Lombard fallout: Graham urged to give up Sir

00:22, Mar 30 2012
douglas graham
SIR DOUGLAS GRAHAM: He resigned as a director the day after the company was put in receivership "as there was nothing more I could do''.

Disgraced former justice minister Sir Douglas Graham has been urged to hand in his knighthood as a gesture to those who lost more than $110 million in Lombard Finance and Investments.

Graham, who was Lombard's chairman when it collapsed in 2008, escaped jail yesterday, along with fellow former justice minister Bill Jeffries, director Lawrence Bryant and chief executive Michael Reeves.

All four will have to complete lengthy periods of community work, and Graham and Bryant must make substantial reparations payments to investors.

All were found guilty last month of making misleading statements in documents seeking money from the public between December 2007 and April 2008, when Lombard was put into receivership, owing $111m to about 3600 unsecured investors.

Investor Paul Wah said yesterday's sentencing in the High Court at Wellington was "an opportunity for Sir Douglas Graham to make a gesture to the investors and the New Zealand public.

"And I think the best thing that could happen would be for him to voluntarily surrender [his knighthood] rather than have to put the prime minister through the unpleasant task of having to strip him of it.


"In some respect, that would restore some of his mana."

Prime Minister John Key is still refusing to say whether Graham's knighthood will be taken off him.

"At the point at which he has completed all of the legal options available to him, then at that point I will consider the matter," Mr Key said.

The men have 28 days in which to appeal should they wish to. Paul Davison, QC, lawyer for Graham and Bryant, said outside the court that his clients' reaction "was one of relief" and they wanted to reflect on the sentence.

Jeffries told the court through his lawyer that he planned to appeal.

Mr Wah said the reparation payments from Graham and Bryant totalling $200,000 were inadequate, but about all he could have expected.

"There are some shareholders who have lost a disproportionate amount of their savings and therefore their retirement."

Mr Wah said he was now looking for the receivers of Lombard or the Financial Markets Authority to pursue a class action against the men on behalf of investors.

The FMA has a civil claim before the court seeking compensation for investors who relied on the offer documents to invest or reinvest money in Lombard.

Graham, 70, was sentenced to 300 hours' community work and must pay $100,000 reparation. The Lombard directors owned 60 per cent of the company and lost considerable sums themselves.

The court was told Graham's reparation payment would "pretty well clean him out". But his home in the upmarket Auckland suburb of Remuera was held in a trust of which he was not a beneficiary.

Jeffries, 66, a lawyer, was sentenced to 400 hours' community work. He said he could not pay reparation and, even if he could, he had philosophical and principled objections to doing so.

Reeves, who founded the company, was sentenced to 400 hours' community work. He could not pay reparation and Justice Robert Dobson said the sentence that otherwise would have been appropriate was reduced because of his ill-health and having sole care of two children and part-time care of a third.

Bryant, 68, was sentenced to 300 hours' community work and must pay $100,000 reparation. The owner of a small vineyard in Wairarapa, he said he would borrow money to pay.

Investor Gino Zambon said he had not expected any of the four to be sent to jail. "No, the old-boys' network would have protected them. What judge would sentence a sir, a knight of the realm, to prison?"

Passing sentence, the judge said the charges on which the men were found guilty were of omitting information from investment offer documents used for 101 days until the company was put in receivership. More than $10m was either invested or reinvested during that time.

The judge accepted the men had not intended to mislead but their decision not to disclose growing pressure on Lombard's cash flow was not one they could reasonably have come to.

If the pressures had been spelled out, readers of the documents would have seen the risks of investing in a materially different light, and he thought most would not have invested or reinvested their money.

The convictions come under a law that has been in place since 1978.


The Lombard Finance four may soon be seen planting trees along Wellington streets or picking up litter as they serve their community work sentences.

Victoria University criminologist Elizabeth Stanley said the men would not get any special treatment despite any skills or educational background they might have.

What they ended up doing would depend on the local Probation Services. She said she had heard of people being given community work based on their skill-set in Britain and the United States, but not in New Zealand.

They could be asked to do anything from gardening to picking up rubbish.

The community work must be undertaken at a hospital or a charitable, educational, recreational or cultural institution or organisation, or at an institution for the old, infirm or handicapped. And it must be on land owned or run by the Government or a public body.

The men have to complete their work within 12 months, and the times are determined by an agreement between them and the community agency they end up working for.

They are not entitled to any payment, and any breach is punishable by a fine of up to $500.


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

Former Cabinet ministers Sir Douglas Graham and Bill Jeffries, and fellow directors Lawrence Bryant and Michael Reeves, were found guilty on February 24 of four charges of making false statements in documents seeking money from the public in December 2007.

Sir Douglas Graham, 70 300 hours community work,  $100,000 reparation

The former chairman of Lombard Finance, Graham was a lawyer before becoming a National MP from 1984 till 1999. His ministerial portfolios included justice, cultural affairs and, most prominently, Treaty negotiations.

He also became attorney-general and courts minister. He was made a Knight Companion of the New Zealand Order of Merit in 1998, and has held various board positions.

He has left his $2m lifestyle property at Drury, south of Auckland, for a Remuera townhouse.

William (Bill) Jeffries, 66, 400 hours community work

An  executive director, Jeffries is a Wellington barrister and former Labour Party minister who served in Parliament from 1981 to 1990.

Portfolios included justice, transport, and works and development. He retired in 2010 as a chief commissioner of the Transport Accident Investigation Commission (TAIC), and is the honorary consul-general for Sweden.

Lawrence Bryant,  300 hours community work, $100,000 reparation

 A journalist, Bryant has a public relations consultancy. The New Zealand Who's Who says he was assistant press secretary to the Queen in the early 1970s and is a graduate of Stanford Graduate Business School.

Michael Reeves, 400 hours community work

Lombard's managing director, Reeves has reportedly spent 15 years in commercial lending and merchant banking.


Graham and Jeffries will be stripped of their taxpayer-funded travel perks for former MPs.

A former National justice minister and attorney-general, Graham served five terms as an MP from 1984 to 1999 which entitled him to a 90 per rebate on private domestic and international travel.

Jeffries also served as justice minister from 1989 to 1990. As a three-term Labour MP for Heretaunga, he was entitled to a 60 per cent subsidy.

There have been calls for Graham's knighthood to be stripped from him.

* This story has been edited. It provided the wrong date for Bill Jeffries' departure from TAIC.

The Dominion Post