Unfortunate inaccuracies in Rubicon minutes: Moriarty

By PAUL PANCKHURST

Rubicon chief executive Luke Moriarty yesterday said his description of multibillion-dollar US hedge fund Perry Corporation as a large shareholder in Rubicon was loose, unfortunate and inaccurate.

Moriarty gave evidence in the High Court at Auckland on the seventh day of Guinness Peat Group's action against Perry and the company's owner, Richard C. Perry.

GPG claims Perry hid a 16 per cent stake through equity swaps with two merchant banks in June last year.

It alleges Perry broke New Zealand laws requiring market disclosure of stakes larger than 5 per cent.



Moriarty said that, in hindsight, it was "perhaps unfortunate" that Rubicon board reports and minutes after last year's swap deals had described Perry as one of Rubicon's largest shareholders.

Moriarty's argument is that "shareholder" was a shorthand for a party with an economic interest in the company.

Moriarty said reports for the Rubicon board recorded Perry's "shareholding" or "ownership" at the level of the "total economic exposure we believed Perry had to Rubicon under the swaps plus the physical shares it owned beneficially".

"As a result, we continued to list Perry as one of our top 10 shareholders."

But the company did not regard Perry as having voting rights or any other form of interest that required disclosure to the market under securities laws.

Perry Corporation managing director Carl Berg had been "quite clear" in conversations with Moriarty and chief financial officer Mark Taylor that any Rubicon shares held by Perry's swap counter-parities were not Perry's, and could not be voted or controlled by Perry in any way.

On the basis of responses from Perry and the two merchant banks - the Australian offices of UBS Warburg and Deutsche - the company accepted that Perry did not have a disclosure obligation connected with the shares held by the bankers.

Over a year, Berg periodically updated Moriarty or Taylor on "changes to Perry's total economic interest in Rubicon - either through shareholding changes or changes to their interests under swaps".

"On several further occasions, Mark and I asked Carl to confirm that Perry's swap interests did not confer a discloseable interest under New Zealand securities law.

"He repeatedly confirmed that they were satisfied the swaps did not require disclosure."

Moriarty said that in June or July last year, he and Taylor phoned Rubicon's lawyer, Brynn Gilbertson, a partner at Bell Gully, and told him that Perry Corp believed the equity swaps did not have to be disclosed.



Gilbertson "responded to the effect that it was possible to create a synthetic interest under a swap which did not create a relevant interest in the shares".

Moriarty told the court that Gilbertson said that "where there was no beneficial ownership of the physical shares and no voting rights or control of the shares or power of disposal, there was nothing to disclose".

Moriarty said this advice matched Perry's view and "because it seemed logically correct to me" he did not seek a formal written opinion.

GPG's lawyer, Raynor Asher, QC, cross-examined Moriarty.

Questioned on use of the word "own" in connection with Perry, Moriarty said it was a "loose" usage intended to mean "maintained their economic interest".

Asked later if he was telling the court that descriptions over 12 months of Perry as one of the largest shareholders were "simply an inaccurate statement on your part", Moriarty replied: "That's right."

Earlier, Moriarty told how he, chairman Michael Andrews and director Hugh Fletcher met GPG director Tony Gibbs on July 8 this year, five days after GPG's lightning raid on the share register to secure a 19.9 per cent stake.

"Tony indicated his dissatisfaction that Perry had what appeared to him to be an undisclosed interest, and said he would consider reporting the matter.

"I said that Perry had told us their interest was in the form of swaps that did not require disclosure.

"Hugh Fletcher said that given Perry was a reputable international investor, GPG could assume that Perry's actions were above aboard and that they had complied with their disclosure obligations."

After the meeting, Moriarty called Berg to tell him Gibbs seemed to have been unaware of Perry's interest in Rubicon.

He suggested to Berg that Perry should seriously consider "officially" disclosing its economic interest in Rubicon to the market - as well as its support for the then-live deal involving the Central North Island Forest - since it seemed likely that "Tony was going to do it for them if they did not".

That was the context, said Moriarty, for the following email to Berg: " ... will wait until u are ready but now that someone else knows u should not delay too long to ensure that u are the ones that announce it first".