Crown prosecutors want the Court of Appeal to quash non-custodial sentences and jail the Lombard Finance Four. 

Former justice ministers Bill Jeffries and Sir Douglas Graham, along with former fellow director Laurie Bryant and former chief executive Michael Reeves were found guilty of misleading investors by signing off on offer documents which omitted material information about Lombard’s liquidity in late 2007.

They all escaped jail when sentenced in March last year to non-custodial sentences.

Just as the four want the Court of Appeal to overturn their convictions and sentences, the Crown wants the non-custodial sentences replaced with imprisonment.

All four were in court today.

Arguing the Lombard Four's case, Queen's counsel Jim Farmer told the court reinvestment rates in Lombard Finance were healthy in the months leading to its collapse, because it was considered a “blue-chip investment." 

“Lombard’s directors were expecting a drop in reinvestment rates, following the collapse earlier in 2007 of Bridgecorp and the stigma which was attached to it. But Bridgecorp was run by someone who was notorious,” Mr Farmer said.

“Obviously Bridgecorp’s stigma didn’t carry over,” Mr Farmer said. "“Lombard was considered a blue-chip investment.”

“That’s perhaps not a wise term to use, given what we now know,” Justice Tony Randerson said.

Mr Farmer said in a year when at least a dozen finance companies, including Capital + Merchant, Nathans and Bridgecorp fell over, liquidity checks were a major issue for Lombard’s directors.

He said there were weekly liquidity updates provided internally and to directors.

Mr Farmer admitted reinvestment rates varied hugely during the second half of 2007 but said it was due in part to all the uncertainty in the finance company sector, delays in developments and delays in repaying loans.

“Lombard’s reinvestment was strong despite the concern. There was a decline, but in fact Lombard did significantly better than others.”

He said reinvestment rates plummeted to just 12% one week but climbed to a high of 47% one week in November and reached 45% in December.

Mr Farmer told Justices Randerson, Christine French and John Wild the Lombard four did not mislead investors.

He said the prospectus had adequately warned of the liquidity risk.

Friends and family turned out to support the four, including Bryant's son and transport minister Gerry Brownlee’s press secretary Nick Bryant and Maori Council lawyer Donna Hall there for Jeffries and Sir Douglas.

Ms Hall says she was not an investor in the collapsed company but wanted to show her support for the two former company directors as they fight their sentences.

Queen's counsel Colin Carruthers appears for the Crown.

He is expected to present his case on Wednesday.

The appeal is proceeding.

bcunningham@nbr.co.nz