R v Bateson

[2011] NSWSC 643

Supreme Court

New South Wales

Medium Neutral Citation:

R v Bateson [2011] NSWSC 643

Hearing dates:

14.02.2011, 3.03.2011, 11.03.2011, 25.03.2011, 03.06.2011

Decision date:

24 June 2011

Jurisdiction:

Common Law - Criminal

Before:

BUDDIN J

Decision:

1. The offender is sentenced to a term of imprisonment of 2 years to commence on 6 July 2011 and to expire on 5 July 2013.

2. Pursuant to s 7(1) of the Crimes (Sentencing Procedure) Act 1999 , I direct that the sentence is to be served by way of an intensive correction order.

3. In addition the offender is to pay a fine of $70,000.

Catchwords:

Criminal Law - sentencing offence of insider trading - "true insider" - plea of guilty and other favourable subjective features

Legislation Cited:

Crimes Act 1914 (Cth)
Crimes (Administration of Sentences) Act 1999
Crimes (Administration of Sentences) Regulation 2008
Crimes Amendment Regulations 2010 (Cth) (No.4)
Crimes (Sentencing Procedure) Act 1999
Sentencing Act 1991 (Vic)

Cases Cited:

Aitken v Moten-Connor (Supreme Court of Victoria, unreported, 9 February 1995
Cameron v The Queen (2002) 209 CLR 339
Dimitrovski v Jones (Supreme Court of Victoria, unreported 23 August 1994)
Dinsdale v The Queen (2000) 202 CLR 321
Dipangkear v R [2010] NSWCCA 156
Douar v The Queen (2005) 159 A Crim R 154
DPP v El Karhani (1990) 21 NSWLR 370
DPP v Karazisis & others [2010] VSCA 350
DPP v Nikolic [2008] VSCA 226
DPP v O'Reilly [2010] VSC 138
Einfeld v R (2010) 266 ALR 598
Hili and Jones v R (2010) 272 ALR 465
R v Dalzell [2011] NSWSC 454
R v De Silva [2011] NSWSC 243
R v Doff [2005] NSWSC 50
R v Doff (2005) 54 ACSR 200; [2005] NSWCCA 119
R v Edwards (1996) 90 A Crim R 510
R v El Rashid (NSWCCA unreported, 7 April 1995)
R v Foster [2001] NSWCCA 215
R v Frawley [2005] NSWSC 585
R v Firns (2001) 51 NSWLR 548
R v Hall (No 2) [2005] NSWSC 890
R v Hallocoglu (1992) 29 NSWLR 67
R v Hannes (2000) 36 ACSR 72
R v Hannes (2002) 173 FLR 1
R v Hartman [2010] NSWSC 1422
R v Hinton (2002) 134 A Crim R 286
R v JCE (2000) 120 A Crim R 18
R v Lanteri [2006] VSC 225
R v McKay (2007) 61 ACSR 470
R v McQuoid [2009] EWCA Crim 1301; [2009] 4 All ER 388
R v Maslen and Shaw (1995) 79 A Crim R 199
R v Morgan (1993) 70 A Crim R 368
R v Panchal [2009] QDC 105
R v Rivkin (2003) 198 ALR 400
R v Rivkin (2004) 184 FLR 365
R v Thomson & Houlton (2000) 49 NSWLR 383
R v Zamagias [2002] NSWCCA 17
Rich v ASIC (2004) 220 CLR 129
Spies v R (2000) 173 ALR 529

Category:

Sentence

Parties:

Regina
Jeffery Bateson

Representation:

Counsel:
R Bromwich SC (Crown)
L Robberds QC/M Friedgut (Offender)
Solicitors:
Commonwealth Director of public Prosecutions
Addisons (Offender)

File Number(s):

2010/121999

Judgment

Introduction

1. Jeffrey Bateson (the offender) pleaded guilty to an indictment which alleged that:

Between about 11 May 2008 and about 16 May 2008 at Sydney in the State of New South Wales, while he possessed information that was not generally available and which, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of particular Division 3 financial products, namely shares in Wind Hydrogen Limited, and he knew, or ought reasonably to have known, that the information was not generally available and that if it were generally available a reasonable person would expect it to have a material effect on the price or value of those securities, [he] did acquire 550,000 shares in Wind Hydrogen Limited in his capacity as a beneficiary of the Carmarthen Superannuation Fund.

1. Five separate instances of the offender having possessed inside information were particularised. Reference will be made to those aspects of the case in due course. The offence to which the offender pleaded guilty is commonly referred to as "insider trading".

1. The offender originally pleaded guilty in the Local Court and adhered to that plea when he appeared in this Court. At the relevant time the maximum penalty for the offence was imprisonment for 5 years and/or a fine of $220,000. [The maximum penalty has now been increased, with effect from 13 December 2010, to imprisonment for 10 years and/or a fine of $495,000 (or three times the value of the benefits obtained from the offence)].

Facts relating to the offence

1. An Agreed Statement of Facts was admitted into evidence. It is a very comprehensive document and, but for some minor modifications, is set out below:

A. Background .

On 10 March 2005, Wind Hydrogen Australia Limited was incorporated as an unlisted public company. On 29 March 2005, the company changed its name to Wind Hydrogen Limited (WHL). On 24 June 2008 it changed its name to WHL Energy Limited.

The offender was a non-Executive Director of WHL from 13 June 2006 until his resignation on 1 July 2008, apart from a period of two months from July to September 2007.

On 6 September 2007, WHL's shares were listed on the Australian Stock Exchange (now the Australian Securities Exchange, or ASX). Wind Hydrogen Limited was allocated the ASX code "WHN" and its shares thereafter traded on the ASX. At all relevant times WHL was an alternative energy company, focussed on developing and commercialising energy assets including wind energy and clean fossil fuels. Until the end of April 2008, WHL's investments were exclusively in wind power projects, including the construction and operation of wind farms. These projects traditionally have long lead times from the decision to construct a wind farm to the time that the farm begins to produce power which might be sold in order to generate a return to shareholders. Accordingly, these projects can only promise a long term return on investment.

In early May 2008 a new investment into shale gas projects in the United States was proposed for WHL by its Chief Executive Officer. The new investment offered the prospect of short to medium term returns on the investment.

As at May 2008:

(a) Lawrence Podrasky ("Podrasky") was the Executive Chairman and Chief Executive Officer,

(b) Warwick Pearce ("Pearce") was Company Secretary and Commercial Manager, and

(c) The offender, John Peter Bartter ("Bartter") and Declan Pritchard ("Pritchard") were non-executive directors of WHL.

(d) Erene Keriakos was WHL's Administrative Officer.

B. Share trading account

At all relevant times, the offender and his wife, Geraldine Clisby, were the trustees and equal beneficiaries of the Carmarthen Superannuation Fund (CSF). CSF had a share trading account with Dixon Advisory and Super Service Pty Ltd ("Dixon Advisory"). Craig Cameron was the "Client Advisor" for the account. Cameron took all instructions in relation to the account from the offender. Dixon Advisory in turn used an ASX participant, ABN Amro Morgans (ABN Amro), as the broker to purchase or sell shares on its behalf.

In their capacity as trustees of CSF, the offender and Ms Clisby held accounts with Macquarie Investment Management Limited (Macquarie) to pay for shares and as a repository for those shares. These accounts were, respectively, a cash management account and a " wrap account ". The Macquarie cash management account was used to fund the purchase of shares by CSF. The legal title in CSF's shares in the Macquarie wrap account was in the name of Bond Street Custodians Limited, a nominee of Macquarie. Bond Street Custodians Limited appeared as the acquirer and holder of CSF's shares.

The association between CSF and the offender (and Ms Clisby) was known to WHL and that information was also publicly available. See, for example:

• The prospectus of 8 June 2007 which refers to the offender as being a beneficiary of the Jeffery Bateson and Geraldine Clisby Carmathen Superannuation Fund which holds 1 million shares in the company;

• Notes to the consolidated financial statements for the year ending 30 June 2007 at p 44;

• An ASX announcement on 6 September 2007 of the top 20 shareholders; and

• The WHL issue sponsored holding statement as at 23 August 2007 being the initial allotment of a million shares.

C. Buy order for 750,000 WHL shares placed on 11 March 2008

In January and March 2008, public announcements were made by WHL regarding a key appointment of a managing director of its UK business (21.1.08), an external investment of US$300,000 to buy 22% of the shares in a company which intended to develop energy assets in Latin America (25.1.08), and the signing of a memorandum of understanding for a joint venture to develop its wind power assets in the UK (7.3.08).

After the last of those public announcements, the offender emailed Cameron on 11 March 2008 requesting the purchase of 750,000 WHL shares for his superannuation fund. This was an open and standing order, which Cameron put into effect the following day.

This was achieved through numerous contract notes covering trades on 11 separate days, for a total of 700,000 shares, in the period between 12 March and 9 April. By the time the last of these trades had settled, on 14 April, the balance of funds in CSF's fund account was nil. On 2 May on Cameron's instructions, the offender's 11 March open buy order for CSF was cancelled because there were insufficient funds to complete the balance of the order, being 50,000 shares.

D. The Morgan County Deal and communications with the Board

In early 2008, Podrasky became aware of an opportunity to invest in a proposed joint venture between a US oil and gas company known as Derby Resources LLC (" Derby ") and Rolland Energy Incorporated (" Rolland "). Rolland was incorporated in Quebec, Canada, and its shares were listed on the Toronto Stock Exchange (TSX).

Podrasky told Pearce on or about 2 May 2008 that he intended to propose to the Board of WHL that the company invest in a project to exploit reserves of shale gas in Eastern Kentucky. He gave Pearce a Microsoft Excel Spreadsheet of financial information relevant to the project, and said that he had received the information from a Canadian company, Rolland, one of the companies involved in the project. He asked Pearce to review the financial information and reformat it for presentation to the WHL directors at the board meeting scheduled for 6 May. Podrasky then put forward a proposal for WHL to become involved in the project. Podrasky and Pearce sent emails and attachments about the project to board members, including the offender.

From 4 May onwards, the offender was party to communications concerning the shale gas project in Kentucky. The other parties were Derby and Rolland . The project was variously referred to as the " Morgan Gas Project Investment Opportunity ", " the Morgan County Gas Project ", the " Morgan County Deal " and the " Kentucky Shale Gas Joint Venture ".

At 5:05 pm on 4 May , Podrasky sent an email to the offender and other members of the board on the subject of " Morgan Gas Project Investment Opportunity ". This email and its attachments constitute the first item of inside information possessed by the offender.

Attached to Podrasky's email were various documents, including:

- A "WHL Executive Chairman and CEO's Report to the Board", which was an investment summary;

- A projected cash flow for the Kentucky Shale Gas Project; and

- A supplement from a United States periodical entitled "Oil and Gas Investor" dated January 2006, providing background on shale gas exploration in the USA.

In the email Podrasky wrote that the recipient should review the material

"as soon as possible due to the fact that we will need to secure the rights, very quickly by Tuesday 6 May next week, as there are competing buyers of significance. To achieve this, we will need Board approval by this date at the latest. Apologies for the short time frame, but to respond to desirable opportunities in the energy market, given that oil & gas is obviously a hot sector, quick turn around comes with the territory!".

In the email, Podrasky also suggested a conference call at 9.30am on 6 May, and said, "we will likely have available on the call, to present when required, our Farm-in partner, Dr David Khan ." Podrasky's purpose was to provide the other board members with information about the project so that it could be discussed at the board meeting.

The document entitled " WHL Executive Chairman & CEO's Report to the Board ", contained an estimate that the cost to WHL of participating in the proposed project would be approximately US$5million in the first 13 months, and that WHL's share value could potentially increase by approximately A$0.85 per share as a result of the project. The document stated that:

"This represents a unique investment opportunity for WHL to become a major gas producer in the U.S. with a relatively small upfront investment (US$5.0 mil) which could contribute potential share price value of 85c per share. Board approval is sought to proceed with funding the Deposit and to enter into a Farm-in Agreement to receive a 35% Project interest. This acquisition will be done with or without WHL's participation by one of the major shale gas players in N. America.

Board approval is further sought in order to recommend this investment to WHL shareholders requiring majority approval. Thus, an extraordinary shareholders meeting and vote with 28 day notice is necessary as this represents a diversification in to clean gas which is complementary to wind-power."

The following events took place the next day 5 May :

(a) At 9.39am , the offender sent an email to Podrasky (copied to the other directors), on the subject of "Morgan Gas", in which he asked five questions about the project. The fourth question was as follows:-

" Assuming we go ahead with this we desperately need the website updated to reflect our enlarged strategy. When this is announced to the market the website will be the key point of contact for info on WHL- its crucial to getting the full share price kick. So how will this be done?"

(b) At 9:51 am that day, the offender sent a further email to Podrasky, (copied to the other directors), on the same subject. In it he asked further questions, including, "How did this deal come our way- were you contacted by Kahn; is the deal 'common' knowledge in the industry and you happened to chase it up? what?" . Podrasky replied that the deal was not common knowledge.

(c) At 11:59 am , Podrasky sent an email to the offender and other board members. Attached to the email were further documents about the proposed investment. Those documents included an operations and due diligence plan, a WHL project cash flow summary, a WHL budget for May to December 2008 covering all its projects on a monthly timeline, a letter dated 14 April 2008 from a consulting geologist Gregory Maynor, a resume of key personnel (including a summary of qualifications for the proposed manager of the project, Orville Cole) and some project drilling maps.

(d) At 1.39pm Podrasky replied to the offender's 9:39 am email by answering each of the five questions and saying in relation to the fourth, "Yes, we should change the website and possibly our corporate name to WHL Energy" . The offender responded 10 minutes later, saying " Thanks Larry. I felt the answers would be positive but I have to due (sic) my Independent Director due diligence.... ".

(e) At 4:20 pm , Pearce sent an email to Podrasky, the offender and the other directors, to which he attached a series of documents that he had prepared. They included cash flow projections for the period from August 2008 to May 2028, revenue projections for 20 years after WHL's intended investment, projected net present value calculations per share, an internal rate of return that WHL could expect to derive from its investment in the project over the first twenty years, and a pro-forma balance sheet based upon the acquisition proceeding.

The 4.20pm email and its attachments constitute the second item of inside information which the offender possessed.

The Board Meeting of 6 May 2008

On 6 May , the WHL board met for more than two hours and discussed the project in detail. The offender was present and was actively involved in discussions about the project. The meeting was chaired by Podrasky. The documents attached to Podrasky's email of 5.05pm on 4 May, and Pearce's email of 4.20pm on 5 May, were tabled at the meeting. Podrasky explained the nature of the opportunity to the board, including the arrangements whereby WHL would "farm-in" to Derby's fifty per-cent share of the joint venture with Rolland. He also explained that WHL would receive an interest in two-thirds of Derby's fifty percent of the joint venture in return for funding one hundred percent of Derby's initial commitments.

The minutes of the meeting dealt with what was described as the " Kentucky Shale Gas Joint Venture ", and included, amongst other things, the fact that the board had noted that the estimated gas price for the project to break even was US$3.50 while the current gas price in the US was approximately US$11.50. The minutes further noted that Podrasky had an indirect material interest in the project and that he had abstained from voting.

The signed minutes record, inter alia, that the Board resolved:

(a) to enter into a letter of intent and two memoranda of understanding in relation to the project;

(b) that Podrasky be given authority to sign the letter of intent and memoranda of understanding;

(c) that a meeting of shareholders be convened to seek approval for a change in the nature of WHL's business and to change its name; and

(d) that WHL make an initial deposit of up to US$125,000 to secure its rights under the letter of intent and memoranda of understanding.

The board resolutions were signed by Podrasky on 23 May 2008 after having been circulated to the directors . The discussion of the investment proposal at the Board meeting, and the resolutions passed in relation to it, constitute the third item of inside information which the offender possessed.

At the meeting, the offender asked a number of questions about the proposed project. The minutes of the meeting record that one of the offender's questions was, " When will we have to notify the market? Is it at the end of Due Diligence? ". The offender disputes the accuracy of that record.

Letter of Intent

At about 5:00 am on 8 May Podrasky signed the letter of intent. The letter of intent established the basic terms of a sale and purchase agreement involving a joint venture between Derby, WHL and Rolland on one part, and a company known as NAFG LLC on the other part, by which the former agreed collectively to acquire 100% ownership of the Morgan County Gas Project owned by NAFG LLC. Podrasky organised for the signed letter to be sent to a J. Allen White for signature on behalf of NAFG LLC.

That same day the TSX issued a press release announcing the signing of the letter of intent. The press release only referred to Rolland and to Derby, and did not mention WHL. On 8 May Podrasky received by fax from White an executed copy of the letter of intent, bearing all necessary signatures.

At 10:56 am that day, Podrasky sent an email to the offender and the other directors in which he described as " good news " the fact that the letter of intent had been signed that morning with the vendor, and that the deal had been negotiated without putting up a 10% deposit. Podrasky observed in the email that there was no upfront " earnest money " required to tie up the deal and perform due diligence, that the full purchase price of US$2.5million would be due in 45 days, that a Notice to Shareholders was being prepared, and that he and Pearce had a due diligence conference call with members of the other parties scheduled for the following morning. This email constitutes the fourth item of inside information possessed by the offender.

At 11:05 am the same day, Podrasky sent an email to the offender and other directors attaching a link to a website operated by Bloomberg. The subject heading of the email was "U.S. Gas Prices". The website showed that gas was selling in the USA for approximately US$10 per MMBTU (Million British Thermal Units), which was close to historical highs. At the board meeting on 6 May there had been discussion about the price at which the joint venture had to be able to sell gas produced by the project in order for it to be profitable, and the figure mentioned was approximately US$4-5 per MMBTU.

On 9 May , the first Memorandum of Understanding (" First MOU ") was signed between the three purchasing companies, Derby, Rolland and WHL.The First MOU referred to the letter of intent, and stated that Rolland, Derby and WHL had agreed to enter a joint venture in order to acquire the Kentucky shale gas project. It set out the relative interest each would take in the joint venture, namely: Rolland, 50%; WHL, 66.67% of 50%, being 33.33%; and Derby, 33.33% of 50%, being 16.67%. The intention was for WHL to "farm-in" to Derby's 50% interest in the proposed joint venture with Rolland, so that WHL was not in fact a party to the proposed joint venture agreement. The directors were notified of the execution of the document.

At 5:24 pm on that day, Pearce sent to the directors, including the offender, an email with the heading " Draft notice of general meeting ". Attached to the email were the following draft documents: Chairman's letter to shareholders, notice of extraordinary general meeting of shareholders, explanatory statement, glossary and proxy form. The draft letter referred to a May 2008 announcement by the company of a decision to diversify into complementary energy operations and said that for this reason approval was sought from shareholders to make a significant change to the nature of its activities to include gas production and complementary energy projects as well as approval to change the name of the company to reflect its new direction. The draft notice of general meeting set out resolutions to give effect to the proposed changes. The proposed change to the nature of the company's business detailed in the draft explanatory statement was the US Kentucky shale gas investment opportunity. The proposed date for the shareholders' meeting was 20 June. The draft letter began, " On xx May, the company announced that it had made a decision to diversify into complementary energy operations ". This email and its attachments constitute the fifth item of inside information possessed by the offender.

At 9:58 am on 10 May the offender sent an email to Podrasky, copied to Pearce, on the subject " notice ". He described the draft notice as " a very fine document ". He also said: "I have one suggestion and that is that in your Chairman's letter in para 2 , you mention the rationale for the change in business being the development of risk diversification and bringing forward (sic.) earnings (or words to that effect). I don not (sic) think we can assume everyone will read the full document, but they will read the Chairman's letter, so I think we need to get in early with an attractive rationale. " The offender also wrote, in reference to an entry at page 21 , "... I now have 1,700,000 million shares by way of my superfund and hence indirect interest ". He also said, " I hope we will be able to hit the 20 th target date as the following week I am in New Zealand (and I would like to be at this meeting )".

The offender's superannuation fund CSF owned one million WHL shares prior to the 11 March buy order, to which 700,000 shares were added in March and April.

At 11:00 am on 13 May , Podrasky sent an email to the offender and the other directors in which he reported that, following the TXS market response to Rolland's announcement of its joint venture with Derby to acquire Morgan County (namely that the share price of Rolland had tripled with a huge volume traded), Derby had received better offers and had put forward a request for a finder's fee of 5 million WHL shares. Podrasky supported the proposal.

The offender replied a little over an hour later at 12:06 pm , saying that,

"Properly announced to the Australian market, the new look WHL Energy has a very good prospect in my judgment of exciting 'buy' interest and pushing up our share price both short and long term".

The offender wrote that he supported Podrasky " closing this deal as quickly as possible ". Pearce and Pritchard also responded by agreeing with Podrasky's proposal.

Later that same day, the second Memorandum of Understanding (" Second MOU "), being the farm-in Memorandum of Understanding between WHL and Derby, was signed by Podrasky. It incorporated the issue of 5 million WHL shares to Derby as a finder's fee.

At 8:06 am on 14 May , the offender sent an email to Podrasky with the subject heading "LOI" in which he asked whether there was " Any good news on the LOIs being signed? " At 9:57 am that day, Podrasky replied, " Waiting for David's signature to be scanned. " The 8 May letter of intent and the First MOU did not have anyone called " David " as a signatory. However, the Second MOU did.

At 11:53 am that same day, the offender sent an email to Podrasky entitled " Looking ahead - a bit. " It addressed the issue of how to manage the announcement and the mechanics of the gas joint venture. In it, the offender suggested two things. The first was that if Podrasky decided to have a shareholders' vote on David Khan coming on the Board, as opposed to directors simply appointing him, he thought it was appropriate to give the big shareholders a " heads up ". Secondly, he said that because WHL was not followed by any analysts he thought it would be very beneficial if they got someone who could assist Podrasky in getting an " Announcement Pack/meeting " in front of the relevant Sydney analysts so that they could get as much interest as possible on this " first really significant foray into braoder [sic] business model ".

At 8:33 am on 15 May , Podrasky informed the offender that he had received the " Signed LOI from David ". At 12.19 pm the offender replied,

"Well done Larry. I'm absolutely of the opinion that this braodening [sic] in our direction is the best thing that could happen to the company right now".

Podrasky provided documents regarding the project to the directors on a confidential basis. His understanding was that all discussions in relation to the project at the relevant time were to be on a confidential basis.

The Second MOU was announced on the TSX at 7:49 am on 15 May (Canadian Eastern Daylight Time), which equates to 9:49 pm on 15 May, Sydney time. At 9.47am on 16 May an announcement was made to the ASX that WHL had signed the second MOU.

E. Buy orders for WHL shares placed by the offender in May 2008

At 11:26 am on 11 May (which was a Sunday), the offender sent an email to Cameron entitled " share transactions ". He advised that he was depositing money into the CSF account the following morning. He directed the sale of certain other shares " immediately ", and asked Cameron to start purchasing " as qucikly [sic] as practicable up to $50,000 worth " of WHL shares as soon as funds were available. He stated that at that point in time he was willing to pay up to 11c to see if they (being he and Ms Clisby via their superannuation fund) could get another 500,000 shares. A Chris Monaghan at ABN AMRO entered the order the following day, 12 May, for the purchase of the 500,000 shares.

On 12 May CSF contracted to buy 100,000 WHL shares at 9 cents per share with a settlement date of 15 May ( the first set of trades ). This was executed in two tranches following a 9 cent bid for 100,000 shares at 4.08 pm, which resulted in two trades at 4.10 pm for 77,650 shares and for 22,350 shares respectively. The shares were subsequently paid for out of the Macquarie CSF cash management account on the settlement date. A trading advice was sent to the offender by email at 8.14 pm on 12 May advising him of the purchase of 100,000 shares in WHL that day, together with the price paid and the amount due to be paid.

On 13 May CSF contracted to buy 140,000 WHL shares at 9.8 cents per share with a settlement date of 16 May ( the second set of trades ). This was executed in two tranches following a 9.8 cent bid for 140,000 shares entered at 4.09 pm, which resulted in two trades at 4.11pm for 40,000 shares and for 100,000 shares respectively. The shares were subsequently paid for out of the Macquarie CSF cash management account on the settlement date and were the subject of a trading advice sent to the offender by email at 8:15 pm that night.

On 14 May CSF contracted to buy 160,000 WHL shares at an average price of approximately 9.8cents per share with a settlement date of 19 May ( the third set of trades ). This was executed in four tranches:-

(a) following a 9.5 cent bid which resulted in a trade for 45,000 shares at 12:42 pm; and

(b) following a 9.6 cent bid for 115,000 shares entered at 3:45pm, amended at 4:09 pm to 9.9 cents, resulting in three trades at 4:10 pm for 12,700 shares, 10,000 shares and 92,300 shares respectively.

The shares were subsequently paid for out of the Macquarie CSF cash management account on the settlement date and were the subject of a trading advice sent to the offender by email at 8:13 pm that night.

About an hour later, at 9:12 pm the offender sent an email to Cameron in which he said,

"looks like you'll fill that order for 500,000 WHL shares by week's end based on what is transpired so far. That being the case, I would like to up the numbers slightly to 550,000 total, in other words another 150,000 (if my arithmetic is correct and we've brought 400,000 to date)".

On 15 May CSF contracted to buy 105,339 WHL shares at 9.9 cents per share with a settlement date of 20 May ( the fourth set of trades ). This was executed in three tranches:-

(a) following a 9.9 cent bid for 50,000 shares entered at 9.53am, which resulted in a single trade for 50,000 shares at 10:08 am; and

(b) following an 8.3 cent bid for 100,000 shares entered on 12 May 2008, which was subsequently amended to a bid of 9.9 cents on 15 May which resulted in two trades, one for 5,339 shares and one for 50,000 shares, both at 3.49pm.

The shares were subsequently paid for out of the Macquarie CSF cash management account on the settlement date and were the subject of a trading advice sent to the offender by email at 8:17 pm that night.

On 16 May CSF contracted to buy 44,661 WHL shares at 10.5 cents per share with a settlement date of 21 May 2008 ( the fifth and final trade ). This was executed in one tranche, being the balance of the order for 100,000 shares entered the previous day, following the amendment of the price to 10.5 cents at 11.04am on 16 May, which resulted in a trade for 44,661 shares at 12.19pm. The shares were subsequently paid for out of the Macquarie CSF cash management account on the settlement date and were the subject of a trading advice which was sent to the offender by email at 8:14 pm that night.

As a result of the execution of the order which he had placed on 11 May, the offender acquired a beneficial interest in a total of 550,000 WHL shares at between 9 cents and 10.5 cents per share. The total consideration for the shares was $53,497.97.

F. The offender's communications with WHL regarding his share purchases

On 12 May at 1.17pm , Pearce sent an email to the offender in which he referred to his presently holding 1.7 million shares in WHL through his superannuation fund. Pearce wrote, " I note your direct interest has increased from 1,000,000 to 1,700,000 since the initial director's interest notice. " Pearce sought information, for inclusion in an "Appendix 3Y" document to be provided to the ASX, regarding the share purchases, including the date of purchase, the consideration paid, details of the legal title holder, and details of the offender's percentage beneficial interest. Pearce wrote, inter alia , " ... WHL needs to supply the ASX with changes in the interests of a director in the company within 5 business days of the change. " The offender responded to Pearce by email at 2.37pm that day. He wrote, " the legal entity is: Jeffrey Bateson & Geraldine Clisby Carmarthen Super Fund A/C: My interest is 50%" . He provided the dates on which shares had been purchased between 17 March 2008 and 14 April 2008, at prices between 8 cents and 10 cents, and concluded, "So 700,000 at an average price of about 9c". On the basis of that information, Pearce prepared an Appendix 3Y Change of Director's Interest Notice to reflect the offender's March and April WHL share purchases, which he sent to the ASX on 13 May.

Erene Keriakos had a standing instruction from Podrasky to monitor on a daily basis who was buying and selling WHL shares in the market. She normally provided the information to Podrasky about the previous day's trading by 10.00 am each day. On 16 May the documentation she provided to Podrasky indicated that there had been significant recent trading in a nominee name.

At 9:31am on 16 May, Keriakos sent an email to the offender saying, "I have just noticed from Computershare reports that there were 100,000 bought in the past few days under Bond Street Custodians Limited. Do you use Bond Street? and are these included in the list you have sent to Warwick [Pearce]? "

The offender responded by email at 11:34am the same day, "ABN AMRO is, through Dixon Advisory completing a buy order that I had placed on behalf of my Superfund a couple of months ago. As I receive the confirmation settlement notices I shall you keep you informed. I haven't received anything regarding the 100,000 but that probably means that it is in the pipeline" . The purchase in fact resulted from the offender's 11 May order and by then he had been notified that the purchase had been effected.

At 3:32 pm that day, Pearce sent an email to the offender thanking him for his email to Erene Keriakos, and said, " Noting your recent share trades/orders and WHL's present position and intentions, can we remind you of WHL's Share Trading Policy (a copy of which is attached) and the insider trading prohibitions under the Corporations Act 2001 (Cth). Could you please confirm that you have been complying with, and will continue to comply with, WHL's Share Trading Policy ." Pearce's reference to "WHL's present position and intentions" was a reference to WHL's proposal to invest in the Kentucky Shale Gas project.

The offender responded to Pearce's email, at 4:52 pm . He wrote inter alia, " I can confirm unequivocally that I have complied with our Share Trading Policy. I determined to purchase WHL shares, and instructed my broker accordingly, in early March and what you see is the wash-up of those instructions. At the time I issued those instructions to my broker none of the deals that have very recently been before the Board were known ...". He stated that his decision was based solely on his opinion that "at, then, 8.5c a share, it would be attractive to increase my holding". He stated that he believed his broker had secured the number of shares which he had identified, but that he had not got settlement confirmation and would advise when he had. Some time after he sent that email, the offender telephoned Pearce and explained that he had become aware of share purchases in addition to those that he had declared in his email of 12 May. He said they had been processed by his broker after his email of 12 May, and that he would give Pearce the details of the purchases once he had received the settlement notices from his broker. He said that he could not provide Pearce with information which would enable him to complete an updated Appendix 3Y for the ASX until he received it from his broker and until after he had returned from a fishing trip to New Zealand.

In an email sent at 9.24 am on 17 May to Pearce, the offender again referred to a decision having been made over two months previously to increase his superannuation fund's WHL share holding. He asserted that there was no question of violating the letter or spirit of the company's share trading policy but did not refer to the share purchase order which he had placed on 11 May. He said, " Normally I receive a weekly summary via email as to purchases and then, upon settlement an advice in the mail (within a day or two) confirming. Although I have not received any confirmations yet, I can tell you that I expect be receiving confirmation of the following outstanding purchases: ..." He then listed 5 share parcels comprising 550,000 shares in WHL, with " expected settlement dates " from 15 May to 21 May. He said that he expected to receive confirmation of settlements in the following week, and that the " wash up " would be that the CSF would own 2,250,000 shares and that he, in his own name, would own 763,750 shares in WHL. In fact, at that point in time, the offender had already received email notifications of purchases from his broker.

On 19 May at 12.53pm , Pearce sent a further email to the offender expressing concern that the offender may have breached the company's share trading policy and the Corporations Act 2001. Pearce made specific reference to the insider trading provisions in s 1043A of the Corporations Act , and stated that he was concerned that the offender had applied for shares during the period when he was in possession of inside information and that that expression pertained to any period in which an order to purchase shares was open. Pearce, proceeding upon the basis (as described by the offender) that the subject shares were ordered in early March 2008, wrote, " My view is that whilst you advise that the order was placed in early March 2008, the application for shares was still open (and filled) subsequent to the board meeting held on 6 May 2008 at which price sensitive information became available to you and prior to the announcement of 16 May 2008. " Pearce asked the offender to advise by return email why he believed that he had not contravened WHL's share trading policy and the Act. He referred to the seriousness of the matter and to the ramifications for the company. He also spoke of the need for the Board to act swiftly in the event that that there had been any breach of the policy or the Act.

On 22 May at 4.09pm , the offender sent an email to Pearce and Podrasky attaching what he described as " a comprehensive chronology of the shares that have been acquired by the Carmarthen Superannuation Fund (CSF) of which I have a 50% interest ." He wrote, " you will see, that the CSF issued two open orders, one for 700,000 (on 11 March) and one for 550,000 (on 11 May). Those trades that have occurred between 11 May to 16 May are listed, with details, for a further Appendix 3Y reporting. " The attached chronology included the following statements: " Carmarthen Superfund ("CSF"), of which I am a 50% beneficiary, decided on or about 8 March to purchase up to 1,250,000 shares in WHN. The reason to do so was my opinion that the share price had reached its nadir and that at 8c-10c it represented an excellent long-term investment ." And later, " The CSF decided, sometime during the week of May 5-9 to continue acquiring shares to reach the 1,250,000 goal, if possible, and how that should be funded ." .

In an email sent to Pearce at 4.59pm that day, the offender again referred to the May WHL share purchases having been initiated in March and said, "...it did not enter my mind that the shares purchases that the Carmarthen Superfund had initiated in March...should be suspended..." .

At a Board meeting held on 23 May the offender's WHL share purchases of May 2008 were discussed. The minutes of that meeting record that the offender again explained that a decision had been made in March to purchase more shares in WHL at a time before the Board discussed purchasing the Kentucky shale gas assets. The minutes record that, " The board noted that Dr Bateson had placed an open order with his stock broker that was temporarily unable to be fulfilled due to a lack of funds in his current account and this explained the gap in purchasing between 14 April 2008 and 12 May 2008." There was no reference in the minutes to a fresh May buy order having been placed by the offender.

On 30 June 2008, Podrasky and Pearce asked the offender for his resignation. The offender tendered his resignation by email the following day, 1 July. He said, " While I dispute any wrong doing, the situation does not, I believe, permit me to continue on the Board of WHL Energy as to do so may not be in the best interest of the Company ". His resignation was immediately notified to the ASX by Pearce.

G. Materiality of the Information

An expert retained by ASIC, Andrew Frazer, who has been an investment advisor and stock broker since 1992, reviewed the Information possessed by the offender and concluded that, in his opinion, it was material. That is, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of WHL shares.

H. Record of interview conducted on 1 September 2008

On 1 September 2008, the offender participated in a recorded interview with officers of ASIC. When asked about the May share purchases, the offender did not deny the share transactions and did not suggest that the information available to him was not confidential. Nor has the offender ever sought to deny that the information was not generally available.

He told investigators that he had always intended to buy 1.25 million WHL shares, and that he had always intended to buy the further 550,000 shares which were the subject of the 11 May order, as amended on 14 May. The following exchange then occurred:

Mr Waschl: When you made the decision to purchase 1.3 million or 1.25 million Wind Hydrogen shares what was the reason that you didn't

Offender: Well, at that time I looked at the cash we had available in the super fund and whether or not we would have to put anything in, or whatever, and I just picked that number because that is about how much cash we had available. In fact we actually ran out on that tranche and I had to transfer some money from one of the linked bank accounts that the super fund has to get to that first 750,000, and also in the back of my mind I thought I'd wait and see what happens to the share price. I mean for all I know it could have taken off. Then again it could've got- and what it did was sit again round about that eight to ten cent range, which is what I had identified originally as the trigger for wishing to purchase."

The offender also admitted that he understood the company's policy about insider trading. He explained his understanding in the following terms:

"If you were in possession of information that was not in the general market and it was information that would manifestly cause(d) somebody to do something that they would otherwise not do, either sell shares or buy shares, some other action, that you oughtn't to trade in the shares. ...And just for the record I don't believe I have done anything that is either illegal or wrong from a moral point of view or whatever you want to put it" .

I. WHL Shareholding

The offender, in his capacity as a beneficiary of the CSF, acquired a beneficial interest in the 550,000 WHL shares the subject of the charge at between 9 cents and 10.5 cents per share. Between 1 April 2008 and 30 May 2008, WHL's share price ranged from 8.1 cents to 14.5 cents.

In September 2009 CSF also took up its full entitlement of WHL right shares purchasing 750,000 shares at 4 cents per share. The CSF sold 1,275,000 shares in WHL on 26 March 2010 at between 3.7 cents and 4 cents per share. As at 10 February 2011, the offender held, either personally (763,750 shares) or beneficially through CSF (1,725,000 shares), a total of 2,488,750 shares in WHL. The closing price for WHL shares on 10 February 2011 was 3.5cents.

The evidence for the offender

1. The offender did not give, nor call evidence at the sentence hearing. He relied, in advancing his case, upon a large number of testimonials and other documentation which included a pre-sentence report. The offender is now aged 58. He has been married for more than 30 years and his wife remains supportive of him. There are no children of the marriage. The offender spent his formative years in Canada before coming to Australia. His father was a career Army officer and was apparently a strict disciplinarian. Nevertheless he remains in close contact with both his father and his brother who still live in Canada. The offender is clearly highly intelligent. At university he acquired an Honours degree in Science, a Masters degree in Nuclear Engineering and a doctorate in Finance and Economics. He has also completed a Senior Executive Program and the Australian Institute of Company Directors' Course.

1. The offender has worked in a number of high profile positions in the public and corporate sectors both here and overseas, mainly in Hong Kong and the United Kingdom. A colleague, Mark Snape, indicated that he has known the offender for more than 20 years. He described some of the offender's professional achievements in the following terms:

He has worked at senior levels in the NSW Government (Chief Economist for NSW Treasury) and with some of the world's largest corporations including as Associate Director County Natwest Corporate Finance Australia (the Australian subsidiary of the UK Investment Bank), Head of Strategy for China Light & Power (a Hong Kong listed power company) and Chief Financial officer for National Power (a UK listed power company). I am also aware that Dr Bateson has served as non-executive director of various listed and unlisted companies.

1. Mr Snape then outlined the nature of his contact with the offender. He said that he had known him:

• As a colleague, at County Natwest between 1994 and 1995 [where] we worked closely as part of the corporate finance group providing advice to governments and corporate entities on the privatization of government business;
• As a business partner and co-director from 1997 to 2000. China Light and Power and American Electric Power established an incorporated joint venture in Australia, Australian Energy International Pty Limited, to bid for electricity generating companies Loy Yang Power and Southern Hydro when they were being privatized by the Victorian Government for the right to build, own, finance and operate Basslink, a high voltage transmission line between Tasmania and Victoria. Dr Bateson and I were directors of AEI, representing CLP and AEP respectively.

1. Dr Janet Roth is a friend of the offender. She works as a clinical psychologist and provided the following insight into his activities:

My view is that Jeff is a brilliant and talented man who does his best to be helpful and contribute to his local community and broader society through his involvement on various boards, e.g. alternative energy companies, Century Asset Management, which operates and manages solar power generation assets, Wind Hydrogen Ltd, a renewable energy company, and Varuna. Until he was accused of this charge, Jeff worked pro bono approximately a half day a week for several years as the financial controller for Varuna, Australia's only national writing centre, which has a particular focus on remote and indigenous writers. The Dark Home, Varuna's premises, was gifted by the Eleanor Dark Foundation.

1. The offender and his wife returned to Australia from overseas in 2001. The testimonials which were tendered on his behalf speak uniformly of his reputation for honesty and integrity. Many of them were provided by people who have had considerable contact with the offender both in his private and professional life. Indeed, two were furnished by former directors who had served on the board of WHL with the offender. The offender's actions were described by a number of persons as "being out of character" and, in that context, particular reference was made to the fact that he had frequently, in his professional life, been in possession of sensitive information but had not misused it. Furthermore, the testimonials provide strong support for the proposition that the offender is remorseful and that he feels ashamed of his actions. The author of the pre-sentence report noted that the offender "appeared to show remorse for his actions and stated that he accepted full responsibility for his offending behaviour. He also stated that in hindsight, he could see, no excuse for 'his behaviour and could find no way to justify' such".

1. A newspaper article and a report on ASIC's website, which record the fact that the offender had entered a plea of guilty to the offence in the Local Court, were tendered in evidence. The adverse publicity which the offender has received has no doubt added to his sense of shame and humiliation. The material before the court strongly suggests that, as a result of these proceedings, the offender has withdrawn from the circles in which he used to mix and that he has become somewhat reclusive. A colleague, Alan Rich, expressed the opinion that the impact of the proceedings upon the offender has been "devastating" and that "he has become a shadow of the man he was".

1. The offender's wife provided a statement in which she observed that she and her husband had suffered from the financial burden of having to meet the legal expenses that are associated with these proceedings. I was informed that to date nearly $170,000 had been paid in legal fees with the expectation that a further considerable sum is still to be outlayed. It is common ground that, as a result of the offender's conviction for the present offence, he will be disqualified from holding corporate office for a period of 5 years: Rich v ASIC (2004) 220 CLR 129. Moreover, his age, the shame which he feels, as well as the realities of the business world, all suggest that the offender is unlikely to be able to work again in the corporate sector. The offender has of his own volition resigned from the two non-executive directorships to which Dr Roth referred, as a direct consequence of the charge having been laid against him in April 2010. Since then he has been effectively unemployed. He spends his time maintaining the matrimonial home and attending to other domestic matters. For some of this period the offender had assumed the major burden of looking after the needs of his elderly parents-in-law. The offender was in the habit of driving them around in order that they could attend doctor's appointments and to enable them to do their shopping and banking. He also assisted them with their daily chores. He was able to do so because he has more time at his disposal than does his wife, who runs two small retail shops in Leura which are open 5-6 days a week. Apart from assistance which may be provided to them by community organisations, the only other person who could attend to their needs is their son, but he lives in Canberra. Regrettably, since the sentencing proceedings commenced the offender's father-in-law has died. His mother-in-law, who is aged 88, is now even more dependent on the offender and his wife particularly as she is mourning the passing of her husband to whom she was married for 65 years.

The relevant sentencing principles

1. In determining the appropriate sentence to be imposed, I must proceed in accordance with s 16A of the Crimes Act 1914 (Cth) (the Act). In DPP v El Karhani (1990) 21 NSWLR 370, the Court of Criminal Appeal said:

The language of the Act gives no support for the proposition that general deterrence has been removed from the list of criteria to be considered by a court sentencing a person for a Federal offence. On the contrary, s 16A(1) imposes on the Court the duty, which is its primary obligation, to ensure that the sentence or order "is of severity appropriate in all the circumstances of the offence". It is by this duty that the general principles of sentencing law are imported into the function of a court imposing a sentence on a Federal offender convicted of the offence. What will be "appropriate" will depend, in part, upon a consideration of fundamental notions, such as that of general deterrence.

The list of particular considerations in s 16A(2) must be read as subject to the primary obligation of the court stated in s 16A(1). All that s 16A(2) requires is that the court should "take into account" the listed matters. They provide a catalogue of matters to be considered in determining the "severity appropriate in all the circumstances of the offence". [at 378]

1. Furthermore, I must not impose a sentence of imprisonment unless, having regard to all other available sentences, no other sentence is appropriate: s 17A of the Act. It is common ground that a sentence of imprisonment must be imposed. However, that is where the submissions of the parties diverge. On behalf of the offender, it was submitted that the combination of objective and subjective features of the case made the present offence "an exceptional case of insider trading" such that a sentence which did not have an actual custodial component should be imposed. Accordingly, it was submitted, that a fully suspended sentence ought to be imposed upon the offender, or, in the alternative, that an intensive correction order should be made. The Crown, on the other hand, submitted that a sentence entailing a period of full-time custody was required.

1. The principles which are applicable to sentencing for offences of insider trading were conveniently stated in R v Rivkin (2003) 198 ALR 400, in which Whealy J, as his Honour then was, said that:

[t]he element of general deterrence is important in white collar crimes. It is of course, an important part of the sentencing process in all crimes. It is however, an especially important matter in crimes such as the present because of the need to mark out plainly to others who might be minded to breach their professional or related obligations that such conduct will generally merit, in appropriate cases, condign punishment.

An important reason why this is so relates to the often remarked difficulty in detecting and investigating white collar crime. Insider trading is particularly hard to detect. It may often go unnoticed but where it occurs it has the capacity to undermine to a serious degree the integrity of the market in public securities. It has the additional capacity to diminish public confidence not only so far as investors are concerned but the general public as well. Moreover, this diminution in confidence may occur subtly and is not confined to the circumstances where a substantial insider trading transaction has taken place. There is a capacity to undermine and diminish public confidence in the market even where the offence may be shown as one which in some respects occupies a lower level of seriousness. This is likely to be particularly so in the case of an offender who occupies a substantial position as a trader and advisor in the market.

It is especially important that the sentencing process provide a firm disincentive to the carrying out of illegal activities especially by those who are engaged in the securities industry. There is a need to sound, in effect, a clarion call to discourage illegal and unethical behaviour among company directors, company officers, brokers, traders, advisors and those who have a close connection through, for example merchant banking, to the stock market: (See Regina v Pantano (1990) A Crim R 328 at 330; Regina v Andrew Peter White (NSWCCA unreported, 20 August 1998); Regina v Riccord (NSWCCA unreported 9 May 1997); Regina v El-Rashid (NSWCCA unreported 7 April 1995); Regina v Hawker [2001] NSWCCA 148 at para23 and para24; Regina v Pont (2000) NSWCCA 419; Regina v Hannes (2000) 158 FLR 389 at para394 (per Spigelman CJ); Regina v Hannes (James J) 13 December 2002 at para90; see also The Griffiths Report (1989) [1.2.1; 3.3.4 - 3.3.6; 4.3.4] Second Reading Speech to the Corporations Legislation Amendment Bill 1991, p4215). [at para 44]

1. The damage caused by insider trading was described by the Court of Criminal Appeal in R v Rivkin (2004) 184 FLR 365 in the following terms:

Nor is it correct to describe the offence ... as "victimless". The victim of any such offence is the investing community at large, the injury being that related to the loss of confidence in the efficacy and integrity of the market in public securities. [at para 412]

1. In R v Firns (2001) 51 NSWLR 548 Mason P observed that:

On this approach, equality of access to the relevant market is the critical factor. Under this theory, restrictions on insider trading are designed to ensure that the market operates fairly, with all participants having equal access to relevant information. The playing field is to be levelled. [at para 50]

1. In R v Doff (2005) 54 ACSR 200; [2005] NSWCCA 119 , the Court of Criminal Appeal, in the context of dismissing a Crown appeal, observed that:

[w]e do not, in this respect, suggest that anything other than a stern approach should be taken to offences of insider trading for the reasons earlier identified. It remains a serious offence, and there needs to be a considerable deterrent aspect reflected in order to protect the integrity and efficacy of the market. Those in a position of trust who receive price sensitive information in relation to securities are expected to conform to exacting standards of honesty, and transgression can normally be expected to lead to custodial sentences as well as to pecuniary penalties. [at para 56]

1. In DPP v O'Reilly [2010] VSC 138, T Forrest J said that:

[I]n insider trading cases I consider there are at least two victims; the seller or sellers of the stock at the lower price and the public, whose confidence in the integrity of the market must be diminished. The impact upon public confidence in the market is an important factor. The securities markets could not survive and flourish without the confidence of those who elect to invest in it. [at para 19]

1. In R v Hartman [2010] NSWSC 1422, McClellan CJ at CL said that:

[I]t must be remembered that his crimes were not victimless. Each illegal transaction was likely to have a cost to someone, who either traded or held their position, without the benefit of the knowledge available to the offender. The offender set about systematically trading in breach of the law for the sole purpose of enhancing his personal wealth at the expense of others. [at para 45]

1. It is also timely to recall the remarks of the Lord Chief Justice of England and Wales in R v McQuoid [2009] EWCA Crim 1301; [2009] 4 All ER 388, in which His Lordship observed that:

[t]hose who involve themselves in insider dealing are criminals: no more and no less. The principles of confidentiality and trust, which are essential to the operations of the commercial world, are betrayed by insider dealing and public confidence in the integrity of the system which is essential to its proper function is undermined by market abuse. ... The message must be clear: When it is done deliberately, insider dealing is a species of fraud; it is cheating. [at paras 8-9]

1. It is clear from those pronouncements just how seriously the courts treat offences of this kind.

The objective gravity of the offence

1. A critical aspect of the sentencing process is an assessment of the objective gravity of the offence under consideration. It was submitted by senior counsel who appeared on behalf of the offender that the "nature and circumstances of the offence" were such as to place it "in the mid-range of objective seriousness". [I pause to observe that that expression does not have the significance that it assumes in relation to State offences in respect of which a standard non-parole period is applicable]. A number of features of the case were relied upon as providing support for that characterisation of the offence. First, it was submitted that it was important to have regard to the context in which the shares were acquired. It was pointed out that the offender had, for a number of years, been a non-executive director of WHL and indeed, for a period of time, had served as its chairman. Emphasis was placed on the fact that the offender had, on no fewer than five previous occasions, "supported the company by capital raisings prior to the company raising money from the public and that he still held those shares at the time of the offence". As I understand the submission, it was contended that as a long-term investor the offender had always acted in promoting the company's best interests. Secondly, it was submitted that the present offence was quite unlike those cases in which an "offender obtained the insider information and then used it to acquire shares for the purpose of making a quick profit". The present case, it was submitted, was also distinguishable upon the basis that not only had the offender not made a profit, but he had suffered a substantial loss. Thirdly, it was submitted that the extent of the offender's criminal venture was relatively modest given the amount of money that had been invested and the number of shares which had been purchased. Fourthly, it was submitted that far from the offence arising from a lengthy course of conduct, it had been committed within a relatively short timeframe. Counsel went so far as to describe the offender's conduct as "a single, isolated, aberrant act". That submission, when developed, was to be understood against the background that the offender had frequently been in possession of highly confidential information in the course of his professional life without previously misusing that information. Fifthly, it was submitted that "no elaborate steps were undertaken by the offender to disguise the identity of the purchaser or the transaction". In support of that submission, attention was drawn to the fact that the transactions in which the offender engaged in order to purchase the WHL shares were no different from the methods which he had previously used, including the fact that he had retained the same broker. The consequence, so it was submitted, was that the offender's connection to his superannuation account with that broker was readily traceable. The lack of subterfuge and sophistication meant, so it was submitted, that the offence was easier to detect than others of its kind. Sixthly, it was submitted that the offender's decision to acquire the 550,000 shares "was not a new plan to buy those shares. He had always intended to do so. He reactivated his original decision. The insider information brought about the reactivation but it was not a new idea to buy." Finally, unlike in other cases, it was submitted that the offender had not sought to involve third parties in his criminal conduct.

(1) When an offender is referred for assessment, the Commissioner of Corrective Services is to investigate and report to the court on the matters referred to in section 67 (1) and such other matters as the regulations may require.

(2) An offender's assessment report:

(a) must take into account, and specifically address, the matters prescribed by the regulations, and

(b) may indicate the nature of any conditions that it would be appropriate for the court to impose on an intensive correction order if such an order is made.

(3) The regulations may make provision for or with respect to the conduct of investigations and the preparation of reports for the purposes of this Part.

1. It is also important to have regard to s 81 of the Crimes (Administration of Sentences) Act 1999 which is in the following terms:

81 Conditions governing intensive correction orders

(1) An intensive correction order is subject to any conditions imposed by the sentencing court under this section.

(2) The sentencing court must at the time of sentence impose on an intensive correction order the conditions prescribed by the regulations as the mandatory conditions of an intensive correction order.

(3) The sentencing court may at the time of sentence, or subsequently on the application of the Commissioner or the offender:

(a) impose additional conditions on an intensive correction order, or

(b) vary or revoke any additional conditions imposed by it on an intensive correction order.

(4) The additional conditions that a court can impose are limited to:

(a) conditions prescribed by the regulations as additional conditions that can be imposed by the sentencing court, and

(b) such other conditions as the court considers necessary or desirable for reducing the likelihood of the offender re-offending.

(5) The court may refuse to entertain an application by the offender under this section if the court is satisfied that the application is frivolous or vexatious.

(6) The court may, at its discretion, deal with an application under this section with or without the parties being present and in open court or in the absence of the public.

(7) Before imposing an additional condition under subsection (4) (b), a court is to consider whether the condition will create a need for additional resources and must not impose the condition unless satisfied that any such additional resources that will be needed are or will be made available.

(8) This section does not permit the sentencing court to impose any additional conditions, or vary any additional conditions imposed by it, so as to be inconsistent with any of the conditions prescribed by the regulations as the mandatory conditions of an intensive correction order.

1. Sections 89 and 90 of that Act deal with the consequences of a breach of an order.

1. Regulation 175 of the Crimes (Administration of Sentences) Regulation 2008 provides that:

The following are the mandatory conditions of an intensive correction order to be imposed by a court under section 81 of the Act:

(a) a condition that requires the offender to be of good behaviour and not commit any offence,

(b) a condition that requires the offender to report, on the date fixed as the date of commencement of the sentence or on such later date as may be advised by the Commissioner, to such local office of Corrective Services NSW or other location as may be advised by the Commissioner,

(c) a condition that requires the offender to reside only at premises approved by a supervisor,

(d) a condition that prohibits the offender leaving or remaining out of New South Wales without the permission of the Commissioner,

(e) a condition that prohibits the offender leaving or remaining out of Australia without the permission of the Parole Authority,

(f) a condition that requires the offender to receive visits by a supervisor at the offender's home at any time for any purpose connected with the administration of the order,

(g) a condition that requires the offender to authorise his or her medical practitioner, therapist or counsellor to provide to a supervisor information about the offender that is relevant to the administration of the order,

(h) a condition that requires the offender to submit to searches of places or things under his or her immediate control, as directed by a supervisor,

(i) a condition that prohibits the offender using prohibited drugs, obtaining drugs unlawfully or abusing drugs lawfully obtained,

(j) a condition that requires the offender to submit to breath testing, urinalysis or other medically approved test procedures for detecting alcohol or drug use, as directed by a supervisor,

(k) a condition that prohibits the offender possessing or having in his or her control any firearm or other offensive weapon,

(l) a condition that requires the offender to submit to such surveillance or monitoring (including electronic surveillance or monitoring) as a supervisor may direct, and comply with all instructions given by a supervisor in relation to the operation of surveillance or monitoring systems,

(m) a condition that prohibits the offender tampering with, damaging or disabling surveillance or monitoring equipment,

(n) a condition that requires the offender to comply with any direction given by a supervisor that requires the offender to remain at a specified place during specified hours or that otherwise restricts the movements of the offender during specified hours,

(o) a condition that requires the offender to undertake a minimum of 32 hours of community service work per month, as directed by a supervisor from time to time,

(p) a condition that requires the offender to engage in activities to address the factors associated with his or her offending as identified in the offender's assessment report or that become apparent during the term of the order, as directed by a supervisor from time to time,

(q) a condition that requires the offender to comply with all reasonable directions of a supervisor.

1. The consequence of Regulation 175(o) appears to be that an offender who is sentenced to the maximum term of 2 years (or 24 months) by way of an ICO will be obliged to perform a minimum of 768 hours of community service. Regulation 176 sets out the additional conditions that may be imposed by a court.

1. On 25 March 2011 I referred the offender, pursuant to s 69(1) of the Crimes (Sentencing Procedure) Act 1999 , for an assessment as to his suitability for intensive correction in the community. I did so after having satisfied myself of the matters referred to in s 69(2) of the Act. Regrettably the report was not made available until 24 May 2011, with the consequence that there has been a delay in finalising the proceedings. Nevertheless, the offender has now been assessed as suitable for an ICO. He has also signed an undertaking to comply with his obligations in the event that such an order is made.

1. It is common ground that an ICO has been available as a sentencing option for Commonwealth offences since 29 October 2010: Crimes Amendment Regulations 2010 (Cth) (No.4).

1. To assist my understanding of the operation of such orders, the parties provided me with a considerable amount of background information. Material provided by Corrective Services NSW suggests that a curfew may be imposed upon the offender in addition to the other conditions to which I have referred. As I understand the situation, the ICO consists of 4 stages, commencing with the most restrictive conditions and progressively working towards fewer restrictions.

1. Because ICOs have been available in Victoria for some time, and particularly as there appears to be little difference between the two schemes, the parties drew my attention to some aspects of the scheme which operates in that State. Section 19 of the Sentencing Act 1991 (Vic) enables a court, in the circumstances set out in ss (1), to impose a sentence of imprisonment of not more than one year and order that it be served by way of intensive correction in the community. Section 20(1) sets out the core conditions of an ICO and ss (2) provides that an ICO must have all the core conditions attached to it.

1. Core condition (d) requires that the offender attend at a specified community corrections centre, or as otherwise directed by a community corrections officer, for twelve hours during each week of the period of the order or a shorter period specified in the order for the purpose of -

(i) performing unpaid community work as directed by the Regional Manager for not less than eight of those hours; and

(ii) spending the balance (if any) of those hours undergoing counselling or treatment for a specified psychological, psychiatric, drug or alcohol problem as directed by the Regional Manager.

1. In DPP v Nikolic [2008] VSCA 226, Warren CJ, with whom Vincent JA agreed, said that

[a]n intensive correction order is not a light sentence. It is intended to be, and ordinarily will be, burdensome and will substantially contribute to the punishment of an offender, including where condign punishment is warranted. [at para 21].

1. In DPP v Karazisis & others [2010] VSCA 350, in the context of dismissing Crown appeals against the inadequacy of sentences in which ICOs had been imposed at first instance, a majority of the Court of Appeal in Victoria said:

In any case, it is well established that an Intensive Correction Order must be regarded as a significantly punitive disposition. The conditions of any such order are extremely onerous. Any breach is likely to have dire consequences. [at para 184]

1. In R v Lanteri [2006] VSC 225, Gillard J said:

An Intensive Correction Order seeks to meet the objects of sentencing. There is no doubt that it is a form of penalty in that it will intrude into your life for the next 12 months. It will require you to provide your services to the community on an unpaid basis, and further will constantly remind you over the next 12 months of the evils of criminal conduct. It will be an appropriate adjunct to your rehabilitation and a constant reminder to you to never again involve yourself in criminal conduct. [at para 116].

1. In Aitken v Moten-Connor (Supreme Court of Victoria, unreported, 9 February 1995) Smith J said:

It becomes necessary then to identify the important features of an Intensive Correction Order. It might be argued that major features of the Intensive Correction Order are the imposition of the term of imprisonment and the treating of the order as a sentence of imprisonment. From the legal point of view that is a very significant aspect of the order. Plainly, however, it is the requirement that the sentence of imprisonment be served by intensive correction that gives an Intensive Correction Order its identity. To remove the latter is to change the character of the Order so that it ceases to be an Intensive Correction Order. [at p 5]

1. In Dimitrovski v Jones (Supreme Court of Victoria, unreported 23 August 1994) Mandie J said:

In his Second Reading Speech relating to the Sentencing Bill in the Legislative Assembly on 19 th March 1991, the then Attorney-General said this: "The Bill introduces a new sanction - the intensive correction order. This measure is designed to provide a severe punishment just short of imprisonment but more severe than a community-based order." [at p4]

1. I now return to the principal submission made on behalf of the offender that I should fully suspend the sentence of imprisonment. Counsel made submissions concerning the passage from McKay (supra) to which I referred earlier. In particular, it was contended that Whealy's J view that because that particular offender was rehabilitated, there existed "an additional reason" why a suspended sentence was inappropriate in that case, was inconsistent with what was said by the High Court in Dinsdale (supra). Although I am disposed to accept that submission. I do not need to reach a concluded view about the matter. That is because, in my view, the objective gravity of the present offence, in the terms in which I have described it, outweighs the personal considerations which have been advanced on the offender's behalf to such an extent that I am unable to accept the submission that a suspended sentence is an appropriate sentencing outcome in the circumstances of the present case. In so concluding, I have not overlooked the very considerable significance which the Crown submitted should be afforded to the offender for his early plea of guilty. Furthermore, I accept that a suspended sentence would not properly reflect the need for general deterrence in this case.

1. As I said earlier, the legislature treats an ICO as a sentence of imprisonment notwithstanding the fact that it is served entirely in the community. As the Crown submitted, such an order is not regarded as an alternative to imprisonment itself but as a means of serving such a sentence. Courts often described periodic detention as having a "strong degree of leniency built into it and as being outwardly less severe in its denunciation of the crime": R v Hallocoglu (1992) 29 NSWLR 67 at 73. In my view, those sentiments are equally apposite to an ICO and I have proceeded upon that basis.

1. I referred earlier to the fact that it was open to the court to also impose a fine upon the offender. Before doing so a court must take into account the offender's financial circumstances: s 16C of the Crimes Act 1914 (Cth) . To that end, I was provided with a comprehensive statement of the offender's assets and liabilities. It reveals that he and his wife jointly own a property at Leura worth, on current estimates, between $850,000 and $900,000 as well as a motor vehicle worth $25,000. They also have a joint bank account in which, as at 7 March 2011, there was a balance of $43,772.45. The value of the shares which the offender retains in Wind Hydrogen Limited were said, as at 16 March 2011, to be worth $25,968. The Carmathen Superannuation Fund, which he also jointly owns with his wife, also has significant investments. It includes an apartment which is currently worth about $550,000 and shares in listed companies which are worth in excess of $800,000. However, it was submitted on the offender's behalf that if he was obliged to draw down from the superannuation fund in order to meet any pecuniary penalty that may be imposed upon him, that may have "adverse taxation implications" for him. In essence, it was contended that whereas he could draw down on those funds when he reached the age of 60 without incurring tax, if he was obliged to do so before reaching that age then he would, in all probability, be taxed at the rate of 15%. In short, it is submitted that such an outcome would constitute a further significant impost upon him. In considering the appropriate penalty in this case, I accept that it is relevant to have regard to that submission.

1. In arriving at the appropriate penalty I have sought to fashion a sentence that meets the various purposes of sentencing to which I referred earlier. As I also said earlier, the legislature has recently seen fit to dramatically increase the maximum penalty which is available to be imposed upon persons who engage in "insider trading". That development is likely to result in rather more severe penalties, everything else being equal, than those which I am about to impose upon this offender.

Sentence

1. The offender is sentenced to a term of imprisonment of 2 years to commence on 6 July 2011 and to expire on 5 July 2013.

1. Pursuant to s 7(1) of the Crimes (Sentencing Procedure) Act 1999 , I make an intensive correction order and direct that the sentence is to be served by way of intensive correction in the community. The conditions of the latter order include the mandatory conditions referred to in s 81 of the Crimes (Administration of Sentences) Act 1999 and Regulation 175 of the Crimes (Administration of Sentences) Regulation 2008 . As I indicated earlier, s 7(2) of the Crimes (Sentencing Procedure) Act 1999 precludes a court from setting a non-parole period in respect of such a sentence.

1. In selecting the date for the commencement of the sentence, I have had regard to the need for the authorities to have time in which to put the appropriate administrative arrangements in place. The offender is to report by no later than 10 am on 6 July 2011 to such local Office of Corrective Services NSW or such other location as may be advised by the Commissioner of Corrective Services.

1. In addition, the offender is to pay a fine of $70,000. I will allow him 6 months within which to pay that fine.

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Decision last updated: 27 June 2011