R v Jacobson (Sentence)
[2014] VSC 592
•28 November 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
CRIMINAL DIVISION
S CR 2011 0054
| THE QUEEN |
| v |
| MERVYN JACOBSON |
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JUDGE: | KAYE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19, 24 November 2014 |
DATE OF SENTENCE: | 28 November 2014 |
CASE MAY BE CITED AS: | R v Jacobson (Sentence) |
MEDIUM NEUTRAL CITATION: | [2014] VSC 592 |
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CRIMINAL LAW ‑ Sentence ‑ Share market manipulation – Guilty verdicts – 33 counts of taking part, and 2 counts of conspiracy to take part, in share purchases contrary to s 1041A of Corporations Act 2001 (Cth) ‑ General deterrence and denunciation ‑ Age and health ‑ Good character – Delay – Effect of disqualification from managing any corporation.
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APPEARANCES: | Counsel | Solicitors |
| For the Prosecution | Mr J Rapke QC and Mr C Winneke | Solicitor to the Director of Public Prosecutions (Commonwealth) |
| For the Accused | Mr A Burns and Mr S Tovey | Markotich Lawyers |
HIS HONOUR:
Mervyn Jacobson. You have been convicted, by the jury empanelled on your trial, of two charges of conspiracy to take part, and 33 charges of taking part, in transactions which had, or were likely to have, the effect of creating or maintaining an artificial price for trading in financial products, contrary to s 1041A of the Corporations Act 2001 (Cth).
Those charges arose out of a series of transactions in which shares were purchased in Genetic Technologies Limited (“GTG”) on the Australian Stock Exchange (“ASX”) between 16 May 2006 and 2 November 2006.
You were the founder and driving force of the corporation, which was the predecessor to GTG. In 2000, that company merged with an Australian company, to become GTG. The principal business of GTG was to research and develop genetic technologies which it commercialised by the licensing of non-coding patents. During the period in question, you were the chief executive officer and principal shareholder of GTG. During that time you held 150 million shares in GTG, which constituted about 40% of its issued capital.
As a result of the merger in 2000, you, and interests connected with you, were issued with approximately 50 million options, the conversion price of which was 20 cents per share. In March and April 2005, you exercised the options, which resulted in you acquiring in excess of 100 million GTG shares. In order to finance that transaction, you entered into a lending and borrowing facility with Opes Prime Securities Limited (“Opes Prime”) in the sum of $11.4 million (approximately). As security for that facility, you lodged approximately 106 million shares in GTG with a trustee. Under the terms of the facility, Opes Prime was entitled to make margin calls on you, requiring you to provide further security. The calls were to be calculated according to a loan to value ratio of 25%, which was based on the daily closing price of GTG shares on the ASX.
Subsequently, in May 2006, due to liquidity problems you were then experiencing, you entered into two further securities and borrowing agreements with Chimaera Capital Limited, by which you increased your borrowings by a further $2.5 million. The facilities provided by Chimaera operated in the same manner as the facility provided by Opes Prime, save that the loan to value ratio, in respect of the Chimaera facilities, was 30%.
In its simplest form, the basic allegation made by the prosecution, in respect of each of the charges, was that you were involved, either personally, or through others, in the making of bids to purchase shares in GTG on the ASX at prices, which were designed to maintain the closing market price of GTG shares at a level, that would avoid the need for you to provide further security to Opes Prime and Chimaera under their finance facilities.
The first charge alleged that, between 16 May 2006 and 31 October 2006, you conspired with your son-in-law, Geoffrey Newing, and your daughter, Tamara Newing, to take part in the purchase of shares in GTG on the ASX, which were likely to have the effect of creating, or maintaining, an artificial price for trading in GTG shares on the ASX. It is alleged that during that period Tamara, and to a lesser extent Geoffrey Newing, with your agreement, purchased a large quantity of GTG shares for the purpose of creating or maintaining the closing price of those shares at the required level. Those purchases were conducted through Richard Wade, a stockbroker, who was then employed by ABN AMRO Morgans Limited (“ABN AMRO”).
Charges 2 to 34 on the indictment each alleged that, on various dates between 14 September and 27 September 2006, you took part in the purchase of specific quantities of GTG shares on the ASX, which were likely to have the effect of creating or maintaining an artificial price for trading in GTG shares on the ASX. Those shares were purchased by you, on behalf of XY Inc, an American company, through Rocco Musumeci, who was then a trainee stockbroker employed by Bell Potter Securities Limited at its Wollongong office.
Charge 35 on the indictment alleged that, between 27 September 2006 and 2 November 2006, you conspired with Musumeci and Tamara to take part in the purchase of GTG shares on the ASX, which were likely to have the effect of creating or maintaining an artificial price for trading in GTG shares on the ASX. During that period, it was alleged that your daughter Tamara, with your agreement, purchased a substantial quantity of shares on behalf of XY Inc through Musumeci, for the purpose of ensuring that the closing price for GTG shares was at a level which obviated or reduced your exposure to margin calls on your two borrowing facilities.
Under s 1041A and s 1311 of the Corporations Act, it is an offence to take part in the purchase of shares on the ASX which has, or is likely to have, the effect of creating or maintaining an artificial price for those shares on the ASX. At law, a purchase is one which has, or is likely to have, such an effect, if it is established that the sole or dominant purpose of the buyer, in taking part in the purchase, was to create or maintain the price of shares, in the company in which shares were purchased, on the ASX, at a particular level.
By its verdict in respect of charge 1, the jury was satisfied, beyond reasonable doubt, that you were a party to an agreement with Geoffrey and Tamara Newing to take part in the purchase of GTG shares on the ASX, the sole or dominant purpose of which was to create or maintain a price for GTG shares on the ASX at a particular level. Similarly, by its verdict in respect of charge 35, the jury was satisfied, beyond reasonable doubt, that you were a party to an agreement with Rocco Musumeci and Tamara Newing, between 27 September and 2 November 2006, to take part in purchases of GTG shares on the ASX, the sole or dominant purpose of which was to create or maintain a price for GTG shares on the ASX at a particular level. By its verdicts in respect of each of charges 2 to 34, the jury was satisfied, beyond reasonable doubt, that, in purchasing shares on behalf of XY Inc through Musumeci during the period 14 September to 27 September 2006, your sole or dominant purpose was to create or maintain the price for GTG shares on the ASX at a particular level.
For the purpose of sentencing you, it is necessary for me to set out, in a little detail, the facts relating to each of the charges on which you have been convicted. In order to do so, it is necessary, first, to give a brief description of the manner in which the Australian Stock Exchange operates.
Throughout the period covered by the charges, the ASX maintained a computerised screen-based trading system through which brokers, on behalf of their clients, would enter orders to buy shares (referred to as “bids”) or orders to sell shares (referred to as “asks”) on behalf of their clients. The orders entered by brokers traded where the highest bid or bids matched with the lowest ask or asks on the system. The normal trading phase for that system was between 10.00 am and 4.00 pm. Between 4.00 pm and 4.15 pm, bids and asks could be entered on the market, but they were not traded during that period. At approximately 4.15 pm, the system conducted an automatic “closing single price auction”. At that time, bids and asks, which matched, would be traded at one single closing price. As I stated, during the period of the charges, your exposure to margin calls was based on the daily closing price for GTG shares on the ASX.
Almost immediately after you entered into the margin loan with Opes Prime in March 2005, the price of GTG shares on the ASX fell substantially. As a result, you became liable for three margin calls which were made on you, on 31 March 2005, 12 April 2005, and 6 February 2006 respectively, totalling $1.85 million. In response to those margin calls, you provided a further 29.2 million GTG shares as security for your borrowings from Opes Prime.
By May 2006, your continued exposure to margin calls was a matter of concern to you, and to those who were advising you. By then, you only had approximately 20 million GTG shares remaining, which you could provide by way of further security. At the same time, you were suffering liquidity problems. In order to address those matters, you borrowed the further sum of $2.5 million from Chimaera Capital. During May, Geoffrey Newing sent you two detailed facsimiles, in which he made suggestions as to the means by which you might address your continued exposure to margin calls. Although, in your evidence, you claimed that you had ignored those communications, your conduct, in the ensuing period, demonstrated that you shared the concerns, expressed by Newing, as to your ongoing susceptibility to margin calls due to the decline in the price of GTG shares.
On 14 May, you wrote a letter to the chief financial officer of GTG, in which you expressed your anxiety as to the outcome of the discussions, which he was conducting on your behalf with a view to enabling you to borrow further funds. In that letter, you agreed with the suggestion that “further market support” (for GTG shares) should be provided by “someone else” than yourself. On the next day, 15 May, you participated in the purchase of 150,000 GTG shares through your own stockbroker, Tolhurst Noall, in a manner which was patently directed to maintaining the closing price of GTG shares on the ASX at 35 cents.
On 16 May, Newing sent you a facsimile, which, the prosecution alleged, contained the script of the agreement that constituted the conspiracy that was alleged in charge 1. In that facsimile, Newing proposed that the funding, which you were to receive from Chimaera, should be used to “manage the market”. He suggested that that objective could be best achieved by you giving funds to Tamara, who would then watch the price of GTG shares daily, and maintain a floor price, by purchasing shares at a fixed price. Newing stated that the advantage of such an arrangement was that someone, apart from yourself, would watch the market each day, and acquire shares, in circumstances in which you would not be required to disclose those purchases to the ASX.
The proposal made by Newing was almost immediately put into effect by yourself, Tamara and Geoffrey Newing. On 19 May, you forwarded to Tamara the sum of $250,000. Over the following six weeks, you made four further payments to her each in the sum of $250,000. On 5 July and 22 July, you made two further payments to her each in the sum of $150,000, and on 31 August 2006, you forwarded to her a further sum of $50,000. Thus, in the period of three months following Newing’s facsimile suggestion, you provided the total sum of $1,600,000 to Tamara. In turn, she used $1,101,000 of those funds to purchase GTG shares through Richard Wade of ABN AMRO.
During the period between 16 May and 31 October, Tamara, in accordance with the suggestion made in Newing’s facsimile of 16 May, watched the share market almost on a daily basis, and instructed Wade to purchase GTG shares. She was in regular, and constant, communication with Wade. The uncontested evidence of Wade was to the effect that, during that period, Tamara’s explicit purpose, in providing instructions to him, was to maintain the share price of GTG shares at a particular level, normally at or above the price of 35 cents.
Pursuant to the bids placed by Tamara through Wade, 355 trades were executed on the ASX during the period of the conspiracy alleged in the first charge. A total of 3,248,000 shares were purchased in the names of Tamara and Palamine Pty Ltd, which was Geoffrey Newing’s private company. The total market value of those shares was $1,117,000. Those purchases represented 14% of the total volume of GTG shares traded during the period. They represented 35% of all price increases, and 46.5% of all late price increases, of GTG shares during the period.
In your evidence, you maintained that you had ignored Newing’s facsimile of 16 May, and that the payments, which you made to Tamara, were pursuant to an earlier agreement entered into with her to gift her the sum of $1.55 million. By its verdict, the jury rejected your account, and was satisfied, beyond reasonable doubt, that you provided those sums of money to Tamara for the sole or dominant purpose of creating or maintaining the closing price of GTG shares at a particular level, with a view to either avoiding or reducing your exposure to margin calls on your loans from Opes Prime and Chimaera Capital.
The conspiracy, alleged in the first charge, came to an end, on 31 October, when Wade was informed that the Australian Securities and Investments Commission (“ASIC”) was making inquiries into the trading in GTG shares by Geoffrey and Tamara Newing. On the next day, Wade advised Tamara that he could no longer place bids on her behalf for GTG shares. On 3 November, Wade resigned his position at ABN AMRO. As a result, the trading in shares by Tamara and Geoffrey Newing, through ABN AMRO, ceased.
Charges 2 to 34 on the indictment, of which you have been convicted, alleged a number of purchases of GTG shares by you on the ASX, on behalf of XY Inc, through Rocco Musumeci of Bell Potter, at its Wollongong office. Those transactions took place between 14 September and 29 September 2006.
XY Inc was an American company, originally founded by you in 1995. It also was involved in the biotechnology industry, specialising in the sex selection of livestock. Throughout the period, which is relevant to these charges, you were the chief executive officer of, and a substantial shareholder in, XY Inc. Its principal place of business was in Fort Collins, Colorado, where you maintained a residence for your frequent sojourns in the United States.
In the period leading up to the transactions, which are the subject of charges 2 to 34, the Wollongong office of Bell Potter had been recommending GTG shares to its clients as a worthwhile speculative investment. In August 2006, at the invitation of Musumeci, you visited the Bell Potter office in Wollongong, and gave a presentation to some Bell Potter clients about GTG. At the conclusion of that meeting, Musumeci, and his superior, Rodney Symes, suggested that you might use their services in trading shares on the ASX.
By that time, two further margin calls had been made on you by Opes Prime, totalling $341,000. A substantial part of the funds, which you had borrowed from Chimaera Capital, had already been used. You had less than 20 million GTG shares, which were unencumbered, and which you could provide in response to any further margin calls.
In either late August or early September 2006, at your instigation, the directors of XY Inc conducted a teleconference, in which you were authorised to purchase GTG shares on behalf of XY Inc up to the sum of US$500,000. That approval was subsequently ratified at a formal board meeting of XY Inc directors which was held on 22 September.
On 14 September 2006, you telephoned Musumeci from Colorado, and asked him to open an account with Bell Potter Wollongong for XY Inc. During the following two weeks, you gave instructions to Musumeci to purchase GTG shares on behalf of XY Inc. On a number of days during that period, you spoke to Musumeci on several different occasions to place separate orders with him. In placing those orders, you specified differing amounts of shares to be purchased, at differing prices. At your trial, Musumeci gave evidence that, on a number of occasions, you expressly told him that the purpose of the bids for GTG shares, which you instructed him to make, was to support the price of those shares. On other occasions, you instructed him to defer placing bids for GTG shares until just before the close of the market. In addition, on other occasions, you instructed Musumeci that you wanted the market to close at or above a particular price level. Based on the verdicts of the jury, I am satisfied, beyond reasonable doubt, on the evidence of Musumeci, that you provided those specific instructions to him.
Musumeci’s evidence was supported by the evidence of Stuart Dent, who was a market analyst employed by ASIC. In examining the orders placed by you, through Musumeci, during that period, Mr Dent noted a number of important features. In particular, during the period, XY Inc, through Bell Potter, placed 34 bids for GTG shares. Those bids resulted in the purchase of a total amount of 1,495,000 GTG shares. On 26 of those occasions, XY Inc was bidding against a priority bid it already had on the market. In addition, at the same time there were other bids by XY Inc at a lower price on the market. As Mr Dent stated, the layering and overbidding by XY Inc, of its own existing bids, on your instructions, during that period, was not consistent with a sound commercial strategy by you to acquire a large volume of stock on behalf of XY Inc at the best possible price. Rather, it was directed to giving the impression, to the market, of a greater level of demand for GTG shares than in fact existed. In addition, the bids placed by you through Musumeci were responsible for eight out of the 18 price increases in GTG shares during the period. The other ten price increases occurred when other bidders either matched your bids, or placed higher bids than your bids. On twelve separate occasions, bids placed on your instructions “broke the market”. In other words, twelve of the bids, placed on your instructions, matched the total number of shares offered in the lowest ask or asks on the market, thus causing the lowest ask price on the market, for GTG shares, to rise.
Based on that evidence, and on the evidence of Musumeci, the jury was satisfied, beyond reasonable doubt, that on each occasion on which you placed bids which were the subject of charges 2 to 34, your sole or dominant purpose was to create or maintain an artificial price for GTG shares on the ASX.
The second conspiracy, which was charged in count 35, commenced on 27 September 2006. On the previous evening, you telephoned Musumeci from Colorado. You advised him that henceforth you wanted him to take orders from Tamara, instead of yourself, because of the difficulties resulting from the time difference between Colorado and the east coast of Australia, and because you would be travelling shortly. You told Musumeci that Tamara was aware of your instructions and of what you wanted to achieve.
Following that telephone conversation, Musumeci had regular communication with Tamara. During the period of the second conspiracy, 74 separate bids for GTG shares were placed on behalf of XY Inc by Musumeci pursuant to instructions given to him by Tamara. Consequent upon those bids, 133 trades were executed on the ASX system, as a result of which 1,905,000 GTG shares were purchased in the name of XY Inc, for a total market value of $667,000.
It was clear, from the communications between Tamara and Musumeci, that Tamara’s instructions were directed to ensuring that the price for GTG shares closed at a particular level, ordinarily above 35 cents. Tamara was quite explicit in a number of her instructions to Musumeci to that effect. It was not in dispute, at your trial, that, in giving instructions to Musumeci, the sole or dominant purpose of Tamara was to set or maintain the closing price of GTG shares at a particular level. During the period of the second conspiracy, the purchases of shares on behalf of XY Inc represented 39.6% of the total volume of GTG shares traded, 62% of all price increases in GTG shares, and 90% of all late price increases in GTG shares.
By its verdict on charge 35, the jury was satisfied, beyond reasonable doubt, that you had directed Musumeci to take instructions from Tamara to purchase GTG shares for the sole or dominant purpose of setting or maintaining the price of GTG shares on the ASX at a level which would minimise or avoid your exposure to margin calls by Opes Prime and Chimaera Capital.
That verdict was based on a substantial body of evidence implicating you as a party to the trading in GTG shares by Tamara through Musumeci. For the purpose of your sentence, it is sufficient for me to mention three aspects of that evidence.
First, by its finding of guilt in relation to charges 2 to 34, the jury was satisfied, beyond reasonable doubt, that, for the period which immediately preceded the conspiracy charged in count 35, you were involved in purchasing GTG shares through Musumeci for the sole or dominant purpose of creating or maintaining an artificial price for those shares on the ASX. The jury was entitled to infer that the instruction which you gave to Musumeci, on 27 September, to take further direction from Tamara, was directed to the same purpose.
Secondly, the events, relating to charge 35, took place in the context of the margin loans and margin calls, and of the circumstance (as found by the jury by its verdicts in respect of charges 1 to 34), that during 2006 you had set out to avoid or reduce your exposure to those margin calls by attempting to manipulate the price of GTG shares on the ASX. In addition, the evidence revealed that you were aware that, in 2005, Tamara had been manipulating the price of GTG shares by trading through her National Online Trading account. Thus, at the time at which you directed Musumeci to take instructions from Tamara to purchase GTG shares on behalf of XY Inc, you were aware that Tamara knew how to manipulate, and that she had a history of manipulating, the price of GTG shares on the ASX.
The third aspect of the evidence, which was relevant to charge 35, concerned the circumstances in which XY Inc authorised you to purchase GTG shares on the ASX on its behalf. As I have already noted, the decision to purchase those shares was taken, by the board of XY Inc, at your behest, at the time at which the funding, which you had received from Chimaera Capital, was virtually exhausted. It is particularly significant that, at no relevant time, did you disclose to the board of XY Inc the fact that you had the margin loans, that margin calls had been made on you, that you were purchasing the GTG shares through an inexperienced broker in regional Australia, and that (after 27 September) you had delegated the role of instructing that broker to your own daughter Tamara, who had no association with XY Inc. Those facts support the inference that the purchase by XY Inc of GTG shares on the ASX was intended by you to serve your purposes, namely, to set or maintain the price of GTG shares on the ASX at the level necessary to avoid or minimise margin calls on you.
Taken in combination, those three categories of evidence were a substantial basis, upon which the jury was entitled to be satisfied, beyond reasonable doubt, of your guilt on charge 35.
By 3 November 2006, you had learned that either the ASX or ASIC had contacted ABN AMRO in respect of the purchases of GTG shares conducted by Wade on the instructions of Tamara. Accordingly, on that date, you contacted Musumeci, and told him not to take any further instructions from Tamara, but that, thereafter, he was to take instructions from a friend of yours. It was that instruction which brought the second conspiracy, which is the subject of charge 35, to an end.
The offences, for which you have been convicted, are serious. The express objective of s 1041A of the Corporations Act is to promote a fair, orderly and transparent market for registered securities. As part of that objective, s 1041A is directed to ensuring that the market price for registered securities truly reflects the genuine interaction of the forces of supply and demand for those securities on a free market. The conduct, in which you indulged, and to which you were a party, was calculated to undermine that objective. In that way, your conduct had the capacity to erode the integrity of, and public confidence in, the securities market, and thereby to cause damage to members of the community, who have invested their savings in that market.
Your offending involved a number of serious features. It extended over a period of more than five months. Your conduct was deliberate and calculated, designed to serve your own financial purposes, and, in particular, to avoid or limit your exposure to further margin calls, and to protect the value of your principal investment. Through your involvement in national and international commerce, you had gained a sophisticated understanding of the commercial world, and you had significant experience in business affairs. Your offending could not be excused on the basis that you were in any way naïve or unwitting.
Although it was Newing who proposed the scheme that was the basis of the conspiracy charged in count 1, you readily acceded to it, and you financed the implementation of it, over a period of four months, in the amount of $1.6 million. You were a principal party to, and the primary beneficiary of, that conspiracy. The agreement envisaged, and, as implemented, involved, substantial purchases of GTG shares, which had a significant effect on the price of GTG shares on the ASX.
You, yourself, instigated and conducted the offending which is the subject of charges 2 to 34, and for the purposes of doing so, you took advantage of a young and inexperienced trainee sharebroker, who was, largely, unsupervised. Those offences involved the purchase of a substantial number of GTG shares, which had a significant effect on the market for those shares in the manner described by Mr Dent. When you were confident that Musumeci understood the manner in which you wished GTG shares to be purchased, you instigated the conspiracy that was the subject of charge 35, proposing that your daughter continue to implement your objective of artificially manipulating the price of GTG shares. In addition, the offending, which was the subject of charges 2 to 35, was financed by XY Inc, of which you were then a director and the chief executive officer. You had persuaded the board of directors of that company that the purchase of GTG shares was a worthwhile investment for XY Inc, and you then took advantage of that decision in order to further your own ends, rather than investing those funds in a manner which was in the best interests of XY Inc.
All of those matters, which I have mentioned, reflect on the level of your culpability in the offending for which you have been convicted.
On the other hand, I am satisfied that your offending was not directed to obtaining for yourself a profit from the resale of the GTG shares at an artificially high price. Rather, as I stated, your motive was to avoid or limit your exposure to margin calls under the facilities provided to you by Opes Prime and Chimaera Capital. In that context, it is relevant that each of those margin facilities was repaid by you, in full, in the first half of 2007.
It is possible that investors, or potential investors, made decisions about purchasing, or retaining, GTG shares, based on the market price of the shares which you had artificially inflated. However, during the period covered by the charges of which you have been found guilty, the GTG shares were not heavily traded. Thus, the risk of any such potential loss to investors, or potential investors, was quite limited.
I turn, then, to matters relating to your personal background. You are 72 years of age, having been born in March 1942. You were married at the age of 20, but have been divorced for some time. You have three adult children, two sons aged 51 years and 46 years, and your daughter, Tamara, who is aged 49 years.
You were born and educated in Australia. After your secondary education, you completed a medical degree at the University of Melbourne, achieving honours grades in each of your subjects. Having completed your year of residence at Prince Henry’s Hospital, you worked in private practice in a medical group for two years. After that, you established a medical centre at Northland Shopping Centre, which you operated for approximately ten years. You sold out of that medical practice, because you had become interested in the possible connection between computers and medicine, and you perceived that there was significant potential in the use of computers in medical practice.
Accordingly, in the early 1970s, you formed the Datalab Group in Australia, which focused on computer-based medical diagnostic platforms. That business grew, and was subsequently sold into the business Sonic, which is now a world leader in that field.
In the mid-1970s, you formed a regional medical supply company in Australia, which developed a new concept for streamlined bulk billing, importing, production and distribution of medical and dental supplies. You subsequently sold that business. In the 1980s, you then pioneered the construction of passive solar office buildings, including medical centres, in northern Colorado.
During this time, you continued to pursue your interest as a medical entrepreneur. You assisted in the establishment of Cytomation Inc in Fort Collins, Colorado. That company developed the next generation of medical flow cytometers, which were capable of sorting living cells at very high speeds.
Subsequently, in 1989, you established GeneType AG, a Swiss based genetic research company, which focused on the development of a better understanding of gene function, genetic analysis and gene mapping. It was that company which, in August 2000, merged with an Australian listed company to form GTG.
In the meantime, you had also founded XY Inc. That company was, in effect, a joint venture between a company established by you, and the Colorado State University Research Foundation.
In 2001, you formed ImmunAid Limited, and served as its chief executive officer. That company focused on the immunotherapy of cancer. It holds patents to significant new medical opportunities in the field of the immunology of cancer. ImmunAid has recently been involved in clinical trials involving cancer patients at the Mayo Clinic, and those trials have, apparently, produced successful results.
In the course of your plea, Dr Andrea Tobisch, a director of that corporation, gave evidence, and a testimonial prepared by her was tendered. Dr Tobisch described your passionate commitment to the work performed by ImmunAid, and, particularly, to its potential to make a substantial contribution to the treatment of cancer. Your involvement in ImmunAid has been fundamental to the scientific research it carries out, to the patenting of its discoveries, and to the commercialisation of those patents.
It is clear that, throughout your working life, you have displayed an extraordinary degree of enterprise, initiative and commitment in pursuing your professional and commercial activities. As a result of your work, you have spent large amounts of time overseas, and for that purpose you have maintained residences in Lucerne and in Colorado. You are a person who is driven to work hard, and to be productive. While you have managed to amass a large financial fortune in doing so, nevertheless I accept that your involvement in enterprises, such as GTG and XY Inc, was not directed purely to financial gain, but also because you have had a genuine passion for the work and causes in which you were involved.
In addition to your commercial activities, you have also been actively and constructively involved in a significant number of philanthropic activities. In doing so, you have provided substantial financial support to the causes in which you had become involved, and you have given most generously of your time and expertise to them.
In particular, you have been dedicated to preserving and protecting endangered species of wildlife, and to providing shelter and aid to distressed animals. You were the chairman of the W.O.L.F. Sanctuary in Colorado for ten years. W.O.L.F. is the acronym for Wolves Offered Life and Friendship. That organisation provides sanctuary for abandoned wolf-dog hybrids. You have played an important role in saving the W.O.L.F. Sanctuary from probable closure, and, in doing so, you made available a tract of your ranch to relocate the sanctuary after it had been devastated by a severe bushfire, followed by destructive floods.
You were also the chairman of the Institute for Breeding Rare and Endangered African Mammals, which is referred to as IBREAM. Associate Professor Monica Paris, who provided a character reference on your behalf, has stated that your involvement in that organisation has made a great difference to its capacity to achieve its objectives. As part of your involvement in that cause, you have provided financial support to a PhD student who is conducting research directed to the preservation of the endangered Ethiopian wolf.
In 2002, you were the founding benefactor of the brush-tailed rock-wallaby program, and, through GTG, you provided generous financial and other support to that project. Your involvement in that program has played an important role in preventing the extinction of that species of rock-wallaby in south-eastern Australia. In 2004, you were awarded a life membership of the Royal Zoological Society of South Australia in recognition of your contribution to and support for the cause of animal welfare.
Your work has been publicly recognised by the President of the United States of America, and in the early 1990s, the House of Lords held a special session to acknowledge the important work which you had undertaken in overcoming the destructive “mad cow” disease. Other testimonials describe how you have provided generous support to struggling scientists, who have made contributions in the fields of cell technology, genetics, animal breeding and immunology.
In Colorado, you have been particularly generous in support of your local community. You have been actively involved in, and provided support to, the Rist Canyon Volunteer Fire Department. The president of that department, Mr Michael Thompson, in a testimonial has described the support that you have given to the department, as well as your generosity to the local community in times of need. Mr Thompson’s observations are supported by a testimonial by Professor Brigitte von Rechenberg, who is, in effect, your neighbour in Colorado. In addition, you have provided generous support to the local Jewish community, and you have provided ongoing funding for Jewish university students in Colorado. You have also subsidised two Haitian girls, who you assisted to relocate to Miami.
You have also been a supporter and a co-chairperson of the Melbourne City Opera for in excess of ten years. Mr James Long, who is a director of the Melbourne City Opera, provided a character reference, and gave evidence on your plea. The objectives of the Melbourne City Opera are to advance local opera in Melbourne, to give local artists the opportunity to develop their art in their home state, and to give the Melbourne public access to affordable operas. Mr Long described how you have provided dedicated service to the organisation. He stated that you were generous both in terms of providing financial support, as well as in giving of your time to attend rehearsals and functions hosted by it. You have played an important role in encouraging local artists in their careers, and you have exhibited significant commitment and enthusiasm for that cause.
As I stated, Ms Tobisch and Mr Long each gave character evidence on your behalf on your plea. Dr Mervyn Cass, a lifelong friend, gave character evidence on your behalf at your trial. In addition, testimonials, prepared by ten other persons, who have been acquainted with you in your various different endeavours, were tendered on your plea. Collectively, those witnesses, and those testimonials, attest to the substantial commitment and contribution by you to causes which are of benefit to the community, to medical science, and to the preservation of, and care for, wildlife. You have been particularly generous, in terms of giving both financial assistance and your time, in all of your extracurricular activities.
On a personal level, the witnesses, and the testimonials, describe you as a generous, selfless and compassionate person, who has an extraordinary work ethic. They also describe you as a person of integrity, who, in your various activities, has always been meticulous in adhering to the rules which govern those activities. The witnesses, and the testimonials, have expressed surprise as to the outcome of the case, and they have each stated that the offending, for which you have been convicted, is totally out of character for you.
I have referred to the evidence, relating to your character and to your philanthropic works, in some detail, because, it demonstrates that, apart from your offending in this case, you are a person who comes before the court with an exceptionally good character. The work, which you have performed, for the betterment of the community, for humanity and for the conservation of endangered wildlife species, is quite exceptional, particularly given the heavy workload which you have borne in the course of your commercial activities.
For the purposes of your plea, I have been provided with a report by Mr Geoffrey Cummins, a consulting clinical and forensic psychologist, who you have consulted on nine occasions since April of this year. Mr Cummins noted that you had been feeling depressed since you initially learned that you had been charged, and that you had subsequently experienced feelings of depression typically on a daily basis. You have been taking medication for some period of time in order to assist you to sleep. You have not engaged in focused suicidal ideation. However, since you were charged, you have intermittently had fleeting suicidal thoughts. Since the jury’s verdict on your trial, you have had frequent suicidal thoughts, although you have not formulated any plan in that direction.
Mr Cummins is of the opinion that you have considerable difficulty accepting, and coping with, the jury’s verdict. He considers that you are suffering from a persistent depressive disorder with associated anxiety distress, which is now severe in type, and which will, at least initially, deteriorate if you are incarcerated. Mr Cummins states that you present as being overwhelmed, shocked and humiliated regarding your current position, which has resulted from your conviction.
Mr Cummins confirms that you would not have attracted any mental health diagnosis at the time of your offending. Rather, your depressive disorder, with the associated anxiety, has developed as a result of being charged. Mr Cummins is concerned that there is realistic risk that you could become suicidal if you are incarcerated. He also considers it is likely that you will experience some age-related symptoms of physical and mental decline, which would be likely to be accelerated if you were incarcerated.
A report of Dr Conn Constantinou, a medical practitioner, who examined you on 13 November last, was also tendered on your plea. Dr Constantinou noted that your usual medical practitioner is in Lucerne. He stated that your main health problems relate to your gastro-enterological system. In particular, you have experienced increasing difficulty in swallowing, which, in medical terms, is described as severe dysphagia. That condition has involved pressure on your abdominal structures, one consequence of which is the prolapsing of haemorrhoids from which you suffer. As a result of your condition, you have suffered a significant decrease in your weight during the last four years. Dr Constantinou also noted that you have several solar keratoses on your face, hands and neck which require medical attention, and removal.
As a result of the report provided by Dr Constantinou, you underwent a gastroscopy on 21 November, which was performed by Dr Noack of the Cabrini Brighton Gastroenterology Centre. That investigation demonstrated that you suffer from reflux oesophagitis, and a benign appearing oesophageal stricture. You have been provided medication for the former condition, and Dr Noack performed a dilatation to alleviate the latter condition.
In summary, then, I accept that you are a person who, apart from your offending in this case, has been of exceptionally good character. You have displayed an extraordinary degree of initiative and enterprise in your working life, and you have also selflessly devoted your energies and expertise to a large number of worthwhile community causes which are for the benefit of society and humanity. You have no previous convictions. I also accept that you suffer from genuine health issues, particularly resulting from your gastro-enterological condition, and from your present psychological state. I am satisfied that those conditions will mean that a sentence of imprisonment, involving immediate custody, would be substantially more burdensome for you.
In cases such as this, the courts have emphasised that the principles of general deterrence and denunciation must be given significant weight. It is the common experience of the courts that offences, such as those for which you have been convicted – falling under the general rubric of “white collar” offences – are ordinarily committed by persons who have hitherto been of good character and reputation. Such offences are difficult to detect and to prove. Unless the courts adopt a firm approach in the imposition of sentences for such offences, those persons, who are minded to commit such offences, will consider that the risks in doing so are outweighed by the potential benefits, which may accrue from involvement in such offences. For those reasons, it has been emphasised by the courts that the considerations of denunciation and general deterrence must take precedence, and be given significantly more weight, than the mitigatory factors, to which I have already referred, such as your good character and your health issues.
Nevertheless, personal matters, including evidence as to your good character and your health, to which I have referred, are relevant and valid mitigating circumstances, which must be given appropriate weight. You are now 72 years of age, and have genuine health problems. A custodial sentence would be particularly onerous for you because of those factors, and would have an adverse impact on your physical and psychological conditions. While denunciation and general deterrence remain important factors in respect of an offender, such as yourself, who is elderly or in ill health, nevertheless it is accepted that those matters are legitimate mitigating circumstances which should be taken into account.
In that connection, there has been a significant delay between the initial detection of your offending, and your trial. The ASIC investigation commenced in January 2007. Charges were laid against you, Tamara and Geoffrey Newing in December 2008. The committal hearing proceeded in February 2010. Geoffrey Newing pleaded guilty. Tamara and you were both committed for trial. The charges against Tamara were resolved shortly after the committal proceeding, and she pleaded guilty. In April 2011, you successfully applied to have this matter transferred from the County Court to the Supreme Court. At a mention hearing, questions were raised as to the meaning of “artificial price”, and the elements of the offences charged against you. As a consequence, Justice Weinberg referred the matter to the Court of Appeal on a case stated. The matter then proceeded through the appellate courts, and that process completed when the High Court delivered judgment on 27 June 2013.
When the matter returned to the Supreme Court, I held a mention hearing in February of this year, at which time I set down the trial for June. Unfortunately, in the meantime, difficulties arose between yourself and your then solicitors over the extraordinarily large amount of fees which you had already paid to them, and the further substantial amount of fees which they were then demanding be paid, for your continued representation. As a result, you were required to obtain alternative representation. The trial was re-fixed for 8 September, on which date it commenced.
I accept that, in those circumstances, there has been a significant delay between the date upon which ASIC became involved in the investigation of your offending, and the trial of the charges. I should add that I am satisfied that none of that delay was due to any dilatoriness, or unreasonable conduct, on behalf of the prosecution, or by you. Nevertheless, the fact is that you have had these matters pending against you for a considerable period of time.
In general, delay, of itself, is not a mitigating circumstance. However, where the delay is not attributable to the conduct of the accused person, it may constitute a mitigating circumstance, if it has had a deleterious effect on the accused. In this case, I am satisfied, from the report of Mr Cummins, that the charges brought against you, and the lengthy period during which they have been pending, have had a detrimental effect on your mental state. Mr Cummins’ view as to that matter is supported by the evidence given on your plea by Dr Tobisch and Mr Long, together with the testimonials that were tendered on your behalf. That evidence, and those testimonials, demonstrate that, during the period in which the charges against you have been pending, and particularly during this year, your physical and psychological health has suffered significantly.
In addition, during the period in which the charges against you have been pending, you lost your grandson, to whom you were very close, as a result of a tragic fatal accident. The stress of the pending trial was also exacerbated by the circumstances in which your former solicitors ceased to act for you in April of this year, less than two months before the date upon which your trial was then due to commence. I accordingly accept that, in that way, the delay in this case, and the stress resulting from it, is a mitigating circumstance.
As a result of your convictions in this case, you will be automatically disqualified from managing a corporation for a period of five years. You have spent the better part of four decades of your working life as the driving force of a number of different enterprises involved in the commercialisation of medical and genetic technologies. Your disqualification from managing any corporation will be a significant penalty to you. It will disable you from pursuing work, to which you have been dedicated, and which you have been particularly passionate about. By the time that the period of disqualification is completed, you will be more than 77 years of age. It will be most unlikely that, at that stage, you would be able to regenerate your working career.
I also accept that, for a person such as yourself, your conviction has involved a dramatic fall from grace for you, as a result of which you suffer from genuine feelings of humiliation and embarrassment. The shame attaching to your offending is a not insignificant penalty to you.
As I have noted, you have had difficulty accepting the verdicts of the jury, and, by doing so, you have not displayed any contrition for your offending. Nevertheless, I am satisfied that it is unlikely that you would reoffend. The stress occasioned to you as a result of the case, and the penalty which has already been paid by you, particularly by the loss of your directorships of corporations in which you have been involved, would, I expect, deter you from indulging in the same conduct again.
In determining your sentence, I have read and taken into account the reasons for sentence of Tamara Newing, Geoffrey Newing, Rocco Musumeci and Richard Wade. The sentences of Musumeci and Wade involved very different considerations to those which apply to your sentence. Each of them played less significant roles in the offending than you. Neither of them instigated the offending. They both pleaded guilty, provided significant cooperation to the investigative authorities, and gave an undertaking to cooperate with the prosecution of their co-offenders.
There are also a number of relevant differences between your case and the cases of both Tamara and Geoffrey Newing.
Tamara pleaded guilty to three charges of offending covering the period 18 April to July 2005, to six “between dates” charges for the period 18 May to 27 September 2006 (in respect of the purchase of shares through ABN AMRO), and to one “between dates” charge covering the period 28 September to 2 November 2006 (in respect of the purchase of shares on behalf of XY Inc through Bell Potter). She was sentenced to a total effective sentence of 21 months’ imprisonment, and was ordered to be released forthwith on a recognisance to be of good behaviour for two years. The sentencing judge noted that Tamara was less knowledgeable than either you or Geoffrey Newing, and that she was not the instigator of the offending. She was suffering from significant depression, due to the tragic death of her youngest son, so that a term of imprisonment would weigh more heavily on her. In addition, the sentencing judge found that there were exceptional circumstances, arising from the death of her son, which entitled her Honour to take into account the potential hardship to Tamara’s other children, should she be sentenced to a term of immediate imprisonment. The sentencing judge described that consideration as the “weightiest matter” in determining Tamara’s sentence.
Geoffrey Newing pleaded guilty to five “between dates” charges covering the period 18 May to 7 August 2006. The charges, to which Newing pleaded guilty, represented the bulk orders he placed with ABN AMRO. He was sentenced to a total effective term of 22 months’ imprisonment, and he was ordered to serve 6 months’ imprisonment before being released on a recognisance release order to be of good behaviour for two years. The judge found that he displayed genuine contrition. Her Honour also extended mercy to him, because he was responsible for the upbringing of his son, who was in difficult circumstances. Newing, of course, was not involved in, nor sentenced for, the offences which you committed by purchasing GTG shares on behalf of XY Inc through Bell Potter during the period from 14 September 2006 to 2 November 2006.
While there are relevant differences between your case, and the cases of Tamara and Geoffrey Newing, nevertheless the principles of parity of sentencing require that there be some proportionality between the sentence to be imposed on you, and the sentences imposed on Tamara and Geoffrey Newing, taking into account the relevant differences to which I have just referred.
In conclusion, for the reasons I have already stated, the offences, for which you have been convicted, are serious. In addition, there are a number of serious aspects relating to your conduct that was involved in the offending. Those aspects reflect on the level of culpability which was involved in the commission by you of those offences. On the other hand, I am satisfied that there are substantial mitigating circumstances in your case, attaching to your background, and to the evidence about your good character. In particular, you have given generously of your time, of your expertise, and financially, in support of a number of important and worthwhile causes. The lengthy delay between the laying of charges against you, and your trial, has had a substantial adverse effect on your psychological and physical health. In light of your age, and your health issues, a term of imprisonment will be burdensome on you. In addition, your automatic disqualification from managing a corporation for a period of five years will be a significant penalty on you, as it will be particularly difficult for you to resurrect your career, in a meaningful way, at the completion of that term of disqualification. I am also satisfied that it is unlikely that you will reoffend.
In a case such as this, it is particularly difficult to balance the factors, demonstrating the gravity of your offending, against, on the other hand, the mitigating factors, to which I have just referred. However, ultimately, I am satisfied that there is no alternative other than to sentence you to a term of imprisonment. In particular, I consider that no other form of sentence would be sufficient to reflect the seriousness of your offending, and thus to serve the important purposes of denunciation and general deterrence.
Indeed, on your plea, it was conceded by your counsel that the appropriate sentence would involve the imposition of a term of imprisonment on you. Rather, it was submitted on your behalf that that sentence should not involve any immediate term of custody but, rather, you should be released on a recognisance to be of good behaviour for the duration of the sentence. On the other hand, Mr Rapke QC, who appeared with Mr Winneke for the prosecution, submitted that the only appropriate sentence is one which would involve a period of immediate incarceration.
I have given careful consideration to the submission made by your counsel. That submission is supported by the powerful mitigating circumstances in your favour. However, as I have pointed out, in a case such as this, appellate courts have emphasised that the considerations of general deterrence and denunciation must be accorded substantial and prominent weight. Notwithstanding the significant mitigating circumstances, that I have found to exist in your favour, I have concluded that the demands of general deterrence and denunciation are such as to require the imposition of a sentence which involves an immediate term of incarceration.
For the purposes of determining the length of the sentence, which you must serve in custody before you are to be released on a recognisance to be of good behaviour, generally, the same principles apply, as those which are applicable to fixing your head sentence, save that the law attaches more weight to your personal circumstances, and, in particular, to considerations such as your age, your health, your good character, the circumstances in which you will serve your sentence, and the prospects for your rehabilitation. In your case, the mitigating circumstances in your favour are such that it is appropriate that, for a substantial part of your sentence, you should be released on a recognisance to be of good behaviour.
In determining your sentence, I consider that it is appropriate that I impose an aggregate sentence for the offences which are the subject of charges 2 to 34 (inclusive). It is plain, from the facts that I have recited, that each of those offences formed part of a series of offending of the same or similar character. In particular, each of those offences were part of a course of trading undertaken by you, in the period 14 September to 27 September 2006, directed to the same purpose, namely, the creation or maintenance of an artificial price for trading in GTG shares.
Although I am not required to provide details as to how the aggregate sentence, for those offences, is calculated, it is appropriate that I indicate that, in determining the length of the aggregate sentence for those offences, the factors that I have taken into account include the number of offences, the amount of shares that were involved in each of the offences, the period of time over which the offending took place, and the purpose to which the trades, which were the subject of the offences, were directed.
Taking into account the matters that I have considered in the course of these reasons, I therefore sentence you as follows:
(1)On charge 1 (conspiring with Geoffrey Newing and Tamara Newing to take part in purchases on the ASX of GTG shares which were likely to have the effect of creating or maintaining an artificial price for trading in GTG shares on the ASX) I sentence you to sixteen (16) months’ imprisonment.
(2)On charges 2 to 34 (inclusive) (taking part in purchases on the ASX by XY Inc of GTG shares which were likely to have the effect of creating or maintaining an artificial price for trading in GTG shares on the ASX) I sentence you to an aggregate sentence of ten (10) months’ imprisonment.
(3)On charge 35 (conspiring with Rocco Musumeci and Tamara Newing to take part in purchases on the ASX of GTG shares which were likely to have the effect of creating or maintaining an artificial price for trading in GTG shares on the ASX) I sentence you to twelve (12) months’ imprisonment.
Pursuant to s 19 of the Crimes Act 1914 (Cth), I direct that the sentence on charge 1 be commenced immediately, that the aggregate sentence on charges 2 to 34 be commenced on 28 November 2015, and that the sentence on charge 35 be commenced on 28 July 2016. In that way, your total effective sentence is two (2) years and eight (8) months’ imprisonment.
I further order that you be released after twelve (12) months on a recognisance release order in the sum of $20,000 without a surety to be of good behaviour for a period of twenty (20) months.
I am required by the relevant legislation to explain to you the sentence that I have just pronounced. The sentence that I have imposed on you involves you serving a term of imprisonment in custody for a period of twelve (12) months. At the expiration of that period, you will be released. If you are of good behaviour over the ensuing period of twenty (20) months, that will complete your sentence. On the other hand, if you breach the terms of the recognisance by not being of good behaviour, you will be brought back to court, and, depending on the nature and seriousness of your transgression, the court may impose a fine, extend the period of good behaviour, or impose a different penalty. In particular, depending on the circumstances, the court may revoke the recognisance release order and send you back to prison for the balance of your sentence. I am also required to explain that an application may be made to this Court to discharge the recognisance or for a variation of its terms.
Finally, pursuant to s 18(4) of the Sentencing Act 1991 (Vic), I declare that a period of four days be reckoned as already served under the sentence which I impose. I shall cause that declaration to be noted in the records of the court.
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