Former Cabinet Minister Doug Graham told the High Court he lost his own retirement savings when Lombard Finance & Investments failed and his best efforts weren’t enough to safeguard the funds of other investors.
Graham, who was chairman of the property financier, reinvested NZ$12,000 of NZ$17,000 of matured debentures in October 2007 and also held a small stake in then NZX-listed Lombard Group.
Graham, chief executive Michael Reeves, and directors Bill Jeffries and Lawrence Bryant last month pleaded not guilty to five counts relating to claims they made untrue statements in a 2007 prospectus, investment statement and advertising material.
In Graham’s statement today he said the investment had been “my retirement fund.”
“I am deeply saddened to have been involved in a company which failed and lost investor capital,” he told the court, reading from a prepared statement. “I accept that some investors invested in Lombard because they trusted me to look after their saving. I did my best but it was not enough.”
Lombard went into receivership on April 10, 2008, owing approximately NZ$127 million to some 4,400 investors, and it is unlikely that secured debenture holders will receive more than 24% of their investment back. Unsecured creditors are likely to receive nothing.
In his statement, Graham defended the level of disclosure in the prospectus documents and painted a picture of his personal efforts, as chairman, to double check figures through the whole period leading up to the failure. Lombard had proposed a moratorium on payments though this was rejected in favour of receivership by the trustee.
Jeffries, a former Labour Cabinet minister, sat in on the hearing and in the public seats, former ministers Wyatt Creech and Max Bradford were briefly in attendance.
Graham said he “found it difficult to understand” the allegations which led to the indictment against him. He disputed that the offer documents omitted that five loans were impaired, saying they were not impaired using a normal accounting or layman’s understanding of the term. He said at the time he believed the trustee’s decision to appoint receivers “would ensure the losses would be greater than they needed to be” though such a view was difficult to prove either way now.
Graham said he has fretted about whether he could have become more personally involved in monitoring the loan book “but quickly concluded that, as I had no expertise in property development, my input would have been more a hindrance than a help.”
“I do not known what else I could have done,” he said. Lombard Finance “was swept away with some 40 other finance companies as the GFC (global financial crisis) struck with full force in 2008 and plunged the world into a maelstrom from which it has yet to escape.”
The case in continuing.