Former JP Morgan executive denies
involvement with Kurdistan energy minister's $21m
By Simon Bowers - The Guardian
Banker contests £450,000 fine
for allegedly disclosing inside information
Former JP Morgan executive and Banker Ian Hannam (L)
is appealing against a L450,000 fine imposed by the
Financial Conduct Authority. He denies involvement
with Kurdistan Energy minister Ashti Hawrami's $21m
Heritage Oil share order Reuters Photo: Ekurd.net/KRG/Reuters
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July 4, 2013
LONDON,— The Kurdish oil minister who
allegedly received inside information from the
former JP Morgan banker Ian Hannam later instructed
brokers to buy up to $21m (£13.9m) of shares in
Hannam's client Heritage Oil, a tribunal has heard.
Details of the order were disclosed in papers that
form part of the Financial Conduct Authority's
defence of its decision to fine Hannam £450,000 for
disclosing inside information about Heritage in
2008. The banker, who stepped down from JP Morgan
after the fine, began an appeal against the fine at
a tribunal in London on Tuesday.
In explanation of the fine, the FCA, then part of
the Financial Services Authority, said: "It is not
suggested that any trades were conducted on the
basis of the information disclosed by Mr Hannam."
The latest court papers, filed by the FCA, say: "The
FSA did not consider that it had evidence that the
purchase [on the instruction of Ashti Hawrami] was
made on the basis of the information Mr Hannam
provided to him."
Hawrami explained in a statement that the
instruction to brokers at HSBC, on 16 October 2008,
had been to purchase shares in a basket of oil
companies in order to provide a hedge against
investment in the troubled Norwegian exploration
group DNO, which had interests in Kurdistan region
in Iraq's north.
"Nothing was going on with any of these companies
that could have been considered as my having private
knowledge as far as I was aware, and no rules were
to be broken," he said.
Filings with the tribunal show that JP Morgan
instigated its own internal investigation in
parallel to FSA actions, which concluded that Hannam
had "conducted business communications with third
parties in a manner falling below the standards
expected of you".
Internal disciplinary action required that he resign
from the board of JP Morgan Chase; not initiate new
business relationships; not act as nominated adviser
to any listed company; and that he must have his
mobile phone and emails monitored.
The case against Hannam focuses on two emails sent
to Hawrami in September and October 2008, which
regulators claim contain insider information in
relation to the activities of Heritage in Uganda,
which were being closely watched by the markets.
On 9 September, Hannam emailed the Kurdish regional
government minister telling him that discussions
were taking place between "Tony Buckingham's
business" [a reference to the Heritage chief
executive] and an unnamed potential bidder. It added
that Hannam believed an offer would come in,www.ekurd.net
and that offer would be priced at between £3.50 and
£4 a share. Nine days later, the Takeover Panel
requested that Heritage make a statement to
shareholders, in which it confirmed a preliminary
The next day shares rose 18%. Hannam's second
contentious email, sent on 8 October, contained a
postscript: "PS. Tony has just found oil and it is
looking good." This was at a time when news of
drilling at Heritage's Warthog-1 well in Uganda was
so sensitive that the group's staff had been barred
from trading in company shares.
On 21 October 2008 Heritage announced to the stock
market "a significant new discovery" at Warthog-1.
That day, the FCA told the court, shares in the
exploration group rose 14.6%.
Hannam's counsel, Laurence Rabinowitz QC, has urged
the tribunal to throw out the fine order. "On a fair
and proper analysis of the emails, neither contained
inside information. Even if they did, this
information was sent by or on behalf of Mr Hannam
pursuant to his client's mandate and in the proper
performance of his duties as a financial and
Rabinowitz claimed that decision against Hannam had
"sown confusion" as to where the boundary lay on
inside information. It "demonstrates a possible
failure on the part of the [FCA] properly to
understand the nature of the work routinely (and
honestly) carried out by financial advisers," he
said. The investigation into Hannam had stemmed from
a 2009 insider dealing inquiry into Mehmet Sepil,
the chief executive of Genel Enerji, which led to a
record fine of almost £1m. Genel was a Turkish
company with which Heritage had at one stage been
discussing a deal. The deal failed as, on the advice
of Linklaters, Hannam and others took evidence to
the UK authorities that appeared to show insider
dealing in Heritage shares.
The tribunal hearing continues.
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