Former chief executive of Murray Goulburn Co-operative Gary Helou has been banned from managing corporations for the next three years for failing to disclose critical financial information.
Bradley Hingle, the former chief financial officer has also been banned for three years.
The pair admitted numerous breaches to the Federal Court including failing to inform investors that the now-defunct processor was not going to meet its financial targets.
The court found both men were aware of market sensitive information between March and April 2016, but did not update public statements made in February 2016 that painted a much rosier picture.
Both were directors of Murray Goulburn Co-operative and the Murray Goulburn Responsible Entity Limited.
MGRE was the trustee of the MG Unit Trust, a managed investment scheme that, under the Corporations Act, had to comply with Australian Stock Exchange rules for continuous disclosure.
In handing down his judgment, Justice Jonathan Beach gave a detailed account of the circumstances leading to the breaches.
“Given the nature of the investors that have been harmed by the relevant conduct and the fact that this is the last of the proceedings,” Justice Beach said.
“They are entitled to have some picture at least as to what occurred.”
The substance of the breaches was Murray Goulburn's reliance on a boom in Chinese demand for 1 kg bags of adult milk powder, known as sachets.
Sachet volumes in the first half of FY16 had been about triple the sachet volume in the second half of FY15, and in excess of the sachet volume for the whole of FY15.
The February guidance was based on that growth continuing and included a higher farmgate price to farmers.
By April the price had been slashed and Murray Goulburn was demanding dairy farmers repay money.
Chinese New Year suppressed demand, Murray Goulburn struggled with distribution in China and could not fulfil contacts because of production limitations.
As the bad news got worse, between February and April, there was no update to the guidance.
As a result of a separate prosecution by the Australian Competition and Consumer Commission in 2018 Mr Helou and Mr Hingle had both paid substantial financial penalties and voluntarily agreed not to manage a corporation that carried on business in the dairy industry for a period of three years.
The Australian Securities and Investment Commission pressed on with its own prosecution, the fifth and final case to reach court.
The case survived an attempt to stay or dismiss the proceeding as being “unjustifiably oppressive”.
In considering applications by both former directors to remain as managers of companies they currently manage, Justice Beach said the breaches were “. . . unintentional contraventions by a senior officer of a public company who had an otherwise clear record and was otherwise of good character.”
However, he said the disqualifications were “. . . both necessary and sufficient to serve the interests of deterrence and protection”.
“More generally, the failure by MGRE to disclose that it was unlikely to achieve its profit forecast artificially maintained the market price of the units,” Justice Beach said.
“As a consequence, the market operated on a false basis.
``It is not to be doubted that conduct leading to such a market distortion is serious to say the least.”
Mr Helou will be able to continue to be involved in a small, privately-owned vegan health food start-up and family trusts.
Mr Hingle can remain as head of finance for a small clothing and footwear company.
The co-operative, which was the largest milk company in Australia, was swallowed up by Canadian processor Saputo.