'Climate of legal secrecy' keeping Ross Asset Management investors in the dark
A group of Ross Asset Management (RAM) victims are applying to the courts to obtain documents they say will lift the "veil of secrecy" surrounding liquidators' claw backs from New Zealand's largest Ponzi scheme.
On November 19, Wellington lawyer Hamish McIntosh took a case to the appeal court to overturn a June High Court decision that he should give back $454,000 of 'fictitious" profit from RAM.
Liquidator John Fisk of PwC, counter-appealed the decision in a bid to help claw back $43 million from more than 200 investors.
Bruce Tichbon, a spokesman for the RAM Investors Group, said investors did not have access to the papers filed with the Court of Appeal.
"PwC is adamant the proceedings must be conducted in secret, with the exception of the public hearing which they cannot avoid. The effect of this culture of secrecy with other finance cases is that secret settlements are often reached, without the small investors knowing the details. The small investors usually lose most of their money as well."
In the climate of legal secrecy surrounding the case, it was difficult to be certain of the "value" argument that was debated in court, he said.
McIntosh invested $500,000 in RAM in 2007 and withdrew $954,000 in 2011. While the High Court ruled he should return any profits, he argued that he invested in good faith and should keep all of the money. He was allowed to keep his original investment because this was deemed to represent him giving "value".
During the case his lawyer Justin Smith, QC, argued a change in position for McIntosh, who "gave value" by investing funds with RAM.
However, Mike Colson, the liquidator's lawyer, argued funds invested by McIntosh never gave "real and substantial value" because RAM was only supposed to be managing the funds on behalf of the client and if he had not been paid out, the money should have been available to creditors upon liquidation."
"If he hadn't been paid out he would have a return of $15,000 as opposed to $954,000," Colson said.
The Court of Appeal judges noted this, stating the pay out from RAM to investors from funds currently in RAM was about 3-4 cents in the dollar.
The argument presented in court by the liquidators lawyers was a true representation of the "value" investors can expect to get back, Tichbon said.
"If McIntosh was to see the same 'value' he could expect to see about $15,000 of his original investment back. This would presumably put him in the same position as all other investors."
An overarching principle of New Zealand investor law was that all investors should be treated equally when it came to being paid out, Tichbon said.
"In the light of this, the High Court judgement that would let McIntosh keep all his original investment of $500,000 is an affront to justice and common sense. How can investors have any confidence in the financial markets if such injustice is allowed to stand?"
Fisk said court files could be searched but with confidentiality, only a certain amount of information was available.
There were confidently issues surrounding the names of investors, he said.
"There is an open invitation to investors who want to contact us. We also welcome a single lawyer or firm to represent the investors on claw backs."