FORMER Gunns chairman John Gay told his bank manager before offloading 3.4 million shares in the company in December 2009 that he did not want to sell his whole stake because he believed the share price would go back up, a Launceston court has heard.
Mr Gay still had 12 million shares in the company before selling three million on December 2, 2009, and another 404,000 two days later.
The Australian Securities and Investment Commission has alleged that the 68-year-old was in possession of inside knowledge that could affect the market if released when he made the deal.
Mr Gay was charged last year with two counts of insider trading and pleaded not guilty in February.
At the final day of a preliminary proceedings hearing in the Launceston Magistrates Court yesterday, former ASIC investigator Morris Broder denied that the investigation was unfairly slanted towards Mr Gay.
Mr Gay’s counsel, Phillip Priest, QC, suggested that Mr Broder had favoured the evidence of some directors over others when he conducted interviews in July last year and recommended that the Commonwealth Director of Public Prosecutions press charges.
“Can we take it in making your recommendation you cherry-picked the information between the directors?” Mr Priest asked.
“Absolutely not,” Mr Broder said. “But anyone would make an assessment based on all the available information.”
The charges against Mr Gay are founded on his possession of a management report for October 2009, which was distributed to directors a week before the board meeting on November 26 that year.
Mr Broder agreed with Mr Priest that the board did not think that information needed to be released to the market, because it did not paint an accurate picture of Gunns’ finances, and shareholders had received a more telling picture at the annual meeting two weeks earlier.
But he disagreed that the professional views of the directors should be accepted at face value, saying “there’s a lot of professionals in prison too”.
Launceston ANZ Bank officer Christopher Cooper told the court that Mr Gay had told him before selling the shares that he believed the company’s financial position would improve.
Mr Cooper told Mr Gay’s solicitor, Jonathon Moore, that Mr Gay told him in mid-November 2009 that he had had a cancer scare and wanted to sell some of his shares because he wanted to get his affairs in order and was not comfortable with his debt levels.
“So he was by no means liquidating his shares,” Mr Moore said.
“No. His intention was to reduce his debt to a certain figure.”
Mr Moore asked: “Do you recall a conversation with Mr Gay that he wasn’t going to sell any more shares because he expected the share price to go up?”
“Yes,” Mr Cooper said.
The share price fell 20 in February 2010 when Gunns released a half-yearly market update that showed a 98 per cent drop in profits.
Mr Gay was remanded to the Supreme Court in Launceston for trial on February 4 next year.
Former Gunns chairman John Gay leaves the Launceston Magistrates Court yesterday, followed by his legal team. Picture: SCOTT GELSTON
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