More jail time for Capital+Merchant pair
Prison sentences handed down to two directors of failed finance company Capital + Merchant would hopefully act as a deterrent to others, the Financial Markets Authority says.
Wayne Douglas and Neal Nicholls were sentenced to further jail time in the High Court in Auckland this morning on Financial Markets Authority (FMA) charges of misleading investors.
The two men are already serving seven-and-a-half years each in prison after being convicted on fraud charges brought by the Serious Fraud Office (SFO) last year.
The sentences are the longest handed out to failed finance company officers.
Douglas, 59, and Nicholls, 57, pleaded guilty in February to the Securities Act charges laid by the FMA for making untrue statements in the company's prospectus.
Justice Geoffrey Venning sentenced Douglas to eight months in prison and Nicholls to one year's imprisonment. This was on top of the earlier sentences.
When Capital and Merchant collapsed in 2007, 7000 investors lost about $167 million.
FMA head of enforcement Belinda Moffat said she hoped today's sentencing would act as a deterrent to others.
"Wayne Douglas and Neal Nicholls misled the public to get them to invest in Capital + Merchant Finance.
"If investors had known what was really going on, it is unlikely they would have invested at all.
The offending has had a grave financial and emotional impact on investors," Moffat said.
The sentencing of the failed finance company directors brings to an end the FMA criminal proceedings against the company's bosses.
During the sentencing Crown prosecutor Nicholas Davidson, QC, described the pair's offending as "serious and reckless".
Defence lawyer Bruce Gray, QC, who represented Douglas and Nicholls, said it was important to understand the directors' roles alongside that of the company's chief executive.
The two former directors were taking responsibility for their conduct, he said.
"Their offending was at the top end, but the gravity has already been recognised."
Nicholls' reference to the pressure put on the company by the financial crisis in former statements was not "avoiding responsibility", but recognising the "market condition", Gray said.
Justice Venning said both Douglas and Nicholls were remorseful, at a low risk of reoffending, and not in a position to pay reparations.
However, the effect of the offending would still be felt by investors day in and day out for the rest of their lives, he said.
Douglas' offending occurred because he wanted to maximise his personal financial position before withdrawing from the company, Justice Venning said.
"You put your own interests ahead of your obligations as director."
Justice Venning read letters from elderly investors who had lost hundreds of thousands of dollars, and had no chance of earning the money back.
Other Capital and Merchant directors Robert Sutherland, Colin Ryan and Owen Tallentire earlier pleaded guilty to charges in the FMA case. Tallentire was also found guilty in the SFO case and sentenced to five years in prison.
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