Court of Appeal justices yesterday questioned whether the securities fraud convictions of a former bank manager and a stock broker were sound.
Wayde Bethel, a former manager at Commonwealth Bank, and Hiram Cox, a broker at First Bahamas Capital, were convicted of facilitating the black market sale of shares purchased through an employee stock option plan (ESOP), last year.
The court found that between November 2005 and February 2006, Bethel participated in a scheme where bank managers sold shares to third party purchasers, who had unwittingly financed the purchase of the employee stock options.
During the charged period, the value of the shares fluctuated between $8 and $10, but employees had the option to purchase them at the reduced rate of $6. The managers who participated in the scheme earned a $2 profit per share.
As part of the scheme, the managers signed blank powers of attorney that purportedly transferred the not-yet-purchased shares under the ESOP to First Bahamas Capital, which sold them to third parties.
None of the transactions were registered on the local Bahamas International Securities Exchange.
Court President Anita Allen asked, "Where is the evidence of intent to defraud, where is the evidence of intent to deceive?"
Justice of Appeal Abdulai Conteh added, "Nobody lost money. Commonwealth Bank got its money and the buyers got their shares. While improper activity, it doesn't rise to the level of criminal fraud."
Allen adjourned the appeal to July 18 to allow lawyers Charles McKay and Roger Gomez Jr. to determine the course of the appeal.
The magistrate fined Bethel $50,000 for dealing in securities without being a licensed stock broker. He was fined $25,000 for his part in the securities scheme.
If he fails to pay the fines, he will spend a year in prison. Bethel was also ordered to repay Commonwealth Bank $164,650 in commissions he earned through the illegal scheme.
Cox, who facilitated the purchases, was fined $15,000 for his role. He faces a year in prison if he fails to pay the fine. Cox was ordered to pay $7,805 in commissions.
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