Ross Asset investors ask court for liquidation to be put out to tender

BusinessDesk report by Jonathan Underhill
A group of investors in the failed Wellington group Ross Asset Management has asked the High Court to be admitted as a party to proceedings and called for the liquidation of the companies to be put out to tender.

A tentative new date of Dec. 10 has been set for the Financial Markets Authority to update the High Court on the Ross Asset Management receivership, by which time receivers PwC is expected to have applied to liquidate the group.

At a brief hearing in the High Court at Wellington today, counsel for receivers John Fisk and David Bridgman of PwC sought an order allowing them to sell property owned by the Ross Group to the extent necessary to pay their fees up until Nov. 12 of $153,683. There were insufficient liquid assets from the group’s owner David Ross. Fisk told BusinessDesk said the application to put the group into liquidation would be made this week.

Also at the court today, Bruce Tichbon, who represents more than 50 percent of investors in Ross’s group of investment companies, sought to be admitted to proceedings. Tichbon told BusinessDesk he was concerned his group wasn’t being kept in the loop.

In Tichbon’s memo to the court he also sought for any liquidation to be put out to tender with a clear brief on strategy and costs.

Members of his group had observed receiverships and liquidations “where professional fees have devoured all the money left over,” he said. The tender for liquidation should clearly state “how investors’ interests will be represented.”

The receivers’ memo said both receivers and counsel “are very conscious of costs given the overall circumstances” but the receiverships to date had been “challenging” due to David Ross’s unavailability while in hospital after three weeks of compulsory treatment under the Mental Health Act and work was needed “to verify assets, recreate cash flows and consider legal options and avenues of recovery.”

Wellington fund manager Ross, whose businesses were frozen after missing investor payments, told PwC on his release from hospital not to expect to find any assets other than the $10.2 million plus $200,000 in cash deposits initially identified by Fisk and Bridgman.

The Serious Fraud Office launched a formal investigation this week, having helped the Financial Markets Authority with its own inquiries since Oct. 25.

Ross, formerly a share broker, managed funds on behalf of 900 privately wealthy individuals, with management fees averaging $4.4 million a year paid in each of the last three years.

The PwC investigation found inadequate record-keeping and has been unable to source much of the documentary evidence for trading and investment holdings that it needs to complete a full picture of what looks to have the characteristics of a Ponzi-style scheme, where investors were paid out at least in part using other investors’ funds. It suspects many or most of the trading history disclosed to clients was “fictitious.”

The Ross group’s database purports to show investments worth $449.6 million, of which $152.4 million is said to be held in Australian investments, another $136.1 million in Canada, some $156.4 million in the US, $3.8 million in New Zealand, and $943,332 elsewhere. Of this, some $437.6 million was held by a Ross group subsidiary, Bevis Marks.

Statement from Ross Asset Management Investors Group – November 23
The Ross Asset Management Investors Group is deeply concerned that it is now confirmed that there is very little money left in RAM (Ross Asset Management in receivership) for distribution to investors. Most of the investors were ordinary New Zealanders of limited means, and many have been left destitute by the failure of the company.

We are also aware that the High Court will probably put RAM into liquidation on Monday. This may start a process which, based on previous liquidations in this country, may involve extensive litigation and costs that absorb all the remaining investors’ funds, and leave investors with little or nothing.

We are calling for the work of liquidator to be put out to competitive tender, with the following provisos:

• That tenderers for the work be required to describe their liquidation methodology in advance; how they will control and minimise all costs to RAM investors, while maximising returns to RAM investors.

• This will include limiting the direct cost of the liquidator themselves and limiting the cost of litigation by the liquidator and by investors, especially if a voidable preference regime or similar is implemented. The methodology must be flexible to cater for a range of potential paths and outcomes.

• The successful tenderer is to be chosen on the combination of maximum returns to investors, least overall cost, and previous experience.

The available pool of funds from RAM is small and investors can only hope to get a part of their investments back. It is incumbent on the authorities to conduct this liquidation in a manner that does not allow what little is left to be devoured by fees and litigation.

RAM investors and all investors in New Zealand deserve an investment environment that works.

Media statement from David Ross – November 22
Ross Asset Management founder and director David Ross will cooperate fully with all inquiries into his company and the funds invested with it. Mr Ross was released from hospital late yesterday. He has been receiving compulsory treatment under the Mental Health Act in hospital for the past three weeks. During this time he has been unable to assist authorities.

Through his lawyers, Mr Ross has now undertaken to cooperate fully with the Financial Markets Authority (FMA), the receivers, and the Serious Fraud Office (SFO). While these matters are the subject of official inquiries, Mr Ross and his family will be making no further comment.

Report from BusinessDesk – November 19
The Serious Fraud Office has begun an investigation into Wellington fund manager David Ross and his firm Ross Asset Management after court-appointed receivers found records for just $10.2 million of the $449.6 million he purportedly managed.

The SFO has been working with the Financial Markets Authority, which began its own investigation on Oct. 25 and has since obtained a freeze on Ross’s assets. John Fisk and David Bridgman of PricewaterhouseCoopers were appointed receivers and managers and have recommended all of the Ross-related entities be placed in liquidation.

“An evaluation of the information now available has concluded that there are reasonable grounds to believe that an offence of serious fraud may have been committed,” said acting SFO chief executive Simon McArley. “The SFO notes with concern the comments made by Mr Fisk that it is likely the historical returns advised to investors may be fictitious and that what has occurred has the characteristics of a Ponzi scheme,” McArley said. “Given the scale of the potential loss this is a matter we take extremely seriously.”

David Ross has been hospitalised since the FMA raid on his premises.

Ross, formerly a share broker, managed funds on behalf of 900 privately wealthy individuals, with management fees averaging $4.4 million a year paid in each of the last three years.

The PwC investigation found inadequate record-keeping and has been unable to source much of the documentary evidence for trading and investment holdings that it needs to complete a full picture of what looks to have the characteristics of a Ponzi-style scheme, where investors were paid out at least in part using other investors’ funds.

The Ross group’s database purports to show investments worth $449.6 million, of which $152.4 million is said to be held in Australian investments, another $136.1 million in Canada, some $156.4 million in the US, $3.8 million in New Zealand, and $943,332 elsewhere. Of this, some $437.6 million was held by a Ross group subsidiary, Bevis Marks.

However, assets worth just $10.2 million, and $200,000 in cash deposits, had been identified in the receivers’ initial searches, which they described as a matter of “considerable concern.’

Press Release – Serious Fraud Office

The Serious Fraud Office has commenced a formal investigation into David Ross, Ross Asset Management Limited (In Receivership) and associated entities.

In response to investor complaints, the Financial Markets Authority (FMA) opened an investigation into Wellington Financial Advisor, David Ross and firm Ross Asset Management on 25 October. A freeze was obtained on Mr Ross’ assets and John Fisk and David Bridgman from PricewaterhouseCoopers, were as appointed as receivers and managers.

Acting Chief Executive of the SFO, Simon McArley, said the Office had been working with the FMA over the last two weeks. An evaluation of the information now available has concluded that there are reasonable grounds to believe that an offence of serious fraud may have been committed and accordingly have commenced a Part II investigation under the SFO Act.

“We will continue to work closely with the FMA to ensure both agencies’ resources are applied effectively in a coordinated and timely manner. We are meeting with the FMA and Mr Fisk early this week to progress that”, he said.

“The SFO notes with concern the comments made by Mr Fisk that it is likely the historical returns advised to investors may be fictitious and that what has occurred has the characteristics of a Ponzi scheme. Given the scale of the potential loss this is a matter we take extremely seriously”.

A dedicated telephone message line +64 (0)4 462 7040 has been established by PwC for any investors or creditors who have an enquiry relating to Ross Asset Management Limited (In Receivership) and related entities. Investors with questions should continue to contact PwC.

 

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