Lawyers allege inconsistency in shares case

Mark Bloomer

Lawyers acting for former Tranz Rail chief financial officer Mark Bloomer have questioned why the Securities Commission has retrospectively challenged the validity of share sales which were authorised at board level.

In a letter sent one month after Bloomer was hit with insider trading proceedings, Glaister Ennor solicitor Paul Collins spelled out that the former Tranz Rail executive had applied to sell shares at a similar time to those of other senior managers and a former director.

The Collins letter discloses that Bloomer - who was by that stage in such a severe cash squeeze that his debts of more than $3 million had risen by $140,000 due to an accumulation of unpaid interest - had received company approval to sell a parcel (400,000 shares) on December 13, 2001.

But he deferred the sale until after the half-year result was announced in February 2002 - the same time as other key players sold.

"He cannot help but be concerned by the apparent inconsistency between the commission's stance in accepting their explanations - while claiming that his [Bloomer's] explanation was a lie," said the letter, addressed to commission counsel Robert Dobson, QC.

The letter details the raft of company approvals sought - and gained - by Bloomer before a series of trades.

The letter alleges the commission "preferred to stigmatise him" with the taint of insider trading in its October 13 press release - and by the enormous publicity which it would inevitably create - rather than learn if there were answers to any questions it might possess.

In response, Crown Law said it would not engage in a point-by-point discussion.

Deputy Solicitor-General Karen Clark said that in the commission's view none of the subjective matters related to Bloomer's personal circumstances was relevant to the existence of a cause of insider trading action against him.

"As to the allegation of inequity in pursuing Bloomer (as opposed to other individuals named in your letter) the commission reflected very carefully on the central role played by Bloomer in the production and dissemination or and debate about management accounts, internal projections and other insider information.

"The commission was satisfied that it was appropriate in the public interest to issue the proceeding."

On Friday, Bloomer filed an affidavit detailing how he became severely cash-strapped in 2001/early 2002 after:

* His debts increased by $1.5 million when he bought an Auckland house after Tranz Rail shifted head office.

* His ability to service $1.5 million loans for Tranz Rail stock acquired under the executive share plan was eroded when dividends were suspended - at his recommendation.

The Australian-based Bloomer had earlier filed an "appearance under protest to the jurisdiction", claiming the commission had no standing to take the action against him in Tranz Rail's name.

Bloomer and four other defendants face potential penalties totalling hundreds of millions of dollars.