Almost 4000 out-of-pocket Lombard investors will still get
only "peanuts" after the failed finance firm's receivers
reached a $10 million settlement with its four directors,
says one man who lost money in the company.
Lombard Finance & Investments' receivers, PwC, had made a
civil claim against the company's former directors for
alleged breaches of duties.
However, PwC announced yesterday a $10 million settlement had
been reached involving the receivers, the four men, their
insurers and an unnamed "third party".
The settlement will see another 9c in the dollar go to
Lombard's 3900 secured debenture holders, who were owed $111
million when the company collapsed in 2008. This brings the
total payout for investors so far to 22c in the dollar. One
of the receivers, PwC partner John Fisk, said he hoped the
payment would be made in about a month.
One person who lost money in Lombard, Lower Hutt man Paul
Wah, said that while investors were "grateful for small
mercies", the payment wasn't "great news".
"A lot of those secured debenture holders have either died by
now or gone bust. Together with what has already been
distributed I suppose it amounts to perhaps 20c [in the
dollar] ... as I've said, it's peanuts," Wah said.
The Financial Markets Authority had filed its own civil case
against the Lombard directors - Sir Douglas Graham, Michael
Reeves, William Jeffries and Lawrence Bryant - but dropped
this as a condition of the settlement agreement.
" ... FMA concluded that the PwC settlement represents the
best outcome for Lombard investors, and that it was in the
public interest to consent to the settlement and discontinue
its claim," a FMA spokesman said.
"Today's announcement has no bearing on FMA's other civil
claims [in other cases]," he said.
Fisk said he could not reveal who the unnamed third party was
as it would breach the terms of the settlement agreement.
In the case of another failed firm, Nathans Finance, PwC had
also targeted the firm's auditors in its civil claim.
The Herald asked Lombard's former auditors, KPMG, if the
accounting firm was the third party involved in the
settlement and a spokesman said he could not comment.
After yesterday's announcement, Lombard's receivers expect
the final payout to secured investors to be 25c in the dollar
and Fisk said he hoped the receivership would be wrapped up
in about a year.
Fisk said capital note holders who had invested $10 million
and subordinated note holders who had invested $3.7 million
were unsecured and unlikely to receive any return.
The four directors were found guilty of Securities Act
charges in the High Court and in the Court of Appeal were
sentenced to home detention.
They appealed these sentences to the Supreme Court and while
it has been heard, a judgment has not been released.