Insider trade director wins gag

By KARYN SCHERER and SIMON HENDERY

A prominent company director has won a late-night court order gagging the Herald from naming him as the person involved in one of New Zealand's most blatant cases of insider trading.

The director lives in Auckland and is involved in more than a dozen companies.

He is believed to have made a $40,000 profit from buying and selling Fletcher Challenge shares on the basis of sensitive inside information in May last year.

He has escaped prosecution because current insider trading laws allow only those with first or second-hand access to information to be prosecuted.

The Securities Commission declined to name the man this week, but he acknowledged to the Herald last night that he was the person involved.

Later, in a case which began at 9.30 pm in the High Court at Auckland, his lawyer won an interim injunction that prevents the Herald from naming him until today.

His lawyers have until 10 am to give an undertaking to the court to cover any monetary loss to the Herald or last night's order will lapse.

The director was identified in a Securities Commission report on insider trading this week only as EF.

The commission said he could not be prosecuted because he was the third or fourth link in a chain of people who had access to the information.

The Serious Fraud Office has confirmed that it is not pursuing the man, for similar reasons.

The commission said this week that it did not want to name EF, because to do so might identify the other people with whom he was linked.

But it noted that EF was the same man who approached the Herald in May last year offering sensitive information about Fletcher Challenge's restructuring plans.

When approached about the report at his home yesterday, EF first threatened to sue if his name was mentioned and then slammed the door. He later pleaded with the paper not to run the story.

"In the light of the world I'm an innocent person, if a bit naughty," he said.

"Maybe a wee bit naive and maybe those things happened in a moment of madness."

The man claims the Herald agreed to protect his identity in return for the sensitive information. The Herald gave no such undertaking and did not learn his identity until some time later.

According to the commission report, the man admitted to the Serious Fraud Office that he had traded Fletcher shares on the basis of the information.

"The shares would go up in value and I would sell them and make a profit. That was my intention," he is alleged to have said.

Fletcher Challenge spokeswoman Ginny Radford said last night that the company was disappointed that it had not been possible to prosecute the people involved.

"Apparently manipulating the market is not a crime in itself and nor is using an assumed name to achieve something ...

"We are disappointed but what we very much hope is that this is used, as the commission has indicated, as one of the levers to change the law and to ensure a much clearer definition of an insider."