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Posted on 13-10-2004 At Last! Former Tranz Rail hareholders face insider trading charges, 13.10.2004
(Group photo shows Michael Beard (left), Robert Wheeler (centre) and Mark
Bloomer, individual photo shows David Richwhite)
Finally there is going to be some sort of karma applied to the rip-off
merchants who, since 1985, used their past positions within treasury to
rob the NZ economy of its state assets and then stripped those assets and
used the blood money they made to scam the stockmarket.
The Securities Commission said today it had filed insider trading charges
against former leading shareholders in Tranz Rail including high profile
expatriate businessman David Richwhite.
The watchdog said it was the first time the commission had used its powers
to take court action for insider trading.
It had filed insider trading proceedings relating to share trading in
Tranz Rail Holdings Ltd, named in the High Court at Wellington today as
Toll New Zealand.
Those named were Midavia Rail Investments BVBA (previously known as
Pacific Rail Ltd NV), Berkshire Fund III A Limited Partnership, Michael
Beard (former managing director of Tranz Rail), Mark Bloomer (former chief
financial officer of Tranz Rail), Carl Ferenbach (former director of Tranz
Rail), and Mr Richwhite (former director of Tranz Rail).
The commission's inquiry focused on the sales of shares in the first half
of 2002, before the share price of the company began to deteriorate from
about the middle of 2002.
At the beginning of 2002 the share price was $4.00. By April 16 2003 it
had plunged to 30c.
The commission explained the long wait before issuing proceedings by
saying its inquiry involved obtaining documents both in New Zealand and
overseas. It involved a large number of interviews and the receipt of
formal oral evidence from many witnesses.
"The basis for the proceedings is that the parties who sold their Tranz
Rail shares had information about the company which was not publicly
available and which would have affected materially, or would have been
likely to affect materially, the price of the shares if it had been
publicly available."
An additional action for "tipping" is raised against Carl Ferenbach,
representing Berkshire Fund III A Limited Partnership, and David
Richwhite, representing Midavia/Pacific Rail, an investment vehicle
controlled by Fay Richwhite interests.
Fay Richwhite is the high profile merchant bank which is controlled by Mr
Richwhite and Sir Michael Fay, who is best known for backing New Zealand
challenges for yachting's America's Cup. Sir Michael is now based in
Geneva.
The commission's proceedings seek compensation for the losses avoided by
the traders. They seek to have pecuniary penalties imposed.
The commission said it had actively investigated the matter since February
2003, when the now disbanded Stock Exchange Market Surveillance Panel
released a report on Tranz Rail.
The commission said the inside information at issue relates to: a forecast
on Tranz Rail's financial performance and capital expenditure, a bid by
Rail America for Tranz Rail which did not eventuate, asset and investment
write downs in Tranz Rail, and the financial obligations and credit
worthiness of Tranz Rail.
The proceedings are brought under Section 18A of the Securities Markets
Act 1988.
The Government changed the law in late 2002 to extend the commission's
power to prosecute for insider trading. Previously, it undertook an
investigation and left it to shareholders to prosecute if they wanted to.
Under the amended law, the commission can pursue cases when they are
deemed to be in the public interest.
"The commission has decided that it is in the public interest to do so in
the present case," it said in today's statement.
The commission would not say how much damages it was seeking. Nor would it
comment beyond the statement it released.
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