Former Genetic Technologies Ltd director and chief executive Dr Mervyn Jacobson was yesterday convicted of 33 charges of market manipulation of GTG shares and two charges of conspiring to manipulate GTG shares over a six month period in 2006.

Dr Jacobson, of Brighton in Victoria, has been bailed to appear for a sentencing hearing in the Supreme Court of Victoria on 19 November 2014. He faces a maximum of five years jail and/or a fine of $22,000 on each of the charges.

The conviction follows an eight week trial in the Supreme Court of Victoria before Justice Kaye.

On 5 November 2014, a jury of 12 convicted Dr Jacobson of the 35 charges under section 1041A of the Corporations Act 2001 (Corporations Act): Of these:

• Two of the charges related to Jacobson’s participation in conspiracies to trade in GTG shares that were likely to have the effect of creating or maintaining an artificial price for GTG shares between 16 May 2006 and 31 October 2006, and 27 September 2006 and 2 November 2006.
• The other 33 charges related to Jacobson’s participation in transactions in GTG shares between 14 September and 29 September 2006, which were likely to have the effect of creating or maintaining an artificial price for GTG shares.

ASIC argued Dr Jacobson and his co-conspirators engaged in the manipulation of the GTG share price on ASX to help minimise and manage margin calls on large margin loans held by Dr Jacobson.

In the first conspiracy charge, Dr Jacobson was found guilty of conspiring with his daughter Tamara Newing [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities], who were buying GTG shares through share trading accounts with ABN Amro, to manipulate the GTG share price.

In the second conspiracy charge he was also found guilty of conspiring with [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities] and Tamara Newing, who were buying GTG shares through a share trading account with Bell Potter Securities, to manipulate the GTG share price.

In the remaining 33 charges Dr Jacobson was found guilty of directly giving instructions to Bell Potter Securities’ trainee client adviser [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities] to buy GTG shares to manipulate the GTG share price on the ASX.

During the trial the jury heard evidence that:

• In March 2005 and May 2006, Dr Jacobson took out margin loans through Opes Prime Securities Ltd and Chimaera Capital, totalling approximately $12 million, to fund the exercise of 49 million options for GTG shares.
• Dr Jacobson’s margin loans were secured by over 150 million of his GTG shares, almost his entire holdings of GTG shares.
• Every decline of 0.5 cents in the GTG share price during this period would result in a margin call of approximately $370,000.
• To manage and reduce his margin calls, Dr Jacobson and his co-conspirators placed orders to buy GTG shares on ASX using a number of strategies to manipulate the GTG share price.
• Dr Jacobson provided $1.6 million to Ms Newing for her to use to buy GTG shares on ASX to manipulate its share price.
• Dr Jacobson engaged [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities] to buy GTG shares on ASX to manipulate its share price.
• Dr Jacobson also used approximately $1.1 million from an overseas entity, namely XY Inc, a US-based company in which he was a director and major shareholder at the time to buy GTG shares on ASX to manipulate the GTG share price.

Background

ASIC’s investigation into this matter followed a referral from ASX. The Commonwealth Director of Public Prosecutions prosecuted this matter.

Dr Jacobson resigned as a director of Genetic Technologies in December 2008.

All of Dr Jacobson’s co-conspirators have previously been convicted and received sentences of imprisonment for their role in the conduct, following ASIC’s investigations.

In 2009, [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities] was sentenced to a term of imprisonment of seven months, which was fully suspended, following pleas of guilty to three counts of market manipulation of GTG shares (refer: AD09-19).

In 2009, former ABN Amro client advisor [This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities] was sentenced to a term of imprisonment of 15 months, which was fully suspended, following pleas of guilty to six counts of market manipulation of GTG shares (refer: AD09-19).

[This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

In February 2011, Ms Newing was sentenced to a term of 21 months imprisonment, and released on a recognizance order, following pleas of guilty to 10 counts of market manipulation of GTG shares (refer: 11-30AD).

ASIC has also taken administrative action against individuals, including[This media release was amended on 6 March 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

Editor's note 1:

On 19 November 2014 the sentencing hearing was part-heard and adjourned to 24 November 2014.

Editor's note 2:

On 24 November 2014 Dr Jacobson's plea hearing was finalised. The Judge reserved his sentence for a date to be fixed. Dr Jacobson was remanded in custody pending his sentencing.