Lombard Four latest: Crown wants home detention added
UPDATED / 5.55pm:
The Crown will argue for home detention to be imposed to the existing community service sentences of former Lombard Finance directors Sir Doug Graham, Bill Jeffries, Lawrie Bryant and a sterner sentence for executive director Michael Reeves.
Colin Carruthers QC and lawyer Dale La Hood are representing the Crown at the Court of Appeal hearing this week, which is two parts being heard concurrently: the directors appealing against their conviction and the Crown seeking tougher sentences.
The appeal over sentencing is due to be heard tomorrow but Carruthers told Justices Anthony Randerson, John Wild, and Christine French today that the solicitor-general was seeking "home detention be imposed in addition to community work".
"That's certainly put forward for (Graham, Jefferies and Bryant) but the Crown takes Mr Reeves' case into a more serious category than that," he said.
The Court of Appeal says Lombard Finance's directors should have made more mention of the company's financial troubles.
Justice Tony Randerson has questioned why an amended prospectus published late in 2007 did not outline the company's deteriorating loan book.
"They could have said something like 'things haven't been as good as they have in the past. We anticipated this trend, nevertheless we are confident we can manage our liquidity'," Justice Randerson said.
He could not understand why the worsening market conditions, which have been put down largely to delays in developments and maturing investments, were not referred to by management and the board.
Queen's Counsel Colin Carruthers this afternoon launched the Crown's case for tougher sentences for chairman Sir Douglas Graham, directors Bill Jeffries and Laurie Bryant, and chief executive Michael Reeves.
Mr Carruthers agreed with Justice Randerson about making more of a mention in the amended prospectus, saying it would have had to be "a little sharper" than a general statement.
The Lombard Four avoided prison terms in March last year after being found guilty by Justice Robert Dobson of misleading investors by signing off on offer documents which omitted material information about Lombard’s liquidity in late 2007.
They were given non-custodial community-based sentences and ordered to make reparation
They are appealing those convictions and sentences while the Crown wants more serious sentences, including the addition of home detention for the three former directors and "something more serious" for Reeves.
Mr Carruthers said the question is whether Justice Dobson was correct to assess the ommission of Lombard's liquidity from its prospectus.
He said Justice Dobson was right to look at liquidity issues.
Mr Carruthers said Lombard Four Queen's counsel Jim Farmer gave the impression the directors took it upon themselves to amend the prospectus during 2007 because they were sufficiently worried about liquidity issues.
"He gave the impression the amendments were somehow altruistic."
However, Mr Carruthers said the prospectus expired in December 2007 and the amended prospectus was required by the market.
He said the company's cash reserves had decreased markedly, which was a great cause for concern among the directors.
"There was a severe downward trend in cash reserves and that hugely affected Lombard's ability to pay debts as they fell due. That was the reason for the directors' certification that Lombard would be able to deal with all its debts over 12 months.
Earlier in the week, Mr 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."
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.'
The appeal is continuing.
Additional update reporting: BusinessDesk