Former Ross Asset Management clients agree settlements to avoid court

Fraudster David Ross was jailed for 10 year and 10 months for his role in New Zealand's largest ever ponzi scheme.
kevin stent

Fraudster David Ross was jailed for 10 year and 10 months for his role in New Zealand's largest ever ponzi scheme.

Three investors in New Zealand's largest ever ponzi scheme have agreed to return fictitious profits to avoid being pursued through the courts.

The latest liquidators' report on Ross Asset Management revealed that three former investors had agreed to hand over $446,000. The money could eventually be returned to those who lost out in the scheme.

By mid-December $171,000 had been paid, marking the first cash recovered from former investors, more than three years after the Wellington-based asset manager collapsed.

When the Financial Markets Authority raised Ross Asset Management in late 2012, hundreds of clients mistakenly believed founder and principal David Ross was managing close to $440 million on their behalf.

READ MORE:
Liquidator appeals ruling on Ponzi scheme investor with eye to future claims
* David Ross of Ross Asset Management declared bankrupt
* Broker Duncan Priest denies knowing of Ross troubles when he tried to get shares

Ross had taken around $115 million in deposits from investors, however receivers were able to locate assets worth around $10m. Further money has been recovered from the sale of Ross' properties.

Ross was creating fictitious, inflated returns with customer deposits being used to cover the shortfall created when others withdrew money from the company.

While Ross was jailed for 10 years and 10 months after pleading guilty to fraud back in 2013, receivers are still embroiled in legal action to recover money from those clients who were able to withdraw money from his company prior to its collapse.

Liquidators PWC have begun legal action against five former investors, and have reached agreements with a further 28 to effectively put possible legal action on hold pending other cases which could set a precedent. The agreements are required to avoid the potential claims expiring because of the provisions of the Limitations Act

At stake is up to $77m if the courts rule that all withdrawals can be clawed back from the clients, however an earlier court ruling that only profits above the client's original deposit could cut the amount subject to claw back to $33m.

Ad Feedback

The Court of Appeal is expected to soon announce a decision on PWC's action against Wellington barrister Hamish McIntosh.

The High Court ruled that McIntosh should return $454,000 of profits from Ross Asset Management, but should be able to keep the original $500,000 deposit.

McIntosh appealed, arguing he should be able to keep the full amount, while PWC cross appealed, arguing the entire $954,000 should be returned.

Liquidator John Fisk of PWC said in the course of negotiations over legal action, three clients had agreed confidential settlements to have the matters dealt with.

He would not disclose whether the amounts involved represented all of the fake profits the investors had received from Ross, but said the settlements reflected the "likely outcome" of other legal action.

"We make an assessment on what our likely outcome will be, litigation risk and the financial position [of the client] and then conclude a number from there."

Talks were continuing with other investors about settlements, while two investors had refused a request to enter a standstill agreement, meaning fresh proceedings had been initiated.

While the recent settlements increase the funds available to be returned to investors, Fisk said any distribution would be subject to the outcome of future legal action.

Depending on what the courts ruled on clawbacks, the available pool for distribution could increase, but more investors could become creditors of the receivership.

Receivers had held discussions about a possible model for distributing funds, Fisk said, but this would need court approval before it could proceed.

 - Stuff

Ad Feedback
special offers
Ad Feedback