Regina v Rodney Stephen Adler

CATCHWORDS : Criminal Law - Sentencing - white collar crime - principles - disseminating false information likely to induce purchase of securities - obtaining money etc by false or misleading statements - acting dishonestly as a director

Corporations Act 2001 (Cth) ss184 (1)(b), 997, 999 Crimes Act 1900 (NSW) s178BB LEGISLATION CITED : Crimes Act 1914 (Cth) Part 1B Crimes (Sentencing Procedure) Act 1999 (NSW)

Adler and anor v ASIC [2003] NSWCA 131, 46 ACSR 504 Adler v ASIC 28 May 2004, [2004] HCA Trans 182 Adler v Director of Public Prosecutions [2004] NSWCCA 352 Adler v The Queen [2004] HCA Trans 546 Cameron v The Queen (2002) 209 CLR 339 Director of Public Prosecutions v Bulfin [1998] 4 VR 114 Re HIH Insurance Limited (in prov liq) and anor: Australian Securities and Investments Commission v Adler and Ors [2002] NSWSC 171, 41 ACSR 72 R v Adler [2004] NSWSC 108 CASES CITED : R v Adler (19 November 2004) R v Adler (8 February 2005) R v El Rashid (CCA - 7 April 1995) R v Glenister [1980] NSWLR 597 R v Pantano (1990) 49 A Crim R 328 R v Rivkin [2004] NSWCCA 7 R v Thomson (2000) 49 NSWLR 383 R v Sharma (2002) 54 NSWLR 300

L P Robberds QC / M A Wigney - Cwlth DPP COUNSEL : E L Fullerton SC / M Buscombe - Accused

Commonwealth Director of Public Prosecutions - Crown SOLICITORS : Gilbert and Tobin Solicitors - Accused

• 20 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

SENTENCE 1 HIS HONOUR: Rodney Stephen Adler has pleaded guilty to 2 counts of disseminating information on 19 and 20 June 2000 respectively knowing it was false in a material particular and which was likely to induce the purchase by other persons of shares in HIH Insurance Limited (HIH) contrary to s 999 Corporations Act 2001 (Cth), one count of obtaining money by false or misleading statements, contrary to s 178BB Crimes Act 1900 (NSW), and one count of being intentionally dishonest and failing to discharge his duties as a director of HIH in good faith and in the best interests of that company contrary to s 184 (1)(b) Corporations Act 2001 (Cth). 2 It is important to note at the beginning of these Remarks that he has not been charged or convicted of being a director of a large public company which went broke resulting in large losses to shareholders and creditors, including a large number of insurance claimants, whose claims could not be met and others such as building owners who could not get their work done or completed because insurance for buildings ceased to be available. As he has not been charged or convicted of any of those things, he cannot be sentenced or punished for them in these proceedings. It has not been suggested, and cannot be, that the conduct alleged in these 4 counts and to which the offender has pleaded guilty caused or significantly contributed to the collapse of HIH in 2001 with debts of $5.3b. 3 Each of the offences carry a maximum penalty of imprisonment for 5 years, and/or in the case of the offences under the Corporations Act, an additional fine of $20,000. 4 In addition, ordinary sentencing principles require that the maximum penalty be reserved for the worst cases of a particular offence where there are no mitigating subjective circumstances such as prior good character; and that sentences for offences which are closely related in content or point of time should generally be made wholly or partly concurrent with each other. 5 The facts relied on by the Crown are set out in the Crown's Statement of Facts (Ex A). The offender also gave evidence in which he attempted to explain and justify, at least partially, his actions, and two of the Crown witnesses were cross-examined on his behalf. 6 Following the death of his father in 1989, the offender became Managing Director and Chief Executive of Fire and All Risks Insurance Limited (FAI) until it was taken over by HIH in 1998, after which he became a non-executive director of HIH. He was unhappy with the manner in which HIH was being run and believed he could do a better job if he were Chief Executive. 7 In June 2000, he arranged with Ray Williams, the then Chief Executive Officer of HIH for that company to lend $10m to a company of his, Drenmex Pty Limited for venture capital and share trading. He said in evidence that his object was to demonstrate that he could manage investments more successfully than those currently doing so on behalf of HIH. The arrangement was subsequently changed so that instead of the money being advanced to Drenmex, it was paid to Pacific Eagle Equities Pty Limited (PEE) of which the offender was sole director and secretary and a trust was set up, the Australian Equities Unit Trust with PEE as trustee. 8 At the time, he had a prominent media profile as a director and shareholder of HIH and as an experienced, active, successful and large scale investor with a diverse array of investment interests spread across property, retail, e-commerce, mining, insurance, financial services, biotechnology and communications. In January 2000, shares in HIH had been trading on the Stock Exchange as high as $1.49 but by 14 June they had fallen as low as $0.94 and on that day they closed at $0.95 a share. 9 On 15 June 2000, through Foster Stockbroking, the offender purchased 1,873,661 shares in HIH in the name of PEE at an average price of $1.0062. The purchase represented 38 per cent of the HIH shares traded that day on which the shares opened at $0.97 and closed at $1.02. 10 On 16 June, again on behalf of PEE, he purchased 951,339 shares at an average price of $1.0192. These purchases represented 42 per cent of the shares traded on that day on which the shares opened at $1.01 and closed at $1.03. 11 Then on 19 June, he purchased 425,000 shares at an average price of $1.018. On that day the shares opened and closed at $1.02. The funds for all of these purchases were provided by HIH Casualty and General Insurance Pty Limited, a subsidiary of HIH on 15 June 2000 (Ex 10). 12 On 7 July 2000, the Trust Deed establishing the Australian Equities Unit Trust was executed and PEE thereafter held the shares it had acquired in HIH, other investments made from the $10m, and the balance of the $10m, on the terms of the Trust Deed. 13 On 12 July, HIH Casualty and General Insurance Limited applied for 1 "B" class unit at $10m, and thus became the sole beneficiary of the Trust, subject only to 10 per cent of all distributable income for the holders of "A" class units, which it was intended would be held by the offender and represent his commission. 14 On 19 June, the offender caused a notice under s 205G of the Corporations Act to be sent to the Australian Stock Exchange Limited for the purchase of the shares on 15 June, and on 20 June, a further notice was sent relating to the purchase of 16 June. The notices did not specify who the purchaser was but merely reported that the offender being a director had a "relevant interest" in the shares purchased. 15 Following the first s 205G notice, he was contacted by Morgan Mellish, a journalist with the Australian Financial Review who assumed wrongly, but reasonably, that Adler had purchased the shares on his own behalf. The offender did nothing to correct Mr Mellish's misunderstanding but fostered and encouraged it by statements such as "I think there will be a weakness for another week or two and that will give me a chance to get some volume." 16 The following day, he read Mr Mellish's report in the Australian Financial Review headed "HIH director goes on buying spree" which stated inter alia that the offender had "topped up" his holding in the company by the purchase. However, when Mr Mellish contacted him later that day following the receipt of the second s 205G notice, he chose not to correct the inaccuracies in the article (T 84) and went even further and specifically said: "I want people to know I'm a committed insurance person. People think I sold out and I've got my money and gone. That's not true. I'm making a number of statements by buying these shares. I believe in the company. I'm putting my money up which shows I believe in the industry. I think the company can be a billion dollar company again." 17 In that conversation, he also discussed "off the record" his criticisms of the existing management of HIH including the Chief Executive, Ray Williams, and the way in which the company was being run. However, when asked by Mr Mellish whether he could be quoted on any of the conversation, he said that although what he had said about Ray Williams was completely off the record and he did not want to be quoted about anything he had said in that regard, when asked "What about you just buying shares and your commitment to the industry" he replied, "I'm happy to be quoted about that". The following day, Mr Mellish caused to be published another article, which quoted the passage I have set out above. 18 By making the statements he made on 18 and 19 June, the offender disseminated information which he knew to be false, that he had purchased shares in HIH with his own money which information was likely to induce other persons to purchase shares in HIH; hence counts 1 and 2 in the indictment. 19 Not only were the statements which he made to the journalist, and which were therefore likely to be reported, likely to induce other persons to purchase shares in HIH, but I am satisfied that such was his intention so as to cause a rise in the share price, as in fact it did, rising as high as $1.21 on 11 July 2000 before commencing its final decline. 20 The offender stood to benefit from a rise in the share price in 2 ways; firstly, successful trading through PEE on behalf of the Trust would enable him to demonstrate to Ray Williams and to the Board of HIH that he could manage the company's investments better than the current team, and thus help to position him to succeed Williams as Chief Executive, and secondly, it would increase the value of the shares in HIH held by him, including those transferred to him from his company, Adler Corporation, on 14 June 2000. He said in evidence that one of his objects in speaking to the press and making himself approachable was to position himself externally as well as internally to take over a more senior managerial role in the company (T 76); and these discussions with Mr Mellish were part of that process. 21 He claimed in evidence that he was caught unawares on 19 June when he realised that Mr Mellish was assuming that he was purchasing the shares with his own money and on his own account, but he did nothing to correct the misapprehension and having seen the article published the following day, his misrepresentation that day was more blatant and more direct in specifically asserting that he was "putting up" his own money for the purchase of the shares and authorising its publication. Not only was this statement totally untrue, but it was the type of statement most likely to induce other investors to purchase HIH shares. 22 In evidence, the offender said that he did not want to disclose at that stage that the shares were being bought with HIH's money as such disclosure would create a "false impression"; that HIH was financing the purchase of its own shares (T 82,134,135); but such disclosure (i.e. that HIH money was being used for the purchase) would not have created a "false impression" but rather a "true impression", because that was exactly what was happening. 23 As to the third count, in the latter part of the year 2000, Business Thinking Systems Pty Limited (BTS), a company in which Adler interests held an effective 35-38.5% of the share capital and HIH interests (on account of its take over of FAI) an effective interest of 15-16.5%, was desperately short of money and needed additional capital to survive. A plan to raise $8m on the open market through Foster Stockbroking had been unsuccessful and the proposal had been modified to an attempt to raise $5m, but as at 3 October 2000, that proposal had been equally unsuccessful and no money had been raised. 24 At the end of September 2000, the company had accumulated losses of $1.3m, current assets of just over $1.17m and current liabilities of over $2m. Cash flow projections indicated that to meet its current liabilities, it needed $1,455,000 without allowing for contingencies and $2,045,000 allowing for contingencies. Its cash flow difficulties were such that it was unable at all times to remain within its overdraft limit and was under pressure from its bank. The offender was the non-executive chairman of directors of BTS. 25 On 29 September 2000, the offender sent a facsimile to Ray Williams stating that BTS was in the process of raising funds through Foster Stockbroking and was $2.5m short of finalising the raising. He went on to request that HIH invest $2m and said that he would put in another $500,000 to finalise the raising. 26 This facsimile contained two statements which were materially false to the knowledge of the offender: firstly, the company was not $2.5m short of finalising the raising but, as no money had been raised, it was $5m short of the intended raising, and secondly, he had no intention of investing another $500,000. He spoke to Ray Williams apparently on the evening of 4 October and subsequently, Williams approved the investment of $2m by HIH in return for shares in BTS. 27 In the meantime, on 9 or 10 October, the offender received a letter from John Vamos, the owner of the balance of the shares in BTS acknowledging the receipt of $500,000 from Adler on the previous Friday (6 October) and on 10 October, Adler sent to Williams and to John Ballhausen (Chief Investment Officer of HIH) copies of John Vamos' letter knowing that the statement in it that he, Adler, had provided $500,000 on the previous Friday, was false. 28 The $2m from HIH was paid on 11 October and was promptly disbursed. $200,000 was paid to Westpac to bring the company's account to order for payment of wages and $400,000 was paid to retire an existing loan to Pacific Mentor Pty Limited, a part owner of BTS and in which HIH interests held 30 per cent of the shares and Adler interests held 70 per cent. In addition, following remarks made by the offender to Michael Vamos about his entitlement to a brokerage fee for obtaining the $2m, $50,000 was paid to Adler Corporation which was recorded in the books of BTS as a brokerage fee. 29 The offender subsequently realised that he was not entitled to a brokerage fee and called Mr Ballhausen and asked him to "fix it up" which the latter purported to do by re-allocating the money to what was described as a "rental bond". This was sought to be justified as a payment for past and future rent of office space occupied by BTS in the premises of Adler Corporation. The only evidence was that BTS agreed to pay rent to Adler Corporation as and when it could, but that there was no set amount agreed on either a weekly, monthly or other basis, and I am satisfied that this payment was in fact intended as a brokerage fee for the offender for organising the investment by HIH of the $2m. 30 The misrepresentations of the offender relied on by the Crown to constitute the offence charged in the third count are: 1) The statement in the facsimile to Ray Williams on 4 October that BTS had raised all but $2.5m of its fund raising when it had not raised any funds and was $5m short of its projected fund raising.

2. The statement to Ray Williams in the same facsimile that the offender or a company controlled by him would invest $500,000 in BTS if HIH invested $2m when he had no such intention.

3. The statement to John Ballhausen on 10 October 2002 in the letter from John Vamos that the offender or a company controlled by him had invested $500,000 in BTS on Friday 6 October 2000 when no such money had been paid or invested. 31 In his evidence, the offender sought to minimise his culpability in relation to this count by claiming that at his meeting with Williams on 4 October, he told him that rather than investing the $500,000 directly, he would "drip-feed" it as and when he saw fit. I reject this claim. It is inconsistent with the offender's statement to Mr Studd of Foster Stockbroking on 10 October when he specifically said that Adler Corporation "has put in $500,000" (my underlining), and is also inconsistent with him sending to Williams and Ballhausen on or about 10 October the letter from John Vamos containing the assertion that he had paid the $500,000 on the previous Friday. 32 He conceded in cross-examination that he made the false representation about his intention to contribute the $500,000 so as to improve his chances of obtaining the $2m from HIH. 33 BTS sustained a loss of $872,000 in October and by the end of November 2000, it had accumulated losses for that financial year of $2.89m. Its cash flow deficiency had deteriorated markedly and in the months leading up to and in November, it had fallen vastly short of all of its budgeted forecasts. It subsequently went into liquidation with no funds available for distribution to unsecured creditors or shareholders (Ex C).

34 The offender attended the Board meeting of HIH on 29 November 2000. At the meeting, approval was sought for the $2m investment by HIH in BTS which required ratification by the Board because there was a $500,000 investment limit on unlisted investments. He took part in the Board discussion and informed the Board that the investment in BTS was initiated two years previously and, although a director of BTS, he should not be precluded from presenting investment opportunities to HIH. 35 He provided no adverse or negative information about the investment or about the financial position of BTS, although aware that such information was relevant to the Board's deliberations. In particular, he failed to disclose specifically or generally, any of the facts previously referred to, including that he had failed to disclose to Williams the financial situation of BTS at the beginning of October, that he had misrepresented to Williams that BTS was $2m short in its fund raising proposal when it was in fact $5m short, that he had not put in $500,000 although that was the basis on which the $2m had been advanced, that BTS had substantial losses and was at the time of the advance actually insolvent, or that BTS had since sold Affinitas Pty Limited at a loss, and that its position as at the end of November when the Board meeting was held was even worse than it had been when the money had been advanced early in October. All these matters would have been material to the Board's decision, which was to ratify the transaction. 36 In evidence, he said that prior to the Board meeting, he had attended a meeting of the Investment Committee at which the Chairman of HIH, Mr Geoffrey Cohen, Mr Terry Cassidy, the Managing Director of Australian Operations of HIH, and Mr Ballhausen were present; and this fact, together with the fact that Ray Williams had made the investment meant that there was a lot of knowledge about BTS around the Board table. But there is no indication in the minutes of the Investment Committee (Ex 3) that anything was disclosed to the Investment Committee about the true state of BTS, and Williams had been induced to authorise the investment by the fraudulent misrepresentation of the offender. 37 The offender conceded in his evidence that he should have told the Board that the situation of BTS had deteriorated, but he put his personal interests ahead of those of the company in order to have the transaction ratified and that he acted dishonestly and not in the best interests of shareholders (T 58). 38 The offences are serious and display an appalling lack of commercial morality. The dissemination of false information concerning the real purchaser of the HIH shares and the source of the funds for such purchase had the potential to, and I am satisfied did in fact, distort the market in HIH shares and I have no doubt that the statement "I am putting my money up which shows I believe in the industry" coming as it did from a director of the company with a reputation for shrewd investment, would have induced people, particularly small investors, to purchase HIH shares. Many, if not all, of such people would have lost their money when the company collapsed.

39 The BTS matters are equally serious. They also display a lack of commercial morality and the telling of lies for business purposes, expressly in the case of the third count and by non-disclosure in the case of the fourth count. On top of that, they were offences committed by a director of the company where the company was itself the victim. Directors are not appointed to advance their own interests but to manage the company for the benefit of its shareholders to whom they owe fiduciary duties. Accordingly to obtain money from the company by false representations and then to attend a Board meeting and compound the earlier offence by not disclosing the misrepresentation or the deterioration in BTS' position since the advance, but actively talking it up as a good investment to secure ratification for the transaction, constitutes very serious breaches of the duties of a director. 40 In relation to the misrepresentations the subject of the third count, the offender described them "in a broad sense" as "stupid errors of judgment" in an effort to cut corners (T 44). They were not stupid errors of judgment but deliberate lies, criminal and in breach of his fiduciary duties to HIH as a director. The amount of money fraudulently obtained from the company ($2m) was large. 41 Away from his business activities a somewhat different character emerges. He is described in a number of testimonials as a good and committed husband and father, who has given generously to charity and assisted persons in difficult circumstances, both financially and with personal support and encouragement. 42 He was born on 19 August 1959 and resided in Sydney all his life. He is the son of Larry Adler, a self-made immigrant to this county who established and ran FAI until his sudden death in 1989, aged 57. The offender was educated in Sydney and subsequently graduated Bachelor of Commerce from the University of New South Wales and Master of Commerce from Macquarie University. Subsequently, he was admitted as a member of the Institute of Chartered Accountants. 43 It appears to have always been envisaged that he would succeed his father in the management of FAI and to that end, after a year's experience overseas, he joined the company where he was described as hard working, but arrogant. On his father's death, he assumed the role of Chief Executive Officer of the company until it was sold to HIH in 1998. Since then, he has been engaged in share trading, property investments, venture capital and such like, as well as being a non-executive director of HIH. 44 Since the collapse of HIH, he has become estranged from his sisters although his wife remains supportive. He and his wife and children have also been subjected to an excessive amount of unreasonable and intrusive publicity by the media relating to their private lives, causing him and them additional distress. Whilst the media have a legitimate interest in reporting any matter relating to his business activities, provided they do it accurately and fairly, it has no legitimate interest in reporting on the private lives of his wife and children who have not committed any offences. 45 Counts 1, 2 and 4 are federal offences whilst count 3 is a state offence and consequently two different sentencing regimes apply, the sentencing for Commonwealth offences being governed by Part 1B of the Crimes Act 1914 (the Commonwealth Act) and that for the State offences by the Crimes (Sentencing Procedure) Act 1999 (the State Act). Relevant matters to be considered are set out, non-exhaustively, in s 16A of the Commonwealth Act and ss 3A and 21A of the State Act, and I have taken each of the matters specified where relevant into account. 46 In particular, I have had regard to the particular circumstances of one of their children as detailed in Dr Newman's report (a matter of no concern to the general public) but notwithstanding s 16A (2)(g) of the Commonwealth Act, I am not satisfied that this is a matter which in the circumstances of this case is relevant to the sentence. 47 A relevant consideration under both regimes is general deterrence, that is imposing sentences, which will deter others from committing similar offences. As Wood J said in R v Pantano (1990) 49 A Crim R 328 at 330: "…..those involved in serious white collar crime must expect condign sentences. The commercial world expects executives and employees in positions of trust….. to conform to exacting standards of honesty. It is impossible to be unmindful of the difficulty in detecting sophisticated crimes of the kind here involved, or of the possibility for substantial loss by the public… The element of general deterrence is an important element of sentencing for such offences."

See also R v Glenister [1980] NSWLR 597 at 616. It is also useful to refer to the remarks of the Victorian Court of Appeal in Director of Public Prosecutions v Bulfin [1998] 4 VR 114 at 131-2 where Charles JA said in reference to white collar criminals: "Such offenders usually have no prior criminal history, and indeed it is often this very fact which makes possible the commission of the crime, for such crimes are frequently committed by persons in a position of trust, which the possession of a criminal record would almost inevitably prevent them reaching. Discovery and punishment make it unlikely that the white collar criminal will re-offend, not least because the offender will probably never again be given the opportunity to do so. In these circumstances specific deterrence will often not feature largely in sentencing consideration, and the prospects of rehabilitation will generally be high. A further matter is that, in the case of white collar crime, the lives of the offenders and their families will frequently have been devastated by the consequences of discovery and punishment….But I think there is a serious risk that the consequences of discovery and punishment, and the havoc that a custodial sentence usually wreaks on the lives of the white collar criminal and his or her family, may have a tendency to distract attention from the importance that general deterrence ought to carry in the imposition of sentences for crimes such as the present. The motivation to engage in conduct of the kind here under consideration may spring from many sources: a position of trust and the easy ability to abuse it; the enormous rewards that may be available; a position of high authority in some substantial enterprise and the offender's assumption that discovery or proof of wrongdoing can be avoided; greed or the burden of funding an extravagant lifestyle; weakness in succumbing to outside pressures to use deceitful means for business ends; and personal or corporate ambition, to name but a few…..Detection is difficult, the investigation of the crime usually lengthy and very expensive, and the problems of trial and proof will frequently be extreme…..The result of such considerations, in my view, is that the element of general deterrence will usually carry particular significance in sentencing for crimes such as the present, both in relation to the total effective sentence and the non-parole period; together with a requirement for strong denunciation by the sentencing court. For persons first contemplating corporate criminality, a sentence which requires an offender to spend a substantial term in actual custody by virtue of the non-parole period fixed, is, in my view, much more likely to focus their attention and have real deterrent impact than a longer head sentence, much of which is likely to be served on parole after the offender's release from custody." 48 The offender's pleas of guilty, including their timing, must be taken into account not only to the extent that they constitute evidence of remorse and contrition, but also in the case of the federal offences, to the extent that they disclose a willingness to facilitate the course of justice: Cameron v The Queen (2002) 209 CLR 339, and in the case of the State offence, on account of its utilitarian value: R v Thomson (2000) 49 NSWLR 383, R v Sharma (2002) 54 NSWLR 300. Pleas of guilty also constitute evidence of remorse and contrition but the degree of such remorse and contrition varies from case to case. In this case, the offender has expressed remorse and regret for his actions to a number of persons who have provided testimonials and also to Dr Roberts. He also voluntarily returned his Membership of the Order of Australia acknowledging that it was inappropriate to retain it in the light of the criminal charges. 49 On the other hand, he said in evidence (T 92): "I pleaded guilty to 4 charges of, effectively, dishonesty and intentionally misleading people. There is no excuse. Even though I can justify it today , the justification is unacceptable." (my underlining)

50 These remarks and his description of the misrepresentations the subject of the third count as "stupid errors of judgment" suggest to me that although he accepts that his conduct is unacceptable to others, he does not really acknowledge to himself the full extent of its wrongfulness in the business sense. 51 At the time of the commission of the offences in counts 1 and 2, the offender had no prior convictions and must be regarded as a person of good character; but at the time of the commission of the BTS offences, he had committed the offences the subject of counts 1 and 2 and also suffered the civil penalty proceedings hereafter referred to, and therefore cannot be regarded as a person of prior good character, at least in the business sense. Furthermore, it has been held that prior good character is of lesser significance in the case of white collar crimes because normally it is that factor which places the offender in a position where he or she is able to commit such crime: R v Rivkin [2004] NSWCCA 7 at [410] citing R v El Rashid (CCA - 7 April 1995); Director of Public Prosecutions v Bulfin above. 52 After the collapse of HIH, the Australian Securities and Investments Commission (ASIC) took civil proceedings against the offender and others in relation to the payment of the $10m to PEE and the subsequent investments by that company with such money: Re HIH Insurance Limited (in prov liq) and anor: Australian Securities and Investments Commission v Adler and Ors [2002] NSWSC 171, 41 ACSR 72. 53 It was held in such proceedings that the offender and others had acted in breach of their duties as directors and orders for a pecuniary penalty and compensation orders totalling $8,886,402 were made against the offender and Adler Corporation. He was also disqualified from managing a corporation for 20 years: [2002] NSWSC 483, 42 ACSR 80. 54 Except on a comparatively minor point, an appeal to the Court of Appeal was unsuccessful: Adler and anor v ASIC [2003] NSWCA 131, 46 ACSR 504 and an application for special leave was rejected by the High Court: Adler v ASIC 28 May 2004, [2004] HCA Trans 182. 55 The offender has paid the whole amount of the penalty and compensation by instalments, the last payment being received on 18 December 2002. He has a claim for contribution against Ray Williams in respect of both the pecuniary penalty and compensation, but the Crown agrees that his prospects of recovering any contribution are nil. 56 Those proceedings were only indirectly concerned with the dissemination of false information to Mr Mellish: see [2002] NSWSC 171, 41 ACSR 72 at [151] to [156] and this aspect of his conduct played only a small part in the order for disqualification imposed by Santow J, and no part in the orders for compensation or pecuniary penalty. Nevertheless, some regard must be had to the order for disqualification to avoid any element of double punishment, but only to a very minor degree. It is to his credit that he paid the fine and compensation rather than avoiding it as he probably could have done by transferring assets or declaring himself bankrupt. 57 Counts 1 and 2 were originally part of an indictment which also included 3 counts under s 997 Corporations Act 2001 relating to the purchase of the HIH shares on 15, 16 and 19 June 2000. The accused was committed for trial on 11 July 2003 and arraigned in this Court on 5 September 2003 when he pleaded not guilty to all counts.

58 On 26 September 2003, he filed a Notice of Motion seeking a permanent stay of proceedings on the ground of abuse of process in that, as a result of the earlier civil proceedings brought by ASIC, he had already been punished for conduct the subject of the current charges. The application related to all counts in the original indictment including those which are now counts 1 and 2. That motion was dismissed by James J on 5 March 2004: R v Adler [2004] NSWSC 108. 59 He appealed against this decision but on 15 October 2004, the Court of Criminal Appeal unanimously dismissed the appeal: Adler v Director of Public Prosecutions [2004] NSWCCA 352. 60 On 2 November 2004, an application for special leave to appeal from this decision was filed in the High Court but no application was made to expedite the hearing of such application. An application to me to vacate the trial date was dismissed: R v Adler (19 November 2004), and an application was then successfully made for expedition of the special leave application which was heard on 10 December 2004 when special leave was refused: Adler v The Queen [2004] HCA Trans 546. 61 On 7 February, the day fixed for hearing of preliminary matters, a further application to adjourn the trial was made on the grounds of adverse publicity. This application was unsuccessful: R v Adler (8 February 2005). There was a further short hearing about preliminary matters on Thursday, 10 February and the trial was then adjourned for the jury to be empanelled on Monday, 14 February. 62 On that day, I was informed that it was anticipated the offender would plead guilty to what are now counts 1 and 2, together with the 2 further charges relating to BTS in respect of which he had not, at that stage, been committed by the Local Court, and the Crown would not proceed further on the s 997 counts. The BTS matters were then fast-tracked in the Local Court and the offender pleaded guilty to the current indictment on Wednesday, 16 February. 63 In the circumstances, I cannot regard his pleas to counts 1 and 2 as early pleas as he could have pleaded guilty to those counts much earlier whilst still pressing his challenge to the other counts; but I do acknowledge that he pleaded guilty to these counts on the first occasion on which he was offered an indictment not containing the other counts, and I have assessed the discount accordingly. The pleas to the BTS counts are clearly described as early pleas.

64 I am satisfied that having regard to the serious nature of the offences and the need for general deterrence, no sentence other than full time imprisonment is appropriate for any of the offences: Commonwealth Act s 17A(1), State Act s 5(1). 65 Section 19AB (1) of the Commonwealth Act requires that where a person is convicted of 2 or more federal offences at the same sitting and the Court imposes sentences which in the aggregate exceed 3 years, it must fix a single non-parole period in respect of those sentences or make a recognizance release order. Orders for release on parole are made by the Attorney General: s 19AL(1). 66 Section 44 of the State Act as it stood at the relevant time requires the Court to firstly set the term of the sentence and secondly fix a non-parole period, unless the term of the sentence is 6 months or less: s 46, but in other cases, it may decline to fix a non-parole period if it appears appropriate to do so: s 45. In the case of sentences of 3 years or less, if it fixes a non-parole period, the Court must itself make an order for the release of the offender on parole. Because of the interplay of these two different sentencing regimes and to avoid possible areas of conflict and confusion in their administration, I intend to fix a non-parole period in respect of the federal offences and a fixed term in respect of the state offence based on what would otherwise be the non-parole period for that offence. 67 The offences in counts 1 and 2 are closely related in time and subject matter and the sentences on those will be concurrent. The offences in counts 3 and 4 are totally unrelated to those in counts 1 and 2 but related in subject matter to each other, and the sentences on those matters will be concurrent with each other. I regard counts 3 and 4 as more serious offences because they directly relate to the performance of the offender's duties and responsibilities as a director. I shall make the sentences on these latter counts partially concurrent with those on counts 1 and 2 to take account of totality. 68 In relation to counts 1 and 2, I consider the appropriate starting point before taking into account the pleas should be 3 years 6 months which should be discounted by approximately 15 per cent for all aspects of the pleas of guilty. In relation to counts 3 and 4, I consider the starting point should be 4 years, which should be discounted by 25 per cent for all aspects of the pleas of guilty.

69 RODNEY STEPHEN ADLER on each of counts 1 and 2, I sentence you to imprisonment for 2 years 6 months, the sentences to be concurrent with each other and to commence today, 14 April 2005 and expire 13 October 2007.

On count 4, I sentence you to imprisonment for 3 years the sentence to be partly concurrent and partly cumulative on the sentences imposed on counts 1 and 2 and to commence 14 October 2006 and expire 13 October 2009.

In respect of these sentences on counts 1, 2 and 4, I fix a non-parole period of 2 years and 6 months to commence today and expire 13 October 2007.

On count 3, I sentence you to imprisonment for a fixed term of 12 months. Such sentence to be wholly concurrent with the sentence imposed on count 4 and to commence on 14 October 2006 and expire 13 October 2007.

70 I am required by s 16F of the Commonwealth Act to explain to you the effect of these sentences. You are sentenced to imprisonment for a total period of 4 years and 6 months commencing today and expiring 13 October 2009. I have fixed a non-parole period of 2 years and 6 months, which will expire on 13 October 2007. On that date you will be eligible to be released on parole. 71 The sentence will therefore entail a period of imprisonment of not less than the non-parole period followed by a period of service in the community to be called the parole period to complete service of the sentence. That parole order will be subject to conditions, which may be amended and if you fail without reasonable excuse to abide by those conditions, your parole order may be revoked in which case you will be returned to prison for the balance of the sentence. 72 I order that the report of Dr Louise Newman, part of Exhibit 12 be placed in a sealed envelope not to be opened except on the order of a judge of this Court.

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