Insured Group stunned by commission court action

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High Court action filed by the Securities Commission against the Western Australian company that used the shell of the failed Lombard Group to achieve backdoor listing on the NZX has outraged the company.

Insured Group, whose shares trade irregularly and last changed hands at two-tenths of a cent, says it "cannot understand" the action filed by the commission relating to alleged failure to make continuous disclosures in 2008, before Insured Group made its 2009 reverse takeover bid for Lombard, owner of the failed finance company Lombard Finance.

Penalties of up to $1.3 million are possible, yet "Insured Group in its current form has had nothing to do with the 2008 business position of Lombard Finance or Lombard Group," said managing director Wayne Miller, in a statement issued to the NZX.

"This does little to engender confidence in New Zealand capital markets, which is particularly disappointing for us as a company that sought to be listed in New Zealand, in contrast to the developing trend of companies leaving the NZX for other exchanges," Miller said.

"It is extraordinary that the Securities Commission has never discussed this matter with us, nor provided details of the allegations beforehand so that we might have an opportunity to respond before the commission took the court action it has."

Moreover, a separate company - First One Holdings Ltd. - had been established to "hold the residual assets from the prior businesses conducted by Lombard Group and as a part of the reverse takeover has accepted responsibility for historical liabilities emanating from that prior business."

However, operating company subsidiaries in Australia were unaffected by the High Court action, which relates only to the NZX-listed parent company.

Insured Group fell foul of NZX listing rules last October, copping a $7500 fine for failing to have two New Zealand-resident directors.

Former Cabinet Ministers Doug Graham and Bill Jeffries are among Lombard directors already facing civil and criminal charges relating to the Lombard Finance collapse. The finance company was placed in receivership in April 2008, owing $127 million to some 4400 investors.