R v Rivkin

[2003] NSWSC 447

Reported Decision: (2003) 45 ACSR 366
(2003) 21 ACLC 1092

Supreme Court

CITATION:	Regina v Rivkin [2003] NSWSC 447
HEARING DATE(S):	26/03/03, 27/03/03, 01/04/03, 02/04/03, 03/04/03, 04/04/03, 0704/03, 08/04/03, 9/04/03, 10/04/03, 11/04/03, 14/04/03, 15/04/03, 16/04/03, 17/04/03, 22/04/03, 23/04/03, 24/04/03, 28/04/03, 29/04/03, 30/04/03, 07/05/03, 15/05/03, 26/05/03
JUDGMENT DATE:	29 May 2003
JUDGMENT OF:	Whealy J at 1
DECISION:	Rene Walter Rivkin, I record that a jury found you guilty on 30 April 2003 of an offence of Insider Trading as defined in s 1002G of the Corporations Act 2001. In relation to that offence, you are convicted. I sentence you to imprisonment for a term of 9 months, such sentence to be served by way of Periodic Detention. I decline to make a recognizance release order. In addition, I impose a fine of $30,000. Direct you to report to the Silverwater Detention Centre by 4pm on Friday 6 June 2003 to commence serving your sentence by way of Periodic Detention.
CATCHWORDS:	Insider Trading, Price Sensitive, Generally Available
LEGISLATION CITED:	Corporations Act 2001 Crimes Act 1914 (Commonwealth) Crimes Sentencing Procedure Act 1999
CASES CITED:	Regina v Patano (1990) A Crim R 328 at 380 Regina v Andrew Peter White (NSWCCA unreported, 20 August 1998) Regina v Riccord (NSWCCA unreported 9 May 1997) Regina v El-Rashic (NSWCCA unreported 7 April 1995) Regina v Hawker [2001] NSWCCA 148 at paras 23 and 24 Regina v Pont (2000) NSWCCA 419 Regina v Hannes (2000) 158 FLR 389 at para 394 (per Spigelman CJ) Regina v Hannes (James J) 13 December 2002 at para 90) 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 4215
PARTIES :	Regina v Rene Walter Rivkin
FILE NUMBER(S):	SC 70065/02
COUNSEL:	Mr D. Yates SC, Mr P. McGuire - Crown Mr B. McClintock SC, Mr M. Wigney - Offender
SOLICITORS:	Commonwealth DPP - Crown Gilbert & Tobin - Offender

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CRIMINAL LIST

WHEALY J

THURSDAY 29 May 2003

70065/01 - REGINA v Rene Walter RIVKIN

SENTENCE

1 HIS HONOUR: On the 30 April 2003 at the conclusion of a trial over which I presided a jury found Rene Walter Rivkin (whom I shall refer to as Mr Rivkin or the offender as the context requires) guilty of the offence charged in the indictment, namely an offence under s 1002G of the Corporations Act 2001.

2 Section 1002G provides, so far as is relevant: -

“Where
(a) a person (in this section called the insider) possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price of value of securities of a body corporate; and
(b) the person knows, or ought reasonably to know, that:
(i) the information is not generally available; and
(ii) if it were generally available, it might have a material effect on the price or value of those securities;
the insider must not…purchase…any such securities;”

3 By virtue of s 1311 and schedule 3 of the Corporations Act 2001 the maximum penalty for an offence under s 1002G is a fine of $200,000 or imprisonment for five years or both. It is convenient to refer to the offence under s 1002G of the Corporations Act 2001 as “the insider trading offence”. After the verdict of guilty was returned by the jury on 30 April 2003 I granted conditional bail to the offender and I adjourned the proceedings for the purpose of receiving submissions on sentence. I received written and oral submissions on behalf of both the Crown and the offender. Oral argument in relation to sentence proceeded on 26 May 2003 when I reserved my sentencing decision. Because the offence for which I am sentencing Mr Rivkin is a Federal offence it is necessary that I have regard to and apply Part 1B of the Commonwealth Crimes Act. I have taken into account all the relevant provisions of Part 1B including ss 16A, 16C, 17A, 19AB, 19AC and 20AB.

Facts relating to the offence

4 It is necessary for me to find the facts in relation to the offence for which the offender has been convicted. The facts must of course be consistent with the verdict of the jury. Moreover, I cannot make a finding of fact which is adverse to Mr Rivkin unless I am satisfied of that fact beyond reasonable doubt. I am not, however, required to sentence Mr Rivkin on a view of the facts, consistent with the jury’s verdict, which would be the view most favourable to him. I can make a finding of fact in favour of Mr Rivkin, if the fact is not disputed by the Crown or is proved on the balance of probabilities.

5 The starting point is the proposed sale of a property at 5 Rose Bay Avenue, Bellevue Hill. In April 2001 this property was owned by a company called Timsa 43 Pty Limited. This company was owned and controlled by the offender and his wife, Mrs Rivkin. The property was placed on the market for sale sometime prior to April 2001. It had in fact been passed in at auction. At the time the Group Operations Manager for the Rivkin Group was Spiros Dassakis. His responsibilities related to and included financial matters and organising contracts for the Rivkin Group. He had been instructed that the property was to be placed on the market for sale and it was his job to supervise and arrange the sale.

6 An Estate Agent was retained to effect the sale. This was Mr Bart Doff of Laing & Simmons at Double Bay.

7 Mr Gerard McGowan and his wife had been to inspect the property at 5 Rose Bay Avenue, Bellevue Hill and were very interested in buying it. Mr Gerard McGowan was the Chief Executive Officer of Impulse Airlines at the time. A meeting was organised at the office of Laing & Simmons for the morning of 24 April 2001. The meeting was scheduled for about 11.30am. Those present at the meeting included Mr Dassakis for the Rivkin Group and Mr Doff the agent involved in the sale. Mr Gerard McGowan attended and brought with him his brother Mark McGowan.

8 Prior to the meeting Gerard McGowan had spoken to Mr Doff and expressed an interest in buying the property. He had told him that he was waiting on a sale of part of his business to come through. He asked whether the Bellevue Hill property was likely to be on the market at a later date. He did not at that time inform Mr Doff of the nature of the sale to which he had made reference during their conversation. The agent had made clear to Mr McGowan that he could, if he wished, make a conditional offer. At that point of time it was Mr McGowan’s understanding that Mr Rivkin owned the property.

9 The events of the meeting at the office of Laing & Simmons on 24 April 2001 were critical to the charge contained in the indictment. The meeting was relatively brief and, according to Mr McGowan, it began by his saying to Mr Dassakis that he was interested in the property. He was waiting, he said, for a sale of part of his business and for that reason it would be necessary for him to make a conditional offer. There was some further discussion during which Mr McGowan said that he informed Mr Dassakis that he did not want to tell him the details of the sale because it could compromise Mr Dassakis and the other people in the room. Mr Dassakis, according to Mr McGowan, pressed to be told of the details of the negotiation to enable Mr Rivkin to make an assessment as to whether he would accept the conditional offer. Mr McGowan said that he then told Mr Dassakis that he was looking to merge Impulse with Qantas, and that he was waiting on ACCC approval at that stage. He also stated that he said to both Mr Dassakis and Mr Doff that now they were aware of the transaction, they could not trade in Qantas shares.

10 Mr Dassakis then tried to contact Mr Rivkin on his pager. He left a message for Mr Rivkin to call back urgently. Mr Dassakis spoke briefly to Mr Rivkin when he called on the telephone. Gerard McGowan was then invited to speak to Mr Rivkin on the phone. The conversation which followed was a brief one.

11 According to Mr McGowan he said to Mr Rivkin “I’m interested in purchasing your property. However, I am currently in merging my Impulse business with Qantas. We are waiting ACCC approval for that transaction”. According to Mr McGowan, Mr Rivkin replied, “I don’t believe that the ACCC would approve such a thing”. Mr Gerard McGowan said to Mr Rivkin “I believe they will approve it”. He told Mr Rivkin that he had several months of negotiation with ACCC on a variety of matters and he believed that they would approve the deal. He also said to Mr Rivkin – “Obviously now that you are aware of this you cannot trade in Qantas shares”. According to Mr McGowan, Mr Rivkin responded, “Obviously a person of my standing would not contemplate such a thing”.

12 I am satisfied beyond reasonable doubt that the conversation occurred substantially in the terms described by Mr McGowan. I am equally satisfied to the requisite degree that the version of the conversation given by Mr Rivkin in evidence was not true and that it did not occur in the terms he described. Although a major attack was launched on Mr McGowan’s credit by senior counsel for the offender during the trial, it is quite apparent that the jury in substance accepted the evidence of Mr Gerard McGowan and, consistently with the jury’s verdict, I do so as well. In addition, I am satisfied beyond reasonable doubt that Mr McGowan gave a warning to Mr Rivkin in the terms mentioned in his evidence. Mr McGowan said that he had taken advice from Impulse’s legal counsel, Mr Rob Paice. It was explained to him that he had to warn people not to trade, that is, any person who was made aware of the dealings between Impulse and Qantas during the confidential period of the negotiations. This had been explained to Mr McGowan at the very commencement of the negotiations with Qantas. It seems quite clear and I accept that the warning given by Mr Gerard McGowan to Mr Rivkin was made as a consequence of the advice Mr McGowan had received from the company’s legal advisor.

13 I am further satisfied beyond reasonable doubt that the effect of the conversation between Mr Gerard McGowan and Mr Rivkin on 24 April 2001 was to put Mr Rivkin in possession of the following information: -

(i) Mr Gerard McGowan said that there was a deal for the merging of Impulse’s business with Qantas,

(ii) Mr McGowan said that he had to wait until he had ACCC approval of the deal before making the purchase of the property at 5 Rose Bay Avenue, Bellevue Hill, and

(iii) Mr McGowan said that he believed that ACCC approval would be forthcoming.

14 It is necessary at this point to say something of the deal between Impulse Airlines and Qantas. On 1 May 2001 at approximately 2pm, a joint announcement was made by the two companies. Impulse Airlines announced that it would withdraw from operating scheduled air services in Australia under its own brand. At the same time the joint announcement placed on public record that the two airlines had entered into a long term commercial relationship involving Impulse contracting to Qantas its eight Boeing 717 and thirteen Beechcraft aircraft complete with pilots and cabin crew. Impulse would operate Boeing 717 services for Qantas under the Qantas brand and livery to a number of destinations including the Gold Coast, Maroochydore, Hamilton Island and also between Melbourne and Hobart. Qantas would loan funds to allow Impulse to buy back its institutional shareholders’ shares and also to provide working capital.

15 The effect of the legal arrangements underlying the joint announcement was the provision of three stipulated commercial components. They were:-

· The funding agreement,

· The “wet lease” agreement in relation to the aircraft, pilots and cabin crew and,

· An employment consultancy arrangement involving the McGowan brothers and one Neil Lewis.

16 The immediate and relevantly important effect of these arrangements was that Impulse would cease to operate services on the major trunk routes of Sydney/Melbourne and Sydney/Brisbane as from 14 May 2001. The arrangements were all subject to ACCC approval. This in fact was granted at a later date.

17 According to Mr McGowan, negotiations for these arrangements had in fact begun shortly after 29 March 2001. On that date, Mr McGowan had rung Geoff Dixon the Chief Executive Office of Qantas and arranged to meet him. Mr McGowan told Mr Dixon that the view of the institutional investors behind Impulse was that the price war in the aviation industry had gone “too far and too deep”. He asked Mr Dixon whether Qantas would consider wet leasing Impulse’s aircraft. The negotiations then began in earnest and they continued from early April right through until the end of April. Heads of agreement were initialled on 30 April 2001. A meeting was organised with Professor Fels of the ACCC on that day and, as I have said, the legal documents were formally executed on 1 May 2001 shortly before the joint announcement. Throughout, the negotiations were conducted and maintained on a confidential basis.

18 The background to the April negotiations between Impulse and Qantas was the highly publicised and notorious price war in the aviation industry. This had commenced and then escalated throughout the period of June 2000 to April 2001. As competition between the airlines grew more fierce on the eastern trunk routes of Australia, the price of airfares dropped dramatically. This had catastrophic consequences for all the competitors in the price cut war. Both Qantas’ share price and its profitability were significantly affected by the level of competition. The effect on Impulse however was nothing short of disastrous. By the end of April 2001 it was estimated that losses for the January, February and March period of that year were running at $5-7 million a month. Impulse was facing losses of $13 million for the financial year to the end of March 2001.

19 In these circumstances, the board of Impulse first attempted to raise further capital from among its investors. The institutional investors included AMP, City Venture Capital, GIC (Singapore) and National Asset Management, a subsidiary of the National Australia Bank. Despite strenuous attempts to raise capital, the institutional investors could not agree and the process of fund raising stalled completely. At a board meeting on 3 March 2001, it was accepted by all present that Impulse now could not continue without a substantial injection of funds. It was against this desperate background that Mr McGowan, with the consent of the institutional investors, made the approach to Mr Dixon the Chief Executive Officer of Qantas on 29 March 2001.

20 I return now to the events of 24 April 2001. It appears that following the conversation between Mr McGowan and Mr Rivkin on the telephone that morning, Mr Rivkin instructed Mr Dassakis to go ahead with the preparation of a contract for the sale of the house on the basis of a conditional contract containing a right of recision after seven days. Mr Dassakis organised the preparation of the contract through the solicitors who were acting for Timsa 43 Pty Limited. He said that it was his understanding that the sale was to be subject to Impulse Airlines entering into a financial arrangement with Qantas and that it required ACCC approval. The conditional contract was to be for a seven day period. Mr Dassakis executed the contract under a Power of Attorney given by Timsa 43 Pty Limited in his favour. Mr Dassakis said that he did not show the contract for sale to Mr Rivkin nor did he read to him any of the conditions in the contract.

21 At about ten to three in the afternoon of 24 April 2001 Mr Rivkin directed Adrian Kerstens, a SEATS operator for Rivkin Discount Stockbroking to purchase 50,000 Qantas shares in the name of Rivkin Investments Pty Limited. Thereafter, Mr Kerstens carried out Mr Rivkin’s instructions and 50,000 shares were acquired at an average price of approximately $2.78 per share.

22 I am satisfied beyond reasonable doubt that on 24 April 2001 when Mr Rivkin gave instructions to Mr Kerstens he knew that the information which had been conveyed to him by Mr McGowan during the telephone conversation earlier on that day was information that was not generally available. I am also satisfied beyond reasonable doubt that at that time, Mr Rivkin knew that if the information were generally available, it might have a material effect on the price or value of Qantas shares.

23 The factors that have led me to conclude that Mr Rivkin knew that the information was not generally available and that it was, to use a shorthand phrase, price sensitive, are these: First, he caused the shares to be bought on the very day he received the information from Mr McGowan. It is quite clear that when he had the telephone discussion with Mr Kerstens the statements made by Mr McGowan to him about the deal with Qantas were virtually ringing in his ears. There can be no doubt whatsoever that he knew the information was not generally available and this is made clear beyond argument by the fact that Mr McGowan warned him that he was not to trade in Qantas shares. In addition, the entire circumstances surrounding the telephone conversation on that day would have left Mr Rivkin in no doubt that the information was of a confidential nature.

24 Secondly, in relation to the price sensitivity of the information, it was, as I have suggested, no mere coincidence that the shares were bought on 24 April 2001. It is true that Mr Kerstens rang Mr Rivkin and during the course of the conversation remarked that there had been a lot of activity in Qantas and that “they looked interesting”. It is of course, not necessary for the Crown to prove, as an essential element of the offence, that Mr Rivkin procured the purchase of the Qantas shares because of his possession of the insider information. But I am satisfied beyond reasonable doubt that, despite Mr Rivkin’s evidence to the contrary, the insider information was an important factor in his decision to order the purchase of the 50,000 shares on 24 April 2001. I reject his evidence to the contrary as untrue.

25 It is by no means immaterial to note that on the day before the conversation Mr Rivkin, in his Rivkin Report had this to say about Qantas shares: -

“As for Qantas, the situation in the Australian Airline Industry is a mess and I could not add any significant value to the market’s view that would help you make a decision.
Taking a long term view, I do of course, believe that the stock is quite cheap, but in the short term, all sorts of things could happen and I cannot and will not attempt to guess what they are.”

26 It is quite clear, as Mr Rivkin conceded, that he was not in his April Newsletter, recommending Qantas to subscribers as a share to be purchased. Yet he had no hesitation in instructing Mr Kerstens to arrange the purchase of 50,000 Qantas shares shortly after his conversation with Gerard McGowan, a conversation in which he had received the confidential and price-sensitive information. Moreover, there were but three trades effected in the name of Rivkin Investments Pty Limited on 24 April 2001 and the subject transaction was by far the largest.

27 It is also necessary for me to make one further factual finding in this area. Mr Rivkin gave evidence that he had read the Herald article Exhibit 2, the day before the telephone conversation with Mr McGowan. His evidence was that, bearing in mind the newspaper article, he did not believe a word of what was told to him by Gerard McGowan. I am satisfied beyond reasonable doubt that this evidence given by Mr Rivkin was not true. I have no difficulty in accepting that Mr Rivkin was sceptical about the deal with Qantas going through to completion, and sceptical as well as to whether ACCC approval would be granted to it. I reject however any suggestion that Mr Rivkin truly believed that there was no deal being negotiated between Qantas and Impulse. It is quite clear to me that the jury rejected that aspect of Mr Rivkin’s evidence and I do so as well. Any doubts that Mr Rivkin may have had as to whether the deal would ultimately succeed and as to whether ACCC approval would be given did not eliminate or weaken the only reasonable inference available in all the circumstances that, following the telephone conversation, Mr Rivkin knew that the information was not generally available; and knew as well that, if it were generally available, it might have a material effect on the price or value of Qantas shares.

28 It was argued on the offender’s behalf that the Court should not draw this inference because it was not expressly suggested to Mr Rivkin in cross-examination that his evidence regarding this belief was untrue. I accept however, the Crown’s submission that it was never part of the offender’s case that the conversation occurred in the terms described by Mr McGowan but that Mr Rivkin simply did not believe it. Rather his case was that the conversation was in markedly different terms than those asserted by Mr McGowan and that he did not, in any event, believe what was stated in that conversation. As I have said, I am satisfied beyond reasonable doubt that the conversation did occur in the terms described by Mr McGowan and I am equally satisfied to the requisite degree that it did not occur in the terms described by Mr Rivkin.

29 On 1 May 2001 Mr Kerstens left a pager message for Mr Rivkin. Mr Kerstens had noticed that the share price in Qantas had gone up sharply. The share price hit a high of $2.90 per share just before Mr Rivkin received the pager message and rang Mr Kerstens back. The share price started to fall from its high of $2.90 and Mr Rivkin instructed Mr Kerstens to sell 50,000 shares at $2.85. The shares were then sold achieving a modest profit of $2,664.94. There was no contest in the proceedings and it is the fact that Rivkin Investments Pty Limited was at the time a wholly owned subsidiary of Rivkin Financial Services Limited, a publicly listed company. Mr Rivkin at that time held approximately 13 per cent of the shares in Rivkin Financial Services Limited. He was however a director and secretary of Rivkin Investments Pty Limited at all relevant times.

30 The last stage in the events surrounding the sale of the 50,000 shares was this: shortly after the sale, the price of Qantas shares jumped again, this time to $3.00. There was then an announcement made by the Stock Exchange temporarily suspending trading in Qantas shares. The joint announcement was made by Qantas and Impulse shortly after 2pm and trading commenced once again. Following resumption of trade, the share price rose again this time to about $3.40. These circumstances make it quite clear that Rivkin Investments Pty Limited, had it held on to the shares beyond the time of the joint announcement, would have made a much more significant profit than in fact was achieved by the earlier sale.

31 Finally, it is necessary to say, consistently with the jury’s verdict, that I am satisfied beyond reasonable doubt, that the Crown has proved the presence of all the necessary elements to establish the offence of insider trading against the offender.

32 I turn now to consider Mr Rivkin’s subjective circumstances. The offender is now 58 years of age and has been married for approximately 30 years to his wife, Gayle who is aged 52. He has five children aged between 30 and 16 years. He was born at Shanghai in China, the eldest son of Jewish parents. They had, I understand, migrated out of Russia to the East following the Second World War. Mr Rivkin was educated at Rose Bay Public School and at Sydney Boy’s High School. He went on to undertake and complete tertiary education at Sydney University in Law. From his early teenage years the offender had been interested in the share market and share trading generally. After completing his studies at University he joined the stockbroking firm Norths and was there for a little less than a year before setting out to start up his own stockbroking firm. He has been a member of the Sydney Stock Exchange for well over 30 years and has been a principal in a number of his own stockbroking firms during this time. He has held a number of important positions both within the Sydney Stock Exchange and the Australian Stock Exchange Limited.

33 Although no doubt his career has had, as any successful career does, its ups and downs, the offender comes before the Court for sentence as a very successful businessman and a person of considerable wealth and financial standing in the business community. He has provided the Court with more than a dozen extensive character references from persons who are themselves of considerable standing and often, so it happens, of considerable wealth in the community. These include the well-known broadcasters Alan Jones and Ray Martin. There are references from Graham Richardson a former Labor Minister, Mr John Coates of the Australian Olympic Committee and Paul Ramsay the Chairman of Ramsay Healthcare and Prime Television. There is no need for me to detail the identity of all of those who have given references but it is necessary to say that I have read the character references carefully and have given considerable attention to their contents. In addition, there are significant acknowledgements of the charitable deeds of Mr Rivkin from the Sydney Children’s Hospital, the Jewish Communal Appeal, the Spastic Centre and the Centre for Immunology at St Vincent’s Hospital, amongst others. Again, I have not set out in full detail the institutions and groups who have drawn to the Court’s attention the extensive philanthropy of Mr Rivkin.

34 The third category of material to which my attention has been drawn is contained within a substantial folder containing over 250 copy documents which are described as unsolicited e-mails, facsimiles and letters received by or sent to Mr Rivkin after the verdict indicating support for him.

35 The general body of this character evidence, as I shall for shorthand purposes conveniently describe it, attests to the high regard in which a number of prominent citizens of this country hold Mr Rivkin. It is also testimony to his undoubted generosity as a philanthropist and to his devotion to his family. A number of the more personal references highlight the proposition that the offence in respect of which the offender has been convicted is out of character for him. To give but, three examples, there is first Mr Graham Richardson who said this: -

“I am of course aware that a conviction on a charge of insider trading has now been recorded against Mr Rivkin. The commission of any crime, whether serious or trivial, by him is completely out of character. Apart from this blemish he has lived the life of a model citizen with a healthy respect for the law and I am certain that he will not transgress again.”

36 Mr Alan Jones said this: -

“I am aware that he has been found guilty of insider trading. Such a finding is utterly inconsistent with the Rene Rivkin that I know. I have never known him to speak about things acquisitive.

37 Mr Ray Martin said this: -

“I know him to be honest, ethical man who quite strictly observes the parameters of Australian Society. Therefore, I find Mr Rivkin’s behaviour, as reflected by the recent court verdict which found him guilty of insider trading, perplexing and out of character.”

38 Mr Rivkin did not give evidence before me during the sentencing proceedings. A number of those persons who provided character evidence on his behalf stated, however, that the conviction has brought great embarrassment to Mr Rivkin, his family and many friends. Mrs Rivkin gave evidence regarding the significant impact the jury’s verdict has had on the members of the family particularly her daughter. She said that the offender has been very much affected as well. He has been difficult to live with, hypomanic, angry and bitter. Mrs Rivkin spoke as well of the consequences for the family of a sentence of imprisonment. Their life, she said, would be ruined.

39 Although Mr Rivkin has not expressed these matters to me directly, I have no difficulty in accepting that the conviction for insider trading, despite the considerable degree of bravado that Mr Rivkin has maintained in the public arena, will have caused him great shame, embarrassment and concern. It will have, additionally, a significant impact on his family. It is not inappropriate to mention at this point that one of the submissions which I will need to consider relates to the Crown argument that Mr Rivkin has not shown any contrition in respect of the offence he has been found to have committed. In that regard, the Crown has provided me with a considerable number of public statements made by the offender at the time of and following his conviction which it is said attest to this lack of contrition. The offender’s legal team have countered by placing before the Court a report of Dr Robert Fisher, Consultant Psychiatrist who examined Mr Rivkin on 14 and 16 May 2003. The report suggests that Mr Rivkin is presently suffering from a mild hypomania and that this may have contributed to the nature of his public statements since 30 April 2003. I propose to address each of those submissions in their proper context but at this stage it is appropriate to refer to some general matters regarding the physical and mental health of the offender.

40 Professor Ronald Penny provided a report dated 12 May 2003 which provided concise details of the offender’s medical history. In May 1982 he had an episode of Mycoplasma chest infection following which he developed quite severe asthma requiring treatment. The offender left Australia and went to the United Kingdom in 1983 and upon his return suffered a severe depressive illness for which he was referred to a psychiatrist. He sustained profound weight loss and depressive symptoms of some severity before making a good recovery on anti-depressants. In 1987 the offender required operative treatment for the removal of a benign intracranial tumour. This was successfully undertaken without either tumour occurrence or secondary tumours.

41 In July 2001 the offender was admitted for a perforation of the right side of the bowel due to diverticulitis producing peritonitis for which he underwent a removal of the right side of the colon. Depression occurred during the recovery period and Prozac was reintroduced as a treatment. At the same time the offender was found to have a renal cell cancer which required the removal of his right kidney.

42 Professor Penny reviewed the offender’s general health condition in March this year. There were no adverse findings. However, in view of the offender’s history of depressive episodes, Professor Penny thought it advisable to have him reviewed by a psychiatrist especially to take into account the impact of sentencing and imprisonment, if it were to be imposed upon him.

43 It was in this context that Dr Robert Fisher provided the 19 May 2003 report to which I have made reference. Dr Fisher recounted a history of psychiatric illness with the offender first reporting severe depression in 1981-1982. It seems that this was quite a substantial bout of depression and that, it was, however, substantially relieved by the drug Prozac which the offender has taken for the last ten years albeit, with an escalating dose. It does not appear that Mr Rivkin has required psychiatric treatment in the last ten years principally because his bi-polar disorder has been controlled by his medication. It was Dr Fisher’s opinion that this history did not reveal any evidence of the existence of a hypomanic state prior to the conviction on the insider trading charge. However, Dr Fisher thought that the offender presently reported the symptoms of hypomania and that his general behaviour was consistent with a hypomanic state of mild degree. The two principal matters of opinion stated by Dr Fisher may be summarised as follows: -

1. The offender’s state of hypomania has led to him publishing views in his newsletters that may be detrimental to his cause, despite the fact that he has been advised by his own legal representatives that such actions may be detrimental to the outcome of his sentencing process.

2. The likely affect of any sentence of imprisonment, week-end detention or community service order upon him will be dependant upon the mood state he is in at the time. Dr Fisher believes that, if imprisoned on a full-time basis, the offender could move into a state of depression which would require treatment and monitoring. If he were not so treated, his depression could lead to contemplation of suicide. Dr Fisher thought that Mr Rivkin needed to be under the care of a psychiatrist at the present time and that he might benefit from a reduction in the dose of Prozac or the addition of a mood stabliser.

General Principles

44 General principles relating to sentencing in white collar crimes – and insider trading may properly be regarded as such a crime - are well known. The relevant aspect of those principles for present purposes may be shortly stated as follows: -

1. The 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.

2. 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 subtley 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 regarded 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.

3. 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 unethetical 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 380; 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 paras 23 and 24; Regina v Pont (2000) NSWCCA 419; Regina v Hannes (2000) 158 FLR 389 at para 394 (per Spigelman CJ); Regina v Hannes (James J) 13 December 2002 at para 90; 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 4215).

45 In applying these principles to the present situation, it is necessary however that clear and precise consideration be given to the circumstances of the commission of the offence. Moreover, there is a need to recognise that a number of the decisions mentioned above deal with offences of a different kind than Insider Trading. The principles however, remain relevant in a general sense.

Relevant considerations under s 16A(2) of the Commonwealth Crimes Act 1914

46 Bearing these principles in mind, I turn to a number of the considerations to which attention must be paid in the present case having regard to the provisions of the Commonwealth Crimes Act. The first, and plainly an important consideration, is a consideration of the nature and circumstances of the offence.

47 It is, I think, easy enough to come to a clear view at the outset, as has been submitted on behalf of the offender, that the present insider trading offence is by no means the most serious or even a very bad case of insider trading. That much may, at the outset, be accepted. Although a reasonably substantial amount - $139,226.42 was expended on the purchase of the 50,000 Qantas shares, the profit made was by any reasonable standards a modest one. Secondly, the offender did not seek out the information which came into his possession on 24 April 2001. Rather, it was thrust upon him in circumstances not of his making. Moreover, the information came to him during the course of a private negotiation relating to the sale of a house, rather than in his capacity as a stockbroker. Thirdly, the transaction relating to the purchase of the Qantas shares was an open one and not concealed in any way. Fourthly, the shares were sold on 1 May 2001 as soon as the market moved upward. In other words, the offender did not wait until the joint announcement after 2pm on that day as he might have done if he had wished to achieve a greater profit on the sale of the shares. Much has been made on his behalf of the proposition that the shares were purchased by Rivkin Investments Pty Limited, a wholly owned subsidiary of Rivkin Financial Services Limited, although I consider that this aspect of the matter is relatively neutral in the overall assessment of culpability.

48 Notwithstanding all these matters which tend to reduce the seriousness of the offence in a number of respects towards the lower end of the range, there are nevertheless some serious aspects to the circumstances of the offence. First and foremost, the offender is a most experienced stockbroker and trader on the stock market. As I have earlier recounted, he has been a member of the Sydney Stock Exchange for well over 30 years. He has been a principal in a number of his own stockbroking firms during this time. He has been a member of the Trading Floor Committee and later a committee member of the Sydney Stock Exchange and a member of the Joint Stock Exchange Committee responsible for running the Stock Exchange itself. In addition, he was a member of the Inaugural Board of the Australian Stock Exchange Limited. With the vast amount of experience he has accumulated, he makes important investment decisions on behalf of Rivkin Investments Pty Limited as well as on behalf of a number of individuals who clearly regard his advice as most important and valuable to them. He provides investment advice through the Rivkin Report to over 17,000 subscribers. This Report is a vehicle for Mr Rivkin’s publicly stated views and opinions as well as a vehicle for his share trading advice.

49 All these matters, in my view, import a serious content into the circumstances of the offence. It cannot be regarded as a trivial offence or one which, because of the modest size of the profit, can be simply swept under the carpet. To do so would be to turn a blind eye to the very significant position Mr Rivkin occupies and to the significant departure from proper standards which underpinned his decision on 24 April 2001 to arrange for the purchase of 50,000 Qantas shares notwithstanding his clear understanding of the nature of the insider trading laws and his knowledge of the nature of the information he had been given by the Chief Executive Officer of Impulse Airlines on that day.

50 Moreover, on the basis of the findings of fact I have made, Mr Rivkin deliberately decided to arrange the purchase of the shares, notwithstanding that he had received an express caution from Gerard McGowan that he should not trade in Qantas shares. It must be said that throughout his evidence at trial the offender displayed an attitude of rather contemptuous arrogance for the processes which had brought him to trial. The same attitude was displayed by Mr Rivkin towards Mr McGowan and, during his cross-examination to the Crown Prosecutor. It is not unfair to say that this same attitude appears to have played a part in his decision to arrange the prohibited purchase of Qantas shares. Such an attitude may explain in part why the offender acted in the way he did on 24 April 2001 but it is of course, no excuse for those actions. He himself, during his evidence described himself as an addict to trading on the Stock Exchange and it is equally fair to say that the prospect of making a profit out of the ultimate sale of the Qantas shares, albeit, not for himself personally, undoubtedly underscored the decisions he took. Notwithstanding these remarks may I make it absolutely clear that no aspect of the imposition of penalty is designed to punish the offender because he is, on occasions, an arrogant man or because he is “different”; or as Mr Richardson described it, “a little odd” on occasions. Consideration of that kind may be taken into account, where appropriate, in his favour in relation to the subjective case but they have no part to play in increasing an otherwise appropriate penalty.

51 The offender comes before the Court without any prior convictions or offences throughout a long and successful business career. It is proper to take that fact into account although, as the authorities have observed on a number of occasions, white collar crimes are frequently committed by persons of previous good character and persons who have no previous convictions. (R v El-Rashid (supra) per Gleeson CJ at 3). Moreover, the extensive body of character evidence has satisfied me that the offender is to be regarded as a person who has displayed a considerable philanthropy and generosity in both his private and public life. Although he is properly to be regarded as a controversial figure in the community – that is, he appears to excite both fervent admiration and sometimes dislike from sections of the public – the evidence before me persuades me that he is to be regarded as a worthwhile person with an unblemished record.

52 It is necessary then to consider the degree to which the offender has shown contrition for the offence. The starting point is that the offender pleaded “not guilty” to the charge. He was of course, perfectly entitled to do so and to conduct the vigorous defence that he did. This cannot of course lead to any increase in the sentence that should be imposed upon him. It has the consequence however, that the offender is not entitled to the discount that a plea of guilty would otherwise have earned for him. Generally, I am satisfied that the offender has failed to show any contrition for his wrongdoing. Indeed, there is no real contest about that fact. The principal issue, as I indicated earlier, is whether the rather inflammatory statements made by the offender in the public arena on and after 30 April 2003 up to the present time ought in some way to aggravate the offence. The fact is however, that the Crown has never made such a submission. For my part, I accept that an examination of the various statements made by Mr Rivkin in the Rivkin Report on 5 May 2003, during a radio program on the same day and in other material should be assessed as having no greater utility than assisting in a determination as to whether contrition has been shown. In the same way, I think that Dr Fisher’s psychiatric report, when dealing with this topic, in reality proffers something of a false issue. It may well be that the making of some of the more flamboyant remarks recently made by Mr Rivkin, despite legal advice that he should exercise restraint, are properly attributable to a mild degree of hypomania. But whether that be so or not, the plain fact is that the offender has certainly not expressed any contrition for his actions. The plain fact is that the offender continues to assert his innocence and to assert, as he is perfectly entitled to do, his right to appeal the conviction and overturn it, if he possibly can. Dr Fisher’s report does not suggest that the offender’s public statements are not his true feelings.

53 None of these matters, in my view, warrants the imposition of any greater penalty than is otherwise appropriate, although such an attitude, whether it stems from psychiatric causes or from an outraged sense of innocence or both, results in a situation where the offender is not entitled to leniency arising out of the presence of contrition. It is a legitimate consequence of this finding that, regrettably, the offender has failed to demonstrate any acceptance or understanding of his own wrongdoing arising out of the jury’s verdict. Indeed, he has shown little or no respect for the jury’s verdict. Rather he has displayed an attitude of contempt and disdain for the jury’s verdict. But, as I have said, these attitudes, genuinely felt as they no doubt are by Mr Rivkin, should not, and cannot play a role in increasing the penalty to be imposed.

54 I turn then to consider a number of circumstances which have been discussed in the submissions under the heading of extra-curial punishments. First, there is the undoubted disgrace and humiliation which must accompany the jury’s verdict so far as the offender is concerned. Secondly, there is the impact on his wife and family, so eloquently conveyed by Mrs Rivkin. Thirdly, there is the loss of his previous good standing in the community and in his profession as a stockbroker. It is true that many have rallied to his side and have expressed their continued support for him and their belief in him. There will undoubtedly be others who will think considerably less of him as a consequence of the jury’s verdict. Fourthly, there is the unquantifiable but real economic impact the conviction may have upon his livelihood and business calling. Fifthly, there is the disqualification from managing a corporation which flows from the provisions of s 206B(1)(b)(i) of the Corporations Act 2001. Finally, there is the possibility that ASIC may take action in relation to the Security Dealer’s Licence held by Mr Rivkin. Such action has the potential to result in the revocation of the offender’s securities licence or the imposition of a banning order. While it is true that any action in relation to the Security Dealer’s Licence might properly be regarded as protective in character, it is clear that an adverse outcome in any such proceedings would be a matter of real practical punishment so far as the offender is concerned. In my view, such matters may properly be taken into account in the sentencing process, notwithstanding that they derive from proceedings essentially protective in nature rather than penal.

55 In my view, the sentence to be imposed must, to a degree, take into account the deterrent effect it may have on the offender personally. The prospect of the offender’s rehabilitation arises in this regard. In one sense, it would hardly be likely, one would think, that the offender would be tempted to contemplate the commission of a further insider trading offence. This is because of the expense, public disgrace and public humiliation involved in the present conviction, not to mention the possible adverse impacts on his ability to trade on the stock market in the future. Nevertheless, he has not shown any contrition for his conduct and has refused to admit that he has been guilty of any wrongdoing. These latter considerations betoken the need for a sentence which carries with it the likelihood of a deterrent impact on his future conduct and which of itself is likely to ensure his rehabilitation so as to prevent any further delinquency in the area in which he has impermissibly and improperly acted.

The Imposition of a Sentence

56 The Crown has submitted that this is a case in which a substantial fine together with a full-time custodial sentence should be imposed. Mr McClintock SC has argued that the Court should proceed under s 19B of the Crimes Act 1914 (Commonwealth), that is, to dismiss the charge or discharge the offender without proceeding to conviction. Alternatively, Mr McClintock has urged that if a conviction is to be recorded, a conditional order of release under s 20 should be made accompanied by the imposition of a bond or, a modest fine.

57 Before passing to the determination of an appropriate sentence, it is necessary that I make brief reference to a number of other relevant statutory provisions. First, there is s 17A of the Crimes Act 1914 (Commonwealth). This section requires that a Court shall not pass a sentence of imprisonment on any person for a federal offence unless the Court, after having considered all other available sentences, is satisfied that no other sentence is appropriate in all the circumstances of the case. Secondly, it is necessary to refer again to s 16A. I have already made extensive reference to this section but it is important to note that sub-section 3 of that section requires the Court, in determining whether a sentence or order under sections 19B(1), 20(1) or 20AB(1) is the appropriate sentence or order to be passed or made in respect of a federal offence, must have regard to the nature and severity of the conditions that may be imposed on or may apply to the offender under that sentence or order. Thirdly, there is s 20AB. Additional alternatives available under the laws of a participating State – of which New South Wales is one – may be imposed in respect of a person convicted of a federal offence. In practical terms, the sentencing alternatives include, if a sentence of imprisonment is imposed, a home detention order; periodic detention, or full time imprisonment. Fourthly, s 20AB(4) empowers the Court to impose a fine or other pecuniary penalty in addition to other orders made in passing sentence. Section 16C(1) requires that the Court, before imposing a fine on a person for a federal offence, must take into account the financial circumstances of the person in addition to any other matters that the Court is required or permitted to take into account.

58 What then is the appropriate sentence to be imposed on the offender? May I state immediately that I am clearly of the opinion, having considered all other sentences available, that in the circumstances of this matter, no sentence is appropriate other than one of imprisonment. To my mind, orders under s 19B or s 20 of the Crimes Act 1914 (Commonwealth) would be completely inadequate in the circumstances of this matter to reflect the criminality of Mr Rivkin’s actions assessed objectively. Orders of the kind urged upon me by Mr McClintock SC would not adequately reflect the important aspect of general deterrence necessarily arising from the level of criminality I have found to exist. Moreover, I consider that orders under those sections would not adequately address the need for a reasonable level of personal deterrence aimed at ensuring that no further offence of this kind is committed by Mr Rivkin. I have earlier said and I repeat that I regard the circumstances of this offence in some respects as tending towards the lower end of the range. But notwithstanding that finding, there are some serious components of the offence principally related to Mr Rivkin’s position in the market and as a trader generally; and secondly in that context, related to Mr Rivkin’s deliberate decision to cause the acquisition of these shares fully knowing the price sensivitity of the information he had received and knowing that he had been warned not to make a trade in those shares because of the confidential nature of the circumstances in which the information was passed to him. In my view, the community generally would be rightly outraged if a sentence other than imprisonment were imposed.

59 The matter which requires however, a considerable degree of discernment is to determine what the term of that sentence should be. And it is also necessary to determine whether a fine should be imposed and if so in what amount. Once those matters have been determined, it will be necessary for me to come to a conclusion whether any of the available alternatives to full-time imprisonment should be utilised in the circumstances of this matter.

60 As I said at the outset the maximum penalty for an offence under s 1002G is a fine of $200,000 or imprisonment for five years or both. It is necessary for me to consider the objective gravity of the offence balanced against the subjective circumstances of the offender. In my view, a sentence that appropriately is commensurate with, and reflects the seriousness of the crime and fulfils the purpose of punishment in the present case is a sentence of nine months imprisonment together with a fine of $30,000.

61 It is necessary for me to say that I have determined, pursuant to s 19AC of the Crimes Act 1914 (Commonwealth), that I should decline to make a recognizance release order. I have reached this decision because this is a case, in my view, in which a fixed term of imprisonment is appropriate because the personal circumstances and background of the offender, that is his antecedents, are such that it is extremely unlikely that he will require any supervision on probation or otherwise require the benefits of conditional recognizance upon release from prison (Regina v Riccord (supra) per Gleeson CJ at 3).

62 It is also necessary for me to say that the objective assessment of the offender’s criminality in relation to the subject offence is such that I believe that the appropriate sentence should contain both a custodial and monetary element. I am satisfied that the imposition of a custodial sentence of itself would not constitute a sentence or order that is of sufficient severity appropriate in all the circumstances of the offence (s 16A of Crimes Act 1914 (Commonwealth)). I am satisfied that the offender has the capacity to pay a fine of $30,000 and that a fine of that order is appropriate in the present circumstances.

63 The task that remains is to determine whether full-time imprisonment is appropriate or whether any of the available alternatives short of full-time imprisonment are appropriate to the circumstances of this matter. I repeat that those alternatives in ascending order of severity are a home detention order; a periodic detention order or full-time custody.

64 In my view, there is justification for selecting an alternative to full-time imprisonment in this matter. It is my view that the important aim of general deterrence will be preserved, if the sentence to be served by the offender is served by way of periodic detention. It is also my view that periodic detention in the circumstances of the present offence will reflect overall the objective seriousness of the offence and fulfil the manifold purposes of punishment including personal deterrence. I am conscious that in choosing this alternative to full-time custody, I am choosing a sentence that is more lenient than full-time custody. Nevertheless, I am satisfied that such a sentence would, as I have said, reflect appropriate recognition of the objective seriousness of the offence while at the same time attenuating the punishment so as to take account of the offender’s strong subjective case especially in relation to his physical and mental health. I intend that the sentence I am about to impose should send a clear message to those involved in the securities industry that the Court will not tolerate insider trading offences even where such offences are not of the most serious nature.

65 The final matter to which I should make reference is that I have received a Pre-Sentence Report dated 22 May 2003. This report confirms that the offender has been assessed as suitable for a Periodic Detention Order and that he has signed an undertaking as required by s 66(1)(f) of the Crimes Sentencing Procedure Act 1999. The report also makes it clear that vacancies are currently available for either mid-week or weekend detention at the Metropolitan Periodic Detention Centre at Silverwater.

66 Mr Rivkin will you please stand up.

67 Rene Walter Rivkin, I record that a jury found you guilty on 30 April 2003 of an offence of Insider Trading as defined in s 1002G of the Corporations Act 2001.

68 In relation to that offence, you are convicted. I sentence you to imprisonment for a term of nine months, such sentence to be served by way of Periodic Detention. I decline to make a recognizance release order.

69 In addition, I impose a fine of $30,000.

70 I direct you to report to the Silverwater Detention Centre at 4pm on Friday 6 June 2003 to commence serving your sentence by way of Periodic Detention.

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Last Modified: 06/12/2003