Douglas failed in role as Lombard chairman, Crown says
Douglas failed in role as Lombard Finance chairman, Crown says
By Paul McBeth
Jan. 31 (BusinessDesk) – Douglas Graham failed in his role as chairman of Lombard Finance & Investments by not taking a more active role in getting to know the property development business as the lender ultimately failed, the Crown prosecutor says.
Graham, better known for his work on Treaty settlements in the 1990s as a cabinet minister, let Lombard Finance’s management deal with an increasingly problematic loan book, and didn’t lead greater board scrutiny of the lender’s practices, prosecutor Colin Carruthers told the High Court in Wellington in his closing argument.
When the lender was in trouble, Graham should have ensured he became “knowledgeable about the state of the loans, what obstacles existed, what the likely impact was,” he said.
One of the “rare examples” of Graham showing an adequate amount of scepticism was over the recoverability of loans to Mark Bryers and Blue Chip, he said.
“The Crown’s position is that the evidence establishes the accused failed to fulfil their obligations and that failure deprives them of the reasonable grounds defence,” he said.
Carruthers said the tension between supporting the company’s commercial goals was trumped by disclosure requirements under the law.
The Crown contends Lombard Finance directors Graham, Bill Jefferies, Lawrence Bryant and Michael Reeves made untrue statements in a 2007 prospectus, investment statement and advertising material.
In response to questioning from Judge Robert Dobson as to whether Lombard Finance’s stated lending policy implied it was a conservative lender, Carruthers said the recoverability of the loans wasn’t as secure as the amended prospectus stated.
The Crown didn’t address Lombard Finance’s decision not to diversify its lending beyond property development, as indicated in the offer documents, Carruthers said in response to a question from Judge Dobson.
Paul Davison, counsel for Graham and Bryant, will make his closing argument tomorrow, with the lawyers for Jeffries and Reeves set down for the rest for the subsequent two days.
Lombard went into receivership on April 10, 2008, owing approximately $127 million to about 4,400 investors, and it is unlikely that secured debenture holders will receive more than 24 percent of their investment back. Unsecured creditors are likely to receive nothing.
The case is continuing.