Assumptions, not evidence – Warminger defence

Expert witness based his analysis of Mark Warminger’s trading activity on assumptions about intent, defence lawyers claimed in the latest instalment of the high profile market manipulation trial.

Friday, October 7th 2016, 7:45AM

by Miriam Bell

Mark Warminger

Following testimony from one of the Financial Markets Authority (FMA) expert witnesses that did not reflect well on Warminger, his defence team went on the attack on Thursday.

Earlier in the week, expert witness John McMahon gave evidence that Warminger’s suspect trading activity created false and misleading appearances in terms of market demand, activity and pricing.

This amounted to price and market manipulation, as alleged by the FMA, he told the court.

In response, Warminger’s defence lawyer, Marc Corlett QC, sought to undermine McMahon’s credibility as an expert – and his trial evidence.

After questioning McMahon’s trading experience, Corlett pointed out that Professor Michael Aitken, an internationally renowned expert on market security, also analysed Warminger’s trades and arrived at a different conclusion.

Aitken, who is set to provide evidence later in the trial, doesn’t believe there is sufficient evidence to show that Warminger’s trades amounted to market manipulation.

In cross-examination of McMahon, Corlett looked at different examples of Warminger’s trades to explore how he had arrived at the conclusions contained in his evidence.

Corlett said that McMahon did not have the benefit of explanations from various people involved in the trades in question, notably Warminger, when analysing certain of the trades at the FMA’s request.

This meant that McMahon had to form his view without their explanations as to what the purpose and intent of the trades were.

McMahon said he had formed his views from an analysis of trading patterns on the day in question.

When discussing one of Warminger’s SKL trades, Corlett said McMahon had suggested that Warminger’s intent was to push the stock price up by 2 cents in order to sell at that price.

McMahon said he couldn’t comment on Warminger’s intent, but the effect of his actions was to push the price higher.

Similar exchanges throughout the cross-examination led Corlett to extrapolate that McMahon’s conclusions were based on assumptions about trading patterns and data.

Yet there could be various reasons behind trading behaviour, so intent was key, Corlett pointed out on a number of occasions.

McMahon said, repeatedly, that he stood by his evidence.

However, Corlett kept referring to the Code of Conduct for expert witnesses and said it would have been helpful to the court if McMahon had made it clear that his evidence was based on assumptions.

He also suggested that McMahon should replace the word “manipulated” with the word “affected” in his descriptions of the impact of Warminger’s trades on the market.

The trial – which is New Zealand’s first for market manipulation – will continue for several more weeks.

Tags: FMA Market Manipulation Milford Asset Management