Editorial: Sir Douglas' Treaty legacy will endure

The case for Sir Douglas retaining his knighthood has been undermined further by the strong language in the Court of Appeal ruling. Photo / Mark MItchell

PM has little option but to strip ex-minister of title.

Calls for Sir Douglas Graham to be stripped of his knighthood began even before he was found guilty of making untrue statements in Lombard Finance offer documents. They have continued unabated over the past year, led, understandably enough, by investors who lost five- and six-figure sums in the finance company's collapse.

The Prime Minister, who will make that decision, has said only that any action would have to wait until possible appeals had been dealt with. That point seems now to have been reached, given the robustness of a Court of Appeal ruling which not only upheld the convictions against Sir Douglas and three other Lombard directors but proposed increasing their sentences to include home detention. A loss of the knighthood now appears inevitable.

The normal yardsticks provide John Key with little option. Knighthoods are usually forfeited when people are convicted for criminal offending or have been reprimanded by their professional regulator. Sir Douglas has been found guilty of criminal charges laid under the Securities Act.

Those who want him to lose his knighthood say this is necessary if respect for the honours system is to be maintained. That argument makes obvious sense. Nonetheless, the Prime Minister has good reason to hesitate before taking that step.

The stripping of a knighthood usually results from offending in the realm in which the honour was bestowed. Thus, Fred Goodwin, the former chief executive of the Royal Bank of Scotland, who was knighted for services to banking, lost his last year after the bank's aggressive expansion led to its near-collapse, and the largest annual loss in British corporate history. Sir Douglas' case is different. He was knighted for his sterling work as a long-standing Treaty Negotiations Minister in the 1990s. During that time, he galvanised progress towards just and durable settlements of historical grievances, most notably with Ngai Tahu and Tainui.

That will be Sir Douglas' ultimate legacy. If he is stripped of his knighthood, it will be for something unconnected with this work. However, the Goodwin case reinforces the likelihood of forfeiture. No criminal charges were brought against the Scottish banker. But he became a scapegoat for all the ills that afflicted British banking during the global financial crisis. Politicians who had once lauded him and his bank queued up to accuse him of bringing the honours system into disrepute.

Sir Douglas has come to occupy a similar status in relation to the domino-like collapse of 46 finance companies. In sum, about $6 billion of investments were affected and 200,000 investors were left feeling intensely aggrieved. Some who invested in Lombard had undoubtedly taken comfort in Sir Douglas' boardroom presence, believing his work there would echo the integrity he had brought to Treaty negotiations. His subsequent statement that he did not monitor Lombard's increasingly problematic lending practices more carefully because he had no expertise in property development can only have increased their anger.

The case for Sir Douglas retaining his knighthood has been undermined further by the strong language in the Court of Appeal ruling. It found the High Court sentencing of the Lombard directors, including Sir Douglas' 300 hours of community work and an order to pay $100,000 in reparation, "manifestly inadequate".

Sir Douglas' fall from grace has sent a clear message about the extent of the care that directors will have to exercise in future. That will be one legacy. But the more enduring one will be his immense achievements in Treaty negotiations.