Hundreds of millions missing from fund

HAMISH RUTHERFORD
Last updated 13:14 15/11/2012

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The man charged with unwinding the affairs of Ross Asset Management says it appears the company may have become a Ponzi scheme.

The Wellington-based fund manager's offices on The Terrace were raid last Friday by the Financial Markets Authority (FMA) and all staff have resigned.

John Fisk, a partner at PricewaterhouseCoopers who was appointed receiver of the company, today recommended that the entity be liquidated. So far assets worth only $10 million of the $449 million customers believed they were entitled to, had been established.

"I think it's got characteristics of a Ponzi scheme. I don't think it started out that way. If you look at what this business was established for, I can't believe that it was started to be a Ponzi scheme, but at some point there's been a tip from that and it's got characteristics now of [being] a Ponzi scheme.''

A Ponzi scheme is a particular type of fraud that pays returns to investors from the amount those investors, or subsequent, had originally put in, rather than actual profits.

Last week the FMA won a court order to place the Ross Asset Management in receivership, to try to work out the affairs of a company suffering a ''vacuum of management''.

The company's tax returns to the Inland Revenue appeared to be two years in arrears, the FMA's lawyer Hugh Rennie QC said, adding that there was a ''dysfunction which needs to be remedied".

The company, managed by experienced investment adviser David Ross, had more than 900 clients.

Last week  Ross' lawyer, Chapman Tripp partner Pip England, confirmed Ross was currently in hospital. While no detail was given in court, Victoria Heine, who was representing some of Ross' entities, said she had not been able to take any instruction from him.

Fisk said today that PwC had not concluded its investigations into the Ross companies, so he could not say for sure that more money would not be located. However the receivers had contacted every share register and broker that Mr Ross had indicated he dealt with, as well as every broker which had sent mail to it since it took over.

''We've tried to establish what the position is based on the information we've got to date and we haven't been able to find the hundreds of millions that are missing. So in that respect I'm not confident that there will be a sudden revelation that there will be a whole lot of money there, but I can't rule it out either.''

When receivers were appointed there was about $3.25 million in assets immediately able to be established, a figure which had grown daily as more information came to hand.

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''But that growth has slowed in the last couple of days.''

It appeared that about a net $60 million had been withdrawn from Ross Asset Management over the last five years.

The $449 million figure reflected the combined total shown on more than 1700 customer accounts, held by more than 900 clients of Ross, Mr Fisk said, but it did not represent how much they had originally invested with Mr Ross.

''In terms of what people put into the business, we haven't really got to the bottom of that. It'll be significantly less than that {$449 million figure] because obviously there's been some very high returns that were being reported,'' Fisk said.

Investors have told how they were often introduced to Ross by friends because of the extraordinary returns on offer, often in excess of 30 per cent a year.

 

Mr Fisk said in a statement earlier:  "We are fully aware the situation is distressing for investors and it is our aim to provide as much certainty as quickly as possible. Should investors or other stakeholders have any queries, please contact us via our website, facsimile, or postal address, or dedicated telephone message."

Since Friday, the offices in Morrison Kent House have remained locked. All of the staff had resigned, Rennie said.

Contact Hamish Rutherford
Business reporter
Email: hamish.rutherford@dompost.co.nz
Twitter: @oneforthedr

- The Dominion Post

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