Mansion detention for Dominion Finance widow Butler

The lounge of the Butler property in Remuera
The kitchen
The pool area
A cosy sitting room

The widow of former Dominion Finance director Terry Butler has been sentenced to nine months' home detention in her mansion for her role in the lender's collapse.

Ann Butler, 64, pleaded guilty to misleading investors, ahead of trial, last month.

At Auckland High Court today she was sentenced along with fellow director Robert Barry Whale, who also pleaded guilty and was sentenced to 12 months' home detention.

Butler, who had no day-to-day involvement in the company, will serve her "mansion" detention at exclusive 9 Darwin Lane in the Auckland suburb of Remuera - a home with a capital value of $6.8 million, an annual rates bill of $20,000, and which is on the market.

Justice Robert Dobson allowed Butler partial exemption to leave the home for two hours up to three times a week to visit her elderly mother at her retirement home. She was also ordered to serve 80 hours of community work and to pay $300,000 reparation.

The Crown asked for starting points of two years and nine months imprisonment for Butler and two years and three months for Whale.

Butler, a non-executive director, ceased day-to-day involvement in Dominion Finance in 2005.

"You were not the leading light or most authoriative or influential of the board," Justice Dobson said.

However, her reliance and trust in her fellow directors and the company's management was not an excuse.

"A director's duty to ensure accuracy of any offer documents you put into the market is non-deligable."

Justice Dobson gave Butler sentencing discounts for  personal circumstances – which include the trauma of caring for her husband through cancer treatment and the loss caused by his death in March, good character and her offer of $300,000 reparation.

Crown prosecutor Brian Dickey said the offer was "miserly", given the assets Ann and Terry Butler settled on family trusts, which the Crown estimates at more than $10.5 million.

But her lawyer, Timothy Mullins, said the trust would have to borrow to raise the money because its assets were illiquid.

Justice Dobson came down harder on Whale, a  commercial law and taxation specialist.

He said the pair's admissions were at the point of gross negligence and made no finding of dishonesty. But Whale's qualifications meant his negligence could not be ignored.

Whale was sentenced to 12 months home detention, to be served at his home at 20 Inverary Avenue, Epsom, which has a modest capital value of $1.65 million. He was also ordered to serve 250 hours of community work and to pay $75,000 reparation.

The charges
Butler and Whale pleaded guilty to seven Securities Act charges brought by the Financial Markets Authority, which include making untrue statements in a prospectus and investment statements for Dominion Finance Group and its subsidiary North South Finance.

Their guilty pleas were entered on reliance of sentencing indications provided by Justice Dobson – detail of which cannot be reported.

The criminal charges carry a maximum penalty of five years' imprisonment or fines of up to $300,000, plus $10,000 for every day the offence continued.

Those charges  will now be defended by their fellow directors Vance Arkinstall, Richard (Rick) Bettle and Paul Forsyth.

Earlier this week however, Messrs Arkinstall and Bettle made a last-ditch attempt to escape trial, applying to be discharged without conviction.

Their pre-trial application was heard at Auckland High Court on Monday. Justice Sarah Katz reserved her decision.

Mr Butler avoided trial due to his illness. He died on March 28.

Dominion Finance Group was placed in receivership in 2008, owing almost 6000 debenture holders $176.9 million. Subsidiary North South Finance was placed in receivership two years later, owing 3900 debenture holders $31 million.

Both companies were subsidiaries of NZX-listed Dominion Finance Holdings, which was placed in liquidation in 2009. They offered property and commercial loans.

Receivers have estimated recoveries of 12c in the dollar for debenture holders in Dominion Finance Group and of 65c in the dollar for those in North South Finance.

Civil proceedings brought against directors, also brought by the FMA, have been stayed pending resolution of the criminal trial.

Dominion Finance boss Paul Cropp was not charged by the FMA. However, he is serving a two year, seven months prison sentence after being found guilty of theft following a trial brought by the Serious Fraud Office earlier this year.

The theft charges involved related-party lending of about $13.57 million in breach of Dominion's trust deeds.

Cropp is the first chief executive in the recent finance company trials before the court to be convicted.

Mr Whale and a third company executive who has name supression were found not guilty of the charges.

gbond@nbr.co.nz

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36 Comments & Questions

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I bet Annie wept tears of relief when told she wouldn't have to forgo her Sky TV services as part of the draconian stay-at-home punishment.

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Is it still the case home detention people have to spend one month in jail before commencing home d?

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Maybe there is still hope that the Strategic Finance guys get brought to account and possibly get mansion detention at the very least.

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Unlikely as the SFO and FMA don't have the backbone to take these clever guys on.

But the Strategic guys do have mansions in Herne Bay and Remuera to have an enforced holiday in - if need be.

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Ah, that's right, it is the investors' fault - they should know better

They should know that the directors won't abide by the conditions of the prospectus or trust deed.

They should know that all or most of their money is being lent to parties related to the principals of the finance companies.

They should know that many loan deals on the books were related party before they are booked and all of the potential profit in the deal has been extracted before the loan is made (backed up by registered valuations based on the end value not the current value).

They should know that the finance company is lending on third and fourth mortgages and not first or second mortgages.

They should know that the principals of the finance companies have done preferential security deals with the their bankers which allows the banks to have better security at the investors' expense.

That must be why the FMA and SFO hasn't acted on companies like Strategic Finance, etc - because it was the investors' fault.

Yeah, right.

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If "Home detention" was to be ordered, surely the judiciary could find some Housing NZ welfare tenants that need some help?

Like the parents of disabled children... and then these people found guilty should be made to spend their "home detention" helping the less fortunate, whilst also getting a small perspective into what it's like having to survive on very little... like what investors have to do when all their money is lot due to negligence and incompetence... or outright theft.

Is a gilded cage of McMansion proportions, filled with appropriate McMansion toys and luxuries, even a cage? Does she just have Sky TV now instead of MySky as punishment?

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Until judges get serious and asset strip these people and then throw them behind bars no-one will trust financial advisers.

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Seems it's all reward no risk if you're a director in NZ. Where do I sign up?

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You are seriously kidding with this comment and verging on delusion. So most directors earn $30,000 - $60,000 pa gross for taking on a directorship and working between 1 and 3 days a week on that company. It is well known that the defence in some of these cases is costing directors around $300,000 - $500,000 (most of which is currently not covered by insurance) when something goes wrong.

Call that a good risk reward scenario - few else would. If you are so keen on being a director, and you are trully willing to consider boards where there are commercial decisions being taken (and therefore there is normally significant risk involved), contact most major law firms and small investment banks. There isn't much of a queue at the moment, which itself should tell you a lot.

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I would say if you think delusional means that you can lose a truck load of money - ie, return 10 cents back in the dollar - and continue on your merry way without question something is seriously wrong in NZ. And as most know, most of these companies have been set up by slick lawyers/accountants and sometimes ex-political figures. Also, not only are they directors they are generally major shareholders, except with nothing to lose.

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The government needs to increase the penalties for crimes of this nature; and it should be based on the quantum of losses they have created.

Government(s) continued reluctance to legislate; or be luke warm of these, fair penalties suggests to me they are a big part of the problem.

Dido...Avoid companies that ex politicians have an involvement in. When have politicians shown an ability to run businesses, other than behind the scenes cloak and dagger stuff.

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The question that needs to be asked is: Why are our judges so remarkably soft on criminals?
Is it a direction from our pollies who value, above all else, votes, even criminal ones?
Time for a reality check!
liberte

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It's past time for the govt to take soft judges to task for imposing minimum sentences.
Our judges have shown time and again that they can't be trusted to exact justice.
WG

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Shoplift blankets and go to jail for three months. Steal millions and live in luxury in your own home as "punishment".

Justice? I think not. Elitism is the New Zealand way.

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Spot on!

Do not expect any changes with such harsh punishment.

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Can you please link me to the case where someone has been imprisoned for three months for stealing blankets? Your post is emotive codswallop. Someone stealing a blanet would get a minor warning or at worst a small token fine.

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Poor Ann may just have to open up her $6.8 million estate as a bed and breakfast to help pay off her miserable $300k fine. It's time we showed these criminals that the soft option is not going to do it any more. Time for the courts to have more power to strip such people of their valuable family home, cars, artworks, holiday homes, etc, regardless if it is in a so-called "family trust". Increasing imprisonment by five years and increased fines up to $1 million will send a clear message to would-be future white-collar criminals that we will not stand for this kind of criminal offending.

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Given the house is on the market, and there's bound to be an open home. I reckon everyone who lost money should pose as a buyer and take up the offer to see the criminals face to face.

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"A director's duty to ensure accuracy of any offer documents you put into the market is non-deligable."

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Just remember everyone gets a mansion per the man in the sky.

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I thought the naughty ones sizzled down below.

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The trust should be stripped to pay the investors back as much as possible as a lot of them will probably end up bankrupted or have to live a frugal existence.

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Your question about punishment is answered. White-collar crime pays well in NZ. It is a genetically connected club of immunity. LOLs

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Shane Murphy (comment #9) is right on, and the SFO should appeal the sentence as being manifestly inadequate. There will be investors who because of Mr and Mrs Butler's statements and personal invitations lost everything. Their houses sold from beneath them and forced back to work to pay for a tiny flat (cold and uninviting) in the suburbs.

Mr Butler's health, probably the result of stress, deteriorated and he died. Mrs Butler, despite her protestations, is living in relative luxury. Sorry, home detention may be acceptable, but it has to be in a Housing New Zealand property (or similar) and the "mansion" should be sold by deadline treaty - ie, sell it within 60 days to the highest bidder. This would probably pass as a just sentence, and a whole lot better than going to the women's prison.

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I think it's more likely the investors never even read the directors' disclosure statements. In most of these scenarios the investors put their money in based on the advice of a poorly qualified adviser or simply because they saw an advert in the paper with a better interest rate than the bank. Even if the disclosure statement had of been accurate they likely still would have invested.

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Does anyone not believe we have a 2-tier justice system?

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I'd find it pretty harsh being imprisoned with that orange couch, to be fair.

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"Give a man a gun and he will rob a bank. Give a man a bank and he will rob a nation." If you're going to be a robber wear a tie and suit is the message my kids are picking up.

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The public's inexorable loss of confidence and faith in our judges is now complete.

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Yeah, would be much better to spend tax dollars locking away a 64 year old woman for negligence.

No one likes to talk about the fact those debentures were yielding 12.8%.

NZ loves to bash the rich. It's like a national pastime.

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The judge probably lives in a mansion too. Should have been a jury trial.

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Not to worry. The Crown will appeal. Won't they?

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$10.5 million of Trust Assets and only a $300,000 fine?! - that is a complete joke. No contribution from the estate of Mr Butler, either, presumably all those assets passed to Mrs Butler on his death. Sounds "manifestly inadequate" to me - why should investors burned by Dominion Finance care if assets are supposedly "illiquid"? The Butlers have known this was coming for five years or more. Why have the "illiquid assets" not been liquidated in this timeframe. Completely unacceptable and should be appealed by the weak-kneed FMA.

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Poor decision making is one thing. Dishonesty is quite another. She should be ashamed.

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I'm gonna set up an investment institution and take millions... then as punishment I must stay in my castle and roll around in the spoils.

Way better than walking into a bank and stealing a few thousand with a paper note then serving jail time.

Or do I have to have blue blood to get this "punishment?"

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The days of directors being able to rely on advice is gone. Being honest is no longer enough. NZ investors now want all company directors to be their underwriters.
With no reason to even try and read a prospectus. Look at Mighty River at 277 pages. What investor or director today could truly understand all the legal, accounting, audit complexity?

Have we gone too far in criminalising commercial conduct to appease
investors from 08?

Lock up intentional villains, but to criminalise honest conduct is the death
of confidence in being a company director. The smart people will be gone, leaving lightweights = a vacuum that will undermine confidence
in the capital markets, contrary to the primary objective of the FMA.

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