Should The Whitehaven Coal Hoaxers Be Prosecuted?

Jonathon Moylan and some fellow activists in the protest group Front Line Action On Coal (FLAC) released a hoax press release on Monday, purporting to be from ANZ’s corporate affairs section, stating that ANZ had decided to pull its $1.2B in funding from Whitehaven Coal’s Maules Creek coal project.

The hoax was a fairly amateur, copycat version of The Yes Men’s original and more elaborately constructed hoax on Dow Chemicals, in which one of them pretended to be a spokesman for Dow. The “spokesman”, Jude Finisterra (apparently no-one saw the joke in the name) announced on the BBC World Service that Dow would liquidate Union Carbide to provide a $12B compensation fund for the victims of the Bhopal disaster. Dow stock immediately began falling rapidly, wiping about $2B off the market value of the company before the hoax was discovered.

FLAC’s hoax caused Whitehaven’s (WHC) share price to fall from $3.50 to $3.20 before trading was suspended and the share price recovered to $3.50.

One might thus think there was no material harm done, however many investors or traders were induced by the false announcement to sell at a loss as the stock fell. On the flipside, there were many traders who made a profit by buying after the hoax, but prior to the suspension.

However, people who had previously bought WHC shares, either on the day or prior, lost money as a direct result of the hoax if they sold after the “press release” and before the trading halt and subsequent correction. The hoax clearly induced them to sell and the hoaxers were at least reckless as to the effect of the false information they intentionally disseminated.

That’s a pretty clear breach of S1041E of the Corporations Act 2001, so yes, from a legal standpoint, Moylan and his fellow conspirators should be charged. In fact, ASIC has seized Moylan’s laptop and mobile phone to gather evidence, although he has freely admitted his role in the matter anyway. The hoaxers could receive a fine large enough to bankrupt them. There is a possibility of jail for Moylan.

Additionally, investors would have a civil claim against the hoaxers under S1041I. It would be hard for the defence to mitigate their liability for damages by using S1041N 3(a) to argue contributory negligence by anyone who sold shares during the time interval in question. That is because anyone who sold shares would have logically had to do so even if they saw through the hoax, because most people didn’t and thus the share price would have fallen further anyway. There was no knowing how much sellers would panic and how far the share price would fall. Therefore the only logical course of action was to sell, regardless of whether one believed the press release.

Consequently, any civil claim run by a halfway competent lawyer should be able to secure a finding of significant damages against Moylan et al, although since they almost certainly have few assets, the purpose of such an action would really only be to bankrupt them all.

Even bankruptcy might be doubtful if the hoaxers can raise sufficient funds through donations. Analysis by the SMH's Paddy Manning of WHC trades in the time interval between the hoax announcement and trading halt shows Moylan et al's legal liability in a civil suit would be at most $450,000, plus costs (which should be awarded to the plaintiff, given the evidence).

So, it is the law that Moylan et al can be prosecuted for their stunt. A prosecution should almost certainly succeed, as should a civil action for damages. That leaves only the question of whether it should be the law that people can be prosecuted for hoaxes such as this.

With characteristically dishonest sanctimony, the Greens and other lefties think Moylan should be given a medal. Some of these people seriously believe the entire concept of exchange tradable securities is evil.

However, any sane person with a knowledge of history will have grasped that financial innovations like the joint stock company, tradable bonds, public exchanges and clearing houses, insurance and futures contracts are significant contributors to the economic development of Western society. The availability of both venture capital and debt financing allow not only investment in large scale manufacturing and resource projects, but also technological development and production. These three elements have been overwhelmingly the source of the massive increase in Western society’s standard of living, including the growth of the middle class and more recently, the welfare state Moylan and all his mates want (and rely upon).

Without secure and robust financial markets, we couldn’t have the depth and breadth of investment we need to maintain both the standard of living and the standard of government we want, as well as develop new technologies. If Australia were poor, we’d be burning a higher proportion of fossil fuels and be investing much less in developing clean energy sources. This point is of course lost on twits like Jonathon Moylan and commies like Christine Milne and Lee Rhiannon.

This is why ASIC should prosecute anyone who deliberately disrupts the flow of free and correct information in financial markets. From sanctimonious, wannabe heroes like Jonathon Moylan to shonky wankers spreading false rumours for profit, to market manipulators and insider trading. Frankly, I think deliberately spreading false information to manipulate a security price (or being reckless as to the information’s effect) is significantly worse than someone who uses inside information to profit from foreknowledge of the direction of a security’s value … and the latter often get jail time. I think that’s a bit harsh, but what does it mean should happen to Moylan?

He won’t be looking so smug after a good reaming and bashing in Grafton Jail.

Addendum: I'm not really advocating Moylan be sentenced to years in a high security prison, like he would in the USA. However, deliberately or recklessly distorting or disrupting financial markets is not that different to fraud. It should be a serious criminal offence, because poorly functioning markets harm investment, which ultimately decreases innovation, government renenue and living standards in general.

If all the sanctimonious little turd gets is a fine, his equally sanctimonious left wing supporters, probably organised by Bob Brown, will simply raise the money to pay it for him. At least that's a de facto way of taxing them all in return for the taxes they'd like to impose on the rest of us.

1000 hours of community service, plus a large fine, plus a five year good behaviour bond? Maybe. That would be more constructive than a short custodial sentence in a minimum security prison.

The alternative is to impose a fine, plus a 2 or 3 year jail term, but suspend it. That would force him to keep his head down and send a message to all these lefty wankers who think that because they adhere to a "higher law", they can choose which laws they will obey, yet decry religious people who use the same argument to ignore secular laws such as anti-discrimination legislation.