Where's the line between error and crime? If you want to be lenient towards the Lombard Four because they made a simple mistake, then hardly anyone deserves to be locked up

Just a mistake. A misjudgment. Surely not criminal. So says Stephen Franks, and I'm sure others, in response to the sentencing of the four Lombard directors this past week. The line goes that the shame, and perhaps civil damages, are as far as society should go in punishing these otherwise decent men. I'm not buying.

Former justice ministers Sir Doug Graham and Bill Jefferies, plus Lawrence Bryant and Michael Reeves, were sentenced on Thursday to community service; Graham and Bryant were also ordered to pay $100,000 each in reparations.

Justice Robert Dobson said in his summation that unlike some other finance company directors, these four were not guilty of intending to mislead investors, but had simply failed to act quickly enough to alert investors to the company's "deteriorating liquidity" - aka the fact it was losing money hand over fist.

For more than three months they knew of the problems, but didn't declare them, so investors were flying blind.

So is that just an accident? No, these men chose to act contrary to the law. They didn't slip on a banana peel and accidentally harm someone. They weren't tricked into defrauding someone by a prince from Nigeria. They made a decision, one that was against the law.

How is that different from any other crime? Isn't that "conscious wrongdoing"? Why should these men be treated any differently from our stereotypical unemployed man from Otara who got into a fight or drove a car drunk or based his wife?

As Financial Markets Authority CEO Sean Hughes said on Q+A:

"[Investors] were entitled to believe and trust in the names that encouraged them to invest in those ventures. We would say that perhaps the sentences did not reflect what we think… was the sort of outcome we were looking for, but at the end of the day, that’s the decision of the court, and we respect it"

Franks told Morning Report this week:

"I think the criminal law should deal with bad people. But the problem is it’s got involved in an area, where as the judge clearly said, this was just a mis-judgement…”

Except that most crime is the result of a series of mistakes and errors of judgment. Even bad luck. Heck, over 50 percent of all crime in New Zealand is committed by someone who's drunk or high.

You only have to sit in court for a few hours and hear the pitiful stories to start thinking, 'if only he hadn't chosen to have those extra couple of cans... If only he'd chosen to walk home... If only the punch had missed or he'd swerved left instead of right'.

No-one is just simply "bad" and anyway, that's not the test in law. The question is if, for whatever reason, they broke the law. Whether via ill judgment or some inherent genetic badness is irrelevant.

The only convicted murderer I've met was a guy who drank too much as a 16 year-old, trying to impress. People started getting lippy, the pushing and shoving got out of hand, he picked up a knife... next thing you know you can hardly remember the details but you're in Paremoremo until you're 30.

What's that story but a series of misjudgments?

My point is not whether that's deserved or meant to disrespect victims; my point is that the court must be consistent and 'I didn't mean it' or 'I've been good all the other times' has never been a reason to avoid a conviction.

Wouldn't the family of most convicted criminals be able to give examples of how their men where otherwise decent and honourable. Isn't he a stalwart of the local league club? Hasn't he produced a couple of fine boys? Wasn't he there for his mate when his mum died?

The court can always consider such things as mitigating circumstances, but it's a matter of consistency. The court should only give as much weight to the contribution these finance company directors have made to business as they do to the contribution 'everyday' defendants make to their communities of interest.

Sympathy for these men reeks of a different standard for people who are like us - people who make the sort of mistakes others in the middle and upper classes could imagine making.

'Getting falling-down drunk and stabbing someone in the street is beyond my ken - lock 'em up! But not telling potential investors my company's leaking money like a sieve? That's a mistake I could have made - be gentle!'

This is a vital principle, surely. I've got nothing against the Lombard Four. I've met Sir Doug several times and enjoyed his company, his intelligence and wit. He had a stand-out - even brilliant - political career. Recognising the political truth that Nats can get away with more left-looking policies than a Labour government can (and vice versa), he made historic progress on treaty claims and delivered much-delayed justice for many thousands of Maori. His bravery cost him within his own party, but he did what was honourable.

So no, I don't think he should be stripped of his knighthood. Not unless you're also going to take Sir Michael Fay's and any number of other honourees who have been less than perfect in some way.

But the quality of the man doesn't undermine the validity of the principle. From what I know of him, Sir Douglas is the sort of man who would probably argue that himself (even if he believes it doesn't apply to him in this case).

We don't get to pick and choose under the rule of law. If you break a law, you are punished proportionately, no matter who you are or what others might think of your offending. Protecting that principle is surely the best way to protect the law.

 

Comments (20)

by Tobias Barkley on April 01, 2012
Tobias Barkley

I absolutely agree.

 

by Graeme Edgeler on April 01, 2012
Graeme Edgeler

We don't get to pick and choose under the rule of law. If you break a law, you are punished proportionately, no matter who you are or what others might think of your offending. Protecting that principle is surely the best way to protect the law.

That pre-supposes that something should be a crime.

It is against the law to defame people. People are required by law to fulfil contractual obligations. Yet these things aren't criminal. Do you believe that doing anything the law prohibits - or failing to do anything the law requires - should be criminal, and liable to punishment?

That a failure to follow the law was not accidental, is not the defining feature of whether something should be criminal: a breach of contract can be an intentional act.

The question that Stephen has proposed is of this nature, and I'm not sure you address it. Some deliberate illegalities are not criminal (a deliberate choice to refuse to replace or fix a broken toaster despite the obligations in the Consumer Guarantees Act, for example), why is it that this sort of illegality is in the criminal category, and not the civil category? I'm not saying your conclusion is wrong, but the rationale for it doesn't stand up.

by william blake on April 01, 2012
william blake

Is that a long way of saying buyer beware, Graeme? 

It annoys me that the defence attempted to use the sellers 'good reputations' as a bargaining chip against their punishment, the fall from grace being further than the local shady car dealer, but as role models I think the penalty could arguably be increased for actions that bring the institutions, that these people represent, into disrepute.

by animalspirit on April 01, 2012
animalspirit

Was sitting outside a court room where a group of young people and legal aid lawyer were waiting for "crime" of taking $200 out of flat kitty to be heard by judge.  Hearing postponed.   That the police arrested suspect tells you sex and ethnicity (female, Maori).   Lawyer grumbling about cost of hanging about and size of "crime."   Police don't care, do they, except about teapot cases involving Key/Banks.   Sometimes you have to wonder about the distorted values of dear little ol' NZ!!

by animalspirit on April 01, 2012
animalspirit

How did this become three???

[ed: fixed it for you ... maybe such a good comment that the interweb kept on repeating it?]

by Tim Watkin on April 01, 2012
Tim Watkin

Graeme, the point is that concluding something shouldn't be criminal because it's just a mistake doesn't stand up. Thing is, what was done is a crime and is known to be a crime, so if you're going to use the 'misjudgment' argument to defend that crime, why not apply it to others?

If the argument is that it shouldn't be a crime, I say again that that sounds to me like making excuses for 'people like me' and 'crimes I could imagine committing'. Why not make the same argument for other crimes? Because people whose misjudgments lead to violence are 'bad' and people whose misjudgments lead to people losing their life savings – and all the subsequent misery – didn't really mean it? Nah.

by Tim Watkin on April 01, 2012
Tim Watkin

Not sure AS, did you just keep pusing the button? But I hear what you're saying.

by Graeme Edgeler on April 01, 2012
Graeme Edgeler

Is that a long way of saying buyer beware, Graeme? 

No. I haven't formed a view on whether it should be criminal.

I just don't think the reasons Tim has put forward carry the argument.

by Graeme Edgeler on April 01, 2012
Graeme Edgeler

Graeme, the point is that concluding something shouldn't be criminal because it's just a mistake doesn't stand up.

I agree. I just think your counter-argument of concluding something should be criminal because it's contrary to law and deliberate in similarly flawed.

If the argument is that it shouldn't be a crime, I say again that that sounds to me like making excuses for 'people like me' and 'crimes I could imagine committing'. Why not make the same argument for other crimes?

We should. We've done it before. Contrast the Police Offences Act 1927 with the Summary Offences Act 1981 which replaced it. Parliament made a lot of things that used to be criminal, non-criminal. Flying kites to the annoyance of the a member of the public, and sneaking into the concerts or sports venue among them.

I would also note that I'm not making the argument for this offence. I just think your response to Stephen's argument fails to make the case :-)

by Andrew Geddis on April 02, 2012
Andrew Geddis

@Tim: "If the argument is that it shouldn't be a crime, I say again that that sounds to me like making excuses for 'people like me' and 'crimes I could imagine committing'."

Without rehashing all of Stephen Franks' arguments, and at risk of being the least popular combination in the Universe (a lawyer speaking in defence of failed finance company directors), here's why the criminality of the actions is questionable. The particular offences for which they were convicted requires no deliberate (or even reckless) wrongdoing ... simply signing off on a false statement (even if you believe it to be true) that causes loss is enough. It's what is called a "strict liability" offence - if you do it, you are guilty.

So saying "what was done is a crime and is known to be a crime" is a bit beside the point - yes, they knew (or ought to have known) that signing off on a false statement was illegal. But they didn't know they were signing off on such statements when they did so ... . So it's a bit like a person who knows that growing marijuana plants is illegal, but thinks what he is growing is a row of tomato plants. If it turns out that, in fact and unbeknownst to him, the garden center has sold him a bunch of dak seedlings, should he be convicted for cultivating an illegal drug?

Now, maybe you might say "but being a company director is a position of such responsibility, where the potential consequences for other people's money is so great, that you ought to make absolutely sure you don't put your name to false statements - and if you do (on purpose or not), we ought to treat you like a criminal." Well ... maybe. But here's another position of great responsibility - journalism. And the consequences of a journalist writing a false story (whether knowingly or unknowingly) can have bad consequences - especially, say, in the run up to an election. As such, would there be a problem with a law like this one being passed, which makes it a criminal offence to publish or broadcast in the month before an election an untrue statement that defamed a parliamentary candidate and that may influence votes? After all - we shouldn't be making excuses for 'people like me' and 'crimes I could imagine committing' ... right?

One last point - no-one (and certainly not Stephen Franks) is saying that the defendants should walk away scott-free from the wreckage of Sovereign. The issue is whether the criminal law is the appropriate mechanism to respond to the director's actions, or should it be left to the civil law to extract such compensation as can be found to make good the losses. After all, the cry "they did harm, so must be punished!" sounds an awful lot like the retributive demands of the Sensible Sentencing Trust, etc. And if we think they are wrong when demanding "tougher sentences for criminals", then shouldn't we also ask whether some things should be crimes in the first place?

by Andre Terzaghi on April 02, 2012
Andre Terzaghi

I'm an engineer. If I screw up badly enough, with enough negligent recklessness towards the safety of the products I am involved in engineering, I fully expect to face a criminal court. Even if I didn't take any pride in my work, this risk would still enforce a due sense of caution in what I did. Most other professionals are in the same position.

I see no good reason why company directors should be exempt from this principle. From the information that has made it into the public domain, it certainly looks to me like these directors have had enough negligent disregard to their obligations that they should be in a criminal court.

My only reservation is it seems that historically other directors have been guilty of much worse transgressions and not been held to account in the same way. So to the extent that these men are the first to be truly made an example of, I can feel a certain sympathy for them. But if the effect of this decision is to awaken other directors to the extent of their responsibilities and make them take more care in their duties, then that can only be a good thing.

by Tim Watkin on April 03, 2012
Tim Watkin

The tomato/marijuana comparison doesn't work, Andrew, because growing tomatoes can never be illegal. But signing off on statements can be, if they're misleading. Isn't a better comparison getting behind a wheel when you reckon you're below the limit and your mates say 'yeah, you're fine', only to be stopped on the way home and proven to be over?

In that instance, saying 'I didn't think I was doing anything wrong' wouldn't get you very far in court.

As for Andrew's and Graeme's other points, I confess I wasn't after a legal debate but was making a moral point. I don't claim to have thought through where the criminal/civil line should be, but was simply arguing that saying 'it was a mistake' is morally indefensible. The legal technicalities, to me, are red herrings.

For example Andrew, while I understand your broader point about 'people like me' and the law around journalists, it's actually a nonsense argument that has nothing to do with what I wrote.

If journalists operated under the criminal law and if I broke that law, then I don't think I'd have a leg to stand on if I tried to argue that it shouldn't apply to me because I'd just made a misjudgment and wasn't a bad person. But we don't, so it's irrelevant.

The principle I'm arguing is that people charged under the criminal law should be treated the same, because in nearly all circumstances crimes stem from some misjudgment. End of. come on fellas, surely even lawyers can understand that!

by Andrew Geddis on April 03, 2012
Andrew Geddis

Tim,

With respect, you're simply not understanding Graeme, Stephen Franks and my argument. No-one is saying that Doug Graham et al shouldn't be found guilty of this offence just because they are "good people". It's not a claim that otherwise good people should not be prosecuted for any offences they may have committed. Rather, there is a question as to whether the actions that lead to their convictions ought to be criminal at all. And the argument against doing so is that it turns the sort of mistake that even good, careful and conscientious people may make into a crime that attracts all the social disapprobrium that "criminals" ought to suffer. And what is the point of doing this to even good, careful and conscientious people?  

That's the point of my analogy with journalists and criminal libel ... of course if criminal libel was on the statute books, then even saintly scribes who meet the elements of the offence should be prosecuted for it. But should we make it a crime in the first place if it results in otherwise good and blameless journalists unintentionally commiting the offence and thus becoming "criminals"? What good would be served by this? What harm would such a decision cause? Why is it the "right thing to do" to criminalise the mistakes of company directors, but not those of journalists?

As for "The principle I'm arguing is that people charged under the criminal law should be treated the same, because in nearly all circumstances crimes stem from some misjudgment", perhaps you could point to somewhere where someone has argued differently?

by Tim Watkin on April 03, 2012
Tim Watkin

It was Franks who used the idea or 'good' and 'bad', so I'm not sure you can speak that confidently for him. But either way we're arguing at cross-purposes. I could equally ask you to point to anywhere in the post where I argued about whether this offence should be criminal or civil or otherwise.

I didn't, because as I've said, I wasn't writing about that. So you guys are having your own argument, building a case against a point that as never made. Feel free to comment on the points that were made, however.

by Andrew Geddis on April 03, 2012
Andrew Geddis

@Tim: "I could equally ask you to point to anywhere in the post where I argued about whether this offence should be criminal or civil or otherwise." 

Do the opening sentances of your post count?

"Just a mistake. A misjudgment. Surely not criminal. So says Stephen Franks, and I'm sure others, in response to the sentencing of the four Lombard directors this past week. The line goes that the shame, and perhaps civil damages, are as far as society should go in punishing these otherwise decent men. I'm not buying."

by Rob Macdonald on April 03, 2012
Rob Macdonald

Parliament has prescribed a law and a crime.  A long time past.  A criminal law that doesn't require mens rea, in effect a crime committed by omission.  A criminal law with a statute based defence.  A law that doesn't discriminate between good/bad people with its bite. To the end what's good or bad is subjective anyway. Those commiting this offence, or another, are criminals.  Probably not too many of these laws exist. Is the law that the Lombard directors fell foul of fair or appropriate?  I don't know. But as it stands it is the law. 

I'm not sure what "I'm not buying" qualifies.   Or whether Andrew and Tim are at cross purposes.

But isn't Tim's point:

"We don't get to pick and choose under the rule of law. If you break a law [in circumstances which constitute a crime], you are punished proportionately, no matter who you are or what others might think of your offending. Protecting that principle is surely the best way to protect the law."

 As Andrew notes:

"The argument against doing so [making their omission/lack of care a crime] is that it turns the sort of mistake that even good, careful and conscientious people may make into a crime that attracts all the social disapprobrium that "criminals" ought to suffer. And what is the point of doing this to even good, careful and conscientious people."

I don't have a problem with Parliament revisiting this particular law or any other criminal law on a basis such as Andrew argues for to "specify or describe criminals" in a particular way. 

However as the law stands  Dobson J' held that the requisite "care" expected was missing:   

"Your offending involved issuing offer documents that expressed your confidence that Lombard had, and would have, sufficient liquidity to meet its obligations as they arose. The reality was that the Lombard Board had serious and constant concerns at the liquidity squeeze confronting the company at the time. Further, in the months before December 2007, predictions of the level of loan repayments had been highly unreliable when Lombard depended critically on projections as to the level and timing of major loan repayments in order to maintain its liquidity. You had decided over previous months to conserve liquidity as much as possible and in absolute terms the cash in the bank was showing a substantial and virtually uninterrupted downwards trend. The offer documents made no mention of these important factors. As a result, readers of the offer documents had to form their views about the liquidity risk they would expose themselves to on inadequate and misleading information."

The Judge held that a crime was committed, by, self evidently and although he did not say it, criminals (with no quotes), as criminals commit crimes.  As a consequence of that crime it is at least suggested that other people suffered financial loss. 

And is that all that different from an otherwise Saint's one off mind bending snap to drink, drive and ultimately harm another, and thereby commit another crime? 

Perhaps it is, perhaps it isn't, this is for Parliament, but in the end as things currently stand, it doesn't matter.

I don't think I would want to be paid to be a director of a public company. But if I were or if I were advising one, for fear of potential civil and criminal liability, I would certainly now require, if I hadn't before, an audit committee verification of each line of all documents it issues for which the director is accountable.

by Tim Watkin on April 04, 2012
Tim Watkin

Ugh, I was using the criminal in the broad sense that something is a crime, ie against the law, not writing a law essay. Thanks Rob for getting my point... These men erred and broke the law and that's no more an excuse as it is for anyone else.

by Andrew Geddis on April 04, 2012
Andrew Geddis

Obviously this has gone as far as it can, but may I just say (because I'm the kind of jerk who always has to have the last word) that if you are going to blog on legal issues, you have to expect legally trained people to weigh in on the topic from a legal perspective. And that is all.

by william blake on April 04, 2012
william blake

Lombard was offering 40% better returns than the banks when it went to the wall, not a scary return on investment but pretty good. I have no idea what return Lombard was making in house, but when the market tanked; pants down all round. The last word, caveat emptor. 

 

by danniel on June 01, 2012
danniel

I don't think that what they did was an innocent mistake, the kept some illegal activities secret and that's enough to make them accomplices to what happened even if they weren't the ones to initiate the whole thing. Justice was done in this case.

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