The Tribune

By LAMECH JOHNSON

Tribune Staff Reporter

ljohnson@tribunemedia.net

A FORMER bank manager was told to “try your luck” with the London-based Privy Council in appealing a conviction that saw him punished with a $50,000 fine or one year imprisonment for dealing securities.

Wayne Bethel and his lawyer, Craig Butler, appeared before Court of Appeal judges yesterday seeking leave to contest the appellate court’s judgment on February 26 which saw Bethel acquitted of all but one offence concerning a 2005 scheme involving Commonwealth Bank’s employee stock option (ESOP) plan.

“Don’t you have Mount Everest to climb,” appellate president Justice Allen suggested to Mr Butler.

“And then some,” the lawyer replied.

“Articles 104 and 105 of the Constitution gives Parliament the right to prescribe when there’s going to be a right to appeal to the Privy Council,” Justice Allen said, further pointing to section 14 (3) Court of Appeal Act that referred to the issue in accordance with the Constitution.

Mr Butler suggested that the latter law was discriminatory in its current state and insisted that the court had the power to revisit issues related to the Constitution.

“‘I’m fascinated by the proposed grounds of appeal,” said Justice Conteh, “but section 14 (3) is very clear.”

The court ultimately dismissed the application and Justice Allen suggested to the lawyer to “go to the Privy Council and see if they can grant you special leave. Failing that, go to the Supreme Court on the constitutional point.”

Bethel, a former Commonwealth Bank branch manager, had devised a scheme that would allow his fellow managers to exercise their stock options and generate profits for himself and trader, Hiram Cox.

The scheme, as disclosed by the Court of Appeal judgment, relied on the discrepancy between the $6 price at which the bank’s managers could exercise their ESOP options, and the BISX market price for Commonwealth Bank’s shares. The stock was then trading between $8.80 and $10.50 per share, meaning the ESOPs option price was a substantial discount.

Cox, then a trader with Colina Financial Advisors (CFAL) and its First Bahamas Capital subsidiary, helped Bethel and the other managers find third-party buyers for the ESOP shares at $8.

Bethel “guaranteed” the $8 per share price to all participating Commonwealth Bank managers, who then used the proceeds from the third-party buyers of their shares to exercise their ESOP options, plus pocket the $2 profit differential.

Bethel, according to the judgment, kept the difference between the actual selling price and $8 “guarantee” as his profit/fees for facilitating the scheme.

Garvin Gaskin, prosecuting the case for the Attorney General’s Office, had argued that Bethel and Cox made “false representations” to the third party purchasers of the shares that the Commonwealth Bank managers were legally entitled to sell them.

Instead, he alleged that the shares were instead owned by Commonwealth Bank and this gave rise to the fraudulent and deceitful nature of the scheme.

However, Appeal Justice Neville Adderley, giving the court’s written reasons for overturning most of the earlier ruling, said there was “an honest explanation” for the discrepancies that emerged in share trading logs as a result of the scheme.

These saw Commonwealth Bank managers purportedly selling their shares to third-party buyers prior to exercising their ESOP options.

However, Justice Adderley found that because the buyers received the correct quantity of Commonwealth Bank shares purchased on the trade’s “settlement date”, and no party suffered a financial loss, the scheme could not have been fraudulent.

The appellate court had ultimately cleared Bethel and Cox of securities fraud, deceit and misleading stock purchasers and the wider Bahamian capital markets. The only conviction upheld by the Court of Appeal was Bethel’s for acting as an unlicensed broker in facilitating the sale of shares held in the ESOP for the BISX-listed institution’s managers.

The Court of Appeal found that Bethel “wittingly or unwittingly” had acted as a broker or securities trader without possessing a valid licence. His sentence of a $50,000 fine or one year in prison for this offence was confirmed.