Former Morgan Stanley managing director Du Jun (pictured) borrowed a huge amount to buy Citic Resources shares in 2007, which could be strong evidence that he conducted insider deals, the Court of Appeal heard yesterday.
Du is appealing against a District Court verdict in 2009 convicting him of insider dealing. He was jailed for seven years and fined HK$23 million.
It is the largest insider dealing case ever in Hong Kong in terms of the money involved and the toughest sentence in such a case.
As a Morgan Stanley banker in 2007, Du had helped client Citic Resources issue bonds to buy a Kazakhstan oilfield. He had used the confidential information he received by way of e-mails on updates of the deal to trade Citic Resources shares.
Du traded shares worth HK$87 million on nine occasions between February and April 2007, before Citic Resources announced the deal the following month.
In the District Court hearing, Du denied reading the e-mails but the prosecution produced evidence that showed his BlackBerry had been used to open and scroll through five e-mails relating to the deals from early February 2007 before his first purchase of Citic Resources shares on February 15.
At the appeal hearing, his lawyer, John Griffiths SC, on Tuesday said Du was not trading Citic Resources shares based on the information in the e-mails but 'based on his own research as the market sentiment at that time was positive'.
But Senior Counsel Charlotte Draycott, for the prosecution, yesterday argued Du had committed insider dealing as evidence showed his first purchase of Citic Resources shares was made very close to the time he received the e-mails about the deal.
In addition, she said, Du spent HK$87.1 million on the shares, which included all his savings plus a loan of HK$50 million. His annual salary and bonus in 2006 amounted to HK$19 million.
'The large sum shows he was very confident about the investment,' she said, adding that this confidence stemmed from the confidential information contained in the e-mails.
Citic Resources' share price rose sharply after the deals were announced in May 2007 and Du made a profit of HK$33 million. Du's illegal trades soon came to Morgan Stanley's notice and the bank sacked him as well as reporting the case to the Securities and Futures Commission.
Du went to live in Beijing for a year and was arrested when he returned to the city to collect a picture and a small air purifier from his old office.
Hong Kong law treats insider dealing - the act of using non-public information on listed companies to trade such securities - as a criminal offence. The hearing continues.