Published on 10 Mar 2010 under category: cubism
By Dan Hyde, Consultant at Cubism Law
As pulished in Times Online 10 March 2010
Malcolm Calvert, a former partner at Cazenove, the Queen’s stockbroker, has been convicted of insider dealing and faces up to seven years in prison.
A jury at Southwark Crown Court today returned a guilty verdict for Calvert, 65, on five counts of insider dealing after 18 hours of deliberation. He was acquitted of a further seven counts.
Calvert sat motionless in the dock the jury its verdict. He was released on conditional bail yesterday and faces up to seven years imprisonment when he is sentenced tomorrow. A confiscation of assets hearing will be scheduled for a later date.
The former market-maker obtained confidential information about upcoming takeovers and instructed a friend, Bertie Hatcher, to buy shares. Once the deals were announced the shares soared in value and Mr Hatcher sold, netting a £104,000 profit.
Mr Hatcher spent £502,143 on shares in Vernalis, Johnston Group and South Staffordshire, selling them for £606,026.
Calvert was cleared of insider dealing relating to Mr Hatcher’s share purchases in HP Bulmer, Macdonald Hotels and RAC.
Calvert, who retired from Cazenove ten years ago, used an unknown insider to get confidential information on a series of proposed takeovers and mergers. Then he directed his friend Bertie Hatcher to buy more than 150,000 shares in three businesses.
Mr Hatcher, who gave evidence for the prosecution in return for immunity from an FSA prosecution, left Calvert’s share of the profits in cash envelopes with a bookmaker at a racetrack.
It can now be revealed that Mr Hatcher agreed to pay a £56,000 fine and accept a ruling of market abuse as part of his immunity deal. It can also be reported that Mr Hatcher´s ability to give evidence was the subject of two and half days of pre-trial hearings. After hearing expert medical evidence, Judge Peter Testar ruled Mr Hatcher was not fit to testify but that his statement could be read aloud.
Four people have been convicted of insider dealing in the past 12 months, three of whom received immediate custodial sentences and the other a suspended sentence.
Calvert’s conviction is a significant victory for the Financial Services Authority, which is bringing a series of insider-dealing prosecutions as part of a wider campaign to clamp down on financial crime.
Rob Moulton, a partner at law firm Nabarro, said: "This is a big victory for the FSA, as it is their first criminal success against a "city" name. At a time when FSA is fighting for its survival, this conviction is a real boost to FSA´s credible deterrence strategy.
"Prosecuting financial crimes has often proved problematic, but the FSA is on something of a roll. It has said it wants to be seen as a ´scary regulator´ and this case is going to help to get that message across."
Sara George, associate at Allen & Overy, said: "The FSA has definitely started playing hardball with its strategy of increasing criminal investigations. There is no doubt that they view criminal penalties as providing a far more effective deterrent than civil proceedings ever gave."
Dan Hyde, a corporate fraud consultant at Cubism Law, said: "This case signals the onward march of the FSA in its criminal prosecution of insider dealing.
"Calvert was convicted of five counts involving three separate companies and the jury were evidently satisfied in relation to those that he was in possession of specific price sensitive information he knew to be from an inside source, as oppose to merely a hot tip."
Margaret Cole, director of enforcement and financial crime at the FSA, said: "The guilty verdict is a shot across the bow for any City workers who may be tempted to trade using insider knowledge.
"Our message is simple: if you take part in such activity, you run a very real risk of the FSA taking criminal action against you."
Calvert’s lawyers argued from the outset that the FSA’s case was based on a “gigantic assumption” because they could not identify who the inside source at Cazenove was or how and when they had passed information to Calvert.
They said that Calvert was a skilled stock-picker with 40 years´ stock market experience who did not need inside information “to pick a winner”.
Cazenove said: "This case was against an individual who left Cazenove in 2000 and was in connection with matters between 2003 and 2005. There were never any charges brought against Cazenove and no breach of systems and controls was identified.
"We co-operated fully with the FSA throughout their investigation and will continue to support them in their efforts to ensure that the UK’s financial markets are free from abuse."
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