The Securities Commission said today it had filed insider trading charges against former leading shareholders in Tranz Rail including high profile expatriate businessman David Richwhite.
The watchdog said it was the first time the commission had used its powers to take court action for insider trading.
It had filed insider trading proceedings relating to share trading in Tranz Rail Holdings Ltd, named in the High Court at Wellington today as Toll New Zealand.
Those named were Midavia Rail Investments BVBA (previously known as Pacific Rail Ltd NV), Berkshire Fund III A Limited Partnership, Michael Beard (former managing director of Tranz Rail), Mark Bloomer (former chief financial officer of Tranz Rail), Carl Ferenbach (former director of Tranz Rail), and Mr Richwhite (former director of Tranz Rail).
The commission’s inquiry focused on the sales of shares in the first half of 2002, before the share price of the company began to deteriorate from about the middle of 2002.
At the beginning of 2002 the share price was $4.00. By April 16 2003 it had plunged to 30c.
The commission explained the long wait before issuing proceedings by saying its inquiry involved obtaining documents both in New Zealand and overseas. It involved a large number of interviews and the receipt of formal oral evidence from many witnesses.
“The basis for the proceedings is that the parties who sold their Tranz Rail shares had information about the company which was not publicly available and which would have affected materially, or would have been likely to affect materially, the price of the shares if it had been publicly available.”
An additional action for “tipping” is raised against Carl Ferenbach, representing Berkshire Fund III A Limited Partnership, and David Richwhite, representing Midavia/Pacific Rail, an investment vehicle controlled by Fay Richwhite interests.
Fay Richwhite is the high profile merchant bank which is controlled by Mr Richwhite and Sir Michael Fay, who is best known for backing New Zealand challenges for yachting’s America’s Cup. Sir Michael is now based in Geneva.
The commission’s proceedings seek compensation for the losses avoided by the traders. They seek to have pecuniary penalties imposed.
The commission said it had actively investigated the matter since February 2003, when the now disbanded Stock Exchange Market Surveillance Panel released a report on Tranz Rail.