Lombard directors face court in October

Former National Party Cabinet minister Sir Douglas Graham is one of the directors charged by the Securities Commission. Photo / Sarah Ivey

The Securities Commission case against Sir Douglas Graham and fellow Lombard Finance and Investment directors will go to trial on October 12 in the High Court at Wellington.

Graham, Michael Reeves, William Jeffries and Lawrence Bryant have had criminal charges laid against them by the commission. They are defending these charges.

The commission alleges that Lombard Finance's offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to liquidity, the quality of the loan book and the company's overall financial position.

The commission has also filed civil proceedings against the four directors. This case is pending the outcome of the criminal prosecution.

The commission alleges the directors made false statements in the registered prospectus of September 2007 and investment statements of December 2007.

It also alleges that a DVD advertisement distributed during 2007 and 2008 contained similar statements about the company's financial position.

Lombard Finance, a subsidiary of the Lombard Group, was bought by Perth-based Insured Group in 2010.

Yesterday, the commission confirmed that it had begun civil proceedings against Insured Group for alleged breaches of the Securities Market Act in 2007 and 2008.

The commission said the breaches relate to Insured's alleged failure to disclose information to the market on the performance of its subsidiary Lombard Finance and Investments, including details on loan book quality and liquidity.

It said the information Insured failed to disclose was important because Lombard made up a major part of the Lombard Group's business and was financially dependent on its subsidiary.

The commission's director of investigations and litigation, Sue Brown, said it was vital to the integrity of capital markets that listed companies complied with their continuous disclosure obligations.

She added that the investigation had been "lengthy and complex".

Insured managing director Wayne Miller said the commission did not advise the company it was investigating Lombard Finance when it took over the subsidiary in 2010.

Miller said Insured had nothing to do with Lombard Finance or the Lombard Group in 2008, and that Insured assets today had no connection with the Lombard Finance's operation in 2008.

Despite this, the commission is seeking a penalty of up to $1.3 million from Insured.

"I am advised that, even where there is a case to answer, the remedies the commission is seeking are discretionary and I simply cannot understand how a court would seek to penalise the current Australian owners of the company."

Miller also said that the news would do "little to engender confidence"in the New Zealand capitalmarkets.