A top city financier broke insider trading laws wh

A top city financier broke insider trading laws when he tipped off a friend to buy a large stake in a company plotting a pnds stlg 50 million takeover, a
court heard.

John Townsend, 57, a deputy chairman of City securities firm Hoare Govett told a property magnate to invest in WT Foods plc in a ‘flagrant’ example of insider dealing, alleged prosecutor Alan Suckling, QC.

Townsend had attended a secret meeting at a country hotel where WT Foods spelt out its plan to buy Noon Group, another ethnic food manufacturer.

The broker was confident the company’s shares would rise when news of the deal broke, so he advised Salah Shohet, the former head of the Dukeminster property company, to buy one million shares worth pnd stlg 500,000.

Townsend had been warned by colleagues that to trade in WT Foods shares would break insider dealing laws – and the deal was intercepted before it could be completed.

But confronted by senior members of his company, Townsend wrote an angry note calling the accusations against him ‘a disgrace.

‘

And he said that the ‘integrity’ of both himself and Mr Shohet had been impugned.

Alan Suckling QC, prosecuting, explained that insider dealing is where financiers with access to privileged information ‘make use of information that isn’t available to the rest of us.

‘Townsend encouraged a long-standing friend and client to buy a company’s shares intending that his contact should profit from doing so.

‘

On 28 May 1998, WT Foods held a secret meeting at the Downs Hall Country house in Hatfield, Herts attended by Townsend and other senior members of Hoare Govett, including Ranald MacGregor-Smith, and Mark Ashurst.

There, WT’s directors, codenaming themselves ‘Wolf’ intended to buy Noon – called ‘Panther’ – for pnds stlg 50 million, of which the bulk would be
comprised of WT’s shares.

The Hoare Govett team were also told that WT Foods’ results were likely to be good although this was also inside information that was not to be released to the public until June 18, 1998.

On the train back to the City, the Hoare Govett team said they thought WT had come up with a ‘cracking deal’, Mr Suckling explained.

In response to a concern that the current WT share price might be falling, Townsend ‘said he would call a friend of his, Salah Shohet, a successful property dealer, to buy a number of shares to support the WT
Foods share price.

‘Now of course this was in the ‘closed period’ and the group had been given confidential information,’ Mr Suckling continued.

The court was told that the closed period is before a company publishes its accounts.

‘The others present were astonished but Mr Townsend appeared to react as if he had been joking,’ the QC went on.

On 29 May, 1998, after missing a plane to his home at the Palazzo Terranova hotel, in Umbria, Italy, he rang Mr Shohet to encourage him to buy one million WT Foods shares which was one per cent of the company.

But Townsend maintains he did not tell Shohet WT Foods’ results and ‘insisted the shares were a good investment.

In an an angry retort to the Crown’s allegations, Townsend said: ‘I’ve been in the city for 30 years and been an insider on a number of large decisions.

‘I’ve never disclosed information and don’t intend to start doing so now.

‘

He added that the ‘attitudes displayed’ by his Hoare Govett colleagues impugned his integrity and that of Mr Shohet.

But Mr Suckling said that although Townsend had not disclosed the details of the deal, or the company’s results, he was still guilty of insider dealing.

‘It would be quite wrong to allow someone with inside information to get round insider dealing legislation by persuading to buy shares without telling him inside information,’ Mr Suckling said.

Townsend, who runs the Palazzo Terranova, denies one count of insider dealing on 29 May 1998.

ends