Public Prosecutor v Franco Giuseppe

• Jurisdiction: Singapore
• Judge: Kessler Soh
• Judgment Date: 07 June 2011
• Neutral Citation: [2011] SGDC 184
• Court: District Court (Singapore)
• Docket Number: DAC 38671-90/2009
• Year: 2011
• Published date: 15 June 2011
• Hearing Date: 28 February 2011,05 April 2011,06 April 2011
• Plaintiff Counsel: Mr Hon Yi (Deputy Public Prosecutor)
• Defendant Counsel: Mr Shashi Nathan, with Ms Tania Chin (M/s Inca Law LLC)
• Citation: [2011] SGDC 184

District Judge Kessler Soh:

The defendant was Mr Franco Giuseppe, a 45-year-old Italian national. He faced 20 charges under the Securities and Futures Act (Cap 289) (“SFA”). The offences were committed in 2004. 18 charges were for insider trading (s 218(2)(b), punishable under s 221(1) of the SFA) and two charges were for market rigging (s 197(1)(b), punishable under s 204(1) of the SFA). He pleaded guilty to three insider trading charges and the two market rigging charges. The remaining 15 insider trading charges were taken into consideration for the purpose of sentencing. The defendant was sentenced to a total fine of $280,000 (in default 14 months’ imprisonment). He paid the fine. The prosecution has filed an appeal against the sentence.

Charges Market rigging charges (s 197, SFA)

Section 197(1) of the SFA states:

False trading and market rigging transactions

197.—(1) No person shall create, or do anything that is intended or likely to create a false or misleading appearance — (a) of active trading in any securities on a securities market; or (b) with respect to the market for, or the price of, such securities.

The punishment for the offence is prescribed in s 204(1) of the SFA: an offender is liable on conviction to a fine not exceeding $250,000 or to imprisonment for a term not exceeding 7 years or to both.

The defendant pleaded guilty to two charges under s 197(1). One charge (DAC 38689/2009, marked C19A) was worded as follows:

You [...] are charged that between 13 April 2004 and 14 June 2004, in Singapore and elsewhere, you committed acts likely to create a false appearance with respect to the price of securities, namely shares in Permasteelisa Pacific Holdings Ltd (“the Company”), a body corporate whose shares are traded on the Mainboard of the Singapore Exchange Securities Trading Limited (and which is now delisted) as follows: - You procured as an agent of Permasteelisa International B.V. (“PBV”), trades of the Company’s shares in PBV’s share trading account no. 05-1071882, a sub-account opened with San Paolo ImI Bank Singapore, the trades of which are as set out in Annex A [attached to the charge]. - These trades were intended to raise and maintain the price of the Company’s shares, which shares would be used to pay for the Company’s acquisition of the Asian division of Josef Gartner GmbH.

You have thereby committed an offence under Section 197(1)(b), and punishable under Section 204(1) of the Securities and Futures Act (Chapter 289, 2002 Revised Edition).

The other charge (DAC 38690/2009, marked C20A) was similarly worded and pertained to the procurement of trades of the Company’s shares in another trading account, that of Aurich Developments Ltd’s share trading account no. 05-0274957, during the period between 2 March 2004 and 15 September 2004.

Insider trading charges (s 218, SFA)

The relevant provisions of s 218 of the SFA state:

Prohibited conduct by connected person in possession of inside information

218.—(1) [W]here — (a) a person who is connected to a corporation possesses information concerning that corporation that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of that corporation; and (b) the connected person knows or ought reasonably to know that — (i) the information is not generally available; and (ii) if it were generally available, it might have a material effect on the price or value of those securities of that corporation,

[...]

(2) The connected person must not (whether as principal or agent) — (a) subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities referred to in subsection (1) or (1A), as the case may be; or (b) procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities referred to in subsection (1) or (1A), as the case may be.

[Under s 218(5), a “connected person” is defined to include an officer of the corporation, which includes a director, secretary or employee of the corporation.]

The punishment for the offence is prescribed in s 221(1) of the SFA: an offender is liable on conviction to a fine not exceeding $250,000 or to imprisonment for a term not exceeding 7 years or to both.

The defendant pleaded guilty to three charges under s 218(1). One charge (DAC 38682/2009, marked C12A) was worded as follows:

You [...] are charged that on 28 July 2004, being the Chief Financial Officer of Permasteelisa Pacific Holdings Ltd (“the Company”), a body corporate whose shares are traded on the Mainboard of the Singapore Exchange Securities Trading Limited (and which is now delisted), you committed an offence as a person connected to the Company as follows: - You were in possession of information that was not generally available but, if it were generally available, a reasonable person would expect it to have a material effect on the price of the Company’s shares. - You knew that the information was not generally available and if it were generally available, it might have a material effect on the price of the Company’s shares. - This information was that the Company was acquiring the Asian division of Josef Gartner GmbH (the “Gartner Acquisition”) with no doubt that the sale and purchase agreement for the Gartner Acquisition would be signed as the Gartner Acquisition was initiated by Permasteelisa S.p.A., the parent of both the Company and Josef Gartner GmbH, to ensure that the Company would be able to continue its business activities in China after existing regulations in China that allowed foreign contractors to undertake construction projects in China on a project by project basis were repealed, and with the purchase consideration for the Gartner Acquisition was [sic] to be satisfied by the issuance of 110,000,000 new shares of the Company at an issue price of S$0.40 each. - You, as an agent of Aurich Developments Ltd (“ADL”), procured ADL to purchase 82,000 of the Company’s shares in ADL’s share trading account no. 05-0274957, a sub-account opened with San Paolo ImI Bank Singapore.

You have thereby committed an offence under Section 218(2)(b), and punishable under Section 221(1) of the Securities and Futures Act (Chapter 289, 2002 Revised Edition).

The other two charges were similarly worded. DAC 38685/2009 (marked C15A) pertained to the purchase of 26,000 of the Company’s shares on 2 August 2004. DAC 38688/2009 (marked C18A) pertained to the purchase of 45,000 of the Company’s shares on 5 August 2004.

On the application of the prosecution and with the consent of the defendant, 15 other similarly charges under s 218 were taken into consideration for the purpose of sentencing. These charges pertained to the purchase of the Company’s shares on other days during the period between 4 June 2004 and 5 August 2004.

Brief Facts

The defendant admitted without qualification to the Statement of Facts tendered by the prosecution (the “Statement of Facts”, marked PS1). Some aspects of the facts were clarified in the course of the mitigation plea. The brief facts are stated below.

Parties involved

The company in question, in respect of which the shares were being traded, was Permasteelisa Pacific Holdings Ltd (“PPH” or the “Company”). PPH was mainly involved in the design, fabrication and installation of architectural curtain wall cladding and internal partitions for commercial buildings. It was listed on the Mainboard of the Singapore Exchange Securities Trading Limited on 23 October 1997 (and delisted on 6 June 2008).

PPH was part of the Permasteelisa Group. According to the defence, the Permasteelisa Group was an internationally known company specialising in curtain wall and cladding for buildings, and PPH was its vehicle for its construction activities in the Asia-Pacific region. The Permasteelisa Group had contributed to the construction development and landscape in Singapore, including buildings like the UOB Plaza, Police Cantonment Complex, and Suntec City.

Within the Permasteelisa Group, PPH was a subsidiary of Permasteelisa International B.V. (“PBV”), which in turn was a subsidiary of Permasteelisa S.p.A. (“PSPA”). PSPA was thus the ultimate holding company of PPH. Another company, Josef Gartner GmbH (“Gartner”), was also a wholly-owned subsidiary of PSPA. (The charges relate to the events surrounding the acquisition of the Asian Division of Gartner by PPH in 2004.) Another company mentioned in the charges was Aurich Developments Ltd (“ADL”). ADL was a company incorporated in the British Virgin Islands; it had no direct equity links to PPH, PBV or PSPA, but was used as a vehicle to purchase shares in PPH in order to prop up PPH’s share price.

The defendant was the group treasurer of PSPA from December 2001, during which he was based in Italy. On 29 June 2004 he was appointed the Chief Financial Officer (CFO) of PPH and became based in Singapore. He was also appointed a director of PPH on 13 August 2004.

At the material times in 2004, the defendant received instructions from the following two persons who were senior to him. One was Mr Enzo Pavan (“Mr Pavan”) who was the Chief Executive Officer (CEO) and Chairman of PSPA and also the CEO and a director of PPH. The other person was Mr Giampiero Alessandrini (“Mr Alessandrini”) who was a director and General Manager of Gartner and (as explained by the defence) was the “number two” in PSPA.

Announcement of Gartner Acquisition

On 7 August 2004, PPH announced (the “Announcement”) that it had entered into a conditional agreement to acquire the Asian Division of Josef Gartner for S$44 million (the “Gartner Acquisition”). The purchase was to be funded via the issuance of 110 million new PPH shares at the issue price of S$0.40 per share. The issue...