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A Report on Certain Statements made in Respect of Air New Zealand Limited in September 2001

A  INTRODUCTION

1   AIR NEW ZEALAND LIMITED

1.1   Air New Zealand Limited is a company incorporated in New Zealand with shares listed on the New Zealand Stock Exchange and the Australian Stock Exchange. In the month of September 2001 the affairs of the company were subject to intense media scrutiny, trading in its shares was at times volatile with several trading interruptions, questions were asked as to the adequacy of disclosure by the company, and the New Zealand Government was in active negotiations at various times regarding the future of the company. Events culminating in the week beginning 24 September 2001 led the Commission to announce on 26 September 2001 an inquiry to review trading in the shares of Air New Zealand Limited.

2   TERMS OF REFERENCE

2.1   The Commission published its Terms of Reference on 28 September 2001. The full text of the Terms of Reference is set out in Appendix A. The Commission wished to review the circumstances surrounding trading in the shares of Air New Zealand during September 2001, statements in the media attributed to persons who appear to have had price sensitive information, and halts in trading and reinstatement of trading by the New Zealand Stock Exchange.

2.2   This report has been prepared by a quorum of Commission Members comprising:

Ms Jane Diplock (Chairman)
Mr Falcon Clouston
Ms Elizabeth Hickey
Ms Cathy Quinn
Mr Michael Webb

2.3   This report covers the first part of the Commission's inquiry. It is a report on the Commission's inquiry into:

1. Statements in the media attributed to the Prime Minister on 25 September 2001;

2. Statements in the media attributed to Mr Greg Terry on 27 September 2001; and

3. Statements in the media to the effect that the Office of the Prime Minister approached broking houses regarding possible steps to be taken by the Government in relation to Air New Zealand Limited.

It was these statements that led directly to the trading halts. The report also considers:

(d) The trading in the shares of Air New Zealand Limited during September 2001.

2.4   The Commission's inquiry focused on the following topics:

1. reported approaches to broking firms by the Office of the Prime Minister;
2. whether there is evidence of insider trading in the shares of Air New Zealand;
3. the application of insider trading rules to statements made by the Prime Minister;
4. the application of insider trading rules to statements made by Mr Terry;
5. the appropriateness of the Prime Minister's statements; and
6. the appropriateness of Mr Terry's statements.

2.5   This is not a report on negotiations that took place between parties in respect of Air New Zealand Limited. It is not a report on compliance by Air New Zealand Limited with its continuous disclosure obligations during September 2001. Continuous disclosure obligations arise under the Listing Rules of the NZSE. The Market Surveillance Panel has undertaken a review of compliance by Air New Zealand Limited with its disclosure obligations under Listing Rule 10.1 and has published a report of its findings. Those matters are not the subject of this inquiry.

2.6   The second part of the Commission's inquiry will consider questions arising from the New Zealand Stock Exchange's decisions to impose and subsequently lift trading halts in Air New Zealand Limited in September 2001. The Commission will not consider the specific matters of compliance by Air New Zealand Limited already covered by the Market Surveillance Panel report. The market in shares in Air New Zealand Limited during the latter half of September was volatile. Some brokers have expressed unease about the management of trading in the shares of Air New Zealand Limited. Superficially this relates to the timing of the start and duration of the trading halts. The Commission will be considering these matters in the context of a wider examination of the New Zealand Stock Exchange's policies and practices for monitoring of continuous disclosure by listed issuers and for taking action where it appears there is not an informed market for trading in the shares of any issuer. This second part of the inquiry will require further work. The Commission is currently working on this.

3   PROCEDURE

3.1   The Commission determined the procedures for this inquiry in a formal meeting. The Commission obtained evidence from the following:

• the Prime Minister, The Right Honorable Helen Clark;
• the Minister of Finance, The Honorable Michael Cullen;
• Air New Zealand Limited;
• Mr A Bisley (Secretary for Transport);
• Dr A Bollard (Secretary to The Treasury);
• Mr R Cameron (Partner, Cameron & Co, investment bankers);
• Mr G Dangerfield (Chief Executive, Ministry of Economic Development);
• Mr E Edgar (Chairman, Forsyth Barr Group Limited);
• Mr W Foster (Managing Director, New Zealand Stock Exchange);
• Ms R Janes (Journalist, Television New Zealand Limited);
• the Market Surveillance Panel;
• the New Zealand Stock Exchange;
• Dr M Prebble (Chief Executive, Department of the Prime Minister and Cabinet);
• Reuters Business Briefing (The Reuters Group);
• Ms H Simpson (Chief of Staff, Office of the Prime Minister);
• Mr V Small (Deputy Political Editor, The New Zealand Herald);
• Mr G J Terry (formerly a Director of Air NZ);
• Dr D Turkington (Executive Director, Forsyth Barr Frater Williams Ltd); and
• numerous brokers.

3.2   As more evidence became available it was necessary to seek additional answers from some of the witnesses.

3.3   Privacy and Confidentiality Orders were in place throughout the inquiry. Where interviews were recorded, full transcripts were provided to the Commission. Where interviews were not recorded, the record of evidence was agreed with the relevant parties prior to consideration by the Commission. Written submissions were also provided to the Commission.

3.4   Where an inquiry raises questions about the personal actions and intentions of affected parties it is important for the integrity of the inquiry process that every person with a material interest is afforded the opportunity to appear at a meeting of the Commission.

3.5   Having received evidence from all relevant witnesses, the Commission prepared a confidential consultation draft report and invited comment from affected parties. These parties were given a full opportunity to respond with submissions and to provide further evidence if they so desired. The key people and their lawyers were then invited to make oral submissions addressing in particular those matters that had been identified as central issues.

3.6   The Commission requested and received further evidence and submissions from some of the affected people. A further confidential consultative draft was produced and a further opportunity to comment was provided to the parties most affected.

3.7   The Commission has carefully considered all submissions received throughout this process before finalising this report.

4   ABBREVIATIONS

4.1   We refer to a number of entities throughout this report. We have not used the full names of each. The following is a list of the abbreviations used: