Receivers may chase Ross' assets
The receiver of Ross Asset Management, says liquidating the company could help it go after the assets of its founder or any other entities which have benefited from the suspected Ponzi scheme.
On Thursday the worst fears of Ross' 900 clients were realised when the first receivers' report revealed that of the $450 million they believed they collectively held, PricewaterhouseCoopers has so far only been able to track down $10m.
The offices of Ross Asset Management were raided by the Financial Markets Authority on November 2 after clients complained they had been unable to withdraw money. The High Court granted an order to freeze the company's assets the same day, with PwC appointed receivers the following week.
Ross is in hospital and is understood to have been heavily sedated.
PwC partner John Fisk said the amount confirmed only included the shares, bonds and cash that the company was able to locate through a list of brokers supplied by Ross' founder and sole director David Ross, and did not include any assets he may personally hold.
As well as being receiver of Ross Asset Management and a number of related entities, Fisk is also the receiver for David Ross personally.
Ross jointly owns his home in an exclusive part of Lower Hutt, which has a rateable value of more than $2m, as well as part owning an exclusive apartment on Wellington's Oriental Parade. He is currently in hospital and has been unable to assist with enquiries being conducted by the FMA or PwC.
Fisk said there was potential for other assets to be recovered for investors, including David Ross' personal assets. This process would be helped if the High Court at Wellington granted a request for the companies to be placed into liquidation.
''Getting the companies into liquidation will probably help that because it gives us the ability to trace into other assets and determine whether contributions could be made by entities that might have been a beneficiary of funds from Ross Asset Management,'' Fisk said, adding however that ''there's always challenges to get into trusts''.
Questions are now being asked about how Ross managed to avoid detection, with the company and its subsidiaries apparently never audited. Fisk said this was a feature which had been noted by PwC, although it did not appear to be illegal.
''There was no legal requirement for him to be audited, but when I look at it, you've got supposedly $450 million dollars under his control. If I was an investor, I'd want it audited,'' Fisk said.
The FMA regulates financial advisers and had accredited Ross as an authorised financial adviser. It didn't express any concerns until clients of Ross complained.
According to PwC, over the last five years, withdrawals from Ross Asset Management had exceeded funds deposited by $60m. Fisk said that he had seen no evidence of that panicked investors had learned of the company's problems and quickly tried to withdraw money.
However it meant that some clients had been able to withdraw both their original investments and the apparently fictitious returns on their deposits.
Fisk said PwC had not yet turned its attention to the issue, but it was possible that it could attempt to reverse of ''void'' past transactions.
''Again, a liquidation process would be appropriate for that sort of action, if it is going to happen, because you've got some people paid out substantial returns and others who are going to be lucky to get a couple of cents [in the dollar] at the moment.
''Whether there are voidable transactions in the normal sense, we haven't really turned our mind to that yet.''