An open and shut case of insider trading?

Tuesday, 5 July, 2005

Stephen Mayne writes:

Rene Rivkin must be turning in his grave. Australia’s best known and most prolific insider trader was arrested and eventually convicted in the criminal courts for buying 50,000 shares in Qantas and pocketing a tiny profit. While Rivkin had form with ASIC (having previously given undertakings about his share dealings), the facts surrounding his jailing were, in my opinion, nowhere near as strong as those involving former Telstra director Steve Vizard.

Vizard’s exploits during the dotcom boom in 2000, in my view, look like the most open and shut case of insider trading since former Macquarie Bank executive director Simon Hannes got jailed over $2 million worth of TNT shares.

Steve Vizard is an extremely lucky man. ASIC, a body responsible to Treasurer Peter Costello, has treated him with kid gloves in the face of strong evidence.

The Howard Government appointed Vizard to the Telstra board in September 1996, so it didn’t look good to have long-time Liberal Party bagman Ron Walker publicly defending him yesterday. Rivkin had strong Labor connections, while Vizard is a Liberal Party man — and the treatment appears to be quite different.

After all, Rivkin was not a director of Qantas or Impulse Airlines when he got the tip on the sale of the upstart airline (which wasn’t all that price-sensitive anyway). Contrast that with Vizard, whose position on the Telstra board gave him access to all the comings and goings during the dotcom boom.

He splurged $500,000 on Sausage Software on 7 March 2000, and by 20 March the merger with Solution 6 was announced and Sausage shares leapt $1.60 that day to a record high of $7.40. The Keycorp deal was just as bad, as Vizard plunged $250,000 into the stock on 14 July 2000 and then Telstra’s purchase of a controlling stake on 21 July saw the stock rocket $2.39 to $14.95.

This line about him losing $335,000 on the investments is self-serving because the insider trading saw him enjoy paper profits of about $200,000 at the time. Like so many others, Vizard obviously wishes he’d sold before the dotcom crash really set in, but not realising the profits have probably helped him and his lawyer Robert Richter persuade ASIC to take a softer line.

The media response has been interesting. News Limited’s Terry McCrann takes the strongest line, arguing today that ASIC has “effectively given the green light to company directors to engage in insider trading.” Meanwhile Fairfax commentator Stephen Bartholomeusz argues the decision to let Vizard “cop a plea” is appropriate because ASIC needed to get a result and might not have been successful in obtaining a criminal conviction.

CRIKEY: To jail Vizard ASIC needed to go after him for insider trading under the Crimes Act (here). Instead he fessed up to the civil offence of breaching his duties as a company director — under the Corporations Act (here). You don’t need as much proof to establish a civil offence, but it’s ironic that in admitting to breaching the Corporations Act Vizard has now provided evidence the could’ve been used to pursue a criminal conviction.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey