Lombard Finance was 'sailing very close to the wind'

The Court of Appeal has heard tight liquidity led to Lombard Finance’s amended prospectus in 2007.

In an exchange with Justice Tony Randerson, Lombard Queen's counsel Jim Farmer agreed that former Lombard board chairman Sir Douglas Graham said in December 2007 the company was “sailing very close to the wind.”

Mr Farmer said the board realised the next six months into the early half of 2008 would be tight and the company would be in a very vulnerable position if loan repayments were not made.

Former directors Laurie Bryant, Bill Jeffries, Sir Douglas and chief executive Michael Reeves are appealing their convictions and sentences for misleading investors by signing off on offer documents which omitted material information about Lombard’s liquidity in late 2007.

All four escaped jail when they were sentenced in March last year, but the Crown wants their non-custodial sentences quashed and the four jailed.

Mr Farmer has told Justices Randerson, John Wild and Christine French Lombard was a “well-run company.”

He said conditions throughout 2007 became increasingly difficult and the directors were well aware of the worsening economic cycle.

“By December, directors were seriously concerned about liquidity – do you agree?” Justice Randerson asked.

“Liquidity was a concern and the directors amended the company’s position with an accurate and true prospectus,” Mr Farmer said.

Mr Farmer earlier 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.

The appeal is continuing.

bcunningham@nbr.co,nz

Blair Cunningham
Tue, 05 Mar 2013

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