The Financial Markets Authority has decided not to take legal action against eight directors of failed finance company St Laurence, but has "warned" them in respect of potential breaches of the Securities Act.
The FMA has now closed its investigation into the in-liquidation company, which was tipped into receivership by its trustee Perpetual on April 29, 2010 owing 9,431 secured debenture holders NZ$212 million in principal and NZ$27.1 million in interest. Previously St Laurence had been in a moratorium arrangement. See other articles about the company here.
Distributions by the receiver to date have totalled just 16.7 cents in the dollar.
The FMA said based on the evidence it had seen, St Laurence’s September 2007 prospectus failed to properly disclose information about loan quality and liquidity for the period March – June 2008. It said the directors have been advised of these findings.
"FMA has reached the view that in distributing the prospectus with inadequate disclosure, there was likely to be a breach of the Securities Act 1978, for which the directors may be liable."
The directors who have now been warned are: Kevin Podmore, James Sherwin, Geoffrey McWilliam, Keith Sutton, Barry Graham, Aeneas Edward O’Sullivan, Andrew Walker, and Sandra Lee (alternate for Kevin Podmore and Aeneas Edward O’Sullivan).
"Taking into account FMA’s enforcement policy and public interest considerations, it has determined that issuing a warning, rather than bringing court proceedings, is the appropriate and proportionate response in this case.
"FMA concluded that minimal additional benefit in terms of punishment, deterrence or redress for investors would have been achieved by taking any proceedings in Court."
The decision to issue a formal warning took into account a number of factors, including:
- The short, four-month period in which FMA believes the disclosure breaches occurred, during which reinvestment in St Laurence was low
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The absence of evidence of personal gain or dishonesty involved in the alleged misconduct
- Defences that might have been argued by the directors in court.
The FMA said that during the short period in 2008 under consideration there were no new or rolled-over investments in St Laurence capital notes. Investments in St Laurence secured debentures during this period totalled approximately $4.5 million. That indicates total aggregate losses to investors of $3.3 million, taking into account recoveries.
FMA’s Head of Enforcement, Belinda Moffat said: "In balancing the cost of taking this case to court against the low level of recovery that might be achieved and also considering the possibility of successful defences being argued, FMA has elected to issue formal warnings to the directors.
"A further relevant factor in deciding to issue a warning rather than take the case to court was the absence of evidence of personal gain or dishonest conduct on the part of the directors."
Moffat said in FMA’s view, the St Laurence prospectus, issued in September 2007, did not contain adequate information about the company’s declining liquidity and loan quality, which FMA believed became material from March 2008.
FMA considered that the financial health of St Laurence disclosed to investors, from this period, did not reflect the true position of the company, and the directors should have recognised this and ensured the appropriate disclosures were made.
St Laurence withdrew the September 2007 prospectus on June 30, 2008.
34 Comments
So i am unable to present my drivers licence when pulled over and get a $50 fine plus $30 court costs and these guys get nothing.Maybe i should run some body over as long as their is no evidence of personal gain,i should be home free.When did we change our countries name from New Zealand to cuckooland.
Aside from the issue where well-manicured dudes in suits get an easy ride in the judicial system, the real factor is that there's no violence or threat of violence. If they'd forced anybody to sign a contract at gunpoint, or kidnapped a grandchild and sent fingers in the mail until nana bought units, then they'd be getting the big sentences, because of the distinction made between crimes against persons and crimes against property.
Well, apparently not, unfortunately.
If I was in charge of these things I'd be increasing the maximum sentence for this kind of crime at the very least.
As things are, it's an unfortunate gap in the system. Rip people off in a deliberate and pre-meditated way, on a corporate scale, and it doesn't get the big sentences because it hasn't crossed that threshhold into crimes against the [physical] person.
I think it's an appalling injustice myself, but with the law we've got, that's the way it is, and I'm not holding out high hopes of better regulation or a change in legislation while the Old Boys Network have their hands in each other's pants under the table.
Look forward to seeing some prosecutions against this kind of crime using the new Proceeds of Crime legislation, though. Having all their assets taken will hurt these grasping little piggies more than a few months in jail.
It's been proven in many studies and anecdotally that only increasing the penalties doesn't act as a deterent.
Those who perform basic crimes usually feel they're justified or that they won't get caught. So that way ever mounting punishments are just sublime on the ridiculous (which is what you get for having a dumbass punishment cultre anyway).
Those who are clever and prepared enough to do a cost/benefit analysis on the crime, are also clever enough to hide/spend most of the proceeds, with the exception of a few corrupt accountants, fund managers and lawyers (who fall into the previous paragraph, but just happen to do big enough crimes to make cost recovery profitable for the state).
Having a broken system and making it more severe, probably, if you think about it, isn't going to fix the holes...
the aside to thisw of course, is large punitative systems only affect a small portion of the population... who weren't going to commit crimes because they're already scared.
But because they're scared and it punishment is relevant to their thinking process, then they are the only ones who will be suitably impressed. So by increasing the punishment, you've manage to impress and deter the bunch of people who weren't going to do the crime anyway!
and are the studies of blue collar crime or white?
I'll agree on the cost benefit analysis being done by the crim (where bright enough), LOL.
Also there is a difference between making something that is too light a penalty more severe and making a "reasonable" penalty excessively severe. I mean home detention? really? wow how severe, would be great for me....LOL, no change really, just get shopping delivered.
However some US states have a 3 times and you are out policy, (the 3rd can be something minor like a speeding fine). This has caused a migration out of these states to ones that dont have such a law/rule.
there are studies on the generic "crime" and to test whether punishment is effective as a deterent (not just in human but animal subjects too). It proved to hold up in both blue and white, however the justifications and beliefs did change. The blue collar reports IIRC hold more impulsive and violent crime - although I expect the later is more to do with opportunity
you see that kind of ignorance (I don't mean in the insulting way, more in the not knowing way) is what I'm talking about.
You _can't_ vote a government out. You can only put a vote, or influence votes, to put a party IN.
to effective achieve an "out", you would require a suitable replacement...which we don't have thus "no matter who you vote for the governmentalways gets in"
Good point, and I agree, and yes I consider most of if not all of the parties in Parliment to be cut from the same cloth. I suppose the system we have is better and fairer than any other system we have or on offer as an alternative. It is certainly far from perfect, but the alternatives are even less appealing.
regards
Well Steven I didn't create the monster or the behaviour......but that is how it is! Whether you like it or not or refuse to believe it that is how the system operates!
If regulation worked the problem shouldn't arise......don't you think those Directors would be more terrified of the wrath of investors if the investors were allowed to take their own planned action? Regulation/legislation doesn't protect the investors.....does it? They can't go door knocking and get what's owed to them back can they?
You can cling to your fantasy of a righteous Nanny and the far reaching regulatory arm as being a quality approach........but it is delusional to think more or different regulation is going to correct a problem when you don't get to the root of the problem!
Fear of reprisal tends to keep people honest. When there is no reprisal dishonesty will run rampant!
Be serious, the directors and the pensions industry control things, not investors. Its one nice little earner, the pension companies vote the directors fat paychecks in return get good dividends, even it it weakens the company longer term....they'll just sell the shares and move on, its parasitic.
Regulation can and does work, where its done properly and enforced. Its wertainly better than the anything goes free market, 30 years leading up to 2008 proves that.
regards
No, the victim where the victim didnt take due care in investing is the victims fault, assuming there was no criminal conduct. Really if ppl were that niave then they should be learning fast and asking hard Qs of thier Pollies and making it clear they will be voting for a pollie that "solves" the issue. We get lots of whining on how the saved's money isnt safe with the OBR, well simple move it out, why should some ppl enjoy risk free investment? at the expense of an innocent 3rd party? (ie the tax payer).
Now sure some of the finance companies were criminal, but that is a different argument/point.
regards
Govn employees are watched by the Pollies we vote in and we the voters should be watching the pollies and making it clear if the pollies dont do their job we will vote them out. Yes OK it will be a different bunch of stiffs, but if the threat of vote loss doesnt do it nothing will.
It comes out of general taxes as does most police type work. Alternatively a levy maybe fairer so I dont pay for someone to watch your money.
regards
DC posted a link above on the crime sentences handed out to Finance directors.
Oh and in terms of blue collar crime I oppsied and left $20 in a auto till on Sunday, went back 30mins later. Its recorded on the camera and the next person's eftpos card, police not interested.
regards
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