InvestSMART

INSIDER

Top penalties just in time for O'Brien

Top penalties just in time for O'Brien

Former Computershare employee Justin O'Brien's guilty plea yesterday on four insider-trading charges that could earn him up to 10 years in jail has come barely six months after he committed the offences.

Whether the speed is a result of the "Under New Management" shingle hanging outside the Australian Securities and Investments Commission, or just O'Brien realising that the odds were stacked against him, Insider does not know - but either way it sends the right signals about surveillance and vigilance.

O'Brien may end up with a non-custodial outcome given his plea and, Insider hears, also because the sums involved were fairly small in one case, perhaps as little as $5000 was invested in Crane Group shares ahead of Fletcher Building's mid-December takeover bid.

For O'Brien, escaping jail would be small compensation for the loss of career, and reputation, of someone who was director of business development at Computershare's Georgeson shareholder services arm until ASIC came knocking.

Small investors might well be familiar with Georgeson, which is most often engaged for the corporate equivalent of "getting out the vote" - canvassing small investors for their opinions and support in restructurings and takeovers.

ASIC revealed that O'Brien bought shares in four then-listed companies - North Queensland Metals, Westfield Group, Crane Group and RP Data - between June 30 last year and January 11. Insider understands that is also the chronological order of his activities.

The corporate copper reckons that at the time O'Brien bought the stock, "he possessed inside information he obtained in the course of his employment concerning major corporate transactions".

Computershare was so embarrassed by O'Brien's admissions in Sydney's Downing Centre Local Court yesterday that it issued a statement twice the length of ASIC's own brag sheet:

"We are deeply disappointed that one of our employees disregarded well-understood company policies regarding insider trading," Computershare's group regional director, Scott Cameron, said.

"This incident did not involve a breakdown in company process or procedure but rather a breach of duty by one employee, acting outside well known company policies and obligations under the terms of his employment. We treat misuse of confidential information very seriously and our employees understand that we have zero tolerance for any breaches."

Insider had a look back at activity in property information provider RP Data's shares on January 11 this year, the day before it unveiled an agreed swallowing of the local company by its 40 per cent shareholder, CoreLogic.

RP Data was pushed from $1.00 each to a close of around $1.08 that day after a few thousand changed hands late in the day. That kind of move would (or should) have been enough to set off the surveillance alarms at ASIC, particularly when the takeover scheme, at $1.65 a share plus a 5? special dividend, emerged the following day.

It is not widely appreciated that ASIC is armed with its own insider information that dovetails nicely with all the super, whizz-bang technology. Advisers in corporate deals, whether investment-bank, public-relations or shareholder-services groups, have to supply the watchdog with names, numbers and other information on people "inside" a deal.

Unfortunately for O'Brien, the insider-trading allegations in RP Data came after December 13, when penalties for such misbehaviour were raised so that the maximum jail sentence went from five to 10 years and the potential maximum fines from $220,000 to $495,000.

NOT RIGHTS TIME

It might be unrelated but, a day after First Growth Funds was forced into administration, Transol Corporation announced the underwriting agreement for its share-heavy, cash-light rights issue had been cancelled.

The common link is Angus Edgar's Mungala Investments, which was underwriting the Transol issue and owns 27 per centof First Growth. Edgar is also a director of Transol.

In times of nervous markets it is not rare for an underwriter to pull out, but the benchmark indices in Transol's prospectus are actually up, rather than down, by the 10 per cent required to trigger a deal-killer clause.

First Growth was put into administration by Tim Lebbon's Noble Investments Superannuation Fund. Noble, which is owed $1.2 million, sold down its First Growth holding below 5 per cent in mid-June.

Coincidentally, the same day that First Growth revealed last week that it was trying to keep Noble at bay, Transol told investors that its share issue had been postponed until August. Insider would love to be more informative, but no-one at Transol, First Growth or Noble was able to get back with a comment.

ENDLESS RECYCLE

ING Real Estate Community Living Group has clearly signed on to the low-carbon world, even adopting environmentally sound language.

Yesterday's ASX announcement about it selling its half-share of most of its US Seniors retirement communities headlined the move as part of its "asset-recycling strategy".

In fact, Insider would have thought that the listed ING fund's entire business was about asset- recycling, given that it is effectively the landlord for a variety of seniors' accommodation here and in the US, most of whom only leave when they are deceased.

After that, the properties are either re-let or sold, depending on the management model - recycling at its finest.


Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles