After the Spanish-German concern ACS-Hochtief released this notice of its increased shareholding in construction giant Leighton to the ASX on February 5, 2014, I sent the following email to Matthew Gibbs, general manager for ASX media and communications, early the next morning:

Hi Matthew,

Could you please pass this complaint onto the relevant people at ASX who in turn could on-pass to the relevant people at ASIC.

Leighton is due to release its full year result on February 20 and the controlling shareholder has just spent about $60 million buying another 1% of the company, as per this announcement to the ASX yesterday:

Seeing as Hochtief has board representation at Leighton, I would have thought trading blackouts should apply.

Is there some sort of carve out for a corporate shareholder as opposed to directors, because it doesn’t seem right that a party with inside information on the forthcoming result can purchase shares so soon before making a material earnings release to the market.


Stephen Mayne
Policy and Engagement Co-Ordinator
Australian Shareholders’ Association

The email was also sent to The Australian’s business commentator John Durie and Australian Financial Review journalist Jenny Wiggins.

Only Wiggins ran with the story the next day, which might explain why Durie yesterday launched this extraordinary attack on ASIC’s decision to prosecute ACS-Hochtief for insider trading.

News Corp might have appalling governance itself and regularly misses important governance issues such as Australia’s woeful political donations laws, but attacking the corporate regulator for a successful insider trading prosecution is something else.

As Patrick Durkin wrote in The Australian Financial Review today:

“The remarkable facts which are laid bare in the ASIC press release and are a must-read for all directors beg the question whether our boards need compulsory re-training in Board Governance 101.”

The same goes for John Durie, who I’m punting is the business journalist then-Oz editor-in-chief Chris Mitchell reportedly told AFR gossip columnist Joe Aston was on $470,000 a year back in 2014.

ASIC’s 26-page agreed statement of facts with Hochtief provides a rare insight into the workings of boards, shares dealings and information flows.

Hochtief is claiming the insider trading was “inadvertent”.

Having attended an audit committee meeting on January 14, 2014, which informed them that Leighton would be announcing a better-than-expected net profit of $583 million on February 20, the Hochtief team should have immediately cancelled the buy orders on Leighton shares.

Instead, they ploughed on, picking up stock at around $16, which has proved a very tidy investment with CIMIC (Leighton has been renamed) now trading at close to $24.

Confirmation that the 2014 profit was surprisingly good came with the market reaction on February 20, 2014, which led me to write this email to John Durie and his colleague Damon Kitney at The Australian.

Hi Damon and John, The OZ is yet to report anything on these Hochtief share purchases in Leighton shortly before a surprisingly good result sent the stock up almost 5% yesterday:

It completely dwarfs the David Jones situation for materiality and comes amidst everything else that has happened at Leighton in recent years.

The AFR did a standalone story on this on February 7 and a small follow up after Hochtief wrote this letter to Leighton explaining the trades which was released to the ASX.

To kick the story along and give you a way into it, happy to give you these comments on your own:

“Once the Hochtief directors on the Leighton board became aware that the December half result was tracking ahead of market expectations, they should have immediately taken steps to ensure Hochtief ceased buying any further shares until after the earnings release.”

“As it stands, Hochtief bought 3.42 million shares between December 30 and February 6 at an average price of $16.15. After the stock soared to $17.21 on the back of the full year result, this $55.24 million investment was showing a profit of $3.62 million. These figures dwarf the situation at David Jones which involved immaterial director purchases worth only about $60,000.”

“When you consider that Hochtief is represented on the Leighton board by its CEO and CFO, the argument that they were unaware of the timing of the share purchase stretches credulity. They were certainly in a position to ensure such trades didn’t happen.”

“The ASA calls for Hochtief to provide more information to ASIC on the instructions given to the “third party” to purchase the shares and ASA is also seeking a clear undertaking from Hochtief that it will not purchase any more Leighton shares outside the normal trading windows which the directors themselves must comply with.”

For about a decade, John Durie was the best corporate governance writer in Australia, but on this occasion, he again wasn’t interested.

However, his colleague Damon Kitney contacted ASIC and produced this strong story at the time, which put further pressure on ASIC to act.

It may have taken two years, but the corporate plod should be congratulated for notching up its first successful prosecution of a foreign company for insider trading. And it might not have happened at all if journalists like Jenny Wiggins and Damon Kitney hadn’t shone a light on the situation.