National Finance verdict shows directors cannot rely on executive advice

Friday 27th July 2012

The guilty verdict against National Finance 2000 director Carol Anne Braithwaite is a warning to company directors not to rely on anyone's judgment but their own, says the Institute of Directors chief executive Ralph Chivers.

Braithwaite was found guilty by a majority jury verdict in the Auckland High Court today in relation to 10 misleading statements in the failed finance company's 2005 prospectus.

National Finance went into receivership in 2006, owing investors $21 million. Crown prosecutors alleged Braithwaite had no relevant qualifications to review the prospectus, not having previously served on a company board or read a prospectus.

She is now awaiting sentencing after being bailed to her Devonport home. The solo mother of two potentially faces a prison term.

National Finance 2000's former chief executive and Braithwaite's de facto partner at the time, Trevor Ludlow, is serving six years and four months in prison following conviction on charges relating brought the Serious Fraud Office and the Financial Markets Authority.

Chivers said the verdict was a reminder to all directors that their role was "an active one, not a passive one", especially when they were entrusted with managing other people's money.

"Directors cannot rely on others to do their job for them. If they do not consider they have sufficient financial skills to adequately monitor the business of a company they must take steps to address that immediately," he said.

Similarly if a director doesn't understand the business they are on the board of they need to remedy that. If they do not do so, they are going to be held liable and potentially prosecuted if a company fails and they're found to have breached their duties."

BusinessDesk.co.nz

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