Good to see Ralph Chivers of the IOD risking a lashing by reminding  the flem-specked mob that the Lombard directors were not found to be dishonest or negligent or lazy. Ralph is doing his job, but he is also speaking truth.

The law is set to give New Zealand the worst of all combinations of outcomes. Those howling for blood will be disappointed by the sentences, which will seem pitiful for convicted criminals whose crimes, in media shorthand, will inaccurately boil down to losing $12m of money entrusted to them because of their criminal falsehood. Meanwhile directors fees will go up, the available quality will go down (those who have better things to do with their time will do it), much more will be spent on arse-covering compliance by the honest and the anxious, and crooks will do what they have always done – ignore the law.

I'm guessing that Ralph could not be as blunt as he should because of the head-in-the-sand duffers in his organisation he also quoted:

"But equally a number of senior directors have said to me that nothing has really changed; that these cases are reminding us where the standard has always been, and that good directors have nothing to worry about."

They sound to me as smugly stupid as Sir Douglas Graham nearly 20 years ago.

The rage in comments on NBR, on Interest.co.nz and in response to David Farrar's prompt post is just what criminal law should engender. It is deeply ill informed, but that is not the fault of those foaming in the blogs. It should be justified though it is not. It proves my key  point in the last post  precisely. Criminal law is damaged by extending it into territory that should be governed by civil liability, where costs and risks and benefits can be properly balanced. The barriers to enforcement of civil liability must be lowered, but to abandon that effort as the government is doing and instead use criminal law is like using DDT or 245T for pest control. It works, but you also kill that which you set out to protect.

People should be able safely to pillory directors convicted of making criminally false statements. They should be able to assume that such a conviction merits ostracism, and liability to make good the damage caused by the crime.  They should not have to consider fine points of definition and justification. There should always be a bright line test for criminality. It should involve wickedness of some kind, a conscious willingness to do wrong, what was called mens rea (the guilty mind) in the days before the pragmatic barbarians gained control of the law drafting pen.

The problem lies in the misuse of the criminal law by calling  'false', statements the makers thought to be true. To most of us false carries a connotation of deliberate or conscious untruth. In this case strict liability has mislead the commenters into reading more into the offense words "untrue" than they actually mean.

If there was any good done by prosecuting, much of it will now be undone when the penalties, however stern, will seem pathetic for people who have been labelled (falsely ) dishonest. The penalties can only disappoint too when compared with $12m lost by investors. So instead of being a triumph for the long arm of the law, the case will convince even more people that the insiders are being taken care of by their mates.

Few will stop to think that Lombard money was actually lost long before the relevant prospectus was renewed. It was lost from the day the market turned and the ultimately realiseable value of the Lombard assets became less than its liabilities, though none could know at the time. The only question after that was whether any new investors shared in and reduced the losses to be borne by the existing investors, but that is always the question for businesses that do what banks have to do – borrow short to lend long.

If there is no going back from criminalisation then at the least we shoiuld make sure that the charges are not misleading. The charge should be for recklessness leading to a misleading statement. That could start to fix the problem now evident from the reaction to the Lombard case (and the unfortunate confusion created by Heath J's judgment in the Nathan case where he found, incredibly, that there was no dishonesty but still sentenced to jail.