First person to be convicted of insider trading in the history of the State

By Jessica Magee

The first person to be convicted of insider trading in the history of the State has been fined £60,000 sterling at Dublin Circuit Criminal Court.

Declan Service, of Sunnyvale Avenue, Portrush, Co Antrim, has been told he faces a potential term of imprisonment of 18 months when his sentence is finalised next February.

The 63-year-old carer pleaded guilty to engaging in insider dealing on dates between May 18 and 22, 2020, when he used sensitive market information to sell shares before that information was made public.

The court heard that Service, who is suffering from bowel cancer, prostate cancer and long-term depressive illnesses, effectively gambled his retirement fund by using inside knowledge to offload his shares in a pharmaceutical company days before buying them again at a discounted rate.

At a hearing today, the court heard that Service made a profit of roughly £11,500, which would have increased to £44,000 if he retained his shares for one year.

The alarm was raised when Goodbody stockbrokers alerted the Central Bank to suspicious transactions made by Service, who was one of their clients.

Detective Garda John Farrelly of the Garda National Economic Crime Bureau told Fionnuala O’Sullivan BL, prosecution, that the activity concerned shares in Open Orphan, an Irish pharmaceutical company listed on the London Stock Exchange.

The court heard that in May 2020, Open Orphan decided to sell additional shares on the market at a discounted rate in order to raise €12 million in capital and fund growth.

Before placing these shares on the market, the company invited its shareholders to a Zoom presentation on Monday, May 18, 2020 to brief them of its plans.

Open Orphan told all participants that the presentation was market-sensitive and that shareholders were prohibited from trading shares until the information was publicly available on Friday May 22, 2020.

The court heard that shareholders in receipt of this confidential information were deemed “insiders” and were prohibited from sharing the information, in order to prevent them exploiting it for financial gain and to protect the integrity of the market.

Service, who at the time held 3.89 million shares in Open Orphan valued at £566,000 sterling, agreed to being made an “insider” and attended the zoom meeting where the fundraising round was confirmed.

The court heard that the following day, Service contacted his broker at Goodbody, instructing them to sell his full shareholding over the coming days.

Prosecuting gardaí obtained recorded phone calls of Service saying to his broker on May 19: “There’s going to be something on Friday that might lower the price a bit. I’d put next year’s holiday money in it, if I were you.”

On May 20, Service again phoned his broker saying he had been speaking to the CEO of Open Orphan and that they were “going to raise monies soon, if you know what I mean”.

The broker suspected market abuse and followed procedure by raising his concerns with a compliance manager, without alerting Service.

Service then sold all his shares and instructed another broker at Goodbody to buy £566,000 worth of shares at the discounted rate when they were made available to the public on Friday.

However, because too many people tried to buy the shares, the accused was only able to buy £50,000 sterling worth of shares at the discounted price.

At the end of the trading day on Friday, Service had increased his share number by over 92,700, which the Central Bank calculated as equivalent to making a profit of £11,500.

The Central Bank forwarded its report to the Garda National Economic Crime Bureau in August 2021, and in September 2022, Service was arrested by appointment and interviewed twice by gardaí.

Det Gda Farrelly said Service was fully cooperative and made full admissions, accepting everything that was put to him.

He told gardaí: “I truthfully didn’t realise I had done anything wrong. I acted innocently in my mind. It’s not in my DNA to do something I know to be illegal.”

Service apologised and said he “obviously regretted this serious lack of judgement”.

The prosecuting garda agreed with Brian Gageby BL, defending, that Service’s guilty plea was of benefit to the prosecution as such cases can otherwise be “tedious and tortuous” and “document-heavy”.

Det Gda Farrelly also agreed that Service had not come to garda attention since this offence and did not have “trappings of wealth”.

Mr Gageby said Goodbody was a reputable stockbroking firm and there was an “inevitability” that this offence would be reported up the compliance chain.

Counsel described the offence as “unsophisticated” and said Service had “gambled his retirement”.

Mr Gageby said Service had liquidated his pension scheme and converted it to an approved retirement fund, but that “rather than treating these monies with the care one ought to treat one’s pension, he made rash decisions and effectively gambled his entire nest egg on the stock exchange.”

Service has no previous convictions and has three adult children and a long-term partner, the court heard.

The court heard that Service worked for a US healthcare multinational for 17 years and then for 20 years in various healthcare companies in Ireland and abroad.

He moved to Northern Ireland in 2021.

He now works as a carer for adults with learning disabilities and a reference from his employer described him as an extremely valuable staff member who was highly-regarded by users and staff alike.

Service works for 28 hours a week, earning £350.

Counsel said Service has devoted a good portion of his life to charitable work since his early teens, as a member of several charities including Bray Mental Health and Peata, a group that organises hospital visits by dogs and their owners.

A letter was submitted from Cabinteely Football Club praising Service as a committed voluntary and valued member for 20 years.

A further letter from a charity in Portrush helping young adults with mental health difficulties described Service as extremely reliable, honest, committed, helpful and passionate member who has become a friend rather than a colleague.

Mr Gageby said Service has suffered significant mental health difficulties himself since his 20s and has been treated with anti-depressants and anti-psychotic medications.

Letters were handed in from his GPs in Ireland and Northern Ireland detailing difficulties with alcohol abuse, hospital admissions, mental health and episodes of aggression and excessive spending.

One GP said it was “entirely likely” that Service had bipolar mood disorder.

The court heard that Service is awaiting radiotherapy for Stage 3 prostrate cancer and was also diagnosed with bowel cancer earlier this month.

Mr Gageby said his client had lived a “blameless life” and had given all his life to good causes and that it was “truly out of character” for him to have engaged in these offences.

He said Service’s mental health difficulties suggest he had a “degree of disinhibition” at the time and showed poor decision-making.

“When one hears the evidence, one might take the view that he was some class of high-rolling, stock-dealing person who was trying to take the market to his own advantage, but this does not reflect the life he’s lived,” said Mr Gageby.

Judge Elma Sheahan said the aggravating factor was the seriousness of the offending and the mitigating factors included the value of his guilty plea, his full cooperation and his previous good character.

She also took into account that he has been a productive member of society and has contributed as a volunteer, and has suffered mental health difficulties which provide a context for his offending.

Judge Sheahan said notwithstanding the submissions made by the defence, Service had engaged in insider trading when it had been made clear to him that he could not trade.

“He chose to ignore this and to proceed to make a benefit,” said the judge, describing the offending as “in the lower range”.

She set a headline sentence of two and a half years but said that with mitigation, 18 months would be an appropriate sentence but that she will review this and adjourned finalisation until next February 19.

In the meantime, Judge Sheahan ordered Service to pay a fine of the euro equivalent of £60,000 sterling to be lodged to his solicitor’s account.