Sweeping changes to securities law have undermined the deterrence effect of the custodial sentences handed out to former directors of Lombard Finance & Investments, which should be reduced back to original levels, the Supreme Court heard today.
Former Justice Ministers Doug Graham and Bill Jeffries, former PR man for the Queen Lawrie Bryant and Lombard's ex-boss Michael Reeves are appealing tougher sentences handed out to them by the Court of Appeal, though weren't granted leave to overturn their convictions.
Counsel for the directors, Jim Farmer QC, told the country's top court that the introduction of the Financial Markets Conduct Act last year removed the criminality from their offending, which attracted strict liability, meaning dishonest or criminal intent didn't have to be proved.
"The question of deterrence and denunciation in relation to this offence simply can't be something that can properly be said to have any great weight because the law has changed," Farmer said. "Nobody is going to be deterred by thought of going to prison if they honestly made a mistake."
The new regime reserves criminality for the most egregious misconduct, leaving cases similar to Lombard as civil matters.
Farmer said he is seeking to reinstate the penalties handed down in the High Court.
All four avoided jail time when sentenced in 2012, when Justice Robert Dobson said the offending was much less serious than that involving other failed finance companies, such as Bridgecorp. They had been found guilty of making untrue statements in investment documents and advertisements in late 2007 and early 2008 and the Crown had initially sought jail terms.
The Appeal Court imposed custodial sentences after determining the original penalty didn't reflect the gravity of offending and didn't give sufficient weight to accountability, denunciation and general deterrence.
Jeffries was sentenced to eight months' home detention and 250 hours community work and Reeves was sentenced to nine months' home detention and 250 hours community work, having both initially been sentenced to 400 hours community work.
Graham and Bryant were each sentenced to six months' home detention and fines of $100,000 apiece. Graham had his sentence of community work reduced to 200 hours from 300 hours.
Colin Carruthers QC, appearing for the Crown, told the court this "is a serious case in the category of carelessness," and that the decision to omit the information in the Lombard prospectus wasn't open to the directors.
"That puts it into a significant category," he said.
The hearing is being heard by Chief Justice Sian Elias, and Justices Terence Arnold, William Young, Susan Glazebrook and Peter Blanchard. It is set down for one day and is proceeding.
The 4,400 Lombard Finance investors owed $127 million at the time of the receivership have been repaid 13 cents in the dollar, and are looking at an estimated recovery of between 15 per cent and 20 per cent.