Former Gunns chairman John Gay has been fined $50,000 over insider trading charges. Source: AAP
SHAREHOLDERS have slammed as too lenient the $50,000 fine handed to former Gunns chairman John Gay for insider trading.
Gay, 70, has avoided jail after admitting to the crime, with Justice David Porter telling the Tasmanian Supreme Court it fell into the "less serious category".
He had faced a maximum penalty of five years jail or a fine of $220,000 after disposing of 3.4 million Gunns shares in December 2009 with "high grade" inside information.
The Australian Securities and Investments Commission (ASIC) hailed the outcome as sending a message to company directors.
But Australian Shareholders' Association chairman Ian Curry said shareholders were entitled to be disappointed.
"We're surprised at the leniency of the judge's decisions," Mr Curry told AAP.
"Where a director has pleaded guilty to a charge of insider trading we would have thought that there would have been the potential for a jail term or a suspended jail term."
Mr Curry said the fine did not reflect the benefit Gay had received by selling the shares two months before the company's half-yearly report was released in February 2010.
Gay had in his possession the company's October 2009 management report, which was not released to the market and which showed the company's profit had fallen 139.5 per cent on the previous year.
He sold shares at around 90 cents, netting close to $3.2 million.
The price plummeted to 68.5 cents when the February report was released.
Justice Porter said Gay had made up his mind to sell the shares before he had received the information, making the crime less serious.
He said the decision had been made because Gay had been diagnosed with prostate cancer and had a desire to pay off debts in the event of his death.
The anxiety caused by the disease affected Gay's decision making, Justice Porter said.
"The sales were not triggered by the information," Justice Porter said.
Mr Curry said that did not explain the leniency of the sentence.
"Whilst one doesn't deny that he did have health problems, we don't believe that excuses him," he said.
"It's three-and-a-half years now since that decision and Mr Gay's health still seems to be under control.
"We think the judge accepted that claim lightly."
ASIC commissioner Cathie Armour said Gay was the most senior Australian executive to have been convicted of insider trading.
"The conviction of Mr Gay sends a message to directors to carefully consider the information they possess when making a trading decision," Ms Armour said in a statement.
But Mr Curry rejected that.
"I think there was a clear opportunity for the judge to send a message to the business community in a position where a chairman ... took this action and clearly profited at the expense of shareholders generally," he said.
" ... This case certainly doesn't send a strong message.
Justice Porter said Gay had been advised by company secretary Wayne Chapman that he was in a permitted trading window and the chairman had been reassured by this.
But the judge told Gay, who changed his plead to guilty earlier this month: "You ought to have exercised far greater care."
He described Gay as a person of "exemplary character ... with a reputation of honesty and integrity."
The former sawmiller who joined Gunns in 1973 built the company into a top 100 Australian company by 2005, employing 2000 people.
When Gunns collapsed last year, Gay still held 12 million shares which were "effectively valueless", the judge said.
Gay did not comment outside the court but released a statement asking for privacy as he continues his treatment for cancer, the ABC reported.
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