By FIONA ROTHERHAM
Business Roundtable executive director Roger Kerr and Catharine Franks, wife of Act MP Stephen Franks, are taking a legal test case against insider trader Kerry Hoggard.
The pair, both Fletcher Challenge shareholders, intend to apply in the High Court today for leave to exercise the company's right to take action against its former chairman.
Neither shareholder sold the shares to Mr Hoggard from which he made a $58,000 profit.
In the 12 years that shareholders have had this right under securities law, no penalty has ever been imposed.
Two previous attempts ended in out-of-court settlements. In 1991, four shareholders, including Herald columnist Brian Gaynor, started insider trader proceedings against Colin Herbert and a number of other Wilson Neill directors. In the other case, Levin businessman Donald Kincaid was granted leave by the High Court in 1993 to bring insider trading action against Capital Markets, Fay Richwhite, Robin Congreve and Geoff Ricketts.
Fletcher Challenge has said it would not take action itself. The law requires the company to pick up the tab for the shareholder-inspired action if leave is granted.
The maximum court-imposed penalty for insider trading is up to three times the profit.
The company had asked Mr Hoggard to pay back just the $58,000 he made from buying shares in the four Fletcher letter stocks one day before a major restructuring announcement.
Last week, Mr Hoggard was found by the Securities Commission to have been an insider trader when he bought the 390,000 shares through his broker, JB Were.
Stephen Franks, a former commission member, is spearheading the shareholder case.
He hoped a successful case would show other shareholders they, too, could bring wayward directors to justice and signal to other potential insider traders they risk substantial punishment that outweighs any rewards.
Although Mr Hoggard paid back shareholders, he has made around $200,000 on the capital gain of the shares he still owns.
His profit was calculated from the difference in the price of the shares on the day he bought them and the next day when the announcement was made.
Mr Franks said a correct measure may include the value of the shares at a later date, depending on what other insider knowledge he may have had at the time.
The former commercial lawyer decided to pursue the case after spending years trying to persuade other shareholders to take similar action. His wife holds the FCL shares on behalf of their four children.
"I can think of no other case that better fits what insider trading laws are designed to stop."
Mr Kerr supported the action because he believed the business community should demand the highest standards of conduct from its senior members.
"I would expect the thousands of honest directors out there to welcome this.
"Their reputation is affected when bad apples look as if they are infecting the whole barrel."
Hoggard faces insider case
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