Suspected Ponzi scheme Ross Asset Management has been placed in liquidation.
In the Wellington High Court this afternoon Associate Judge David Gendall appointed John Fisk and David Bridgman of PricewaterhouseCoopers as liquidators of Ross and numerous other related companies.
A low-profile investment management company based on The Terrace in central Wellington, Ross was placed in receivership in early November, shortly after the Financial Markets Authority (FMA) won a freezing order over its assets, as investors claimed they were unable to get access to their money.
A report by PwC, which was previously the company's receivers, found that of the $450 million Ross' clients believed was being managed on their behalf, little over $10m could be established.
David Ross, the company's founder and sole director, was not in court today.
He was held for several weeks under the Mental Health Act but has since promised to provide assistance to the investigations of the FMA, and the Serious Fraud Office.
In a verbal judgement on why he had decided to grant the application for liquidation, Associate Judge Gendall said since being appointed receivers, Fisk had established a vast shortfall between what clients were being managed for them and identified assets.
"Mr Fisk also confirms that as far as the receivers are able to ascertain, there has been extensive co-mingling of funds within the group of companies and in effect they have run a scheme for investors which could only be described as a Ponzi scheme, at least in recent times particularly," Associate Judge Gendall said.
Today’s hearing saw an application by Bruce Tichbon, spokesman for the Ross Asset Management Investor Group, to require the liquidators to include a communication to every client of the collapsed company.
Tichbon said the group represents more than half of the approximately 900 investors in Ross Asset Management.
His lawyer, Mike Lennard, said this communication would outline concerns about the possible conflict of interest faced by the liquidators because of their role with both the group company and nominee companies.
Tichbon was seeking to have a second liquidator appointed to some of the Ross companies, which would require consent of creditors.
However the list of creditors which would normally be available in a liquidation is suppressed to prevent unwanted attention to investors.
However Hugh Rennie QC, appearing for the FMA, pointed out that the group Tichbon represented was unincorporated, and there was no evidence that the majority of Ross investors supported his aims.
Associate Judge Gendall rejected the application, saying he saw no reason why one creditor should have preference over another.
In a statement, PwC’s Fisk said the appointment as liquidators "gives us greater powers to investigate complex transactions and issues" as well as to distribute assets to creditors.
"Given the significant shortfall in assets available to investors at present, we need to be mindful that whatever actions are taken in this process are cost effective and recognise the difficult financial position many investors now find themselves in," he added.
"There have been a number of comments in the media about significant liquidation and legal costs that may be incurred in recovering money from investors who received repayments from their portfolios within the last two years.
"The issues in this insolvency are very complex and involve difficult areas of law and ones that we have not formed a final view on."
Early in the new year the liquidators would organise a meeting of creditors, which would be conducted by postal vote by February 8.
The meeting would confirm PwC’s appointment as liquidators and to appoint a liquidation committee "to provide investor input to assist with the liquidations".
- The Dominion Post
Do you think the appropriation of the Native American headdress for a fashion show is offensive?Related story: Dame Trelise under fire for headdress use