Regina v McKay

COUNSEL : Mr T. Game SC - Commonwealth Crown Mr J. de Mestre (Sol) - Offender

SOLICITORS : Commonwealth DPP - Crown John de Mestre & Co - Offender

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION CRIMINAL LIST

1 HIS HONOUR: Margot Olive McKay ("the offender") pleaded guilty before me at an arraignment hearing on 2 February 2007 to three counts in an indictment. The three counts relate to insider-trading offences under ss 1043A(1) and 1311(1)(a) of the Corporations Act 2001 ("the Act"). 2 The first count asserted that the offender procured her mother Cecelia Agnes McKay to acquire 8,000 ordinary shares in Aristocrat Leisure Limited. The second count asserts that the offender procured her son Nicholas Peter McKay to acquire 8,000 shares in Aristocrat Leisure Limited. The third and final count asserts that she procured her mother, her son and a friend (Jennifer Holt) to acquire 7,650 ordinary shares in Aristocrat Leisure Limited. In relation to this count, her son acquired 2,000 shares; her mother acquired 5,000 shares and Jennifer Holt acquired 650 shares in Aristocrat Leisure Limited. 3 A chronology which has been placed before me (sentence Exhibit 4) demonstrates the offender had agreed to plead guilty to these matters at a time prior to the precise formulation of the charges and the issue of court attendance notices. The offender has at all times adhered to this arrangement and in fact entered pleas of guilty, as I have said, at the first Supreme Court arraignment held on 2 February 2007. 4 Submissions on sentence were taken on 16 and 23 March 2007. Mr Game SC appeared for the Commonwealth Crown on the hearing of the plea. Mr John de Mestre appeared for the offender. 5 As might be expected, the facts in the matter are quite detailed and relatively complex. The parties placed before me a helpful document entitled "Crown Statement of Facts" and I have used it as the basis of the facts I have found in relation to the sentence to be imposed. The document had a number of annexures and I have endeavoured to summarise the material in those annexures in these reasons. The statement also referred to a considerable number of exhibits. I have not sought to include those exhibits in the statement of facts I have found but they are of course, in evidence as part of the relevant sentence exhibit, Exhibit "A". I have examined and taken into account each of those exhibits. 6 Finally, I have endeavoured, in assessing the relevant facts, to take into account any qualifications agreed to between the parties and mentioned during the taking of oral submissions. With these qualifications in mind, I now turn to make findings of facts.

Findings of Fact in relation to the offender's background, her work with Aristocrat Leisure Limited and the dealings in the shares of Aristocrat in August and October 2004. 7 Margot Olive McKay ("the Offender") (dob: 16 December 1950) was until recently, when she sold her home, a resident of 15 Nelson Road, Lindfield, NSW. The Offender has two children, Nicholas Peter McKay ("Nicholas McKay") (dob: 27 June 1983) and Georgia McKay (dob: 5 August 1985) and has an aged mother Cecilia Agnes McKay ("Cecilia McKay") (dob: 28 April 1919). The offender now lives in a retirement village at St Ives next to her mother. 8 The Offender holds a Bachelor of Arts (Psych) degree awarded by the University of Queensland in 1972. She was admitted to the Solicitors Admission Board in 1994 and holds a Certificate in Industrial Relations from Sydney Technical College. She was a member of the Australian Institute of Company Directors and a member of the Public Relations Institute of Australia. 9 The Offender commenced employment in 1973 and has worked as both an employee and consultant for a number of large private and public companies. The Offender has held roles as a management trainee, director, manager and Head of Department in areas such as employee relations, human resources, communications/media, government/regulatory and public affairs. [Exhibit 1, S01498659]. 10 On 27 July 1993, a General Power of Attorney was executed in the Offender's favour by her mother, Cecilia McKay [Exhibit 2, S01091253]. This General Power of Attorney contained no limitations or restrictions. 11 In 2003 the Offender established a business "Margot McKay trading as Margot McKay & Associates" ("MMA"), which acted as a media consultancy to a number of public and private Australian companies. She was the principal of this business. MMA had a brochure detailing the services provided [Exhibit 3, S01091391].

Aristocrat Leisure Limited 12 Aristocrat Leisure Limited ("Aristocrat") was registered in New South Wales in 1992, and is a public company listed on Australian Stock Exchange Limited ("ASX"). Its principal activity is the manufacture and distribution of gaming machines.

The Offender at Aristocrat 13 In the period June 2003 to December 2004, the Offender provided services through MMA, to Aristocrat, as a Media Relations Consultant. She worked from Aristocrat's Sydney office. She was appointed by David Creary, Aristocrat's then acting Chief Executive Officer ("CEO"). In July 2003, the Offender executed a non-disclosure agreement with Aristocrat's wholly owned subsidiary Aristocrat Technologies Australia Pty Ltd ("ATA") on behalf of MMA [Exhibit 4, S01468722]. This agreement set outs the terms and conditions of MMA's relationship with ATA and provided MMA's access to confidential and proprietary information of ATA and members of the Aristocrat group. 14 On 23 November 2003 the Offender created a document titled "Public Affairs and Corporate Reputation Management Strategy for Aristocrat", [Exhibit 5, S01468723]. The purpose of the document was to "establish (for the Aristocrat group) a public affairs programme to manage the myriad financial, legal and reputational issues that confront it and to restore its reputation in the market and media." It states that she will assist in the preparation of company announcements (including ASX releases), reviewing annual, operational and financial reports relating to the group's activities, organizing interviews for key personnel, reviewing internal communications procedures and responding to media enquiries. On 12 January 2004 she then provided a Corporate Communications Strategy Plan to Simon Kelly, Chief Financial Officer at Aristocrat [Exhibit 6, S01468771]. 15 As part of her role with Aristocrat, between June 2003 and December 2004 the Offender attended meetings, had telephone and e-mail discussions and corresponded with various senior Aristocrat Company officers and staff. She had direct access to, and worked closely, with the CEO and Managing Director Paul Oneile ("Oneile"), Company Secretary John Carr-Gregg ("Carr-Gregg"), Chief Financial Officer Simon Kelly ("Kelly"), Communications Manager Alan Jury ("Jury") and also regularly worked with the Group General Manager Commercial and Legal, Bruce Yahl ("Yahl"), the Chairman John Pascoe ("Pascoe"), Non Executive Chairman and director David Simpson ("Simpson"), Group Risk and Audit Manager Nicholas Khin ("Khin") and Company Secretary Frank Bush ("Bush"). 16 In the course of her business and personal affairs, the Offender used and maintained both a laptop computer supplied by Aristocrat and a personal laptop computer. The Offender was the only person to use these computers and did not provide access to anyone else. The Offender used the Internet to conduct both her personal and business activities. The Offender had a private e-mail address being margotmckay@optusnet.com.au and an Aristocrat e-mail address, being margot.mckay@ali.com.au. She was able to access both of these addresses from home. It was the Offender's general practice to review any communications sent to her e-mail accounts on a daily basis.

Trading in Aristocrat Shares 17 In April 2000 the Offender opened a share trading account with Commonwealth Securities Limited ("Commsec") [Exhibit 7, S01091250]. Her account number was 581419. Instructions to deal in securities on this account could be made on the Internet, by telephone or in writing. No one else had authority to act on the Offender's behalf. All instructions to deal in securities in this account were made by the Offender. 18 In September 2002 the Offender caused to be opened a Commsec share trading account for her mother, numbered 2073691. The purpose of this account was to allow the Offender to trade securities on ASX on behalf of her mother after consultation with her mother. The Offender completed the application form, providing her own address as the postal address and her own mobile and home number and e-mail address as the contact details. This ensured that all contact with Commsec in relation to the operation of this account would be with the Offender and any correspondence would be sent to the Offender. 19 While the Offender's mother did sign the application form, the Offender submitted the account opening form [Exhibit 8, S01091249] with a covering letter [Exhibit 9, S01091254] and a copy of the General Power of Attorney [Exhibit 2]. Cecilia McKay gave authority for the Offender to operate this account. Instructions to deal in securities on this account could be made by the Internet, telephone or in writing. All instructions to Commsec to deal in securities on this account were made by the Offender. This followed consultation with the Offender's mother as to the stock to purchase and on some occasions the quantity of stock but not as to the timing or price of the stock to acquire. 20 On 27 July 2004 the Offender caused her son, Nicholas McKay, to apply for a Commsec share trading account. This account was numbered 2174025 [Exhibit 10, S01152043]. The purpose of this account was for her son to deal in securities listed on ASX. The Offender completed the majority of the account opening form and it was then signed by Nicholas McKay. Instructions to deal on this account were made by the Offender initially and then by Nicholas McKay. 21 In the period 10 August 2004 to 26 October 2004 ("the Relevant Period") the Offender caused orders to be placed to acquire Aristocrat shares on behalf of others as follows:

(a) At 11.59.23 on 10 August 2004, she placed an order by way of the Internet to acquire 8,000 Aristocrat shares on the Commsec account of Cecilia McKay, account number 2073691. This was then executed at 10.43.16 am on 11 August 2004 (Count 1 on the indictment);

(b) At 10.25.43 am on 20 August 2004, she placed an order by way of the Internet to acquire 8,000 Aristocrat shares on the Commsec account of Nicholas McKay, account number 2174025. This was then executed at 2.55.51 pm on 20 August 2004 (Count 2 on the indictment); and

(c) At 2.44.16 pm on 26 October 2004, she placed an order by way of the Internet to acquire 5,000 Aristocrat shares on the Commsec account of Cecilia McKay, account number 2073691. This order was then executed at 2.45.36 pm on the same day. She also caused Nicholas McKay to acquire 2,000 Aristocrat shares through his Commsec account, account number 2174025 and a personal friend and business associate, Jennifer Holt to acquire 650 Aristocrat shares through Macquarie Equities Limited on 26 October 2004 (Count 3 on the indictment). 22 Annexure 1 records the orders placed of Aristocrat shares by the Offender or caused to be placed by the Offender. The contract notes for these acquisitions are at Exhibit 11, being S01489746, S01494022, S01494052, S01489742 and S01091453. Cecilia McKay and Nicholas McKay acquired Aristocrat shares in the relevant period. The Offender and Cecilia McKay acquired Aristocrat shares during other periods that are not covered by the particulars. The Offender acquired Aristocrat shares prior to and after Aristocrat made announcements to the market. 23 The majority of the shares acquired as detailed at paragraph 21(a) - (c) were sold subsequently. Annexure 2 records the disposals caused by the Offender, Nicholas McKay and Jennifer Holt of the shares referred to in paragraph 21(a) - (c). The contract notes for these disposals are at Exhibit 12, being [S01494049, S01489744, S01494050, S01494051, S01091454]. The amounts shown in Annexure 2 are net amounts after payment of brokerage and goods and services tax. The total acquisition costs were $148,159. The net profit realized for shares sold at this stage stands at approximately $70,000. 24 The Offender maintained trading documentation in relation to the share trading conducted on the accounts of herself, Cecilia McKay, Nicholas McKay, and Georgia McKay. From these documents the Offender maintained spreadsheets of all share acquisitions and disposals conducted on her own account [Exhibit 13, S01091413 and Exhibit 14, S01091414] and those of Nicholas McKay [Exhibit 15, S01091681 and Exhibit 16, S01091682] and Georgia McKay [Exhibit 17, S01091683] and the McKay Super Fund [Exhibit 18, S01091684]. There is only a spreadsheet maintained by the Offender relating to the sale of shares by Cecilia McKay [Exhibit 19, S01091680].

Funding of Aristocrat Share Acquisitions 25 The Offender was responsible for causing and co-ordinating payment on 12 August 2004 for the acquisition of Aristocrat shares, the subject of particular 1 at para 21(a) and payments the subject of particulars 2 - 3 para 21(b) - (c) in relation to the accounts of Nicholas and Cecilia McKay. This is shown in the attached Annexure 3. The funds for the acquisitions of Aristocrat shares which are the subjects of counts 1 and 2 came from the Offender's own accounts. The bank statements that reflect the funding of the acquisition of these shares are at Exhibit 20 [S01091432, S01489729, S01091440 and S01091471] and the receipt of funds for the majority of the disposal of the shares are shown at Exhibit 21 [S01489726, SBC304066 and S01494047]. In the first instance Cecelia McKay received the entirety of the proceeds of the disposal of the 8,000 shares acquired by her on 11 August 2004 (count 1). The Offender then received from Cecelia McKay the majority of the proceeds of the disposal of those shares - see Exhibit 21 [S01489726 and SBC304066] and Exhibit 19.

The Information in relation to trading in Aristocrat shares on 10 August 2004 26 On 10 August 2004, at the time the Offender placed an order to acquire 8,000 shares in Aristocrat on the account of Cecilia McKay, and until the execution of this order on 11 August 2004 (referred to in paragraph 21(a), she possessed the following information ("Information 1"): As at 30 June 2004 Aristocrat's half yearly figures for: i. profit after tax was $63.3m, up from a $32.9m loss for the corresponding previous period; ii. revenue was $525.6m, up 33.9%; iii. net debt at the period end fell to $10.9m and compared to $257.2m at the same time last year; and iv. cash flow had increased to $90.2m from $33m. 27 The Offender obtained Information 1 as a result of a series of confidential communications, both oral and e-mail, with officers and employees of Aristocrat. From Mid July 2004 through August 2004 the Offender was actively involved in drafting and commenting on Aristocrat's draft half-year reports and draft slide presentations for the half-year results presentation. On 9 August 2004 the Offender received an e-mail marked "MARKET SENSITIVE" [Exhibit 22, S01091436] attaching a draft Aristocrat half yearly report for the six months ended 30 June 2004 (Draft 10) [Exhibit 23, S01091437]. This contained Information 1. 28 On 23 August 2004 Aristocrat shares closed at $5.28. At 8.29 am on 24 August 2004, Aristocrat issued a market announcement entitled " Aristocrat Leisure Limited Announces 2004 First Half Year Results, Full Year Outlook and Share Buy Back " [Exhibit 24, S01091467]. This contained Information 1. Following the release of the announcement on 24 August 2004, Aristocrat shares closed at $6.29 that day, an increase of $1.01 or 16% on the previous days close. The Offender was identified on Exhibit 24 as the point of contact for media inquiries.

The Information in relation to trading in Aristocrat shares on 20 August 2004 29 On 20 August 2004, at the time the Offender placed the order to acquire 8,000 shares in Aristocrat on the account of Nicholas McKay, and when this order was executed later that afternoon (referred to in paragraph 15(b)), she possessed the following information ("Information 2"): As at 30 June 2004, Aristocrat's half yearly figures for: i. profit after tax was $63.3m, up from a $32.9m loss for the corresponding previous period; ii. net debt at the period end fell to $10.9m and compared to $257.2m at the same time last year; and iii. cash flow had increased to $90.2m from $33m; and iv. forecast full year guidance for Earnings before Interest and Tax was between $110 - $130m. 30 The Offender obtained Information 2 as a result of a series of confidential communications, both oral and e-mail, with officers and employees of Aristocrat. Throughout August 2004 the Offender was actively involved in drafting and commenting on Aristocrat's draft half-year reports, draft question and answer papers for the half-year results presentation and draft announcements to the market. On 16 August 2004, the Offender sent an email to Mr Carr-Gregg [Exhibit 25(a), S01494237] which referred to the inclusion of item (iv) of Information 2 in the draft press release. On 20 August 2004, the Offender sent to Messrs Kelly and Oneile an email [Exhibit 25, S01489880] attaching a draft press release [Exhibit 26, S01489881]. This contained Information 2. Later on 20 August 2004, the Offender received an e-mail [Exhibit 27, S01489982] attaching a revised draft of the Half Year Report Draft 12 as approved by the Audit Committee [Exhibit 28, S01489983]. This document was marked "MARKET SENSITIVE AND CONFIDENTIAL". 31 On 23 August 2004 Aristocrat shares closed at $5.28. At 8.29 am on 24 August 2004, Aristocrat issued a market announcement entitled "Aristocrat Leisure Limited Announces 2004 First Half Year Results, Full Year Outlook and Share Buy Back" [Exhibit 24]. This contained Information 2. Following the release of the update on 24 August 2004, Aristocrat shares closed at $6.29, an increase of $1.01 or 16% on the previous day's close. The Offender was identified on Exhibit 28 as the point of contact for media inquiries.

The Information in relation to trading in Aristocrat shares on 26 October 2004 32 On 26 October 2004, at the time the Offender placed the order to acquire 5,000 shares in Aristocrat on the account of Cecilia McKay, until the time the order was executed later that day (referred to in paragraph 15(c)), she possessed the following information ("Information 3"): Subject to confirmation of final figures and board approval, there was to be a revised forecast upwards of Aristocrat's full year profit after tax forecast for the year ended 31 December 2004.

33 The Offender obtained Information 3 as a result of a series of confidential communications, both oral and e-mail, with Kelly of Aristocrat. On 25 October 2004, the Offender received an e-mail, from Kelly entitled "Draft Announcement". [Exhibit 29, S01468738]. This attached a draft announcement entitled "Aristocrat Leisure Limited Full Year Trading Update" [Exhibit 30, S01468739]. That evening the Offender then sent an e-mail to Kelly requesting that they discuss Exhibit 29 and 30 in the morning [Exhibit 31, S01494238]. At 11.36 am on 26 October 2004 the Offender sent a further e-mail [Exhibit 32, S01494239] attaching an updated version of the revised draft-trading announcement. [Exhibit 33, 01494253]. 34 On 26 October 2004, the Offender caused Nicholas McKay to acquire Aristocrat shares. In a conversation with Nicholas McKay, the Offender told Nicholas McKay that it would be a good idea for him to buy Aristocrat shares. On that day he then placed an order by telephone with Commsec to acquire 2,000 Aristocrat shares, which was executed that day. 35 At 3.27 pm on 26 October 2003 the Offender contacted Jennifer Holt by telephone and said words to the following effect: "If you had ever thought about buying Aristocrat shares, now would be a good time." Jennifer Holt then telephoned Macquarie Equities and placed an order to acquire 650 Aristocrat shares, which was executed that afternoon. 36 On 26 October 2004, Aristocrat shares closed at $7.53. At 8.47 am on 27 October 2004, Aristocrat issued a market announcement entitled "Aristocrat Leisure Limited Full Year Trading Update" [Exhibit 34, S01091677]. This contained Information 3. The Aristocrat share price closed at $8.30 on 27 October, an increase of $0.77 or 10.7% on the previous days close. The Offender was identified on Exhibit 34 as the point of contact for media inquiries.

The Offender's Knowledge 37 The Offender assisted in the drafting and proof reading of parts of Aristocrat's Annual Report for year end 31/12/2003. This public document sets out the Aristocrat group's policies as regards fiduciary duties, confidentiality, disclosure and insider-trading [Exhibit 35, S01091678]. On page 34 it states: "Ethical standards and code of ethics

...The Code imposes on all Directors, employees and consultants, the following duties being:

(h) not disclose information or documents relating to the Group or its businesses other than as required by the law, not to make any public comment on the Group's affairs and not to misuse any information about the Group or its associates." 38 Through her work experience the Offender developed a good understanding of the role of companies listed on ASX, in terms of their financial and fiduciary reporting requirements, the issue and release of company announcements on ASX and the movements of company share prices as quoted on ASX. The Offender had completed an ASX course on warrants and options, and had subscribed to online and print share trading advice services. 39 Through her personal financial dealings and investments, the Offender developed a good understanding of the practices of the Australian stock market in respect of the issue, acquisition and disposal of shares listed on ASX. By the time of her appointment with the Aristocrat group of companies in June 2003 the Offender was familiar with the acquisition and disposal of shares and other securities on ASX, actively utilising Internet sites such as Commsec to monitor share price movements, as well as to execute orders for the acquisition and disposal of shares and securities. 40 Prior to the Offender's appointment, Aristocrat issued a document effective 9 December 2002 entitled "Share Trading Transactions Including Incomplete Sell Orders". This detailed Aristocrat's policy in relation to buying and selling of Aristocrat shares [Exhibit 36, S01091446]. There is no reason to suppose that the offender, during her employment with Aristocrat was unaware of this policy.

Subjective circumstances 41 The offender comes before the Court with a compelling subjective case. The offender is 56 years of age. Although she was born in Sydney, she was raised primarily in Brisbane following her family's move there at the time she was eight. She comes from a close knit and solid family environment. The offender completed her University Degree in Brisbane and then returned to Sydney where she married her husband Peter in 1981. There are two children of the marriage, Nicholas and Georgia. They are now approximately 24 and 22 years of age. The offender's mother, who is aged 88 years, is not in good health and lives at Fernbank Retirement Village at St Ives. 42 The offender's husband died suddenly in 1990. This meant that the offender had to bring up her two children alone, although she had the support of her parents who moved from Queensland to Sydney. This significant change in her life situation meant that she had to undertake full time work to support her children and in fact, she worked fulltime up until her diagnosis with Chronic Fatigue Syndrome in 1997. I have described in general terms the ambit and scope of her professional work in the earlier factual findings. The extent of the offender's illness required her to give up work for approximately two years until she was able to return to work part-time in her media consultancy business. This was a very successful business and it appears that she earned a considerable income from it. It is clear that she was well regarded by all the institutions she worked for and was, generally, very well regarded in the community both as a mother, a friend and a businesswoman. She actively helped promote the objects and activities of the Alison Hunter Memorial Foundation on a pro bono basis. This foundation was instituted to conduct research into the disease known as Chronic Fatigue Syndrome. There are references from Mr Martin Boyle of the ABN AMRO Bank and Christine Hunter AM of the Alison Hunter Memorial Foundation. These speak highly of her integrity, her devotion to her family and her outstanding professional status as a businesswoman. In addition, Dr George Peponis gave evidence of the assistance that she gave to the Bulldogs Club in early 2004 at the height of the "infamous" Bulldogs scandal. There are other matters of a praise worthy nature detailed in the pre-sentence report prepared by Mr Gavin McDonald, the Probation and Parole officer of the Chatswood District Office. 43 All these testimonials paint a picture of a person of the highest integrity. All assert that her actions in breaching the insider-trading provisions of the Corporations Act 2001 were totally out of character. They also confirm the fact that she has expressed, on numerous occasions, deep regret and genuine heartfelt remorse for her lapse of judgment. 44 The next matter that requires examination is the personal impact the offending and its aftermath have had on the offender. The Court has been provided with a statement of financial affairs as at 19 March 2007. In a Statutory Declaration tendered by consent (sentence Exhibit 6), Mrs McKay confirms the veracity of the statement of financial affairs. In addition, she has stated that she has been in receipt of a disability pension, which pays her $7,634.40 gross per month. This disability pension will finish in July 2008, unless her health improves. The financial statement indicates that the offender is relatively well off in asset terms, but she had been constrained to sell the family home at Nelson Road, Lindfield as a consequence of the situation which has emerged since the offences were detected. In fact, she now lives in a unit at Fernbank Village near her mother. A principal reason appears to be the need for her to look after her mother and attend to her physical, mental and other needs. There is also the factor of her own declining health, which I shall shortly examine in detail. 45 It is clear that the disgrace and adverse publicity associated with the public revelation of the offences has had a very substantial effect on the offender both professionally and personally. It has really meant the end of her career as a company consultant, at least for the time being. At a personal level, as might be expected, she has experienced considerable shame and loss of face. There was a reasonable degree of publicity in the newspapers and other media arising from the commission of the offences. This publicity principally occurred in November 2006 when the charges first came before the New South Wales court system. No doubt, there will be further adverse publicity in relation to these sentencing proceedings. In addition, the offender has been subjected to considerable stress and uncertainty as to her future, arising out of the fact that she must await the outcome of these sentence proceedings before knowing her ultimate fate. 46 It is necessary now to examine the material relating to the current state of the offender's health. There is a report from Dr Richard Schoefell, a medical practitioner from Gordon. First, the medical report confirms the continued presence of the Chronic Fatigue Syndrome. Secondly, the offender has now been diagnosed with Meniere's disease. The main characteristic of this disease is persistent and severe vertigo, often associated with constant nausea, progressive tinnitus and deafness. The latter is occurring particularly in the offender's left ear but involves both ears to a degree. Dr Schoefell says this condition has led to Mrs McKay losing a fair degree of her confidence, having frequent falls and aggravating her ongoing chronic depression and Chronic Fatigue Syndrome. She is on a salt and fluid restricted diet and is taking regular medication to control the nausea and vertigo. Notwithstanding, she does experience uncontrollable vomiting on occasions, which is aggravated by excessive movement, and lying down. 47 In addition to these problems, the offender has also developed bursitis in the right hip with constant pain radiating into her back and down her right leg. A recent x-ray of her pelvis and hip has shown marked arthritis developing in her right hip joint. She has been commenced on anti-inflammatory medication and has been receiving acupuncture and cortisone injections for this medical condition. 48 As a consequence of other prescribed medication, the offender's sleep pattern has improved in recent times and she is taking anti-depressant tablets as well. 49 Dr Schoefell's conclusion was that the offender is progressively deteriorating in health, more so than would normally be expected for someone of her age. Her medical condition is one of the reasons that has led her to move into the retirement village unit. 50 In the pre-sentence report, there is also mention of these medical issues, primarily based on earlier reports from Dr Schoefell. I have not been provided with these earlier reports. The pre-sentence report notes that, in a report dated 3 February 2005, Dr Schoefell had expressed the opinion that her mental state, derived from the Chronic Fatigue Syndrome, may have been a major factor in the exercise of her judgment to procure the purchase of the shares in Aristocrat Leisure Limited in 2004. It appears that the offender has also described to the Probation and Parole office that, while she did not seek to diminish her responsibility for the offending, she believed that her thinking had been compromised and that overall fatigue caused by her CFS may have contributed to her misjudgement. She also told the probation officer that she had grown despondent and disillusioned with the Aristocrat Company, in particular in relation to the attitude of certain individuals within the company towards people who had extreme gambling problems. This despondency gained more force from the fact that, at the same time, her son had been experiencing severe financial problems associated with his gambling addiction. In fact, her son had originally inherited a large sum of money from the estate of his deceased grandfather. The offender had transferred the balance of this inheritance to her account as a protective measure, due to Nicholas dissipating the inheritance, as a consequence of addictive gambling. 51 It appears that the offender also explained to Mr McDonald that the advice she had given to Mrs Holt to purchase Aristocrat shares followed Mrs Holt's recent loss of employment. So far as her mother was concerned, the investment was in part the result of her mother's diminished financial situation. I should add that it is also been agreed for the purpose of this sentencing process that I may take into account that it was in possible contemplation, so far as the first count is concerned, that the beneficiary of the profits might be the offender's daughter Georgia. 52 There are a number of other matters to be briefly noted. First, the offender has clearly expressed remorse and contrition. That appears from all the material I have read. This I accept is quite genuine. Secondly, the exposure and adverse publicity have had a very substantial effect on her financial position, her ability to resume her work in the business world and on her health. Thirdly, the offender has pleaded guilty at the first opportunity. Exhibit 4 makes it clear that one outcome of the protracted negotiations between the offender's lawyers and ASIC was that the offender indicated her willingness to plead to the charges that would be brought against her shortly before those charges were in fact laid. She has adhered to this decision and has pleaded at the first and earliest opportunity. Fourthly, the offender has consented to an order pursuant to the Proceeds of Crimes Act that $77,428 be paid. This order was made on 23 March 2007. It is my understanding that the amount involved has now been paid. The authorities establish that payment of a pecuniary penalty order under the legislation may be taken into account by a sentencing court as a sign of the willingness of the offender to assist. It is my further understanding that the amount in question equates to the profit that was, or would have been made, in relation to the shares purchased in August and October 2004.

Objective criminality 53 The Crown has submitted that the objective criminality in relation to the commission of the subject offences is at a serious level. This is because, according to the Crown's submission, the inevitable inference from the facts found demonstrate that the offences were committed deliberately; were committed by a true insider, and in circumstances where the offender knew that she was acting contrary to the law. 54 Mr de Mestre, who has appeared for the offender in these proceedings, has not seriously argued to the contrary. However, Mr de Mestre has suggested a number of matters, which he argues might mitigate the objective criminality involved. First, Mr de Mestre has submitted that the amount involved in the transactions was not an excessively large amount and that it is this amount, rather than the profit realised, which is the true indicator of the level of criminality. Secondly, unlike, for example, the Rivkin case, Mrs McKay was not an experienced stockbroker or trader in shares. In addition, she was not a Director of Aristocrat. Thirdly, so far as the first count is concerned, it was in possible contemplation that the ultimate beneficiary might be her daughter Georgia. In relation to the second count, the trade was clearly for the benefit of her son, not herself. Thirdly, in relation to the three trades in the third count they were essentially to help her mother, son and her friend Mrs Holt. 55 Mr de Mestre's three points do not however, significantly mitigate the objective seriousness of the offences. First, the amount ventured in the transactions was approximately $150,000. This could hardly be described as an insignificant investment. Secondly, the comparison of the offender's position with that of the late Rene Rivkin in his trial is not overly helpful. After all, as has been conceded, the offender is a true insider. Mr Rivkin was not. The fact that the offender procured five share purchases in Aristocrat Leisure Limited, the very company that had employed her since June 2003, is significant. Moreover, she was an experienced share buyer. The fact that the beneficiaries on count 2 and, in particulars 1 and 2 of count 3 were family members is of no great warrant; similarly, with count 1, where there was a possible contemplation that Georgia McKay might be the ultimate beneficiary. In all three instances, the position is similar to the offender receiving the benefits of the trades herself (R v Holt No 2 (2005) NSWSC 890 at para (86)). 56 The three offences must be regarded as serious. The offender stood in a special position in relation to Aristocrat Leisure Limited. As the facts indicated, she was employed as a Media Relations Consultant to the company from June 2003. In this position, she came into possession of important confidential information, including proposed company announcements and draft financial reports. It was her task to be actively involved in drafting and commenting on such documents and preparing press releases about them. Since the offender came into the possession of the information in the three counts in that capacity, she was, as I have said, a true "insider" (R v Rivkin (2004) NSWCCA 7 at (414); R v Doff (2005) NSWCCA 50 at (29)). Secondly, the offending took place over a period of two and a half months, involving three offences and the procuring of five share purchases. It must be accepted, in these circumstances, that the offender acted with deliberation knowing, in each case, that the information was not generally available and was material. 57 That this is the situation is further demonstrated by the awareness the offender must have possessed as to her obligations of confidentiality in respect of Aristocrat, both generally and in relation to share trading. The offender executed a non-disclosure agreement on behalf of herself and "Margot McKay and Associates" on 23 June 2003. Secondly, she assisted in the drafting and proof reading of Aristocrat's Annual Report for the year ended 31 December 2003. It includes a section entitled "Corporate Governance Policies…trading in company Shares". This expressly states the policy of the company in relation to trade in Aristocrat shares. Of course, the offender was not a senior executive but was rather a consultant. Even so, it could not be said that she was unaware of this policy. 58 Thirdly, the offender is highly intelligent, well qualified and very experienced in business matters. She is, for example, experienced in share trading, as the facts I have earlier recounted demonstrate. 59 For all these reasons, I accept the Crown submission that the objective criminality in relation to the commission of the subject offences must be regarded as at a serious level. The offences were committed deliberately and in circumstances where the offender must have known that she was acting contrary to the law. While I accept that her medical condition at the time may have played some part in the decision she made, as did her disillusionment with the company and her concerns for her son, I do not consider that these in, any substantial way, mitigate the objective seriousness of the offences.

The importance of general deterrence 60 The offence of insider-trading is a serious criminal offence. It has the capacity to undermine to a serious degree the integrity of the market in public securities. (R v Rivkin [2004] 59 NSWLR 284; R v Doff [2005] NSWCCA 119; R v Frawley [2005] NSWSC 585). 61 White-collar crimes including insider-trading offences, call especially for elements of personal and general deterrence (R v Pantano (1990) 49 A Crim R 328 at 330). 62 There is little scope, however, for the role of personal deterrence in the present matter. The offender's remorse and contrition, her early plea and the other matters I have identified make it unlikely in the extreme that the offender will commit offences of this type again. That this is so does not, however, obviate the need to impose a sentence that will provide a strong incentive to deter others from offending in this way.

The sentence to be imposed - considerations arising under the Crimes Act 1914 (Cth) 63 Section 16A(2) of the Crimes Act (Cth) provides "a check list" of the matters which the Court must take into account in the sentencing of Federal offenders. There is no need for me to set these out in detail since I have given consideration to the majority of the relevant matters in specific terms in these remarks on sentence. In particular, I have given consideration to the fact that the offender has shown remorse and contrition; has pleaded guilty to the charges at the earliest opportunity, and has co-operated with the law enforcement agencies during the investigation. I have accepted that the offender is rehabilitated and is unlikely to offend again. 64 As to the fact that the offender has no prior convictions and has led an unblemished life both professionally and personally, it has been said that good character is not as significant a mitigating factor in sentencing for white collar crimes as it is for other offences (R v El Rashid unreported Court of Criminal Appeal 7 April 1995). Although this is undoubtedly the case, it does not mean that the Court should lose sight of the good character of an offender, which nevertheless, remains a relevant factor in the sentencing process. 65 Section 17A of the Crimes Act 1914 provides that a Court should not pass a sentence of imprisonment in respect of a Federal offence unless the Court, having considered all other available sentences, is satisfied that no other sentence is appropriate in the circumstances. In this regard, Mr de Mestre submitted that the Court should impose a Community Service Order and a fine. While it is true that the offender has a compelling subjective case, the fact remains that these offences were objectively serious and were committed deliberately in the knowledge that they were breaches of the insider-trading provisions. Because of this seriousness, and the need to stress general deterrence in crimes of this kind, I am satisfied that a Community Service Order would be quite inadequate to deal with the matter. It is, I regret to say, my clear view that a custodial sentence of one kind or another is the only warranted outcome in the present matter. 66 There are of course a number of matters, which require a considerable degree of discernment relevant to the appropriate term to be imposed and as to the determination of the nature of the custodial sentence to be imposed. There is, first, the fact of the plea entered by the offender. The circumstances I have earlier described indicate that the offender is entitled to a reasonably generous discount for the utilitarian value of her plea and the fact that it represents a willingness to facilitate the course of justice. (Cameron v The Queen [2002] 209 CLR 339 at [13-14]; R v N P [2003] NSWCCA 195 at 25-27). The range of discount available for an early plea in relation to a State offence is discussed in R v Thomson & Houlton [2000] 49 NSWLR 383. Although that range was not expressed as applying to Commonwealth offences, it appears to me to be a reasonable approach to adopt the range in this matter (R v Bugeja [9(2001] NSWCCA 196 per Hodgson JA (with whom James and Adams JJ agreed on this point) at [28]. See also R v Simon [2003] 142 A Cr R 166 and R v Otto [2005] 157 A Crim R 525. I consider that the offender is entitled to a discount of 25% in relation to the sentence to be imposed on each of the three charges. 67 I have also made reference to the fact that the offender has paid $77,428 following an order made pursuant to the Proceeds of Crimes Act 2002. This is an appropriate case to find that the making of the consent order and the payment of the penalty show a further willingness to facilitate the course of justice in a matter connected to the offence. In addition, the payment may be seen to be further evidence of contrition and co-operation. 68 Both the Crown and Mr de Mestre agree that this is a finely balanced matter. It is, for that reason, a difficult discretionary decision to make. Having considered all the matters and the submissions made to me, I have come to the conclusion that, in relation to the first offence, an appropriate sentence, after discount for plea, is fixed term of imprisonment for nine months. In relation to the second offence, again a fixed term of imprisonment for nine months, after allowance for the plea, is appropriate. These two sentences, in my view should be served concurrently. 69 In relation to the third offence, I consider that an appropriate penalty, after allowance for plea, is a fixed term of 12 months. This sentence however, should be served partly concurrently and partly cumulatively with the earlier sentences. This is to reflect the fact that it was the third offence and occurred at a somewhat later time than the earlier two offences. In addition, there were three trades made in the third charge. It will be sufficient if the sentence for the third offence commences in three month's time. The overall effective length of the fixed term sentences will be 15 months. 70 There is no need to impose a fine in the present matter. Indeed, the Crown does not suggest that a fine be imposed. In view of the offender's good record and her undoubted rehabilitation, there is no need to make a Recognizance Release Order. 71 I should make it clear that the fixed term in each case is the equivalent of the non-parole period that would have been imposed, had a Recognizance Release Order been necessary. 72 The one remaining matter, and a critical matter, does require a careful level of consideration. This relates to the decision as to whether any of the available alternatives to full-time imprisonment should be utilised in the circumstances of this matter. 73 I have first given consideration as to whether the sentences to be imposed should be suspended. I have concluded, however, that the imposition of suspended sentences would send an inadequate message to the business and share trading community. It would not only give the appearance of inadequacy, it would, in fact, be totally inadequate. As I have observed in other matters, the real bite of general deterrence occurs only where an actual custodial sentence is imposed (see Howie J in R v Zamagias [2002] NSWCCA 17 at paras 29 to 32; and R v Boulden [2006] NSWSC 1274 at para 51 per Whealy J). In addition, there would be little achieved by the suspension of sentences in the present matter. The offender is fully rehabilitated and will not offend again. That consideration provides an additional reason why suspended sentences are not appropriate in the present matter. 74 The task that remains is to determine whether full-time imprisonment is appropriate or whether Periodic Detention may be the more appropriate. 75 One complication in relation to this issue arises out of the form of the report provided by the Department of Corrective Services Chatswood Branch on 15 March 2007. In that report Mr McDonald, the Parole officer said: - "The offender is eligible but has been assessed as unsuitable for a Periodic Detention Order as per the requirements of s 66(1) of the Crimes (Sentencing Procedure) Act 1999 and s 65A ands 65B of the Crimes Legislation Amendment (Periodic and Home Detention) Act 2002 . The reasons for unsuitability are as follows: on the advice of Mrs McKay's doctor, her symptoms, associated with Chronic Fatigue Syndrome and Meniere's disease would be exacerbated by the psychological stress associated with the experience of incarceration." 76 I expressed concern at this statement in Mr McDonald's report during the sentencing hearing. I asked for a supplementary report and this was provided on 23 March 2007. The supplementary report was more guarded in its conclusions. The District Manager Mr John Moir states: - "Persons with life threatening illnesses are unsuitable. There is a requirement that a detainee be able to attend the centre as required and engage in light domestic duties. Detainees are locked in a cell overnight alone with only periodical supervision and need to be able to alert staff in the event of a critical situation by activating an emergency button located in the cell. Medical attention will then be arranged. While medication may stabilise illness symptoms it appears from medical documentation held by the service that the offender would be placed at risk if located overnight in a periodic detention cell. However, it is recognised that Mrs McKay's ability to function adequately under the above Periodic Detention conditions, given her medical symptoms, needs to be based on a medical assessment. An offender undertaking a full-time custodial sentence with medical issues would be housed in the gaol hospital when circumstances dictate." 77 In my opinion, this latter report recognises that the earlier statement of unsuitability for Periodic Detention arose because Mr McDonald had apparently placed reliance on material from Mr McKay's doctor. Whatever the nature of that information, it certainly has not been provided to me. I have referred earlier to Dr Schoefell's medical opinions. They do not make any comment about the position of the offender, were she to be placed in Periodic Detention. 78 I do not consider that the report from Mr McDonald, qualified as it obviously is by the District Manager's later report, paints a conclusive picture that the offender is unsuitable for Period Detention. As is correctly observed in the later report, this is really a matter for a full medical assessment and such material has not been provided to me. Based on the whole of the evidence I have considered, I do not consider that the offender is unsuitable or unqualified for Periodic Detention despite the contents of the report dated 16 March 2007. In any event, I am not bound by the statement in the 16 March report (s 66(4)(a) and (b) of the Crimes (Sentencing Procedure) Act 1999. 79 I will shortly state my reasons. First, I am satisfied that the offender meets all the criteria set out in s 66(1). Indeed, recently on 27 March 2007, the offender signed a "Periodic Detention Undertaking". (see s 66(1) and clause 14 of the 2000 Regulations). The only "qualifications" appearing on this undertaking are that the offender's medical condition "is or may be an issue" and it stated that there are "other personal circumstances" that may be an issue affecting suitability. As to the latter, no details are given. 80 Secondly, there is no suggestion in the medical evidence before me that the offender suffers any life threatening illness or for that matter a very serious illness. I accept that Chronic Fatigue Syndrome, Meniere's disease and bursitis can be, to one degree or another, very unpleasant illnesses for the patient. They are susceptible to medication however, and, were the offender to be placed in a Periodic Detention facility, I have no doubt that medical aid could be summonsed to her if she needed it. I stress, however, that there is no suggestion in any of the medical evidence placed before me that she would be at serious risk in such a facility. 81 Thirdly, there is no evidence before me to suggest that the offender's health conditions would be exacerbated "by a psychological stress associated with the experience of incarceration". Nor was any submission made to that effect by her experienced solicitor. That, it will be recalled, was the thrust of the statement in Mr McDonald's first report. It seems to me that this observation is not substantiated by any medical evidence that has been placed before me. I do not doubt that the experience of incarceration, even in a Periodic Detention Centre, would be unpleasant and stressful for the offender. The offender suffers from a degree of depression arising from her Chronic Fatigue Syndrome and no doubt the circumstances in which she presently finds herself. She is however, being satisfactorily treated for this condition by way of appropriate medication. 82 Fourthly, while the state of health of an offender is relevant to the consideration of an appropriate sentence, this does not necessarily mean that a prison sentence should not be imposed or that the sentence should be less than the circumstances of the case would otherwise require (L (unreported NSWCCA 17 June 1996 per Gleeson CJ, Badgery-Parker and Hidden JJ). The nature and level of illness are highly relevant to this issue. 83 Fifthly, I think some care should be taken in assessing the contents of the Probation and Parole Reports particularly where the author of the report appears to have acted on untested information supplied to him or her. This is especially so when that information has not been relied upon in the sentencing proceedings before the Court. I do not think Mr McDonald was qualified to express the views he did. In any event, as I have said, the later report and the signing of the undertaking seriously qualify the observation in the earlier report. 84 Sixthly, there is nothing arising from the nature of the offences committed by the offender that would render her unsuitable for Periodic Detention. Indeed, detention of this kind has been ordered in the case of other insider trader offences in recent times (Frawley); (Rivkin). 85 I regret that this rather lengthy digression has become necessary. It did so because of the need to address the complication arising out of reports furnished by the Probation and Parole Service. May I return to the main thrust of these remarks on sentence. 86 In my view, there is ample justification for selecting an alternative to full-time imprisonment in the present matter. The important aim of general deterrence will be preserved if the sentences to be served by the offender are served by way of Periodic Detention. In all the circumstances of the present offence, Periodic Detention will reflect adequately the objective seriousness of the offences and at the same time, fulfil the proper purpose of punishment. There is no doubt that in choosing this alternative to full-time custody I am selecting sentences that are more lenient than full-time custody. Nevertheless, for the reasons I have expressed, particularly those based upon the strong subjective case of the offender and issues relating to her health, Periodic Detention will reflect appropriately recognition of the objective seriousness of the offences. It will, however, attenuate the punishment so as to take account of the matters I have mentioned, especially her health and her demonstrated rehabilitation in the period between 2004 and the present time. As to her health, I have no doubt that full-time imprisonment would be a more harsh experience for the offender than Periodic Detention. I accept that there is a gaol hospital facility available for full-time prisoners. In that sense, the Periodic Detention facility may not be as well equipped. On the other hand, there would remain an obligation on the prison authorities to make sure the offender is given her prescription medicines, if she needs them. 87 Although the offender has been shown leniency in relation to the type of custodial sentence to be imposed, I intend that the sentences I am about to impose should send a clear message to those in the business and share trade community that the Court simply will not tolerate offences of this kind.

In relation to count 1, I sentence you to imprisonment for nine months commencing on 13 April 2007 and expiring on 12 January 2008.

In relation to count 2, I sentence you to imprisonment for nine months commencing on 13 April 2007 and expiring on 12 January 2008.

In relation to count 3, I sentence you to imprisonment for 12 months commencing on 13 July 2007 and expiring on 12 July 2008.

I decline to make a Recognizance Release Order. Each of the sentences is to be served by way of periodic detention.

I direct that the offender attend the Norma Parker Periodic Detention Centre, or such other Centre she may be directed to attend, by 4pm on Friday 13 April 2007 to commence serving her periodic detention. 88 Margot McKay, it is necessary for me to explain to you these sentences. I have sentenced you to three fixed terms amounting in all to 15 months. I have declined to set a Recognizance Release Order. This means that you will be required to undertake periodic detention for a period of 15 months.

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