Tranz Rail sellers not off the hook yet

Nick Bryant

Saturday 17th April 2004

After more than a year's investigation the Securities Commission appears close to completing insider trading inquiries into early 2002 trades of Tranz Rail shares.

The trades in question were the complete selldown of large stakes held by Fay Richwhite interests, Canadian National Railways (the former Wisconsin Central) and Berkshire Partners.

As a result of the sales, local institutions and listed companies piled into Tranz Rail, only to see the share price collapse in the wake of previously unknown bad news about the company's financial state.

The last public word on the inquiry came in a news release dated February 10, 2003, in which Securities Commission chairman Jane Diplock said information supplied by the Market Surveillance Panel which investigated whether there had been breaches of continuous disclosure rules (it found no evidence of any breaches) would "greatly assist the commission in its inquiry."

"We expect that much of this information from the panel is pertinent to our insider trading inquiry and will enable us to complete our work more quickly," Diplock said at the time.

But things weren't wrapped up swiftly at all. This week Securities Commission head of enforcement Norman Miller confirmed the inquiry was continuing under his charge.

Asked whether there was any statute of limitations on when insider trading charges might be laid, Miller would only say: "Our line is that this [inquiry into insider trading of Tranz Rail shares] is still under way and aside from that we'll be making no comment."

Toll Holdings chief financial officer Neil Chatfield said he couldn't comment on where the Securities Commission investigation was up to, or whether there would be implications for Toll Tranz Rail's new majority shareholder in the event of any legal action.

"All I can tell you is the company [Toll] is involved and is co-operating with the Securities Commission," Chatfield said.

Meanwhile, legal sources say former Tranz Rail director David Richwhite and his business partner Michael Fay spent much of their recent time in New Zealand with lawyers preparing for an upcoming case.

Those sources did not know whether the legal action related to Tranz Rail. They said legal consultation could have been about any number of issues, as despite having given the impression of cutting ties with New Zealand the pair had interests here that were still substantial.

It is understood they own about $200 million of commercial property here, including the $33 million Telecom Centre on Tory St in Wellington, which is 100% leased to Telecom.

A call to Richwhite, who arrived back in Geneva on Monday and was in the office on Wednesday, went unreturned.

Were the Securities Commission to take legal action as a result of its inquiry, it would be under s18A of the Securities Markets Act, which enables it to directly exercise a public issuer's right of action against an insider.

This would be a first for the historically toothless commission after it received new powers on December 1, 2002, as part of the Securities Markets & Institutions Bill, part of which was the Securities Markets Amendments Act 2002, which covers insider trading.

Comments from our readers

No comments yet