R v Houlton [2000] NSWCCA 309, (2000) 49 NSWLR 383
Rich v ASIC [2004] HCA 42, (2004) 220 CLR 129
Tyler v R
Source
Original judgment source is linked above.
Catchwords
R v Houlton [2000] NSWCCA 309, (2000) 49 NSWLR 383
Rich v ASIC [2004] HCA 42, (2004) 220 CLR 129
Tyler v R
Judgment (1 paragraphs)
[1]
SENTENCE
1HIS HONOUR: On 5 August 2011 the offender upon arraignment, pleaded guilty to four counts of "insider trading" contrary to sections 1043A(1) and 1311(1)(a) of the Corporations Act 2001 (Cth) (the Corporations Act).
2The form of the indictment to which the offender pleaded guilty was as follows:
On or about 30 June 2010 at Sydney in the State of New South Wales, in the capacity of a trustee of the O'Brien Family Superannuation Fund, acquired relevant Division 3 financial products namely 80,000 shares in North Queensland Metals Limited (NQM) (the "financial product") whilst in possession of inside information concerning that financial product that was not generally available, being information which if it were generally available a reasonable person would expect it to have a material effect on the price or value of the financial product, and being information which Justin Hugh O'Brien knew, or ought reasonably to have known:
(i) was not generally available, and
(ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products.
Contrary to sections 1043A(1) and 1311(1) Corporations Act 2001 (Law Part Code: 47861)
On or about 29 October 2010 at Sydney in the State of New South Wales, in the capacity of a trustee of the O'Brien Family Superannuation Fund, acquired relevant Division 3 financial products namely 4,000 shares in Westfield Group (WDC) (the "financial product") whilst in possession of inside information concerning that financial product that was not generally available, being information which if it were generally available a reasonable person would expect it to have a material effect on the price or value of the financial product, and being information which Justin Hugh O'Brien knew, or ought to have known:
(i) was not generally available, and
(ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products.
Contrary to sections 1043A(1) and 1311(1) Corporations Act 2001 (Law Part Code: 47861)
On or about 7 December 2010 at Sydney in the State of New South Wales, in the capacity of a trustee of the O'Brien Family Superannuation Fund, acquired relevant Division 3 financial products namely 6,666 shares in Crane Group Limited (CRG) (the "financial product") whilst in possession of inside information concerning that financial product that was not generally available, being information which if it were generally available a reasonable person would expect it to have a material effect on the price or value of the financial product, and being information which Justin Hugh O'Brien knew, or ought reasonably to have known:
(i) was not generally available, and
(ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products.
Contrary to sections 1043A(1) and 1311(1) Corporations Act 2001 (Law Part Code: 47861)
On or about 11 January 2011 at Sydney in the State of New South Wales, in the capacity of a trustee of the O'Brien Family Superannuation Fund, acquired relevant Division 3 financial products namely 50,000 shares in RP Data Limited (RPX) (the "financial product") whilst in possession of inside information concerning that financial product that was not generally available, being information which it were generally available a reasonable person would expect it to have a material effect on the price or value of the financial product, and being information which Justin Hugh O'Brien knew, or ought reasonably to have known:
(i) was not generally available, and
(ii) if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the financial products.
Contrary to sections 1043A(1) and 1311(1) Corporations Act 2001 (Law Part Code: 47861)
3By virtue of section 1311 and Schedule 3 of the Corporations Act , the first three offences referred to on the indictment carry a maximum penalty of imprisonment for 5 years and/or a fine of $220,000. In respect of the fourth offence, effective on 13 December 2010, the legislature increased the maximum penalty applicable to offences against s1043A(1) of the Corporations Act to imprisonment for 10 years and/or a fine of $495,000 or three times the value of the benefits attributable to the commission of the offence (whichever is greatest).
4The offender has been and continues on conditional bail since his first appearance in the Local Court on 19 July 2011.
Factual background of offences
5The offender was born in January 1970 and is currently 41 years old. He obtained an Associate Diploma of Business (hospitality services) from the University of Queensland in 1991 and a Bachelor of Commerce (banking and finance) from the University of Southern Queensland in 1994. From mid 1995 to mid 2004 he worked in the financial services industry in a range of roles with different employers, including Credential Portfolios Managers, Bankers Trust, City Bank, Tyndall Asset Management (Royal Sun Alliance), Macquarie Bank and Commonwealth Bank.
6Between mid 2004 and mid 2009 the offender was employed by Computershare Investor Services Pty Limited (Computershare) which provides a range of investor services to corporations and shareholder groups. He commenced his employment on 19 July 2004 as a Relationship Manager in the Client Relations Department and from 14 May 2007 he was employed as the Business Development Manager of the Clients Solutions Group. On 1 July 2009 he transferred to a subsidiary of Computershare named Georgeson Shareholder Communications Australia Pty Limited (Georgeson), where he held the senior position of Director of Business Development until 24 February 2011 when his employment was terminated on the basis of "serious and wilful misconduct".
7The four offences on the indictment relate to conduct commonly referred to as "insider trading", engaged in by the offender between 30 June 2010 and 11 January 2011 while he was employed by Georgeson, being the same conduct which resulted in the termination of his employment on 24 February 2011.
8Georgeson specialised in the provision of strategic shareholder consulting services to corporations and shareholder groups, particularly in relation to extraordinary transactions such as takeovers, mergers and acquisitions, corporate restructures and capital raising. As the Director of Business Development, the offender was responsible for identifying and winning sales opportunities, either through the existing client base or offering services to companies identified through announcements on the Australian Securities Exchange (ASX). His role included communicating directly with existing or prospective clients about relevant extraordinary transactions.
9At all relevant times the proposals Georgeson submitted to clients for the provision of services included standard terms and conditions whereby Georgeson and its employees undertook to "keep confidential" and not use for any purpose other than the provision of those services, information gained from a client.
10By virtue of his position at Georgeson (including by attending meetings, reading a shared network drive folder and communicating with clients), the offender routinely acquired confidential information about proposed forthcoming extraordinary transactions which, if carried out or publicly announced, would be likely to affect the price or value of financial products (including securities such as shares) relating to the company or companies involved.
11At all relevant times the offender was aware of the legal prohibitions against insider trading in Division 3 of Pt 7.10 of the Corporations Act. He was provided with the conditions of employment with both Computershare and Georgeson which he was required to read and undertake to comply with. Those conditions set out those prohibitions.
12On 30 October 2006 the offender and his mother, Therese O'Brien (who is currently 72 years old) executed a deed to create a self-managed superannuation fund called "O'Brien Family Superannuation Fund" (the Fund) and each became a trustee and member of the Fund. The offender has not yet made any contributions to the Fund and is not presently entitled to any amount held by the Fund.
13Since about June 2007, the offender and his mother have held a trading account with Macquarie Equities Limited (the joint trading account). Through the joint trading account, shares of ASX listed companies could be traded online via the internet. Both the offender and his mother had authority to trade through this account on behalf of the Fund, but at all relevant times it was only the offender who exercised such authority and traded through the account.
14All of the insider trading involved the acquisition of shares in ASX listed companies through the joint trading account. The offender conducted all of the relevant trades in his capacity as a trustee of the Fund and in that capacity, acquired a legal interest in the shares. The immediate beneficiary of his trading was his mother who had made all of the member contributions to the Fund. The offender's mother had no role in any of the relevant trades and had no prior knowledge of them.
First offence
15On 3 June 2010 Conquest Mining Limited (CQT), an ASX listed company, announced that it intended to make an off market takeover offer for all the shares in North Queensland Metals Limited (NQM), also an ASX listed company, at a price which valued NQM at $0.29 per share. On the day prior to this announcement, the highest price paid for in NQM shares was $0.24. On 3 June 2010, following the announcement, the highest price paid for NQM shares traded on the ASX increased to $0.29.
16Shortly after CQT's announcement, Georgeson offered to provide NQM shareholder communication services, including a shareholder information helpline and shareholder defence canvassing. The offender was heavily involved in these dealings and on 11 June 2010 NQM engaged Georgeson to provide such services.
17On 22 June 2010 NQM made an ASX announcement stating that the chairman of NQM would be sending a letter to NQM shareholders that day entitled "The Offer is Inadequate - Do Nothing".
18Between 23 and 29 June 2010 the offender was confidentially informed that Heemskirk Consolidated Limited (HSC), an ASX listed company, intended to make a rival takeover offer for all of the shares in NQM that would be superior from NQM's perspective to CQT's offer and that NQM's board of directors intended to recommend HSK's offer to NQM shareholders.
19Before 30 June 2010 no NQM shares had been purchased through the joint trading account. On that date the opening price of NQM shares on the ASX was $0.255 and at 11.19am, the offender placed an online order through the joint trading account to acquire 80,000 NQM shares. The order was completely filled at a cost of $20,800 excluding brokerage fees.
20During the ensuing months, discussions took place between NQM and HSK and CQT concerning the takeover. CQT was successful. On 22 October 2010 the offender accepted CQT's offer and exchanged the 80,000 NQM shares for $12,000 cash and 40,000 CQT shares. On 11 January 2011 the offender sold the 40,000 CQT shares through the joint trading account at an average price of $0.54 per share for a total consideration of $21,600 excluding brokerage fees. Accordingly, the total cash amount received was $33,600 and the gross profit derived from the illegal purchase of the 80,000 NQM shares was $12,800 (i.e $33,600 minus $20,800 = $12,800).
Second offence
21On or about 18 October 2010 the Westfield Group (WDC), an ASX listed company, engaged Georgesons to provide shareholder communication services in relation to a proposed major corporate restructure and capital raising transaction, codenamed "Project Delorean", involving the following features:
The creation of a new separately listed property trust, the Westfield Retail Trust (WRT).
Raising $3.5 billion in new capital through a $2 billion offer to the general public and a $1.5 billion offer to existing WDC security holders.
Expected increase value for existing WDC security holders.
22The offender was part of the Georgeson coverage team dealing with Project Delorean and was a contact point for WDC and was intimately involved in the planning, preparation and provision of services to facilitate this transaction.
23Before 29 October 2010 no WDC shares had been purchased through the joint trading account. On that date, the price of WDC shares on the ASX was $12.50. The offender placed an online order through the joint trading account for 4000 WDC shares. That order was filled for a total consideration of $49,960 excluding brokerage fees.
24On 3 November 2010 WDC issued a public ASX announcement in which it announced the proposed corporate restructure and capital raising transaction. When trading in WDC shares resumed, the price of the shares on the ASX reached a high of $13.08 per share. The offender has not yet sold the 4000 WDC shares he acquired and the units in the WRT he received when the restructure was eventually implemented. It is common ground that were he to do so at the present time the shares and units in the WRT would be sold at a loss.
Third offence
25On or about 31 November 2011 Fletcher Building Limited (FBU), a company listed on the ASX, agreed to engage Georgeson to assist with a confidential proposal codenamed "Project Stork" involving an unsolicited takeover offer for the acquisition of all shares it did not already own in Crane Group Limited (CRG), an ASX listed company.
26Between 1 and 6 December 2010 information about Project Stork was entered into an electronic spreadsheet at Georgeson and documents containing detailed information about the project were saved in a shared network drive folder at Georgeson. The offender had immediate access to this information and these documents. The offender was requested to provide assistance in relation to the project.
27Before 7 December 2010 no CRG shares had been purchased through the joint trading account. On that date, the offender placed an online order through the joint trading account to acquire 6,666 CRG shares. That order was completely filled at a cost of $49,995 excluding brokerage fees.
28On 15 December 2010 FBU issued a public ASX announcement in which it announced the proposed takeover offer of CRG. On 11 January 2011 the offender sold the 6,666 CRG shares through the joint trading account at an average price of $9.48 per share for a total consideration of $63,193.68 excluding brokerage fees. Accordingly, the gross profit derived from the illegal purchase of the shares was $13,198.68 (i.e. $63,193.68 minus $49,995 = $13,198.68).
Fourth offence
29On or before 10 January 2011 the offender was asked to assist with the provision by Georgeson of shareholder communication services to RP Data Limited (RPX), a company listed on the ASX, in relation to a proposed friendly takeover of RPX by Core Logic Inc (CLGX), a company listed on the New York Stock Exchange).
30Before 11 January 2011 no RPX shares had been purchased through the joint trading account. On that date the offender placed an online order through the joint trading account to acquire 50,000 RPX shares. This order was completely filled at an average price of $1.08 per share for a total consideration of $54,000 excluding brokerage fees.
31On 12 January 2011 RPX issued a public ASX announcement recommending the CLGX proposal to its shareholders. On 18 January 2011 the offender sold the 50,000 RPX shares through the joint trading account at a price of $1.655 per share for a total consideration of $82,750 excluding brokerage fees. Accordingly, the gross profit derived from the illegal purchase of the shares was $28,750 (i.e. $82,750 minus $54,000 = $28,750).
32In acquiring the NQM, WDC, CRG and RPX shares the offender engaged in insider trading contrary to s1043A of the Corporations Act . The gross profit derived from these offences was $54,748.68 (i.e. $12,800 + $13,198.68 + $28,750). These profits were made on behalf of the Fund and the immediate beneficiary of the profits was the offender's mother, who had made all the member contributions to the Fund. It was common ground that the offender's motivation in committing these offences was not to personally benefit himself but to attempt to build up his mother's superannuation account, the value of which had been severely depleted as a result of the 2008 financial downturn.
33On 24 February 2011 the offender, after being informed that he was not obliged to do so and being provided with a formal caution, voluntarily participated in an interview with ASIC officers and made a number of significant admissions in relation to the offences. Minutes after the interview, the offender made further and fuller admissions including specifically admitting that he had committed criminal offences of insider trading in relation to his acquisition of the aforementioned shares.
34On 24 February 2011, shortly after making the admissions to ASIC officers, the offender met with a number of his superiors from Georgeson and Computershare and repeated his admissions, specifically stating that he had "made a criminal mistake" and "traded on the basis of inside information". In addition, he "acknowledged that he had damaged Computershare and he asked what he could do to limit the damage". He also indicated that he would "cooperate with ASIC". Upon making the admissions to his superiors, the offender was informed that his employment would be terminated "effective immediately".
35On 7 March 2011 the offender agreed to plead guilty to the four offences on the indictment and indicated that he was willing to assist in expediting the investigation and prosecution process by agreeing to an appropriately worded statement of facts. Between 23 March and 29 June 2011 the offender assisted ASIC in preparing an agreed statement of facts by voluntarily producing documents and commenting on draft versions of the statement in a timely manner. On 29 June 2011 the offender signed a statement admitting the matters referred to in the agreed statement of facts and voluntarily attending ASIC's office to be served with a court attendance notice for the four offences. When the matter was mentioned before the Local Court on 19 July 2011 the offender pleaded guilty to the four offences.
36The investigating officer from ASIC, CR Luxford, made the following assessment of the offender's cooperation.
"Investigations into suspected insider trading offences are generally very difficult, time consuming and resource intensive even in cases where the available evidence is considered by ASIC to be strong. In my opinion the evidence of the offences committed by the offender obtained by ASIC without the offender's cooperation, both before and after 24 February 2011 was compelling. Nevertheless, the cooperation voluntarily provided by him in relation to ASIC's investigation of the offences has been timely, significant and valuable. If the offender had not provided that cooperation, ASIC would have been required to expend additional substantial time and resources seeking to gather admissible evidence capable of proving the offences and preparing a formal brief of evidence for the Commonwealth Director of Public Prosecutions to consider in deciding whether to recommend that charges be laid.
The cooperation voluntarily provided by the offender in relation to ASIC's investigation enabled this matter to be resolved much earlier than would have otherwise been the case and freed up resources which ASIC has been able to utilise for other investigations."
37On 8 September 2011 the CDPP provided the offender with a proposed pecuniary penalty order requiring him to pay the amount of $54,748.68 (the PPO). On 22 September 2011 the PPO was made by the Supreme Court of NSW by consent. On 20 October 2011 the offender sent a cheque in the amount of $54,748.68 to the CDPP for payment of the PPO in full.
38In relation to that matter and the offender's cooperation generally, Mr Luxford said:
"I consider it likely that the PPO would have eventually been made even if the offender had not consented to it. Nevertheless, the offender's cooperation saved a significant amount of time and resources on the part of ASIC (additional to those saved by the cooperation referred to above) and has enabled ASIC to spend additional time and resources on other investigations.
Overall, I consider that the completeness and timeliness of the cooperation provided to ASIC by the offender in this case has been exceptional and very valuable to ASIC."
39The offender has no prior convictions. He did not give evidence in the sentence proceedings but his mother did so. She was a most impressive witness and described a close and loving family background. The offender lost his father in a helicopter accident in 2000 when he was aged 30. His father was then a pilot with the helicopter rescue service and the accident occurred during the course of a rescue. His mother said that this event had a traumatic effect upon the offender.
40The Probation and Parole report reveals that the offender was married three years ago and that they have a 20 month old child. Until these charges were preferred, the offender and his wife enjoyed a happy and close relationship. Although his wife remains supportive of him, these events have caused severe strains in the marriage.
41Due to the offender's change in circumstances, it has been necessary for his house to be sold and he is presently carrying out renovations in order to enable that to take place. These events have caused not only emotional stress within the marriage but also financial stress.
42In support of the offender, a number of very impressive references were provided. His conduct until these events appears to have been exemplary and he appears to have displayed considerable community spirit and to have been generous in the giving of his time to assist others. Other than the misguided attempt to assist in building up his mother's superannuation fund, neither the author of the Probation and Parole report nor the authors of the testimonials given on his behalf, can offer any explanation for the offending which appears to have been entirely out of character.
Sentencing principles
43The Corporations Act is a Commonwealth statute and offences created by it are Commonwealth offences for the purposes of sentencing. Accordingly, the sentence to be imposed upon the offender is to be determined in accordance with Part 1B of the Crimes Act 1914 (Cth) (the Crimes Act ). Subsection 16A(2) of the Crimes Act provides a "check list" of the matters that the court must take into account in the sentencing of federal offenders. This is not an exclusive list. Each matter is "in addition to any other matters" which are relevant on the question of sentence.
44In addition to any other matters under subsection 16A(2), the court must take into account such of the following matters as are relevant and known to the court:
(a) The nature and circumstances of the offence.
(b) Other offences (if any) that are required or permitted to be taken into account.
(c) If the offence forms part of a course of conduct consisting of a series of criminal acts of the same nature or a similar character - that course of conduct.
(d) The personal circumstances of any victim of the offence.
(e) Any injury, loss or damage resulting from the offence.
(f) The degree to which the person has shown contrition for the offence.
(i) By taking action to make reparation for any injury, loss or damage resulting from the offence; or
(ii) In any other manner.
(g) If the person has pleaded guilty to the charge in respect of the offence - that fact;
(h) The degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences;
(j) The deterrent effect that any sentence or order under consideration may have on the person;
(k) The need to ensure that the person is adequately punished for the offence.
(m) The character, antecedents, cultural background, age, means and physical or mental condition of the person;
(n) The prospect of rehabilitation of the person;
(p) The probable effect that any sentence or order under consideration would have on any of the person's family or dependants.
45There is clear authority that general deterrence must also be taken into account in determining the appropriate sentence despite its absence from the checklist in subs 16A(2) - R v El Karhani (1990) 21 NSWLR 370 at 377; R v Thomas (1998) 96 A Crim R 32 at 44. This is an important consideration in relation to "white collar" offences which are difficult to detect, investigate and prosecute successfully - R v Pantano (1990) 49 A Crim R 328 at 330.
46In determining the appropriate sentence, the court must have regard to the nature and severity of the conditions that maybe imposed on, or may apply to, the offender under that sentence (subs 16A(3)). Section 17A of the Crimes Act provides that a court shall not pass a sentence of imprisonment in respect of a federal offender unless the court, having considered all other available sentences, is satisfied that no other sentence is appropriate in the circumstances.
47Pursuant to s20AB(1) of the Crimes Act additional sentencing alternatives available under the law of a participating state may be imposed in respect of a person convicted of a federal offence. New South Wales is a participating state. The additional custodial sentencing alternatives available in New South Wales and the circumstances in which a court is permitted to impose such alternatives are set out in Part 2 Division 2 of the Crimes (Sentencing Procedure) Act 1999 (NSW). They include home detention where the offender is sentenced to imprisonment for not more than 18 months (s6 and Part 6) or an intensive correction order (ICO) where the offender is sentenced to imprisonment for not more than 2 years (s7 and Part 5).
48Where a court passes sentence or makes an order under subs 20AB(1) in respect of a person convicted of an offence against a law of the Commonwealth, the court may also do all or any of the following:
(a) Impose any fine or other pecuniary penalty that the court is empowered to impose;
(b) Make any order requiring the person to make reparation or restitution, or pay compensation, in respect of the offence that the court is empowered to make; and
(c) Make any other order that the court is empowered to make (subs 20AB(4) of the Crimes Act .
49Where a federal sentence of imprisonment is imposed which does not exceed 3 years, and at the time the sentence is imposed the person is not already serving or subject to a federal sentence, the court must make a recognizance release order in respect of that sentence and must not fix a non-parole period (subs 19AC(1) Crimes Act). There are two exceptions:
(a) Where the sentence does not exceed 6 months, the court is not required to make a recognizance release order (subs 19AC(3); and
(b) Where the exception provided by subs 19AC(4) operates. The exception provided in subs 19AC(4) is in substance similar to that provided in subs 19AB(4).
A recognizance release order is an order that a person be released, upon giving security, after serving a specified period of imprisonment calculated in accordance with s19AF (s16 and subs 20(1)(b) Crimes Act).
Specific matters relevant to this case
Nature and circumstances of the offence (16A(2)(a))
50Conduct described as "insider trading" is a serious criminal offence. It is a serious offence because it can undermine the integrity of the stock market. In R v Doff [2005] NSWCCA 119 the court (Wood CJ at CL, Adams and Bell JJ) said when rejecting a Crown appeal against sentence:
"56 ... We do not, in this respect, suggest that anything other than a stern approach should be taken to offences of insider trading for the reasons earlier identified. It remains a serious offence, and there needs to be a considerable deterrent aspect reflected in order to protect the integrity and efficacy of the market. Those in a position of trust who receive price sensitive information in relation to securities are expected to conform to exacting standards of honesty, and transgression can normally be expected to lead to custodial sentences as well as to pecuniary penalties."
51In this case the following matters are relevant to a consideration of the seriousness of the offender's conduct:
(a) Because of his position as Director of Business Development in Georgeson he is to be regarded as a "true insider".
(b) The offending occurred over six and a half months on four separate occasions, yielding a gross profit of $54,748.68.
(c) He was aware of his obligations of confidentiality and his conduct is to be properly characterised as a breach of trust.
(d) While the offender did not personally benefit from the transactions, they still involved serious criminality.
Circumstances of the victim (injury loss and damage (16A(2)(d) & (e))
52The "victim" in such offences is the investing community at large. In R v Rivkin [2004] 184 FLR 365 at [412] the Court said:
"The victim of any such offence is the investing community at large, the injury being that related to the loss of confidence in the efficacy and integrity of the market in public securities."
Degree of contrition (16A(2)(f))
53The offender's degree of contrition was substantial. Not only did he make full admissions to ASIC investigators, but also to his employer. Significantly, he asked his employer what he could do to limit the damages which his conduct had caused.
Guilty plea (16A(2)(g))
54The Court must take into account that the offender has entered a guilty plea. In doing so, the following factors apply:
(a) The guilty plea is taken into account as a mitigating factor as it demonstrates a willingness to facilitate the course of justice. It must not be taken into account as a mitigating factor for its objective "utilitarian value" or on the basis that it saved the community the expense of a contested trial. ( Cameron v The Queen (2002) 209 CLR 339 at 343 [11] - [14]; Tyler v R ; R v Chalmers (2007) 173 A Crim R 458 at 476.)
(b) The guideline judgment in R v Thomson: R v Houlton [2000] NSWCCA 309, (2000) 49 NSWLR 383 does not apply to Commonwealth offences. However, the range of discounts set out in that case is applicable to sentencing for Commonwealth offences, i.e. 10 percent - 25 percent.
(c) A significant factor relevant to the extent of the discount or reduction in sentence is the timing of the plea and whether it was entered at the first reasonable opportunity. It is clear that the offender's plea in this case was entered at the earliest opportunity.
Co-operation with law enforcement agencies (16A(2)(h))
55It is clear that the offender's co-operation with ASIC was not only full and timely, but as was described by Mr Luxford "exceptional and very valuable".
Deterrence (16A(2)(j))
56As has already been indicated, deterrence, both individual and general, is an important consideration when sentencing for insider trading. If the need for general deterrence is strong, courts generally give less weight to good character ( R v Corner NSWCCA unreported 19 December 1997 at [22]).
Need for adequate punishment (16A(2)(k)
57It goes without saying that the seriousness of insider trading offences requires appropriate punishment. The sentence passed in this matter, despite the significant mitigating circumstances, must have due regard to the principle of general deterrence.
Character and antecedents of the offender (16A(2)(m)
58The offender has no prior convictions. As already indicated, however, in "white collar offences" good character is not as significant a mitigating factor in sentencing as it is for other offences. In R v El Rashid (NSW CCA, unreported, 7.4.1995) Gleeson CJ said:
"It may be observed that what is sometimes called white collar crime is rarely committed by people who do have a criminal history. Such people do not usually find themselves with the opportunity to commit offences of that character."
The prospect of rehabilitation (16A(2)(n))
59I am satisfied on the material before me that there is no likelihood that the offender will commit further offences in the future. In that regard his prospects of rehabilitation are excellent.
Effect of sentence on family or dependants (16A(2)(p))
60When taking this factor into account, it is important to note that even before sentence is passed, the effect of the offender's criminality on his family has already been significant. The family is under significant financial pressure. He has lost his job and his prospects of employment, particularly in the financial industry, are poor. The family is living on his savings and it has become necessary to sell the family home.
Other relevant factors
61In its submissions the Crown stressed the fact that the fourth of the offences occurred after Parliament had doubled the maximum penalty for the offence of insider trading. The Crown submitted that this was an important indicator of the seriousness with which Parliament views the offence. It submitted that the increase in the penalty was a reflection of community standards in relation to the seriousness of the offence and that the court should reflect that seriousness in the sentence ultimately passed. There is, of course, clear authority from the High Court that a maximum sentence provides an important guidepost for a sentencing court ( Markarian v R [2005] HCA 25, (2005) 228 CLR 357). At [31] the plurality said:
"31 It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. ..."
62At [80] McHugh J in that case said:
"80 Second, a judge is sensitive to legislative trends. A change in the maximum penalty for an offence or in the elements of an offence may indicate a shift in the values to be applied when sentencing for that offence. ..."
63Before applying the above principles to the facts of this case, there are some other matters which need to be taken into account. As a result of being convicted for these offences, the offender will be automatically disqualified from managing a corporation for a period of five years. In Rich v ASIC [2004] HCA 42, (2004) 220 CLR 129 the plurality held that disqualification from holding such office was a penalty. The Court acknowledged that disqualification orders under the Act performed a dual role of the protection of the public and as a penalty imposed on the person against whom it was made. It follows that this is a matter which the Court should take into account when considering sentence.
64In the review of the factual background, it was noted that with the consent of the offender the Commonwealth Director of Public Prosecutions (CDPP) obtained pecuniary penalty order pursuant to s116 of the Proceeds of Crime Act 2002 (Cth) (POC Act) in the sum of $54,748.68. That order was satisfied by the offender on 20 October 2011.
65Pursuant to s320(b) of the POC Act, the Court in passing sentence must not have regard to any pecuniary penalty order that relates to the offences. However, pursuant to s320(a), the Court "may have regard to any co-operation by the [offender] in resolving any action taken against" him under the Act. As previously indicated, the extent of the co-operation by the offender was significant and demonstrated a willingness to facilitate the course of justice in relation to the offences.
Consideration
66The High Court in Hili v The Queen ; Jones v The Queen [2010] HCA 45; (2010) 85 ALJR 195 has emphasised that in determining the sentence to be passed in respect of any person for a federal offence, a court must impose a sentence that is of a severity appropriate in all the circumstances of the offence. What the court is not to do is to look for some kind of numerical equivalence by reference to other sentences. The Court said:
"48 Consistency is not demonstrated by, and does not require, numerical equivalence. Presentation of the sentences that have been passed on federal offenders in numerical tables, bar charts or graphs is not useful to a sentencing judge. It is not useful because referring only to the lengths of sentences passed says nothing about why sentences were fixed as they were. Presentation in any of these forms suggests, wrongly, that the task of a sentencing judge is to interpolate the result of the instant case on a graph that depicts the available outcomes. But not only is the number of federal offenders sentenced each year very small, the offences for which they are sentenced, the circumstances attending their offending, and their personal circumstances are so varied that it is not possible to make any useful statistical analysis or graphical depiction of the results.
49 The consistency that is sought is consistency in the application of the relevant legal principles. ..."
67With that guidance in mind, I would assess the objective seriousness of these offences to be at the lower end of the range for offences of this kind. I have reached that conclusion for a number of reasons. While the offender was a true "insider" the level of his involvement was significantly less than for example, that of a director of one of the participating companies in the transaction. The information to which the offender had access while undoubtedly confidential, was information of a kind that a comparatively large number of persons would have had access to.
68The four transactions which gave rise to the offences were not particularly sophisticated and little was done to conceal them. The extent of the transactions was modest and would not have had any adverse effect on the value of the shares in the companies.
69In reaching that conclusion, I have had due regard to the increase in penalty which occurred before the fourth offence took place. While such an increase is indicative of an intention by the legislature that such offences should be punished more severely, the extract from the second reading speech to which the Crown referred is enlightening. One of the justifications for the increase was:
"Moreover, the benefit that can be gained from engaging in insider trading or market manipulation often far outweighs the maximum penalty that can currently be imposed for a breach."
70I infer from that statement that one of Parliament's concerns was that in some cases the extent of the offending was so great as to be disproportionate to the maximum penalty. That is not the situation here where as already stated the extent of the transactions giving rise to the offences was modest.
71I also take into account the offender's motivation for the offences. He did so to assist the superannuation fund in respect of which his mother was the beneficiary. While this does not excuse the offending, it is to be contrasted with other offences of this kind which had as their motivation greed and the acquisition of personal wealth.
72In setting out those reasons, I do not wish it to be thought that I am minimising the seriousness of the offence. Offences of this kind have been properly and consistently regarded by the courts as serious. In passing sentence for offences of this kind, general deterrence has to be an important consideration. Moreover, given the offender's education and background he must have been aware of the seriousness and unlawfulness of his actions.
73The offender has a very strong subjective case. He is a man of previous good character and this is his first occasion of offending. His co-operation with the authorities was immediate and substantial and is indicative of genuine contrition and remorse. I am satisfied that he will not offend in this way again and that his prospects of rehabilitation are excellent.
74Even without the intervention of this Court, he has already been punished for his offending. He has lost his job, he is most unlikely to ever again be employed in the financial industry and his prospects of obtaining employment generally must be regarded as problematic. His family is now subjected to substantial financial stress and his marriage is under stress. He is being forced to sell the family home.
75As exhibit 4 made clear (the extract from the Weekend Australian financial review of 29-30 October 2011) the charges against him have attracted substantial media publicity. It is clear that this offending has resulted in the offender suffering irreparable damage to his professional reputation and to his professional relationships. While these matters do not constitute "exceptional circumstances" for sentencing purposes and are a natural consequence of this kind of offending, they remain relevant and important considerations in the sentencing process.
76In addition to considering the matters in s16A(2) of the Crimes Act , s17A provides that a court shall not pass a sentence of imprisonment in respect of a federal offender unless the court having considered all other available sentences, is satisfied that no other sentence is appropriate in the circumstances. In reaching a conclusion on that issue, it is necessary for the court to examine not only the objective facts relating to the offence and its seriousness, but also the subjective matters to which I have referred. All of those facts and circumstances must be brought to account in determining whether a sentence of imprisonment is appropriate.
77I have concluded that no sentence other than a term of imprisonment is appropriate in the circumstances of this case. To award a lesser sentence would not reflect either the seriousness of the offences or give proper effect to the sentencing principles to which I have referred in the context of the facts and circumstances established by evidence in this case. I have reached that conclusion having regard to both the evidence and the submissions and the cases to which I have been referred. I have determined that the period of imprisonment should be 2 years.
78The submissions by each side in this matter have treated the four offences as constituting a single episode of criminality and that apart from the increase in penalty which occurred before the commission of the fourth offence, the criminality involved in relation to each offence was the same. Accordingly, I have decided that the sentence which I impose in respect of each count on the indictment, should be served concurrently.
79It is then necessary to determine how the sentence is to be served. In the circumstances of this case, I do not consider that a suspended sentence is appropriate. On the other hand, I do not regard a custodial penalty as appropriate. An Intensive Correction Order is a sentencing option which is available and it is the form of imprisonment which I regard as appropriate in this case. An Intensive Correction Order will give effect to the requirement of general deterrence, yet it would not require the offender to be held in custody in a correctional institution.
80An Intensive Correction Order is a term of imprisonment but it directs that the sentence be served by way of intensive correction in the community. I accept that in many cases such an order would not be appropriate in respect of insider trading offences. However, as important as is the principle of general deterrence in sentencing for such offences, there is a statutory requirement for a full consideration of the nature and circumstances of the offence. It is to be borne in mind that a term of imprisonment served as an Intensive Correction Order is a significant sentence and in my view, significantly more onerous than a suspended sentence.
81In accordance with the provisions of s67(2) of the Crimes (Sentencing Procedure) Act 1999 (NSW), in deciding whether or not to make an Intensive Correction Order, the Court is required to have regard to:
(1) The contents of the assessment report of the offender (prepared under s70.
(2) Such evidence from the Commissioner of Corrective Services as the Court considers necessary for the purpose of deciding whether to make such an order.
82On 2 December 2011 the proceedings were listed for further hearing, an assessment report having been received. On that occasion, submissions were made on behalf of the offender and some brief supplementary submissions were made on behalf of the Crown.
83The assessment report is dated 23 November 2011. It indicates the factors that have been assessed to determine the offender's suitability in accordance with the requirements of s70 of the Crimes (Sentencing Procedure) Act . It states that the offender has been assessed as suitable for an Intensive Correction Order and that he has signed an undertaking to comply with its obligations in the event that such an order is made.
84Justin Hugh O'Brien in respect of each count on the indictment, you are sentenced to a term of imprisonment of 2 years to commence 30 January 2012 and to expire 29 January 2014.
85Pursuant to s7(1) of the Crimes (Sentencing Procedure) Act I make an Intensive Correction Order and direct that the sentence which I now impose be served by way of Intensive Correction in the community. The conditions of the latter order include the mandatory conditions referred to in s81 of the Crimes (Administration of Sentences) Act 1999 (NSW) and regulation 175 of the Crimes (Administration of Sentences) Regulation s (2008) (NSW).
86In respect of the mandatory condition prescribed by regulation 175(b), the offender is to report on 30 January 2012 to the specified local office of the Corrective Services Department, or on such other date as may be determined by the Commissioner of Corrective Services.
87The order which I make is as follows:
Order
88In respect of each count on the indictment, the offender is sentenced to a term of imprisonment of 2 years to commence on 30 January 2012 and to expire on 29 January 2014. Pursuant to s7(1) of the Crimes (Sentencing Procedure) Act 1999 (NSW) I make an Intensive Correction Order and direct that the sentence which I now impose be served by way of Intensive Correction in the community. The conditions of the order are to include the mandatory conditions referred to in s81 of the Crimes (Administration of Sentences) Act 1999 (NSW) and regulation 175 Crimes (Administration of Sentences) Regulation s 2008 (NSW). In accordance with s19AD of the Crimes Act I decline to make a Recognizance Release Order in respect of the offender since I am satisfied that such an order is not appropriate.
INTENSIVE CORRECTION ORDER
To: Justin Hugh O'Brien
Of: Victoria Street, Beaconsfield
DOB: January 1970
THE SUPREME COURT at Sydney on 14 December 2011 convicted you of:
Four offences contrary to sections 104(3)A(1) and 1311(1) Corporations Act 2001.
You are sentenced to imprisonment for 2 years, which, with your consent, will be served by way of intensive correction in the community.
While undertaking this Intensive Correction order YOU MUST:
(a) be of good behaviour and not commit any offence.
(b) report on the date fixed as the date of commencement of the sentence or on such later date as may be advised by the Commissioner, to such local office of Corrective Services NSW or other location as may be advised by the Commissioner,
(c) reside only at premises advised by a supervisor,
(d) not leave or remain out of New South Wales without the permission of the Commissioner.
(e) not leave or remain out of Australia without the permission of the Parole Authority.
(f) receive visits by a supervisor at your home at any time for any purpose connected with the administration of the order,
(g) authorise your medical practitioner, therapist or counsellor to provide to a supervisor information about yourself that is relevant to the administration of the order.
(h) submit to searches of places or things under your immediate control as directed by a supervisor,
(i) not use prohibited drugs, obtain drugs unlawfully or abuse drugs lawfully obtained.
(j) submit to breath testing, urine analysis or other medically approved test procedures for detecting alcohol or drug use, as directed by a supervisor,
(k) not possess or have in your control any firearm or other offensive weapon
(l) submit to such surveillance or monitoring (including electronic surveillance or monitoring) as a supervisor may direct, and comply with all instructions given by a supervisor in relation to the operation of surveillance or monitoring systems,
(m) not tamper with, damage or disable surveillance or monitoring equipment,
(n) comply with any direction given by a supervisor that requires you to remain at a specified place during specified hours or that otherwise restricts your movement during specified hours,
(o) undertake a minimum of 32 hours of community service work per month, as directed by a supervisor from time to time,
(p) engage in activities to address the factors associated with your offending as identified in your assessment report or that become apparent during the term of the order, as directed by a supervisor from time to time,
(q) comply with all reasonable directions of a supervisor.
This order commences on 30 January 2012.
You must attend the local office of the Corrective Services NSW at the address given below at 10am on 30 January 2012 or such other location as may be advised by the Commissioner:
Newtown District Probation and Parole Office
I understand the effect and conditions of this Order and consent to it being made.
Signature of Offender
This Order was made on 14 December 2011.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 19 March 2012