ASIC: Corp, Smith guilty over Hallmark, Welcome Stranger

Former Hallmark Gold NL and Welcome Stranger Mining Company NL directors Stuart Adrian Corp and Brian Millwood Smith, have been found guilty of 29 charges brought after an investigation by the Australian Securities and Investments Commission.

The full text of an ASIC announcement is pasted below

Mr Stuart Adrian Corp, of Subiaco in Perth, and Mr Brian Millwood Smith, of East Perth, have been found guilty in the District Court of Western Australia on a total of 29 charges that were laid following an investigation by the Australian Securities and Investments Commission (ASIC). Sentencing is scheduled to take place on Thursday 11 October 2007.

The guilty finding, which arises from Messrs Corp and Smith's conduct as directors of two Australian publicly-listed companies, formerly known as Hallmark Gold NL (Hallmark Gold) and Welcome Stranger Mining Company NL (Welcome Stranger), represents the first successful prosecution of share warehousing in Australia.

The charges, brought under the Corporations Act, follow a complex investigation by ASIC in Australia and overseas into relevant interests in significant parcels of shares in Hallmark Gold and Welcome Stranger.

The jury found that Messrs Corp and Smith:

• engaged in conduct concerning the undisclosed relevant interest in shares in Hallmark Gold and Welcome Stranger while they were directors of those companies;
• controlled shares through the use of offshore entities, and used those shares to vote on related party resolutions at general meetings of Hallmark Gold and/or Welcome Stranger which delivered them financial benefits; and
• provided false and misleading information to ASIC and the Australian Securities Exchange (ASX) in documents required to be lodged under the Corporations Law which should have showed that they had an interest in those shares.

The jury found Mr Smith guilty of:

• six charges of knowingly providing misleading information as to his relevant interest in shares to ASIC and the ASX;
• six charges of failing to act honestly and hereby breaching his duty as a director; and
• two charges of unlawfully permitting voting on related party resolutions at general meetings of the shareholders.

Mr Smith was found not guilty in relation to six further charges.

The jury found Mr Corp guilty of:

• seven charges of knowingly providing misleading information as to his relevant interest in shares to ASIC and the ASX;
• six charges of failing to act honestly and thereby breaching his duty as a director; and
• two charges of unlawfully permitting voting on related party resolutions at general meetings of the shareholders.

Mr Corp was also found not guilty in relation to six further charges.

The offences carry the following maximum penalties:

• knowingly providing misleading information: $10,000 or imprisonment for two years or both; and
• failing to act honestly and thereby breaching a duty as a director: $20,000 or imprisonment for five years or both; and
• unlawfully permitting voting on related party resolutions: $20,000 or imprisonment for three years or both.

Messrs Corp and Smith were both granted conditional bail. His Honour Judge Fenburys made an order for the surrender of Mr Smith's passport. Mr Corp's passport has been surrendered since his first appearance in 2004. Both are required to report to a police station daily pending sentencing.

The Commonwealth Director of Public Prosecutions prosecuted the matter.

Further charges against Mr Corp and Mr Smith arising from a joint ex officio indictment remain on foot.