Citation: R v Hannes [2002] NSWSC 1182 revised - 16/12/2002
Court: Supreme Court of New South Wales, Common Law Division
Date: 13 December 2002
Judge(s): James J
Background
The prisoner was an executive director in the Corporate Advisory Division of Macquarie Corporate Finance, part of Macquarie Bank. In 1996 he was found to have traded in TNT securities while in possession of confidential, non-public information about a potential takeover of TNT by Dutch company KPN. Although the prisoner was not a formal member of the internal team working on the transaction, the court found he had access to the relevant inside information.
The prisoner also faced two charges under the Financial Transaction Reports Act. Those charges related to conducting multiple cash transactions in a manner structured to avoid the reporting obligations that attach to significant cash transactions of $10,000 or more.
This sentencing followed a second trial. The prisoner had previously been sentenced by Judge Backhouse, but that sentence was set aside on appeal. A jury convicted the prisoner on all three counts on 11 September 2002, and James J conducted a fresh sentencing hearing on 19 November 2002.
Legal Issues
- What sentences were appropriate for the insider trading offence under s 1002G of the Corporations Act and the two structuring offences under s 31(1) of the Financial Transaction Reports Act?
- How should the court apply the totality principle and the rules on cumulation and concurrence when sentencing for multiple federal offences?
- What credit, if any, should be given for the period of imprisonment already served under the earlier sentence?
- Whether a short further period of imprisonment was warranted given the prisoner had already served approximately 15 months and 22 days in custody.
Decision
James J sentenced the prisoner under Part 1B of the Commonwealth Crimes Act, which governs federal sentencing. In line with the High Court's guidance in Pearce v The Queen, his Honour fixed an appropriate sentence for each offence individually before considering whether the sentences should run concurrently or cumulatively and whether the overall result satisfied the totality principle.
For the insider trading offence, the court imposed a term of two years and two months' imprisonment together with a fine of $100,000. The maximum penalty for that offence was five years' imprisonment and a $200,000 fine. For each of the two structuring offences under the Financial Transaction Reports Act, the court imposed four months' imprisonment. Those two terms were ordered to run concurrently with each other but cumulatively upon the insider trading sentence.
The court made a recognisance release order to take effect on 21 April 2003, which was one year and eight months from the commencement date of 22 August 2001. This meant the prisoner would serve the remainder of his custodial time and then be subject to a period of community supervision. Breach of the recognisance conditions without reasonable excuse could result in a return to custody.
On the question of the short further period of imprisonment still to be served, James J rejected the submission that no useful purpose would be served. His Honour noted the Court of Criminal Appeal had itself contemplated that a retrial conviction would likely result in some additional custodial time. The court also declined to make a finding of good prospects of rehabilitation in the prisoner's favour.
Orders Made
- Insider trading offence (s 1002G Corporations Act): imprisonment for 2 years and 2 months, commencing 22 August 2001 and expiring 21 October 2003, plus a fine of $100,000.
- Each reporting offence (s 31(1) Financial Transaction Reports Act): imprisonment for 4 months, commencing 22 October 2003 and expiring 21 February 2004, the two terms to run concurrently with each other but cumulatively upon the insider trading sentence.
- No fines imposed for the reporting offences.
- Recognisance release order to take effect on 21 April 2003 (after one year and eight months from 22 August 2001).
Key Takeaways
- A judge re-sentencing after a successful appeal and retrial must conduct a full, independent sentencing exercise for each offence, credit the time already served under the earlier sentence, and still apply the totality principle.
- Under s 1002G of the Corporations Act (as it then stood), insider trading carried a maximum penalty of five years' imprisonment and a $200,000 fine; the court imposed just over two years' imprisonment and a $100,000 fine in this case.
- Structuring cash transactions to avoid the $10,000 reporting threshold (sometimes called "smurfing") constituted a separate category of serious federal offending under s 31(1) of the Financial Transaction Reports Act, attracting its own custodial term.
- The fact that a prisoner had already served a substantial period of imprisonment under a set-aside sentence did not, of itself, preclude a court from imposing a short further period of custody on re-sentencing, particularly where an appellate court had anticipated that outcome.
- In fixing the commencement date of the new sentences, the Supreme Court back-dated them to the date custody originally began, thereby giving full credit for time already served.
Legislation and Cases Referenced
Legislation
- s 1002G, Corporations Act (insider trading prohibition and penalties)
- s 31(1), Financial Transaction Reports Act (structured cash transaction offences)
- Part 1B (ss 16A, 16C, 16G, 17A, 19AB, 19AC), Crimes Act (Cth) (federal sentencing principles)
Cases
- Pearce v The Queen (1998) 194 CLR 610
- R v Gilmore (1979) 1 A Crim R 416
- R v Bedford (1986) 5 NSWLR 711
- R v Merritt (No. 1) [1999] NSWCCA 29
- R v Merritt (No. 2) [2000] NSWCCA 365
- McL v The Queen (2000) 203 CLR 452
- R v Petersen (1999) 2 Qd R 85
- R v MM [2000] NSWCCA 431
- R v Pantano (1990) 49 A Crim R 328