Closing arguments to start in Lombard bosses' trial

Last updated 05:00 30/01/2012

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The criminal trial of four Lombard Finance and Investment directors, including two former Cabinet ministers, enters its final phase tomorrow with closing arguments in the High Court at Wellington.

Former justice ministers Sir Douglas Graham and Bill Jeffries, managing director Michael Reeves and fellow director Lawrence Bryant are accused of making false statements in two investment documents and three related advertisements between December 24, 2007, and April 8, 2008.

All have pleaded not guilty to the charges, which carry a maximum penalty of five years' imprisonment or fines of up to $300,000.

Lombard Finance was put into receivership in April 2008, owing $125 million to 4400 investors. Secured creditors are expected to be repaid less than 24 cents in the dollar.

Graham, who was chairman, has told the court he had personally lost retirement savings of $12,000 he had reinvested in secured debentures in October 2007 and could "ill afford to lose". He was also a small shareholder in the then listed Lombard Group.

The trial began before Justice Robert Dobson on October 18 before adjourning for the holiday period. The Crown alleges the men had signed off on investment documents, seeking money from the public, and related advertising material which failed to disclose the rapidly deteriorating financial position of Lombard Finance.

As a result, investors were not fully informed when they decided to put the money with Lombard Finance. The documents understated the value of Lombard Finance's loan book, the troubled state of its lending and its dwindling cashflows.

Lombard Finance had also failed to adhere to its lending policies, resulting in investors being exposed to much greater risk than they had been led to believe, the Crown alleges.

Defence lawyers said there was no allegation of any deliberate attempt to mislead investors by the accused.

The Crown's case was a "post mortem" of a failed company caught up in the "tsunami" at the start of the global financial crisis, which engulfed the company over 101 days.

Graham said the board left the running of the loan book to senior management. "We were on the bridge charting a course through troubled waters – not in the engine room looking at the dials."

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