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10
Court of Criminal Appeal 7 December 2011

Hartman v R

[2011] NSWCCA 261

Fraud & dishonesty
CRIMINAL LAW SENTENCING APPEAL INSIDER TRAINING OFFENCES MATTERS RELEVANT TO RE SENTENCE SUBJECTIVE CIRCUMSTANCES

Citation: Hartman v R [2011] NSWCCA 261
Court: Court of Criminal Appeal, New South Wales
Date: 7 December 2011
Judges: Whealy JA, Adams J, Latham J

Background

The appellant was a 20-year-old equities dealer employed by Orion Asset Management Limited who used confidential portfolio information to engage in "front-running" through Contracts for Difference (CFDs). Over approximately 18 months between mid-2007 and January 2009, he traded on inside information for personal gain and also passed that information to a close friend who then traded on it. These activities gave rise to 19 insider trading offences and six "tipping" offences under the Corporations Act 2001 (Cth).

The appellant pleaded guilty to all charges and admitted further similar offences listed on a schedule. Prior to sentencing, he consented to the forfeiture of approximately $1.575 million, representing the substantial portion of profits identified in the charges. The sentencing judge at first instance imposed an aggregate custodial term of four and a half years with a non-parole period of three years.

The appellant sought leave to appeal on the ground that the sentences were unduly severe, raising specific errors regarding the treatment of his cooperation with authorities, his contrition, and the weight given to general deterrence against his subjective circumstances, including a psychiatric condition and gambling addiction.

  • Whether the sentencing judge erred in the manner in which he reflected the appellant's assistance to authorities, including future assistance, when structuring the sentences.
  • Whether the sentence for the group offences adequately discounted for that assistance.
  • Whether the sentencing judge erred by failing to give adequate weight to the appellant's demonstrated contrition.
  • Whether the sentencing judge placed excessive weight on general deterrence, and insufficient weight on the appellant's subjective circumstances, particularly his psychiatric and gambling-related conditions.

Decision

The Court of Criminal Appeal granted leave to appeal and found error in the sentencing judge's approach to the appellant's assistance to authorities. The sentencing judge had failed to reflect that assistance adequately in the sentence structure, particularly in relation to the group (tipping) offences. Under ss 16BA and 21E of the Crimes Act 1914 (Cth), cooperation with authorities, including anticipated future assistance, carries substantial mitigating weight, and the Court found this had not been properly translated into the sentences imposed.

On general deterrence, the Court accepted that insider trading offences demand a strong deterrent response given their potential to undermine public confidence in financial markets. However, it agreed with the modified ground of appeal that the sentencing judge had not given adequate weight to the appellant's significant subjective circumstances, including his youth at the time of offending, his guilty pleas, his cooperation, his remorse, and his underlying psychiatric vulnerabilities.

The Court also considered the relevance of the appellant's gambling addiction and associated psychiatric condition to the sentencing exercise. It found these conditions had a bearing on the appellant's circumstances and prospects of rehabilitation, even though they did not provide an excuse for the offending. The Court applied the principle from R v Ellis (1986) 6 NSWLR 603 in recognising the discount available for a plea of guilty and cooperation.

On re-sentencing, the Court restructured the sentences to reflect these matters more appropriately. The overall custodial term was reduced, a shorter pre-release period was fixed, and the appellant was to be released on a recognisance order subject to detailed conditions addressing his psychiatric treatment and gambling addiction.

Orders Made

  • Leave to appeal granted.
  • Appeal allowed; sentences imposed on 2 December 2010 quashed.
  • In lieu, the following sentences imposed:
  • Count 1 (with schedule): 2.5 years imprisonment, commencing 2 December 2010, expiring 1 June 2013.
  • Counts 2 to 19: 2 years imprisonment each, commencing 2 December 2010, expiring 1 December 2012.
  • Count 20 (with schedule): 18 months imprisonment, commencing 2 June 2012, expiring 1 December 2013.
  • Counts 21 to 25: 16 months imprisonment each, commencing 2 June 2012, expiring 1 October 2013.
  • A single pre-release period of 15 months specified, commencing 2 December 2010 and expiring 1 March 2012, after which the appellant to be released upon entering a recognisance of $1,000.
  • The recognisance to remain in force for 18 months from 1 March 2012, subject to conditions including psychiatric assessment and treatment, attendance at a residential gambling program, full disclosure to supervising authorities, and prohibition on any activity involving control of others' money or assets.

Key Takeaways

  • The Court of Criminal Appeal confirmed that a sentencing judge's failure to adequately reflect an offender's cooperation with authorities, including anticipated future assistance, in the sentence structure constitutes appealable error under the Crimes Act 1914 (Cth).
  • General deterrence carries significant weight in insider trading cases, given the capacity of such offending to damage the integrity of financial markets and public confidence in them; however, it does not operate to the exclusion of an offender's subjective circumstances.
  • A psychiatric condition and gambling addiction, while not excusing insider trading offending, remain relevant to the sentencing exercise where they bear on an offender's background, vulnerabilities, and prospects of rehabilitation.
  • In re-sentencing, the Court applied the Ellis discount for guilty plea and cooperation, restructured the sentence to better balance deterrence with subjective factors, and imposed detailed recognisance conditions tailored to the offender's identified therapeutic needs.
  • Forfeiture of the bulk of offending profits under the Proceeds of Crime Act 2002 (Cth) formed part of the overall sentencing picture, though it did not in itself determine the custodial outcome.

Legislation and Cases Referenced

Legislation:
- Corporations Act 2001 (Cth), ss 1043A(1), 1043A(2), 1311(1)
- Crimes Act 1914 (Cth), ss 16A, 16BA, 19AC, 21E
- Criminal Appeal Act 1912 (NSW), s 6(3)
- Proceeds of Crime Act 2002 (Cth)
- Australian Securities and Investments Commission Act 2001 (Cth), s 13

Cases:
- R v Hartman (2010) 81 ACSR 121; [2010] NSWSC 1422 (sentence at first instance)
- R v Ellis (1986) 6 NSWLR 603
- DPP (Cth) v De La Rosa (2010) 205 A Crim R 1; [2010] NSWCCA 194
- Hili v R (2010) 85 ALJR 196
- Director of Public Prosecutions (Cth) v El Karhani (1990) 21 NSWLR 370
- BP v R [2010] NSWCCA 159; (2010) 201 A Crim R 379
- KT v R [2008] NSWCCA 51; (2008) 182 A Crim R 571
- Johnson v the Queen (2004) 78 ALJR 616
- Lodhi v The Queen [2007] 179 A Crim R 470
- MS2 and Ors v Regina [2005] NSWCCA 397; (2005) 158 A Crim R 93
- R v Hearne [2001] NSWCCA 37; (2001) 124 A Crim R 451
- R v Wright (1997) 93 A Crim R 48
- R v Letteri (NSW CCA, unreported, 18 March 1992)
- McQuoid [2010] 1 Cr App R (S) 43
- R v Rollins [2011] EWCA Crim 1825