29 Mar 2012

Lombard directors avoid jail

8:37 pm on 29 March 2012

Four former directors of the failed company Lombard Finance have avoided jail terms and have been sentenced to community work.

Sir Douglas Graham and Bill Jeffries, who were both former ministers of justice, along with Lawrence Bryant and Michael Reeves, were in February convicted of making false statements in company prospectuses before Lombard went into receivership.

Graham and Bryant both received 300 hours' community work and have to pay $100,000 each in reparation.

Jeffries and Reeves were sentenced to 400 hours' community work.

Lombard Finance collapsed in April 2008, owing $127 million to 4400 investors.

Judge describes hardship

Justice Dobson, who sentenced the four directors, said the men's good professional reputations meant many investors trusted their money would be safe at a time when there was broad distrust of financial institutions.

He said most of the victims were unsophisticated investors many of whom did not spread their investments.

Many were retired, he said, and in a lot of cases life savings were lost. He described this loss of nest eggs as a harsh blow that in some cases led to depression.

He also said if advertising material had accurately portrayed the company's status, many investors would not have risked their money with them.

But, he said the 39 victim impact statements gave graphic details of how the investors felt let down by not having that knowledge.

Directors' money tied up in trusts

Crown prosecutor Colin Carruthers, QC, told the court that by not telling investors about the financial statements of the company, the offending falls into the most serious category of that type.

Mr Carruthers said the assets of all the men are tied up in trusts.

He also said there has been no indication of remorse from the directors, because they have all indicated they will be appealing the sentence.

Mr Carruthers read out the victim impact statement of a 42-year-old woman from Hamilton, saying she and her husband were devastated when they lost $30,000 only a month after investing.

The woman wrote that she had trusted the directors because of their good reputations.

He submitted that the directors all receive a custodial sentence of more than two years.

Paul Davison, QC, representing Graham and Bryant, said the men at all times acted honestly and conscientiously as directors.

Mr Davison said they attempted to protect the investors' interests and were working at a time when the economic crisis made it difficult to make economic decisions.

He said the ultimate humiliation for his clients is to be labelled as criminals and they are very remorseful that investors lost their money.

Mr Davison submitted that a sentence of community service would be appropriate.

Life savings lost

Investor Paul Wah lost much of his life savings in the Lombard collapse and told Checkpoint he was not after a prison term for the four men.

"I didn't go looking for retribution I went looking for reparation for the investors and also to set a platform for the receivers and perhaps the trustees to begin a class action."

Civil trial considered

Lombard Finance receiver, John Fisk from PricewaterhouseCoopers, said he is considering civil proceedings against the directors and the criminal convictions open the door for secured investors seeking compensation.

Lawyer says clients relieved

The lawyer for two of the Lombard Finance directors given non-custodial sentences said his clients are relieved by the decision.

Graham and Bryant's lawyer, Paul Davison QC, said the men will now go home and reflect on the conviction and sentence, but would not comment on their next move.