In August 2013, John Eugene Gay, former Managing Director of Gunns Ltd, was convicted of insider trading following the disposal by him of 3,404,178 Gunns Ltd shares between 2 and 10 December 2009.
On 20 April 2015, the Tasmanian Supreme Court considered how to assess the proceeds of crime, arising by reason of the inside selling of shares by Mr Gay, for the purposes of a pecuniary penalty order under the Proceeds of Crime Act 2002 (Cth) (POCA). The gross proceeds of the sale of the shares were approximately $3,095,000.
The Court accepted that in an insider trading case involving the sale of shares, the whole of the purchase price, in selling the shares, will not necessarily be liable to forfeiture to the Commonwealth. The Court found that not all of Mr Gay’s share acquisition costs were expenses or outgoings “incurred in relation to the illegal activity” as required by the POCA. While the Court accepted the draconian nature of the POCA and the policy it was designed to achieve, it would be irrational to adopt a blanket view as advanced by the Crown. The Court rejected the Crown’s case and left it to further argument as to the correct calculation of the proposed pecuniary order.
This judgment is important as a Court will look at the circumstances where an original purchase of property or an asset (such as shares) is untainted by later illegal conduct giving rise to POCA jurisdiction in determining what may or may not be the proceeds derived from criminal conduct.