The Financial Markets Authority
has dropped civil proceedings against four Lombard directors
as the failed finance company's receivers have reached a $10
million settlement with the men, their insurers and an
unnamed "third party".
The receivers had made civil claims against the directors for
alleged breach of duties but announced today a settlement had
The receivers said the FMA had consented to the settlement,
which involved former directors - Sir Douglas Graham, Michael
Reeves, William Jeffries and Lawrence Bryant - as well as the
men's insurers and a "third party".
Lombard receiver, PwC partner John Fisk, said he could not
reveal who this third party was, as it would breach the terms
of the settlement agreement.
As a condition of the agreement, the FMA has dropped its
civil proceedings against the directors, which were filed in
the High Court in 2010 but were on hold.
"FMA is of the view that the PwC settlement represents the
best outcome for Lombard investors, and that given it had
limited prospects of achieving any better recovery through
its own claim it was in the public interest to consent to the
settlement and discontinue its claim," the receivers said.
About 3900 secured debenture holders were owed $111 million
when Lombard collapsed in April 2008.
Fisk said the settlement will mean a further payout to these
investors of 9 cents in the dollar.
This brings the total payout so far to 22 cents in the
Receivers expect the final payout to secured investors to be
25 cents in the dollar once two remaining properties are
dealt with. Fisk said he hopes the receivership to be wrapped
up in around a year.
Fisk said 310 capital note holders who had invested $10.4m in
Lombard and 230 subordinated note holders who had invested
$3.7m were unsecured and were unlikely to receive any money
The FMA also brought criminal proceedings against the four
Lombard directors for false statements in offer documents and
The four were found guilty on the majority of these charges
in the High Court, and Graham and Bryant were sentenced to
300 hours community service and ordered to pay reparation of
$100,000. Jeffries and Reeves were each sentenced to 400
hours community service.
They appealed their convictions and at the same time the FMA
appealed their sentences. While the directors were
unsuccessful, the Court of Appeal believed the original
sentences were inadequate.
Jeffries was given 8 months' home detention and 250 hours'
community work, Reeves 9 months' home detention and 250
hours' community work, Graham 6 months' home detention and
200 hours' community work and Bryant 6 months' home
The directors appealed these new sentences to the Supreme
Court and while it has been heard, a judgement has not been
- By Hamish Fletcher of
the NZ Herald