The Ministry of Economic Development (MED) and the Serious Fraud Office (SFO) commented favourably in late December 2010 on the custodial sentences imposed by a judge on two company directors convicted of breaching the law, saying that the sentences sent a clear “denunciation and deterrent” message to other company directors. Prior to this judgment both directors had been banned for five years by the Registrar of Companies – bans commencing 23 March 2010 – under section 385 of the Companies Act 1993, from being involved in the directing, management or promotion of a company.
SFO chief executive Adam Feeley said he was “pleased with the delivery of a custodial sentence” in the case of the two banned Five Star Financed directors who had pleaded guilty to a number of criminal offences.
“This is the first sentencing in relation to a major finance company collapse, and continues the clear message from the courts as to the seriousness of white collar crime.” But are errant company directors taking note of this message? It appears not in some cases!
Just two weeks after the two Five Star Finance directors were banned, another company director (not connected with Five Star) was banned for four years under the same s. 385 of the Companies Act. Recently he appeared in Court charged with breaching his banning order. If convicted he faces a custodial sentence of up to five years jail or a significant fine of up to $200,000. The accused told the Judge he was not guilty of the charge.
He told the media in May 2010 that he intended to fight the MED over the banning order it imposed against him and take it to judicial review in the High Court. More recently he is reported to have said he will fight the charge of his alleged breach of his banning order in the courts.
The MED and SFO appear to strongly support judges who send clear denunciations and deterrents in their sentencing of company directors who deliberately breach the Companies Act and/or Orders issued by the Registrar of Companies. Custodial sentences appear to be harsher in cases where company directors lie to the courts.