It's not the first time the Queensland Gas directors have be...

It's not the first time the Queensland Gas directors have be caught with their hand in the cookie jar.

Energy boss in trading probe

Michael McKenna |

April 14, 2008

Article from: The Australian

RISING energy giant Queensland Gas has been rocked by an investigation into alleged insider trading involving a member of its senior management ahead of this year's announcement of a $8 billion joint venture with the British-based BG group.

Chief financial officer and company secretary Mukesh Panchal is under investigation over his buy-up of more than $1.3million in shares on top of an existing portfolio given tohim as an incentive to join the company.

It is alleged he bought 418,000 shares and withheld information from the Australian Stock Exchange to capitalise on his inside knowledge of the looming deal that sent the share price soaring when it was announced on February 4, following a temporary halt on trade in the company.

A veteran high-flyer in the resources sector, Mr Panchal could face up to five years' imprisonment, with the Commonwealth Director of Public Prosecutions considering whether to lay charges under the Corporations Act.

Mr Panchal was sacked from Queensland Gas - now one of Queensland's five largest publicly listed companies - after investigators revealed his alleged trading to managing director Richard Cottee in late February.

He joined Queensland Gas in July 2006 - from New Zealand energy company NGC Holdings - and as company secretary was responsible for regulatory and corporate governance.

Mr Cottee yesterday told The Australian he was unaware ofany other executive being investigated.

"I would be highly surprised, I would be aware ... ASIC would have let us know," he told The Australian.

"I don't think there is an allegation of a failure of corporate procedures or policies here."

An ASIC spokeswoman yesterday declined to comment.

Mr Cottee said he was "devastated" by the alleged actions of Mr Panchal, whose QGC shares have been frozen by the District Court of Queensland at the request of ASIC under the Commonwealth's Proceeds of Crime Act.

"The first I knew of it was when they (ASIC) wanted to interview me," he said. "I was devastated. I am still devastated. I can't believe it.

"We have a policy that you (employees) are only allowed to trade (in QGC shares) during certain windows, which are offered from time to time, and he traded outside of those windows.

"It was a fairly cut and dry case for us, and he was summarily dismissed."

Mr Cottee said he had fully co-operated with the investigation.

Mr Panchal did not respond to approaches for comment at his home in Brisbane's eastern suburbs.

According to documents obtained by The Australian, ASIC alleged Mr Panchal bought 13 parcels of QGC shares "at a time when he possessed inside information" that he knew would have a "material effect on the price or value" of the shares.

He purchased the shares through an online trading account with the National Bank of New Zealand between January 15 and February 1.

The buy-up began on the same day that Mr Cottee phoned Mr Panchal informing him that QGC and BG negotiators had "reached agreement about the BG alliance and that it would be put to the board".

Mr Panchal bought several parcels, totalling more than 110,000 shares, in the hour leading up to his own request to the ASX to halt QGC trading on February 1.

The QGC-BG $8 billion deal - to develop liquefied gas exports to Asia - was announced two days later.

QGC shares jumped from $3.42, when trading was halted, to $4.14 on February 4 when trading resumed.

Over two weeks, Mr Panchel had bought QGC shares for as low as $2.54.

According to ASIC investigators, Mr Panchal had been constantly updated as to the progress of the negotiations and was involved in discussions about the deal - codenamed "Project Honey" - throughout January. At one stage, ASIC said he was given a draft memorandum relating to the BG deal ahead of the February 1 extraordinary board meeting. ASIC investigators said Mr Cottee told them that Mr Panchal made comments on the draft on January 11.

The draft memorandum detailed the significance of the deal.

"The economic attraction of Project Honey from a QGC perspective is quite stunning, on the basis of a risk-reward profile that would be regarded as appropriate for the resource sector; and goes on to say that this would translate into a notional increase on the share price," ASIC investigators told Queensland's District Court. It is alleged that Mr Panchal did not send information about the deal to the ASX until after the board meeting.

"Information about the alliance between QGC and BG was not sent to the Australian Securities Exchange until after the meeting on February 1, 2008," ASIC said in court documents.

In an interview with ASIC investigators, Mr Cottee said that last November he had stressed to Mr Panchal and the board for the "need for secrecy" and that the negotiations were commercially sensitive.

Mr Cottee said yesterday QGC had a zero tolerance policy to rogue trading within the company.

"We moved as rapidly as we could to acknowledge and lance the boil," he said.