Hoggard settlement on cards

By PAULA OLIVER

The high-profile drivers of an insider trading case against fallen Fletcher Challenge chairman Kerry Hoggard are understood to be considering settling out of court.

The case, taken by Business Roundtable chief executive Roger Kerr and Catharine Franks, wife of Act MP Stephen Franks, is days away from having a court date set.

But the Business Herald understands that the prospect of an out-of-court settlement is being discussed in both camps. Such a move would enable Mr Hoggard to avoid possibly being banned as a company director.

The case against Mr Hoggard relates to his buying nearly $635,000 of Fletcher Challenge shares the day before the company's major restructuring was announced in December 1999.

The share price jumped when the changes were revealed.

A Securities Commission investigation subsequently found that a law had been breached, but no prosecution followed.

Led by Mr Franks, a commercial lawyer, a private consortium of Fletcher Challenge shareholders opted to take a legal test case against Mr Hoggard.

In the 12 years that shareholders have had this right under securities law, no penalty has ever been imposed.

The consortium's costs are being met by Fletcher Challenge, and proceeds gained will also go to the corporate giant.

Mr Franks would not comment yesterday on the chances of a settlement. But he did say: "Because the courts always encourage solutions that save wasting court time on long cases, we would of course have to take that into account."

Mr Franks said his team had gathered all the evidence needed, and was ready to go to court.

Lawyers representing Mr Hoggard did not return calls.

The high-profile case against Mr Hoggard drew considerable attention to New Zealand's insider trading laws and was trumpeted as proof that insider traders could eventually be chased down.

But the financial reality of chasing Mr Hoggard may be prompting second thoughts. If the consortium pushes ahead with the test case, it could face the prospect of gaining less money than it would through a settlement.

The maximum penalty Mr Hoggard could face if found guilty by the court is what he paid for the shares - about $630,000 - or three times the gain made from them, whichever is the greater. He has already paid back the gain - $58,000 - which could affect the penalty a court would hand down.

It is understood that both sides believe it highly unlikely the maximum penalty would be awarded.

If the court opted not to award costs, Fletcher Challenge would be left out of pocket. The refusal to settle could be taken into account.

But Mr Franks said costs from the case were far below what they would normally be, because of his background as a commercial lawyer.

Fletcher Challenge had the right to ask the court to call a halt to the case if it considered the team were wasting time or money.

"That's a perfectly sensible part of the order, and it hasn't caused any tension," Mr Franks said. "We've been in consultation with them."

If the case does go to court and judgment is given against Mr Hoggard, he could be banned from being a company director for five years under section 382 of the Companies Act 1993.

If the team settles, it forfeits that opportunity. Anything less than the maximum penalty that the court could impose would be seen as weak by the financial community.