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OPINION: No prison for old men, only for crooks

BUSINESSDESK: The Lombard decision took a long time to read, a lot longer than it took Sir Douglas Graham to walk through the media scrum outside the Wellington High Court, down Lambton Quay and away from what must have been the most humiliating hour of his life.

To add insult to injury, a gratuitous shoulder barge for one of his supporters from a TVNZ cameraman was all that was needed to cap an awful day.

The length of the decision was important, because there are so many factors to weigh in the appropriate sentencing of any group of directors associated with the collapse of finance companies in the late 2000s.

One day, a quick history should be written of the varying levels of sentences meted out to the various offenders. For the moment, however, the tangle of legal actions involving so many finance company directors means the relative degrees of offending cannot yet all be judged.

Hanover Finance’s Mark Hotchin has yet to face any allegations, although it’s known only civil charges will be laid, while verdicts are still awaited in the case Rod Petricevic and Bridgecorp directors.

What we do know is that the sentences handed down today by Justice Robert Dobson are intended as a lesser penalty than those imposed on the former Bridgecorp chairman, Bruce Davidson.

For the non-executive directors of Lombard, it’s also a lesser penalty than the directors of Nathan’s Finance, whom the court found were inept and left false offer documents in circulation for more than twice as long as Lombard did in early 2008.

Justice Dobson was also very careful to say he believed Sir Douglas, Bill Jeffries and Lawrie Bryant had worked hard to discharge their duties even as they made misjudgements that saw Lombard reissue a prospectus without referring to liquidity concerns that tipped it into receivership in early April 2008.

It is that 101 day period in which the investment documents were in the market and wrong that today’s sentences relate to.

Outside the court, Lombard investor Paul Wah – whose deeply critical comments of the Lombard directors were seized on by media when the guilty verdicts were first released earlier this month – was more generous than might have been expected, saying there was “no point in jailing old men”.

If any proof were needed that Sir Douglas, in particular, has paid a very heavy price for setting his reputation against a company that failed and lost $127 million, it was the coverage his verdict received. While some may disagree, Justice Dobson was right to suggest no prison term could outweigh the damage to his once good name.

Now for the civil actions…

Comments and questions

Wrong heading

No prison for crocks, only crooks.

"that saw Lombard reissue a prospectus without referring to liquidity concerns that tipped it into receivership in early April 2008."

So in effect they knew enough information at the time that that prospectus should not have been issued and that there were problems with the company.

Did they 1. Tell the public or their investors this or 2: Stay quiet and carry on taking investors money?

That's the bottom line isn't it.

They were entrusted with the role of being honest with the public about the companies position and they shut up about it. More people invested who need not have lost their money if they had simply been honest.

What would the sentence have been if it wasn't Sir Doug and he wasn't a former National Cabinet Minister

Definitely put inside
With whats going on in ACC at the moment and Judith Collins it doesn't look good on the Government

if you wanna be a crook this is the crime to do, chances of prison are slim to nothing,home d in your mansion,or down time in your favorite old peoples home or a mates place who runs some tax dodge charity center.small time crims get prison. the amount of money these high end criminals stole of people would be executed if the same rules applied to them as lower scale criminals get.
No one gets there money back or any thing else that they have lost.Good on you four criminals your punishments include seeing a thief a dishonest man,a greedy man who doesnt deserve to have a family because your crimes have made many people suffer any thing good you guys think you have done in the past means crap,as far as a knighthood is concerned, wake up theif even common criminals have more honour than you scumbags
Just remember do the crime do the time ,judge yourselves and give yourself a life sentance and dont consider giving yourselves parple until you show remorse,oops sorry low lifes dont think like that do they/////

steve broadway
i think the only low life is u and u obviously no little about wat you are talking about

One thing I didn't understand was how much Sir Doug was really involved in Lombard, and whether trusts or other legal entities associated with him might also have been involved. In the reported proceedings he said he had lost $17K of his own money invested in Lombard deposits, but this week it appears he also had $2000000, all of his retirement assets in fact, invested as equity. You see it makes a difference to how a director would respond- if only $17K at stake personally he might not be that concerned at the fate of the company. At the higher level, not signing a prospectus would sound the death knell for the company and for the whole of his savings. I had a lot of respect for Sir Doug, but his behaviour over the overseas travel perk a couple of years back spoilt it for me, and the current issue just seems to be more of the same.

The hypocrisy of our justice system has absolutely no bounds.....hello! these men have just managed to 'rip off'127 million dollars worth of investors hard earned money.

Who cares if they are old men.....they deserve to be put in prison. It appears 'white collar crime' is the way to go

Perhaps, some prisons close to Auckland or other major cities should be converted to Retirement Homes....

The NZ legal system is inadequate and needs a big overhaul. In the USA these guys would be doing time. In NZ, a slap on the wrist. Feeble.

Jail them all - stuff this crap about them being older citizens. The people they ripped off were mostly "older citizens" -who paid their dues to society, paid their taxes, and got ripped off by these mongrels. And take Doug Bloody Graham's knighthood away from him - if for no other reason than being an idiot!

Even if the crime wasn't 'theft', but simply 'loss due to negligence' (i.e. murder vs manslaughter), the magnitude of the damage done surely warranted a custodial sentence, even if it was only symbolic.

A sentence of 1 day in jail for each of these men would have been closer to real justice and would have sent an important message to the rest of NZ's inept company directors.

There was always going to be recourse for ongoing civil litigation for the rinsed investors; it's akin to the station yard master ordering more carriages to be added to the legal fraternity's gravy train.

I am sure that Bernie Madoff would have preferred to be tried in NZ under these decisions.

Old plum in the mouth Graham chokes on his own plum. Ha ha.

It is staggering that so many are taking such delight in seeing another person fall from grace - especially when these comments are based on ignorance of the facts.

Not only is a very sad reflection on these people individually, but also systemic within NZ society.

People should remember "There but for the grace of God go I".

I'd have to agree with you. If this failure had occured in isolation then you would assume criminal levels of management failure however, by by 2008 these companies were tipping over weekly as investor confidence evaporated. I would imagine that these (and all the other directors of the companies that had survived to that date) guys were trying to maintain a level of calm believing that things would settle & normalise - we know that the opposite occurred as asset prices were re-set globally and those in a subordinated position (like most finance companies were) lost most if not all of their lending margin. Some reflection on the context of the failure would be warranted by those seeking a lynching - prove me wrong but I don't think these guys simply wandered out the door with a barrow full of cash and set up camp in the Bahamas???

Poor baby got sad feelings over loss of reputation....o how he suffers.....meanwhile my parent's now can't pay their power bill in winter without their investment.

A terrible shame that the independent directors have any conviction at all and it would be a travesty for them to have received a custodial sentence. We will breed a generation of non executive directors who recommend receivership as a first option at the first head wind a business faces. All investment carrys risk and to say these men lost the money is ludicrous.


John Morrison | Thursday, March 29, 2012 - 7:28pm
Anonymous | Thursday, March 29, 2012 - 8:23pm
steve broadway | Thursday, March 29, 2012 - 8:44pm
Anonymous | Thursday, March 29, 2012 - 9:32pm
Anonymous | Thursday, March 29, 2012 - 11:01pm
Fair's fair | Friday, March 30, 2012 - 12:22am
Troubleshooter | Friday, March 30, 2012 - 7:08am
Anonymous | Friday, March 30, 2012 - 10:01am

Do any of you actually read your comments?. Goodness Its comments of the great unread. You follow what you want without actually taking in the actual true story. I could go on but your ignorance stops me.

JP. As you know, the comments posted here (on a public forum) are merely an outpouring of angst over the harm done by yet another finance company.

Why assume no one appreciates the rationale behind the sentencing? Of course we do, but sometimes justice just doesn't seem... well... 'just'.

Let us not forget that after nine weeks in the High Court the judge threw out 90% of the Securities Commission charges (something that wasn't reported by any media when the verdict came out a month ago) and concluded that in a very small part of a very large document two extra paragraphs were required to explain liquidity information - information which the company was providing to the investors' proxy, the trustee, on a weekly basis, and which the trustee clearly thought was adequate, because it didn't ask for any extra information and made no public statements warning investors.

So what you've got is a complete hindsight re-writing of best practice for disclosure by a judge, despite the fact that the documents he found wanting were drafted with the advice of some of the country's leading securities lawyers.

Frankly the "Lombard four" got shafted by an agency of the state whose sole motivating force was a political response to the public baying for blood. That should scare people.

Has any of the media reported that among the things the Securities Commission charged these guys with was operating while their loans were impaired, and writing sham loan deals to cover this up? And that these charges were brought on the basis of a series of assumptions by the Securities Commission's investigator who admitted in court that she'd come to her conclusions without ever reviewing any of the company's loan files? Revealing of all that information, which had to be done by the defence, saw the substantive and serious charges to be completely without basis.

If that's how an agency of the state that feels under seige from an angry public behaves in a democracy it should make all New Zealanders very, very scared.

You are 100% right. The offence of which the directors were found guilty is one of strict liability. In other words their conduct and their integrity were irrelevant once the court held that there was insufficient information in the prospectus regarding liquidity issues - a decision made with the benefit of 20/20 hindsight.

"Frankly the "Lombard four" got shafted by an agency of the state whose sole motivating force was a political response to the public baying for blood. That should scare people."

As ever, the only people with anything to fear are those that are culpable if their poor management and/or lack of integrity leads to irretrievable investor losses, and even then the penalties aren't that severe.

The real crime is the fact criminal proceedings were brought, which meant the investers lost out entirely. Criminal proceedings for an 'untrue' statement, no intention to mislead at all, as normally required by criminal law. The insurance companies must be laughing. No liability for anything criminal. If instead civit proceedings were issued, insurance companies would have paid out on the directors' directors and officers liability insurance. People are angry at Jeffries and Graham, but they would likely be paid out if the prosecutors cared about the investors; a community sentence absolves the insurers from paying out anything at all. That's the real tragedy; prosecutors after a scalp seemingly caring not a whit about the consequences of their decisioons.

In reply to above and beyond

The real crims are the sec comm who sat on their behinds having expensive lunches whilst finance companies collapsed.
The investor confidence was lost in june 2006 and the sec comm did nothing but watch the whole industry implode collapse
Why did the govt wait until 2008 to put a guarantee in place rather than 2006 why did the secc omm not canvas govt
why are the sec comm and trustee advisers Receiveship experts who end up being the receivers talk about major conflicts of interest
Then they go down the track of proacted legal action
How much money have they spent and is teh propsectus sposed to say "dont invest "to protect the directors
And how many investors actually read the prospectus nad get advice?

Its all a big cop out by the govt who did nothing to protect investors or teh industry

in reply to Rumploe

100% and who are the inept ones the Crown they are just absolutely stupid taking Criminal action.
Maybe teh investors should take proceedings against the crown for ineptness.
Maybe the investors would be better off if the crown put themselves in jail

In sentencing Lombard Finance’s directors Justice Dobson said:

“There was no intention to mislead and, more than that, I am satisfied that at least each of the non-executive directors treated it as important to satisfy yourselves at all times that you dealt absolutely honestly with potential investors. You have fallen foul of s 58 because of a material misjudgement about the extent to which concerns at Lombard’s liquidity, and factors materially contributing to that, should have been disclosed in the offer documents. In the circumstances that applied, I nonetheless remain satisfied that the omission of disclosures on liquidity pressures was not a decision that you could reasonably have come to.”

So, not only did the directors not mean to withhold any information, they couldn’t have “reasonably” been expected to include the two paragraphs of information the judge decided should have been there. And for that they’ll forever be labelled criminals. This country is truly mad.