Visitors to the fourteenth floor of Morrison Kent House in Central Wellington are greeted by possibly the least auspicious entrance to a boutique fund manager imaginable.
A simple plastic logo consisting of plastic letters Ross Asset Management is glued to a pale wooden veneer. One of the letters is broken.
But behind the locked doors lie the remnants of something much more damaged than the name plate, with growing fear that the office was the nerve centre of what could turn out to be New Zealand's largest ever Ponzi scheme.
The company was founded by David Ross, who appears to have run the business with little more than basic administrative support. Hundreds of investors were attracted by extraordinary returns, which PwC says may have averaged 25 per cent a year since 2000.
But there are growing concerns the returns will turn out to be fictitious, with Ross effectively standing accused of overstating the value of the assets he managed by $440 million, or 97 per cent, given little over $10m has been uncovered so far.
The office has been locked since the Financial Markets Authority (FMA) executed a search warrant and broke in on October 31, after Ross failed to respond to a demand to explain why his investors were complaining that they were unable to get their money.
Sources close to the FMA are drawing comparisons to Bernie Madoff, the New York investment manager responsible for a Ponzi scheme believed to be the largest fraud in US history.
Attracted by fantastic returns, the gains Madoff's clients saw were actually just the deposits of subsequent investors, a kind of pyramid scheme named after a 1920s US conman.
But where Madoff's fraud was sophisticated (it escaped detection even during an investigation by the US Securities and Exchange Commission) the problems at Ross - be they fraudulent or not - do not appear to have been looked for.
It was never audited, and did not need to be, apparently because the company may have misrepresented what it was offering.
DAVID Ross' clients were attracted by his track record. Once a senior investment analyst for ANZ, he left to become investment manager at Leadenhall, a prestigious investment manager in 1980s Wellington, which at one point managed $600m.
A promotional blurb from the time gives insight to his strategy.
"If the market is not there, we go out and make it. We owe it to our clients not to sit back and wait for change."
By the time Leadenhall was taken over by South Pacific Finance in 1990 (some describe the takeover as a "rescue") Ross had left the company to set up on his own.
The progress of the company is not clear, but until last month clients believed he was holding investments worth $450m on their behalf.
Bruce Tichbon, a semi-retired Palmerston North businessman, who now represents a large group of Ross' investors, described Ross as a modest, softly-spoken man, who would take time to meet with any client, often sharing coffee or meals.
"He seemed to know everything about what was going on in the market, and he had a fantastic track record for picking the market."
The personal style is believed to have attracted many retired farmers from Wairarapa and Manawatu, who trusted him with large chunks of cash after selling up. Some entrusted virtually all of their money to Ross.
But if Ross was held in high regard by clients apparently willing to believe he could consistently make returns in excess of 30 per cent, he was also respected by his peers.
He was, according to some, "peerless" in New Zealand when it came to selecting which of the early stage "penny dreadful" mining companies would be successful. Kapiti investment adviser Chris Lee said while there were many "punters" in the same space, gamblers who pretended to be experts, Ross had a proven track record.
But not everyone was convinced, or so they claim now, with some apparently concerned about Ross Asset Management's total lack of sophistication.
Aided only by "two office girls", there were no accountants, treasury experts or audit trail, as would be expected in modern fund management.
Whereas in other jurisdictions fund managers are required to provide regulators with constant access to bank accounts and submit to probing audit, Ross was able to operate in such a way that his business was apparently never checked by a professional until receivers PwC were charged with unwinding the mess.
"It's no wonder the Australians think we're bunnies," a fund manager said.
SUE BROWN, the FMA's head of primary regulation, says if there were stories going around doubting Ross' operations, they were never shared with the regulator.
"It is an old boy's club," Brown said of the fund management industry. "Some of the old boys should talk to the old girls some time . . . If you've got concerns come and talk to us".
Brown says it appears Ross may have been misrepresenting what kind of operation it was, claiming to be investing on behalf of investors into specific assets, designed to reflect specific appetites for risk.
In fact the funds appear to have been aggregated into a single pool.
This meant Ross was not audited, because he was simply an adviser, rather than someone who offered investment products.
It is hoped that the Financial Markets Conduct Bill, currently progressing through Parliament, will address the lack of oversight on service offerers.
Brown says the FMA began investigating the Ross situation as soon as complaints were received in writing, and used its power to raid offices for the first time.
This showed the regulator was "willing and able" to act when serious matters were brought to its attention.
Ross himself is apparently incapacitated, with the FMA referring all questions about his health to lawyers Chapman Tripp, which would say only that he is in hospital.
Ross' brother Greg, a Queenstown real estate agent with whom he jointly owns several properties, is not returning calls.
On Thursday, no one answered the door at Ross' home, in an exclusive part of Lower Hutt, which he shares with his wife Jillian.
But shortly after The Dominion Post rang the bell on the locked security gate outside, a middle-aged woman was seen scooping leaves from the swimming pool at the rear of the couple's well equipped home.
This was just hours after his clients learnt that it appeared they would get scarcely any of the money invested with Ross back.
FARMERS DRAWN BY HIGH RETURNS 'EMPTIED OUT'
David Ross "emptied out" many Manawatu farmers who, attracted by high returns of more than 20 per cent a year, invested with him, according to a source in the Wellington investment sector.
Investors are thought to include old boys of Wanganui Collegiate and Christ's College.
But Ross also had money from investors in Canterbury, Queenstown and even Australia.
Until recently it was not apparent just how much money he had taken in - hundreds of millions, with just $10m in shares left.
"He must have gone off the rails and started punting hard on the nose on the last race, and the horse came in last," the source said. But Ross was not acting with a prospectus, there was no audit and no custodian. "Nothing," the source said.
The source doubted that the investments had just turned sour this year, given the drop in mining stocks in recent years.
Investors were initially attracted by the high returns Ross reported, at more than 20 per cent a year. They tended to ask fewer questions about high returns.
"The better the return you offer, the less people want to know about it. Greed was the reason," he said.
The collapse would cast a chill over the market and likely see greater regulation and more compliance checks and costs.
Ross had invested heavily in high-risk small Australian and Canadian mining stocks for hundreds of investors and was earlier seen as "quite canny and good at small stocks".
"Some people put in small amounts, which was the right way, but some put the farm in," the source said.
Ross was a regular at gold-mining industry conferences in Australia.
"We were surprised how good performance was in the last five years, given that he was in resource and mining stocks, which were not going very well," the source said.
The FMA was looking at advisers to see if they were practising properly, but had not reached the point of auditing people to see if they were investing properly, to see if there was a trustee or a custodian for the funds.
"They have looked at the big firms, like stockbrokers, and they are satisfied . . . but they [FMA] have not really looked in detail [at small players]," he said.
The Ross family was originally from Skippers near Queenstown, and Ross's father farmed in south Otago. Ross went to Waitaki Boys High School and was seen as coming from a "solid family", the source said.
Ross went to Otago University and started out with National Mortgage in its pension scheme, and later ran Challenge Corp's super fund, before moving into Leadenhall, a Wellington fund manager.