Businessmen John Kizon and Nigel Mansfield are facing a retrial into charges over an online sex shop business after a landmark High Court ruling this morning that insider trading laws can be breached even when the information allegedly possessed when trading in shares is false.
Mr Kizon and Mr Mansfield were charged with a total of 52 conspiracy and insider trading charges relating to allegations that they received market-sensitive information from AdultShop.com chief executive Malcolm Day and My Casino chairman Mike O’Donnell.
District Court Judge John Wisbey threw out 48 of the charges near the end of a nine-week trial in March 2010 after he found the men had no case to answer after ruling there was no evidence to establish the truthfulness of the information underpinning the charges.
A jury took less than an hour to deliver not guilty verdicts on the four remaining charges against Mr Mansfield.
But in a decision handed down in June last year, the WA Court of Appeal set aside some of the acquittals and ordered Mr Kizon and Mr Mansfield face a retrial on a total of 34 charges. The charges relate only to allegations of conspiracy and insider trading in AdultShop.com in 2002.
The businessmen then took the case to the High Court.
In this morning’s unanimous decision, the High Court held that a person can contravene the prohibitions on insider trading by trading in securities while in possession of “inside information” as described under the Corporations Act, even if that information proves to be false.
The case against Mr Kizon and Mr Mansfield centres on allegations that Mr Day told the businessmen information about the prospects of AdultShop.Com, a publicly listed company, and they shared the information with each other.
It was alleged that while armed with this information, Mr Kizon and Mr Mansfield bought or procured the purchase of chares in the online sex shop.
At the District Court trial, prosecutors conceded that the jury could not be satisfied beyond reasonable doubt that the information about AdultShop.Com’s prospects which was allegedly in the hands of the accused businessmen was true.
In the High Court, Mr Kizon and Mr Mansfield argued that a person could not be guilty of insider trading by buying or procuring the purchase of shares while in possession of information that is objectively false.
“The court held that a person can contravene the insider trading provisions of the Corporations Act even if the information he or she possesses is false, as long as the statutory criteria for insider trading are met,” a judgment summary released this morning said.
The long-running legal battle over charges laid after an Australian Crime Commission investigation also underpins a bid by Mr Mansfield for damages, some of which is earmarked for a Kizon family trust, from the State Government relating to the freezing of his assets.