HONEST & ACCURATE LIQUIDITY RISK DISCLOSURE IS PARAMOUNT IN LOMBARD DIRECTOR’S COURT CASE FOR SHAREHOLDERS RESOLUTION
Grace is about restoring integrity, accuracy, honesty, wellbeing, Kiwi kinship when trust is robbed, eroded and breached.
Recovery is about letting the aftermath’s ashes, atoms, dust settle. When confidence returns. having hope again to rise again with the just.
Lombard & Bridgecorp are two companies whose management could have been better concerning their investors, partners and shareholders. Lombard lost $10 million in investors monies between December 2007 and April 2008. The stories remind me of the AIG scandals at the brink of the GFC in America. There are similarities between AIG, Bridgecorp, Lombard and also South Canterbury Finance and Strategic Finance’s management methodologies that burned trusting shareholders who were left out of pocket through directorship oversights of error that equated to shareholders ‘snatch and grab’ fronts. In my view AIG for example was a case of ‘economic elderly abuse’ concerning this companies shareholders.
Abusing the elderly, is never okay. Many people lost their hard earned pension savings in an AIG kind of tale.
In such stories, often the directors of these companies with a high profile are the ones that journalists target to do investigative journalism stories on. The journalist makes a name for themselves in such cases appeasing the angry shareholders that they interview. New stars are made while some are tarnished. We are fascinated by these stories, because they are stories of “where anything can go wrong.”
The contexts of these stories is set against a backdrop of a world stage where entire countries (many centuries old and once pinnacles of empires of the world) have been financially mismanged. Portugal, Ireland, Italy, Greece and Spain are a few countries whose storylines mirror the Bridgecorp, Lombard, Southern Investments, South Canterbury Finance and AIG stories. Therefore, the principles of Bridgecorp and Lombard (et al) stories that the courts decide on with judgements and outcomes are valid concerning much wider cases too in the Eurozone, because the wisdom of judges endeavors to restore a sense of order to the purpose of fairness in business practice – moving forward.
These same principles could also be applied to governance models in the Eurzone to help make them stronger too - a key reason why I find these cases so appealing. On one hand we learn from mistakes (even mistakes of a lust for delusions of unsustainable grandeur and fleeting addictions of greed that can seduce us all in moments of stupidity).
On the other hand mistakes are fertile ground to glean wisdom we may have lost along the way, a crucial reason why judges hold the office of judge and serve the many-sided prisms of justice’s diverse findings of truth, in their role – effectively – as public servants for the wider good of society.
The best judges turn mistakes into national lessons that better and redeem us all. “The greater good, in good faith” is then restored through a judge’s wise presentation of order that’s fair and just.
It is not a glamorous job being a judge. Wrestling with finding a medium of truth’s narrow and least walked path, is what judges must do when they “inherit a case that is all up the boohai” on their desk. The Lombard case is one such case. Once a judge is satisfied they have gathered all of the facts, the path good judges establish from the facts in seeking a wise judgement, then has the potential to become a highway, for others to journey on more safely. In this regard, they are traffic controllers too of increased trade into an economy.
The best judge restores once-eroded trust. They dissolve doubts. They are magicians. Society’s healers. Builders of strong foundations whose vision is so strong and advanced that it is often realized long after they’ve gone.
[Lombard Chairman, Sir Douglas Graham - Photo Getty Images].
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Lombard News: Derek Cheng writes a story, raising the question” Should “Sir Douglas Graham - a Lombard director be stripped of his knighthood over the Lombard case?” In the Lombard case, two company directors, Graham and also Bill Jeffries are former Ministers of Justice.
Cheng’s story in the New Zealand Herald, highlights spurned shareholder, pensioner Paul Wah, 79 and his views as a Lombard shareholder.
Stuff reports: ‘Former cabinet ministers Sir Douglas Graham and Bill Jeffries, and two other former Lombard Finance directors, have been found guilty of four charges of making false statements. The verdicts, delivered in the High Court at Wellington this morning, also included one set of not guilty verdicts for Graham, Jeffries, Lawrence Bryant and Michael Reeves.
They were allowed bail without conditions. Sir Douglas was visibly shaken and some members of the men’s family were in tears after the hearing.’
Yesterday, a judge found the directors – Graham (chairman), Jeffries, Lawrence Bryant and Michael Reeves – guilty of making untrue statements about the company’s position in its offer documents in December 2007. 24cents to the dollar was what secured shareholders were expecting an R.O.I on.
“These people put themselves up as people of integrity,” Mr Wah said. “If I can’t trust Sir Douglas Graham, who would I trust?” he added.
Mr Wah’s points are very valid. In a further comment that resembles a Lord of The Rings styled movie script set in the Hendian filmmaking town of Chinawood, Mr Wah also asks: “How can a knight of the realm be … not a common criminal but someone guilty of criminal conduct?”… “My fondest wish would be to see those guys on bread and water for a few years.”" Okay, understandably there’s very little mercy going on there from Mr Wah. He has 100% revenge in his heart for the main actors involved in the Lombard tale. At 79, again his feelings are perhaps even more valid.
In Cheng’s report, Justice Robert Dobson found the men guilty of aspects of four charges under the Securities Act, including failure to properly disclose the company’s liquidity risks. Judge Dobson also noted the readers of Lombard’s offer documents were not adequately informed of ”the extent of the company’s concerns, plus the downwards trend in cash and the extent of error in management projections of loan repayments.”
Cheng notes,’Graham himself lost money – he reinvested $12,000 of $17,000 of matured debentures in October 2007, and also held a small stake in Lombard Group, then NZX-listed.’ In addition, both Graham and Jeffries have lost their 90 per cent international travel rebate that they were entitled to as former MPs. Other fines and compensation claims could occur for Lombard’s directors.
Should Graham be stripped of his Knighthood, as Mr Wah would like to see happen? Kiwiblog notes: “I think calls for Sir Douglas Graham to lose his knighthood are uncharitable. He did not get it for services to finance companies. He got it for his contribution to Parliament, Government and Maori. But again, I can understand the views of the investors who lost their money.”
What Sir Doug Graham did in being the mouthpiece elect, to champion the beginning of justice’s steps of equality between The Crown’s relationship with Maori regarding Treaty of Waitangi recognition becoming a more tangible concept for Maori as Treaty Partners of The Crown, is a legendary tale most New Zealanders are very proud of. During those years, where Sir Douglas held the office of MP and made history in terms of furthering justice recognition when all New Zealanders began to make redress in recognising the spirit of the Treaty of Waitangi – allowed our culture to grow into maturity in more visible ways. That important work can never be stripped from any New Zealander whose proud of this legacy of justice, and certainly not Sir Douglas Graham.
However, Mr Wah’s wondering where his sense of equality is on the Lombard issue. Certainly he got burned from a case of “when anything can go wrong,” and where unfortunately it did. How can New Zealand ensure that valued citizens like Mr Wah don’t get abused in business investment deals?
I am more interested in what factors and forces eroded Sir Douglas’ sense of justice and sound judgement leading into the Lombard company being established. That within itself is a goldmine of wisdom and caution for all people in business during a GFC to read and learn from. Perhaps Doug can redeem this patch of poor judgement, with a reflective story told honestly – that speaks to all leaders (and their shareholders) who have been involved in ‘risky liquidity based investments’ where too many unknown variables have not been disclosed or even considered sufficiently, before business ventures regarding shareholders investments have been propositioned for.
Restoring the health of the man and his family is more important than judging a fall from grace – although the remedy to restore justice could also be brutal concerning Lombard’s directors. In the process, restoring the shareholders faith in justice and sound business practice that involves politicians (past and present) is equally important as restoring Mr Graham.
How can New Zealand win from this? Especially people like Mr Wah, an unwilling victim of a litany of negligence and errors?
What is the criteria and the degree that ‘liquidity risk’ should be disclosed at an acceptable level to potential investors – in the court’s opinion?
How can risk exposure be minimalized and business leaders cease from ‘just faking it’ to make a buck, even when they know a deal isn’t solid? Whatever happened to the Kiwi answer, “I dunno” when a company director is not sure of the path ahead, when questioned by others? Does this dumb yet honest answer need to be allowable ‘directorship speak’ in order for a team of directors to find answers a lot earlier on in the piece.
How can a culture of shareholders exploitation change in the world, with better investor checklists being provided to second, third parties? What is the preferred template of R.O.I analysis the business community deem fit for directors to carry out and present back to shareholders to avoid a loss of shareholder’s dough?
Cases like this, just makes young people weary of looking at anyone wearing a tie and a title, when entering the business world at all these days. Doug’s story does not help this perception. So how will Sir Douglas Graham and friends work with young people in the future to change this perception of ‘men in power suits being untrustworthy’ in a business context?
When will elderly pensioners be afforded more respect too from people who promise to grow their investments? Sir Douglas should have known better at 70. Men in their 50′s are more prone to this kind of stuff in the business world. Having said that my Maori-Kiwi heart wants to ask my Iwi if we can legally adopt Sir Douglas and family, immediately! Mr Wah’s family too. Apparently, our tribe can do that now. :)
(The current Minister of Justice is Judith Collins who has replaced Simon Powers in the role after Mr Power accepted a job at Australia’s Westpac Bank in New Zealand).
~Posted by Horiwood.Com, Aotearoa New Zealand, Polynesia Asia-Pacific. 24.2.12~