Former Tranz Rail chief Beard settles with Securities Commission

Former Tranz Rail chief executive Michael Beard has reached a settlement with the Securities Commission over insider trading proceedings.

Mr Beard has agreed to assist the commission with its case against the remaining defendants who include Fay Richwhite principal David Richwhite and the Fay Richwhite investment vehicle Midavia, the commission said in a statement today.

The proceedings relate to share trading in Tranz Rail, now Toll New Zealand, in early 2002, shortly before the company spiralled into near bankruptcy.

The commission alleges the defendants sold Tranz Rail shares between February 2002 and late May 2002 with inside knowledge of likely lower earnings, higher capital expenditure, the need to write down assets and investments, which were not disclosed to the market until months later.

Mr Beard has agreed to pay the commission $155,691.84, which comprises a compensation claim of $55,691.84 and $100,000 of the commission's claim for penalty and costs.

The commission said Mr Beard was making the payment without any admission of liability. But he did acknowledge "he was or may have been in possession of inside information when he traded the shares in question as a result of his position as an officer and director of Tranz Rail," the commission said.

He also acknowledged the commission had a case against him under the Securities Markets Act 1988, but he considered he had a defence to that case/

The settlement has been approved by the High Court. No judgment has been entered against Mr Beard.

Other defendants in the case are: Berkshire Fund III A Limited Partnership, Mark Bloomer (former chief financial officer of Tranz Rail) Carl Ferenbach (former director of Tranz Rail and managing partner in Berkshire).

Berkshire -- which sold a 3.5 per cent stake on February 12, 2002 at $3.60 a share -- will not file its defence until February.

Mr Bloomer, who sold 595,346 shares between February 13 and May 24, 2002, will file his defence in the New Year.

Midavia, formerly Pacific Rail, sold 14.5 per cent of Tranz Rail at $3.60 a share months before big writedowns were revealed.

Midavia has submitted 250 written questions to the commission asking for details substantiating its insider trading action.

The trading was investigated by the now defunct Stock Exchange Market Surveillance Panel. But in April 2003 the panel said it would take no further action despite finding Tranz Rail had breached disclosure rules.

The commission's decision to press ahead with legal action marked the first time it had laid insider trading charges. Since then the commission has also filed insider trading proceedings against listed electronic payments systems company Provenco,

Last week the commission named Provenco, Jeda Investments, Proveco directors Nicholas Gordon and David Wolfenden and former director Anthony Bradely as defendants in the proceedings.

The claim related to three periods of trading in Provenco shares between February and March 2003.

- NZPA