04-415 Former Harts executive director jailed for insider trading
Friday 17 December 2004
The Chairman of the Australian Securities and Investments Commission (ASIC), Mr Jeffrey Lucy today noted that Mr Maxwell John Sweetman, former Executive Director of Harts Australasia Limited (Harts Australasia), had been sentenced to 18 months in prison for insider trading. ASIC’s investigation of Harts Australasia followed a referral by the Australian Stock Exchange (ASX).
Mr Sweetman was sentenced today by Judge Shanahan in the Brisbane District Court after pleading guilty to two charges of insider trading in the shares of Harts Australasia. Mr Sweetman was sentenced to 18 months imprisonment on each charge to be served concurrently, to be released after serving 3 months on a recognisance in the sum of $5,000 and to be of good behaviour for two years.
Mr Sweetman was responsible for the finance and administration-related activities of Harts Australasia, a publicly listed financial services and accounting group, until his resignation as a director on 22 December 2000.
On 8 and 9 January 2001, Mr Sweetman sold 416,000 Harts Australasia shares for $364,259.05. The shares were sold at $1.02 and $1.04. At the time of these sales, Mr Sweetman was in possession of information that was not generally available. The information showed the extent of Harts Australasia’s financial underperformance compared to the forecast profit set out in the prospectus. The information also revealed that the company would report a large loss for the first half of the year ending 30 June 2001.
On 25 January 2001, Harts Australasia announced to the Australian Stock Exchange (ASX) an anticipated loss before tax of $9.7 million. On the day after this announcement, Harts Australasia shares opened at 54 cents and closed at 38 cents.
ASIC’s Executive Director of Enforcement, Ms Jan Redfern said the jailing of Mr Sweetman sent a message to the community that insider trading was a serious offence.
‘Mr Sweetman has engaged in a criminal activity that has undermined the fairness and integrity of the stock market. In order to maintain investor confidence in the market, ASIC will not hesitate to investigate and prosecute those suspected of insider trading’, Ms Redfern said.
‘Investors have the right to expect fair dealing and proper disclosure in stock market transactions and ASIC will continue to pursue those who compromise these expectations and disregard the law. ASIC will always seek to make the market fairer for investors’, Ms Redfern added.
In sentencing Mr Sweetman, Judge Shanahan said that this case was a clear example of a serious breach of the prohibition against trading on inside information and that the conduct had ‘clear impact on the integrity of the market’. Judge Shanahan also commented on the difficulty of detecting offences of insider trading.
In April 2004, the District Court of Queensland placed restraining orders over property owned by Mr Sweetman under the Proceeds of Crime Act 2002 (Cth) on an application by the Commonwealth Director of Public Prosecutions which was supported by ASIC.
Today Judge Shanahan ordered that a pecuniary penalty order of $280,349.54 be paid by Mr Sweetman. This amount was the benefit gained by Mr Sweetman through avoiding a personal loss by selling his shares in an uninformed market prior to the company announcement about the anticipated Group loss.
The matter was prosecuted by the Commonwealth Director of Public Prosecutions.
Background
Harts Australasia listed on the Australian Stock Exchange Limited on 22 May 2000 after raising $30 million from a prospectus dated 27 March 2000. The prospectus forecast a net profit after tax for the year ended 30 June 2001 of $12.281 million.
In October 2001, ASIC successfully applied to the Supreme Court of Queensland to have liquidators appointed to Harts Australasia. The liquidators, Mr John Greig and Mr Robert Duff of Deloitte Touche Tohmatsu reported a shortfall of $60.8 million.
ASIC Website: Printed 01/06/2009
