Kidman Resources chief ‘may have informed’ brother-in-law about takeover, court hears

A Melbourne court has heard ASIC investigated whether a man accused of insider trading received information from his lithium executive brother-in-law.

The corporate watchdog investigated whether the managing director of lithium group Kidman Resources, Martin Donohue, gave information to his brother-in-law – who has been charged with multiple counts of insider trading – about possible takeover deals.

Mr Donohue has not been charged, but a court heard the Australian Securities and Investments Commission was investigating him for about fours years.

ASIC is pursuing criminal charges against Mr Donohue’s brother-in-law, Duncan Stewart, who allegedly made $68,000 after he bought shares in Kidman in April 2019 with inside information.

Under cross-examination from Mr Stewart’s barrister, Ruth Shann, SC, ASIC senior specialist Kerrie Ma told the Melbourne Magistrates’ Court during the second day of a committal hearing that one theory was Mr Donohue told Mr Stewart about information described in the first three charges laid against him, which was “not generally available”.

Charge sheets allege that included an offer from Chilean lithium giant SQM to take over Kidman at $2.40 per share and that Wesfarmers had showed an interest in Kidman and was likely to make a takeover bid.

Ms Ma agreed “there was no investigation evidence that SQM ever offered to (Kidman) buy for $2.40 per share”.

An SQM takeover offer was made but did not proceed and Wesfarmers acquired Kidman Resources in September 2019 for $1.90 per share in a $776m deal.

Ms Ma confirmed to the court Mr Donohue was the managing director of Kidman and that Mr Stewart was his brother-in-law. She said Ms Shann was correct that “(ASIC) was looking for evidence of more than the fact they had just a familial relationship”.

She said her team had no “direct evidence” that Mr Donohue gave Mr Stewart the inside information. The court heard there were a “number of calls” between Mr Donohue and Mr Stewart on April 2 and April 5, but ASIC could not obtain evidence about what they were discussing.

Ms Shann asked if Mr Donohue were originally part of the investigation scope, which began in early 2019, and if he were investigated for four years by the corporate cop.

Ms Ms responded that he was during her time on the case.

The court also heard ASIC alleged Mr Stewart encouraged his brother to buy shares in Kidman. But after his brother contacted his broker for information about the company he received a JPMorgan analyst report on February 18, 2019 and a Bloomberg snapshot which contained recommendations for Kidman.

Mr Stewart’s brother has not been charged.

Ms Ma confirmed that although there were a number of persons of interest in the case, “a distinction was drawn with Duncan Stewart because located on his phone was a text message of 1 March 2019 which was referred to and considered … as a potentially incriminating message”.

In February 2021 Mr Stewart gave a voluntary interview to ASIC which Ms Ma participated in, the court heard.

The ASIC informant, Kate Tonkin who signed the charge sheets on the case, was also cross examined. Ms Tonkin now works as a special counsel at Norton Rose Fulbright.

Ms Tonkin said her team “considered” taking a statement from Mr Donohue but ultimately there was a “no further action” determination made in 2022 about his alleged involvement.

As well, statements were not taken from Wesfarmers apart from a lawyer, and the ASIC witnesses was unable to recall whether a statement was taken from investment bank Greenhill, which had advised Kidman on some “potential takeover bids”.

The case continues.