What the hell do the judges smoke down in the Apple Isle?

First there was the insider trading case against John Gay, a former CEO of failed Tassie logger Gunns. Gay got wind of poor figures from a management report and sold a stack of shares before the information was released to market, saving himself around $750,000 in potential losses. The case was so open-and-shut that even the corporate regulator pursued it.

Gay pleaded guilty and faced up to five years’ porridge and a $220,000 fine.

But Justice Porter wasn’t convinced, describing Gay’s character as “exemplary” and his crime “not in the serious category of insider trading”. Gay was fined $50,000, was banned as a company director and kept the proceeds of his crime.

It makes you wonder what being of exemplary character means in Tasmania. Although Gunns entered bankruptcy a few years after Gay resigned, it was his expansive ambition and hardline approach to environmentalists that eventually bought the company undone.

Gunns also used 1080 poison for decades, which laid waste to many of Tasmania’s protected species. He dragged the environmentalists fighting the destruction through the courts. In the end so toxic was the company’s reputation, no one would lend to it.

Then on Tuesday, up popped Justice Robert Pearce of the Tasmanian Supreme Court. Gay had appealed his disqualification from being a director, requesting the right to run two companies. Pearce, incredibly, granted the exception, claiming “there is no appreciable risk he will reoffend” and that “his management of the companies poses no risk to the public and to the interests of the shareholders”.

Say whaaat? Gay is a criminal with a track record of ripping off his shareholders for personal benefit and there’s “no risk” of him doing that again? And anyway, whatever happened to the idea of, you know, punishment?

The only way this decision appears to make sense is if Justice Pearce doesn’t actually believe insider trading is a crime in the first place, in which case he should say so. Or perhaps he might explain what, exactly, constitutes a “serious case” of insider trading.

The folks running the case at the Australian Securities and Investments Commission must be in a state of despair today, jamming their heads into filing cabinets and throwing legal briefs out the window. If they couldn’t get a half-decent result out of a case like this, what hope is there?

But the message to potential insider traders everywhere — and believe me, they are everywhere — is loud and clear: get yourself down to Hobart, where “corporate criminal” and “exemplary character” aren’t mutually exclusive phrases, and the crime of insider trading has, to all intents and purposes, been abolished.

*John Addis is a director of Private Media (publisher of Crikey) and of Intelligent Investor Share Advisor — get a 15-day free membership to unlock all of Share Advisor’s stock research and buy recommendations

Peter Fray

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