By Pattrick Smellie and Paul McBeth
All four directors of Lombard Finance and Investments has escaped prison sentences, although former chief executive Michael Reeves only escaped prison or home detention because of ill health and family obligations.
Judge Robert Dobson said expressions of remorse by former chairman Doug Graham and fellow director Lawrie Bryant are mitigating factors in final sentencing. The other director, Bill Jeffries, declined to express remorse.
Graham and Bryant were sentenced to 300 hours community work and fines of $100,000 apiece. Jeffries and Reeves were sentenced to 400 hours community service.
Lombard Finance went into receivership in April 2008, owing approximately $127 million to about 4,400 investors.
Last month they were found guilty of making untrue statements in investment documents and advertisements in late 2007 and early 2008. The judge ruled in favour of the Financial Market Authority’s case on two of the five points over untrue statements.
Crown prosecutor Colin Carruthers QC had urged the High Court in Wellington to impose custodial sentences of 2 years to 2 ½ years for non-executive directors Douglas Graham, Lawrence Bryant and Bill Jeffries. He argued for two years, nine months for chief executive Michael Reeves.
But defence counsel argued their clients had already suffered injury to the reputations and no more than a community sentence or fine would be appropriate.
Following the sentencing, the Financial Markets Authority, which brought the actions against the Lombard directors, issued the following statement:
Lombard verdicts highlight directors’ duties, says FMA
The Financial Markets Authority (FMA) today acknowledged the High Court’s sentencing of four directors of Lombard Finance & Investments.
“The guilty verdicts in this case, and the sentences imposed, illustrate the obligation on directors to ensure that investors are properly informed, and are kept informed,” FMA CEO Sean Hughes said.
“These verdicts, like those in the earlier Nathans Finance case, are a reminder to directors and their advisers that timely, accurate and meaningful disclosure to investors is an obligation which cannot be delayed or delegated to others. These responsibilities are hallmarks of New Zealand’s disclosure regime.
“FMA is keen to help directors get these obligations right. We have a process underway to provide the market with further guidance.”
In his 24 February judgment Justice Dobson said the primary issue was the adequacy and accuracy of disclosure.
New Zealand’s disclosure regime “intended that investors be in a position to make decisions for themselves by being adequately informed on material matters, rather than making an investment decision in reliance on an assessment of the quality of judgment of those who would become custodians of their investments,” the judgment said.
Lombard Finance & Investments was placed in receivership in April 2008 owing $111 million to around 3,600 investors.
Sir Douglas Graham, Michael Reeves, Lawrence Bryant, and William Jeffries were found guilty on 24 February 2012 of four charges under section 58 of the Securities Act on the basis Lombard’s December 2007 prospectus and three investment statements contained false statements.
The value of investments and reinvestments made during the currency of the December 2007 offer documents was approximately $10.45 million.