencing, but the extent of damage including losses to investors would be taken into account and the fact that he wasn’t personally profiting”.

Moylan says he wrote the press release by himself, but declined to say if anyone else knew what he was doing.

This is the third time in seven months the Australian stock market has seen share prices and trading affected by hoaxes. In July last year, David Jones stocks fell 5.4% on the back of a fake takeover bid and in October, trading in MacMahon Holdings was halted due to a bogus takeover bid.

“Market integrity is a fundamental case,” said Duns. “There’s been a couple of them and that increases the pressure on ASIC to take action.”

Charges haven’t been laid over the David Jones or MacMahon cases, so there is no Australian precedent. Comparisons can be made to American activist Tim DeChristopher — he was sentenced to two years jail in 2011 after making false bids on an oil and gas lease sale in Utah.

Moylan says it’s unlikely he will take similar action again, but that others will try to “embarrass and shame” corporations with more hoaxes.

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99 thoughts on “Uncharted legal waters as coal hoaxer mulls jail, fines

  1. Jimmy

    Dr Smithy – “Uh, the massive media coverage ? Seems to me it’s been quite successful at getting notice.” But what has the coverage been about – the terrible impact the coal mine will have on the environment or that he will probably go to jail? To me his message hasn’t got out at all.

    “This is a bog standard insider trading scenario, the kind that ASIC investigates on probably a daily basis. The excuse and method is just semantics.” Yes they may investigate it everyday but given the number of people on here defending Moylan by accusing the whole system of being corrupt in the first place they don’t seem to be very successful.

    And if the intent is what is important how do ASIC and the courts prove intent? I played cricket for some time but about 8 years ago he moved interstate and then I subsequently moved about an hour away from our original town. It would be quite easy for me to find out his current address and get in contact with him leaving no electronic trail. How would ASIC link the 2 of us if he made money on me blowing up the stock?
    If I also ensured that I joined numerous left wing and environmental causes and associations and if he ensured he was an active trader for the next 12 months his trades would not look suspicious and I would appear to be the environmental warrior making a political point.

    And I am sure there are people much brighter than me who can come up with much more sophisticated scams than that to expolit the “I was making a political statement” defence that you seem to think should be available.

  2. drsmithy

    But what has the coverage been about – the terrible impact the coal mine will have on the environment or that he will probably go to jail? To me his message hasn’t got out at all.

    The point is to get noticed, which has been done quite successfully. Far more successfully than, say, parking yourself with a sign in front of ANZ headquarters or a mine site would have.

    Yes they may investigate it everyday but given the number of people on here defending Moylan by accusing the whole system of being corrupt in the first place they don’t seem to be very successful.

    That’s a non-sequitur.

    And if the intent is what is important how do ASIC and the courts prove intent?

    With evidence ?

    Crazy, I know, but some of us still believe in the presumption of innocence. That means if yoru accuser can’t provide evidence to support their accusation, nothing happens to you.

    I played cricket for some time but about 8 years ago he moved interstate and then I subsequently moved about an hour away from our original town. It would be quite easy for me to find out his current address and get in contact with him leaving no electronic trail. How would ASIC link the 2 of us if he made money on me blowing up the stock?
    If I also ensured that I joined numerous left wing and environmental causes and associations and if he ensured he was an active trader for the next 12 months his trades would not look suspicious and I would appear to be the environmental warrior making a political point.

    Once again, you are trying to lay a contemporary anecdote over a bog standard insider trading scam. The suggestion that no-one has ever thought of this sort of thing before, just with a slightly different flavour, and hence that there’s somehow some new, never-before-considered angle that’s now suddenly open for abuse, is comically absurd.

    And I am sure there are people much brighter than me who can come up with much more sophisticated scams than that to expolit the “I was making a political statement” defence that you seem to think should be available.

    Firstly, that still wouldn’t be any sort of excuse for insider training, even if Moylan is never charged with a single offense (or is not found guilty of anything).

    Secondly, I didn’t say anything about it being an excuse. I said that Moylan’s actions present a vastly different scenario – legally, ethically and morally – than a premeditated and calculated attempt to manipulate the market for personal gain. I, for one, am interested to hear why you think these two clearly completely different offenses (if, indeed, Moylan’s actions are even found to be an offense) should be punished – or even treated – identically.

  3. Jimmy

    Hugh – “Did Mr Moylan ever say he was “innocent”?” NO he hasn’t, he has admitted his guilt and his willingness to accept the consequences which I have previously given him credit, it is others on this site who have argued he shouldn’t be held accountable because it was the media’s fault.

    Dr Smithy – “. I, for one, am interested to hear why you think these two clearly completely different offenses (if, indeed, Moylan’s actions are even found to be an offense) should be punished – or even treated – identically.” Because the aren’t different – If I ki lled someone for political reasons is that a different offence to kil ling someone for profit?

    “Firstly, that still wouldn’t be any sort of excuse for insider training” Yes it would if a precedent is set that political motivations are exempt?

    “With evidence ?” But what evidence would there be? My associate’s trading pattern wouldn’t have changed to alert suspicion, there is no trace evidence of us having spoken for at least 8 years, I don’t even have a photo of the cricket side we played in.

    It maybe “bog standard” but by setting a precedent by letting Mo ylan off because his actions were “political” you simply open another avenue for the defence of insider trading, make it look like you were acting for political purposes and you get off, or at least a reduced sentence.

    Another example I could use is that a mate of mine has a brother in law who works in a exploratory mining company, he will on occasion discuss his work with my mate, my mate discussed it with me, I discussed it with my brother and my brother discussed it with a work colleague. Let’s just say the work colleague was the only one who had spare cash and he invested based on the info – insider trading you say but ASIC would have a hard time finding the connection given all the conversations were in person, ie no electronic record, and no one has met more than 2 other people.

    Now let’s just say you were happy to split the proceeds of a Moylan style “prank” 5 ways knowing that you could claim “political” reasons and no one gets punished?

    ” I know, but some of us still believe in the presumption of innocence” He has admitted his guilt, he has stated he is willing to accept the consequences – I don’t think the presumption of innonce applies after that – it is only a matter of what punishment he gets.

    “The point is to get noticed, which has been done quite successfull y” Geting noticed is only half the point, getting your message out is the other, I doubt anyone in the general public could name the mine in question or environmental damage it is supposedl y going to cause.

  4. drsmithy

    Because the aren’t different – If I ki lled someone for political reasons is that a different offence to kil ling someone for profit?
    If you accidentally ran into a drunk who stumbled in front of your car, I’d most certainly expect you to be treated differently than if you conspired with others over the course of years to murder someone for profit.

    Yes it would if a precedent is set that political motivations are exempt?
    No it would not. “Doing something that happened to affect the market” (what Moylan has done) and “deliberately seeking to manipulate the market for personal advantage” (insider trading) are completely different things. Setting a precedent for one would not in any way set a precedent for the other.

    But what evidence would there be?
    At the very least, there would be a change in trading patterns and irregular money transfers between you.

    It maybe “bog standard” but by setting a precedent by letting Mo ylan off because his actions were “political” you simply open another avenue for the defence of insider trading, make it look like you were acting for political purposes and you get off, or at least a reduced sentence.
    No you don’t. The offense is not lessened because you happen to have done it in a creative way, or because someone accused of a completely different offense happened to have done something vaguely similar.

    Let’s just say the work colleague was the only one who had spare cash and he invested based on the info – insider trading you say but ASIC would have a hard time finding the connection given all the conversations were in person, ie no electronic record, and no one has met more than 2 other people.

    And, amazingly, not a single hippie needed to be involved in the execution of this conspiracy !

    Now let’s just say you were happy to split the proceeds of a Moylan style “prank” 5 ways knowing that you could claim “political” reasons and no one gets punished?

    Because the legal system does not work that way. You don’t get let off murdering your wife for her money because some other guy killed his wife in self defence. THEY ARE COMPLETELY DIFFERENT SITUATIONS EVEN THOUGH BOTH OF THEM RESULT IN A DEAD BODY.

    He has admitted his guilt, he has stated he is willing to accept the consequences – I don’t think the presumption of innonce applies after that – it is only a matter of what punishment he gets.

    To what actual crime has he admitted guilt ? Does that not require him to first actually be _charged_ with something ?

    Geting noticed is only half the point, getting your message out is the other, I doubt anyone in the general public could name the mine in question or environmental damage it is supposedl y going to cause.

    I’m not going to profess to be an expert on public protest, but I’d be willing to bet most in the field would consider “getting noticed” to be 90% of the battle.

  5. drsmithy

    Dr Smithy – Your argument hinges completely around the premise that Moylan didn’t intend for there to be any impact on the companies share price when this is clearly untrue.

    No, it does not.

    My main point is that the kind of harsh punishment targeted at offenses like insider trading is a completely inappropriate reaction for his actions. This is especially true given that the majority of the “damage” was caused by actions of others outside of his control or influence.

    If it wasn’t his intention the prank would have had no impact and no exposure at all.

    Not necessarily true.

    To try and argue that issuing a press relase with market sensitive information wasn’t intended to be published and wasn’t intended to impact the share price is absurd.

    To try and argue a hoax press release containing the kind of information that would never normally be issued in a public press release, whose impact was primarily driven by irresponsible media outlets and broken automated trading systems, should be considered equal to premeditated, conspiratorial, market manipulation, is absurd.

    Worthy of note, again, is that some media organisations were suspicious and did try to verify the information, at which point they discovered the true nature of the information.

    Once you acknowledge the reality that his actions were deliberate and calculated your faulty logic of comparing him to someone who accidentally ran over a drunk doesn’t stand up, and the rest of you argument falls like a house of cards.

    There’s nothing wrong with my logic, or argument, unless you have some evidence of intent to manipulate the market for Moylan’s personal profit.

    Now, once you are prepared to accept the clear and fundamental difference between doing something to get public attention that incidentally happens to affect the market, and doing something explicitly to manipulate the market for personal profit, we might be able to divine why you think Moylan should be severely punished for an outcome almost entirely driven by the irresponsibility and greed of others.

  6. drsmithy

    Are you really this stupid or do you just see the world entirely through one prism and everything on the left must be good.

    I’m a little unclear on how being “Left” or “Right” has any bearing here. This is (I thought) a discussion about how a law intended to discourage and punish insider trading and other forms of market manipulation for personal gain should be applied to a situation where explicit market manipulation (and certainly personal profit) was quite possibly neither the objective nor intent of the perpetrator.

    The clear evidence of Moylans intent to manipulate the market is that he has admitted he released a fraudulent document to the media with highly market sensitive information – if his intent wasn’t to impact the market it would of been the worst hoax in history.

    So there isn’t actually any evidence of an intent on his behalf to manipulate the market in anything he’s said so far ? That is to say you’ve been lying about what he actually admitted to ?

    Because after having a bit of a look through the various news reports, I can’t actually find anything quoted from him about setting out to manipulate the market. Indeed, quite the opposite, the only relevant statement he’s made says the exact opposite .

    And again if his stunt didn’t affect the markets what public attention would he have got? If the papers hadn’t printed the story who would of known about the hoax?

    Unknowable and irrelevant. “Supposition”, as they’d say on one of those TV shows. You are assuming his intent based on your own beliefs which is, fortunately, not how the law works.

    I cna’t see how you can possibly argue that the actions of deliberately forging a document and releasing it into the public domain had on “incidental” correlation to the resulting market response, you need to remove your bias if you want to be taken seriously.

    I didn’t say it had an incidental correlation. I said the effect on the market was incidental to Moylan’s intent. Ie: his objective was not to manipulate the market, and in particular, not to manipulate the market for personal gain, which is the focus of the law (and harsh punishments) around market manipulation.

    You have yet to offer any reasoning as to why he should be punished as harshly as someone who deliberately and conspiratorily sets out to manipulate the market for personal profit – which is, after all, the primary reason laws around market manipulation exist – given the vastly different intents and outcomes behind the two scenarios.

  7. drsmithy

    I give up Moylan had to intent to manipulate the market […]

    You have no evidence to support this assertion.

    […] he simply wanted to issue a false press release that no one would take seriously and take no action.

    You do understand it’s possible his false press release could garner attention _without_ being considered market manipulation, right ?

    Or are you trying to argue the only way anyone can raise attention about corporate behaviour is market manipulation ? Because if so that’s a pretty scary concept.

    If you ever want to join the rest of us in reality please feel free to post again but otherwise let’s end it here because your unwillingness to acknowledge even the most obvious point, that issuing a fraudulent press release with market sensitive information is clearly market manipulation regardless of whether you you personally profit from it or not makes trying to have a rational discussion impossible.

    This is what’s happened in “reality”:

    Everything I’ve posted is supported by the available evidence.

    * Moylan _has not_ stated he intended to manipulate the market.
    * Moylan _has_ stated the plunge in stock price was not his intent, and that he apoligised to those who had been harmed.
    * No charges have been filed.
    * No arrests have been made.

    Meanwhile, nothing you’ve written about his motives, intent, expected outcomes, confessed guilt, or anything else, are based on _anything_ except your own (or someone else’s repeated) opinions and suppositions. Let us know when you have accusations based on evidence, rather than speculation and a sadistic desire to see someone’s life ruined.

    This is completely wrong – his intent was not to manipulate the market for “financial” gain which is completely different to “personal” gain (the attention received was the “personal” gain he received) which is why “why he should be punished as harshly as someone who deliberately and conspiratorily sets out to manipulate the market for personal profit” because he did deliberately set out to manipulate the market for personal profit, the fact that profit wasn’t financial (although if the hoax was as successful as you would have us believe it should have riased donations) is irrelevant.

    So let me get this straight. You’re arguing that anyone, who performs any action which the market responds to, who could in any way – tangible or intangible, demonstrated or imagined – to be considered to have “benefitted”, they should be thrown in gaol for a decade and fined half a million dollars ?

    Tell us, in your glorious corporatocracy, how anyone could be expected to make even the vaguest criticism of any publicly-listed company with that sort of consequence hanging over their head ?

  8. Jimmy

    Dr Smithy – One final thing here is the relevant section of the act as suppl ied by fellow poster Scott on another thread, please not it doesn’t mention anything about “personal gain” and if you could explain how he didn’t breach the rules it would be great;
    ““CORPORATIONS ACT 2001 – SECT 1041E
    False or misleading statements
    (1) A person must not (whether in this jurisdiction or elsewhere) make a statement, or disseminate information, if:

    (a) the statement or information is false in a material particular or is materially misleading; and

    (b) the statement or information is likely:

    (i) to induce persons in this jurisdiction to apply for financial products; or

    (ii) to induce persons in this jurisdiction to dispose of or acquire financial products; or

    (iii) to have the effect of increasing, reducing, maintaining or stabilising the price for trading in financial products on a financial market operated in this jurisdiction; and

    (c) when the person makes the statement, or disseminates the information:

    (i) the person does not care whether the statement or information is true or false; or

    (ii) the person knows, or ought reasonably to have known, that the statement or information is false in a material particular or is materially misleading.

    Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)). For defences to a prosecution based on this subsection, see Division 4. “

    And obviously given the context of the sentence “Ok Dr Smithy I give up Moylan had to intent to manipulate the market he simply wanted to issue a false press release that no one would take seriously and take no action.” Shold of read “Ok Dr Smithy I give up Moylan had NO intent to manipulate” so yes you are right I have no evidence to support this assertion.

  9. drsmithy

    You are arguing that it isn’t the act of market manipulation that should be punished but the reason for it, […]

    No, I’m not.

    I’m arguing that the _intent_ behind an action is a key factor in how it should be considered by the law.

    […] that is where your analogy falls down – in your analogy the acts are different, one is accidental death the other is premeditated murder, in this case both acts are premeditated murder however one is for supposedly altruistic purposes while the other is for financial gain.

    No, this is where your desire to persecute leads you to twist and turn the facts and argument to meet your reuqired conclusion.

    In the analogy, the act is identical – Person A kills Person B. It is the act of killing that is analogous to market manipulation.

    In the analogy, it is the intent behind the killing that marks the difference in how they should be (and are) treated by the law – killing someone accidentally (especially when the victim bears a non-trivial level of blame for their own demise) carries a much lighter punishment than killing someone deliberately, and pre-meditated killing carries a harsher punishment still.

    This is why I state market manipulation by accident – what appears to have befallen Moylan – should be treated differently by the law than delberate market manipulation with malicious intent.

    As for the “spirit” again I come back to people seeking to exploit this “spirit”, setting up strategies to make themselves appear as though they are doing it for political reasons and having the gain 5 steps removed, you dismiss this as simply insider trading which it is, but if ASIC can’t make the link between the profit and the act then your “spirit” becomes a very good loophole.

    This is an absurd and irrelevant non-sequitur. No-one is suggesting the method of market manipulation be considered a mitigating factor. I dismiss it because it is ridiculous on its face. The treatment of someone caught insider trading will not change regardless of any outcome regarding Moylan. Should this ever reach court, it will be argued and resolved on semantics and minutiae – what a “person” is, what “manipulation” means, etc. Even if he is never charged, there is no new loophole to exploit, and no amount of disingenuous pontificating by talking heads will change that.

    And finally your argument relies on the “spirit” of the law and a very generous view of Moylan’s intent where as back in reality he clearly issued a false statement (deliberately and with premeditation) that blind freddy could of seen would of impacted the share price negatively, he even received a gain in free publicity which could be calculated by some advertising guru.

    Fortunately, Blind Freddy doesn’t run the justice system. My interpretation of his intent is based on the available evidence, as the courts’ will be. I am happy to change my views as more evidence comes to light. Let me know when you have some.

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