Misleading statements end with jail sentence
In the harshest sentence ever meted out to an independent director for making a false and misleading statement in Singapore, Airocean’s former independent director Peter Madhavan was yesterday sentenced to four months’ jail.
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By MICHELLE QUAH
03 March 2011
In the harshest sentence ever meted out to an independent director for making a false and misleading statement in Singapore, Airocean’s former independent director Peter Madhavan was yesterday sentenced to four months’ jail.
He was the only man out of the five former Airocean officers - who had all been charged in connection with a misleading statement made by the company in November 2005 - to be handed a jail term.
Two others - former chief operating officer Johnson Chong and independent director Ong Seow Yong - were yesterday fined for the same offence, although Chong has also been given a jail sentence for insider trading.
Madhavan’s case marks the first ever custodial sentence handed out to any non-executive or independent director found guilty of making a false and misleading statement under the Securities and Futures Act - an offence which carries a maximum penalty of a $250,000 fine and a seven- year jail term - since the Act came into effect in October 2001.
Madhavan, through his lawyer Wendell Wong of Drew & Napier, is appealing his conviction and sentence.
He had been convicted in January, along with Chong and Ong, over the company’s announcement on Nov 25, 2005 - which was seen as an effort to allay investors’ fears and shore up Airocean’s stock price.
Airocean’s board told the Singapore Exchange (SGX) that the probe was related to practices ‘in some other companies in the air cargo industry’, after The Straits Times (ST) reported that then-chief executive Thomas Tay was being investigated by the Corrupt Practices Investigation Bureau (CPIB).
The board omitted to mention Tay’s arrest and the fact that the investigation extended to other Airocean units.
A year later, Tay was convicted on a charge of corruption - for having asked an employee of Airocean unit Airline GSA to bribe a Jetstar employee. Some months later, Tay was also found guilty of flouting securities laws; he was fined $80,000 for failing to notify SGX that he was being probed for corruption, and $160,000 for giving false information to ST on the investigation.
In their defence, the three men told the courts they did not know Airocean and Tay were the subjects of the CPIB investigation. They claimed Tay told them that he was merely assisting in investigations regarding other air cargo firms.
Madhavan and Chong also said the board had chosen not to rely on Tay’s statements and had asked Airocean’s lawyers Tan Rajah & Cheah to probe further, and then relied on their legal advice as to whether this was a matter that needed to be disclosed to shareholders.
District Judge Liew Thiam Leng dismissed their claims in a 178-page written statement in January detailing the grounds for his decision for their conviction. He has not issued his grounds of decision for the sentencing.
‘The evidence before the court confirmed that the three accused . . . were well aware of the fact that Thomas (Tay) was under CPIB investigations and that the CPIB was looking into the two transactions involving Airocean’s subsidiaries,’ he noted.
‘(They) could not be said ‘to have honestly believed’ in the truth of (their) announcement,’ Judge Liew said.
As for seeking Tan Rajah & Cheah’s legal advice, Judge Liew said that there was hardly any discussion by Airocean of any legal advice before the Nov 25 announcement and that the eventual announcement was different from what Tan Rajah & Cheah had drafted.
‘It cannot be the case that Airocean and its directors, while breaching the law, can claim reliance on legal advice to provide legitimacy for their action or inaction,’ he said.
Sovann Giang, executive director of the Singapore Institute of Directors, had this to say about the sterner sentence recently meted out: ‘The jail sentence sends a strong and unequivocal signal to the corporate community that the duties assumed by directors should not be taken lightly. It is a stark and sobering reminder that directors need to be fully aware of their duties and responsibilities under the law and to continuously upgrade their knowledge and skills with regular training.’
By VEN SREENIVASAN
Peter Madhavan, 55, is an experienced civil, commercial and insurance lawyer who graduated from the National University of Singapore in 1981.
He was admitted to the Bar in Singapore in 1982, and founded his first law firm with two other partners a year later.
He served as a council member for The Law Society of Singapore from 1988 to 1991 and chaired various sub-committees.
He was a key member of the Professional Indemnity Sub-Committee that introduced Compulsory Professional Insurance for all practising lawyers in Singapore in 1991.
He was also a member of the Inquiry Panel of the Law Society from 2001 to 2009. His other appointments included panel member of the Investigation Tribunal of The Law Society of Singapore.
In 2000, the government of Uruguay appointed him as its honorary consul in Singapore, a position he held until 2007.
He is a keen golfer and was formerly captain of Laguna National Golf and Country Club. He is also a former honorary racing steward of the Singapore Turf Club.