Jock Anderson

Lombard Financial Services Ltd, its chief executive Michael Reeves and chief financial officer Alan Lawson Beddie have been convicted and fined a total of $37,000 for misleading investors.

In a development this week Mr Reeves is understood to have appealed against conviction and sentence on the grounds that, despite his guilty plea, he should have been discharged without conviction on the single charge he admitted.

After a long fight to proclaim their innocence Mr Reeves, 46, Mr Beddie, 57, and Lombard Financial Services eventually pleaded guilty in the Wellington district court just before Christmas to a reduced number of charges of deceiving and misleading investors by effectively hyping up the values and security surrounding two retirement village contributory mortgage schemes.

The ten charges they admitted concerned debt securities issued in relation to two companies - Village Care New Plymouth Ltd and Ballantyne Development Company Ltd.

Lombard, Mr Reeves and Mr Beddie initially pleaded not guilty to all charges and battled for more than a year to have the charges thrown out.

At one stage they tried to have the case taken away from the district court and tried in the High Court.

Just before Christmas they pleaded guilty to a reduced number of charges.

Charges against Lombard directors and former Ministers of the Crown Bill Jeffries and Hugh Templeton were dropped.

In sentencing the company and its senior officers Judge David Ongley said there were no comparable cases from which to obtain guidance.

He said the maximum fine for these charges was increased from December 1, 2002 from $15,000 to $300,000.

These offences were committed under the earlier penalty regime but Judge Ongley said the increase in penalty reflected the intention that offending should be regarded seriously.

The judge accepted that Mr Reeves and Mr Beddie were caught by the strict liability that attached guilt by virtue of them being directors of Lombard.

But he found that it was to be “inferred that they took a risk,” in the case of Village Care of adopting “a benevolent analysis” of the transactions without exposing them to an “advisable stringent test for compliance.”

In the case of Ballantyne they failed to scrutinize documents for correctness before making an offer to investors.

“In view of the large amounts involved [$3.43 million in the case of Village Care and $13.185 million in Ballantyne] it was of critical importance to ensure that prospective investors were properly informed of all matters affecting the value of the security being offered,” Judge Ongley said.

Judge Ongley said there was no evidence that the offending involved a deliberate failure to comply with the Securities Act and its regulations.

Crown prosecutor Mark Woolford reminded the court there were requirements of accountability and responsibility and denunciation and deterrence.

In both cases the documents displayed “an apparently intentional use of language that obscured important information,” Judge Ongley said.

Rejecting a bid by defence lawyer Bruce Squire QC not to enter convictions, the judge said the prospective loss of employment by either Mr Beddie or Mr Reeves “is not shown to be probable” and there was no evidence that investors or employees would be prejudiced by convictions.

“While the health of the Lombard Group of companies may be prejudiced by entry of convictions, I think it proper to balance against that the possible detrimental effect on the finance industry of withholding the entry of convictions in a case of a breach that is not merely technical,” Judge Ongley said.

In each case the breaches involved misrepresentation of the value of security.

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