The face of one-time Tasmanian timber giant Gunns, John Gay, could spend time in jail after admitting to insider trading.
The former chairman dropped a bombshell on the morning his trial was set to begin by changing his plea to an amended charge in the Tasmanian Supreme Court.
Gay, 70, had pleaded not guilty to two counts after selling 3.4 million Gunns shares in December 2009.
He was accused by the Australian Securities and Investment Commission (ASIC) of dumping the shares, worth around $3 million, after information in a company report forecast a profit drop of more than 100 per cent.
The court had been readying for a trial of up to five weeks but on Monday those charges were rolled into one amended indictment, to which Gay unexpectedly pleaded guilty.
His lawyer, Neil Clelland SC, said the plea was made, not on the basis his client knew information he possessed was price sensitive, but on the basis that he ought to have known.
Gay's sentence will reflect the maximum penalty at the time he sold the shares - five years jail and a fine of $220,000.
The penalty for insider trading has since been increased to 10 years and $765,000.
The information Gay used was contained in an October 2009 management report which was not disclosed to the market.
"On December 2 and 4, 2009, while in possession of inside information relating to the financial performance of Gunns, Mr Gay sold more than 3.4 million Gunns shares," an ASIC statement said.
"This trading was prior to the release of Gunns' half year results on 22 February 2010."
Those results showed a 98 per cent deterioration in half yearly earnings and the share price plummeted from 88c to 68.5c.
In preliminary proceedings, witnesses had told the court Gay was selling the shares in order to get his affairs in order after he'd been diagnosed with prostate cancer.
He held onto another eight million shares, the court was told.
The controversial timber company collapsed into administration in September last year owing around $3 billion.
Gay, regarded by some as the simple saw miller made good, is credited with building the Tasmanian company into an empire.
But that was before it struck trouble when woodchip prices collapsed and a partner could not be found to fund its proposed $2.3 billion Tamar Valley pulp mill.
He resigned as chairman in 2010 as the company looked to build a "social license" by getting out of native forest logging.
When charged in November 2011, he was considered the most senior Australian executive to have been accused of insider trading.
Gay left the Launceston court on Monday without comment.
He will reappear for sentencing submissions on August 14.
