The Financial Markets Authority has dropped civil proceedings against four Lombard directors as the failed finance company's receivers have reached a $10 million settlement with the men, their insurers and an unnamed "third party".
The receivers had made civil claims against the directors for alleged breach of duties but announced today a settlement had been reached.
The receivers said that the FMA had consented to the settlement, which involved former directors - Sir Douglas Graham, Michael Reeves, William Jeffries and Lawrence Bryant - as well as the men's insurers and a "third party".
Lombard receiver, PwC partner John Fisk, said he could not reveal who this "third party" was as it would breach the terms of the settlement agreement.
As a condition of the agreement, the FMA has dropped its civil proceedings against the directors, which were filed in the High Court in 2010 but were on hold.
"FMA is of the view that the PwC settlement represents the best outcome for Lombard investors, and that given it had limited prospects of achieving any better recovery through its own claim it was in the public interest to consent to the settlement and discontinue its claim," the receivers said.
About 3900 secured debenture holders were owed $111 million when Lombard collapsed in April 2008.
Fisk said the settlement will mean a further payout to these investors of 9 cents in the dollar.
This brings the total payout so far to 22 cents in the dollar.
Receivers expect the final payout to secured investors to be 25 cents in the dollar once two remaining properties are dealt with. Fisk said he hopes the receivership to be wrapped up in around a year.
Fisk said 310 capital note holders who had invested $10.4 million in Lombard and 230 subordinated note holders who had invested $3.7 million were unsecured and were unlikely to receive any money back.
The FMA also brought criminal proceedings against the four Lombard directors for false statements in offer documents and advertisements.
The four were found guilty on the majority of these charges in the High Court and Graham and Bryant were sentenced to 300 hours community service and ordered to pay reparation of $100,000. Jeffries and Reeves were each sentenced to 400 hours community service.
They appealed their convictions and at the same time the FMA appealed their sentences. While the directors were unsuccessful, the Court of Appeal believed the original sentences were inadequate.
Jeffries was given 8 months of home detention and 250 hours' community work, Reeves 9 months home detention and 250 hours community work, Graham 6 months home detention and 200 hours community work and Bryant 6 months home detention.
The directors appealed these new sentences to the Supreme Court and while it has been heard, a judgement has not been released.