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David Ross dished out record jail-time over Ponzi fraud

Disgraced fund manager David Ross faces the longest jail-term imposed by the courts for a case brought by the Serious Fraud Office for his long-running Ponzi scheme which the judge said was motivated by a "twisted form of vanity" rather than simply greed.

Judge Denys Barry sentenced Ross to 10 years and 10 months imprisonment, with a minimum non-parole period of five years and five months, in the Wellington District Court today. Ross pleaded guilty to charges in August that he effectively ran a Ponzi scheme through his Ross Asset Management, and fictitiously recorded assets of some $384 million to attract new investors and retain existing ones.

A Ponzi scheme is a money-go-round arrangement which uses cash from new investors to pay returns to existing members, who typically think they're reaping the rewards of an astute investment plan.

"You stole from people who trusted you with their life savings," Judge Barry said in sentencing Ross. "The cold hard reality is you were a liar and a thief operating on a scale unprecedented in this country."

The judge adopted a starting point of 16 years and discounted that to take into account the early guilty plea, offer of reparations and some degree of remorse, and that rather than being motivated by greed, said the offending was driven by "some illusion, some sort of twisted form of vanity or hubris."

He rejected a submission not to impose a minimum non-parole period, saying a third of the final sentence "would not be enough to denounce deter or effectively punish this offending."

The jail term is the longest ordered by the courts for a case brought by the SFO, trumping a nine years and six months-term imposed on Michael Swann in 2009 for his $17 million defrauding of the Otago District Health Board.

In August, Ross pleaded guilty to four charges of false accounting and one of theft by a person in a special relationship, laid by the SFO.

He also pleaded guilty to charges laid by the Financial Markets Authority that he provided a financial service when he was not registered for that service, he knowingly made a false or misleading declaration or representation to the FMA for the purposes of obtaining authorisation to become an Authorised Financial Adviser, and he supplied information or produced documents to FMA which he knew to be false or misleading.

Judge Barry took the FMA charges into account when setting the starting point for sentencing.

"What you did was impugn the integrity of the regulatory and client arms of the Financial Markets Authority by your actions," the judge said.

Four investors, who were granted name suppression, read out their victim impact statements at the opening of the hearing, describing the emotional and financial stress each had been put under by Ross's offending.

One talked down the level of returns described by the media, saying they were "really no different to other investments we had" and that they were considering withdrawing from Ross Asset Management to chase better returns.

The judge said the "raw hurt and anger was palpable" in the victim impact statements, and that no sentence imposed by the court would provide solace for the investors.

Ross's lawyer, Gary Turkington, told the court a deed of settlement was entered into yesterday that would see Ross forgo his share of several properties including his family home to help make repayments.

Turkington said the losses to investors are in the order of $100 million to $115 million and that may be reduced by $1-to-$2 million by the latest settlement deed.

"It will be regretfully infinitesimally small compared with the losses the good people suffered. That's acknowledged," he said.

Ross Asset Management's assets were frozen and receivers appointed last year by the FMA after the watchdog received complaints about delayed or non-payment of investor funds. Ross wasn't available in the early days of the investigation due to his hospitalisation under the Mental Health Act.

Earlier this month, the High Court in Wellington extended asset preservation orders over the assets of Ross, RAM and related entities to include DRG Ross Family Trust, also known as the David Robert Gilmour Ross Family Trust.

PwC's John Fisk and David Bridgman were appointed to preserve the assets of the Ross family and related trusts as part of the wider investigation into Ross Asset Management.

(BusinessDesk)

Comments and questions
14

So .. How much exactly did Ross steal and spend? Or how much is "missing"? Was all the money sent round in circles or did some of it make an exit through Ross?

Yet another wet bus ticket slap on the wrist. When are Judges going to order forensic accounting examinations and bust the Trusts of white collar criminal and use the ill gotten funds to repay the victims. Oh I forgot. Fraud is a victimless crime and the criminal is treated like the victim. Ross will serve 3 to 5 years max for over $400Million fraud so one year for every $150Million. Time Judges and Politicans were called to account.

Dude, the non parole period is 5yrs, 5 months so he will serve a min of that period.

What's more is that the Judge sentenced him to more time behind bars than both the prosecution and defence asked for.

In this case the whole book was thrown at him with regard to what could have been. The max sentence for the main crime was 10yrs...perhaps changing the punishment is where the comments should be directed.

Not saying that what he did was in any way defensible.

The main take away from this was that trust alone is no longer a suitable way to do business.

There are more victims to this than just those who lost money! He will now be funded by us all for a min 5.5 years.

But I understand that Receivers have been appointed in Ross' trust earlier this month.... so is the process not working?

Granted, all this activity is at the bottom of the cliff - FMA obviously needs to work harder to herd the cats at the top of the cliff.

Its difficult to understand whats worse, stealing money or someones life. Steal money get 10yrs/10mths and minimum 5yrs/5mths. Steal a life, eg Daniel Taylor sexually abused boys and get 5yes/7mths years with a minimum of 2yrs/10mths.
Either the law is an ass or the judges are ascting like an ass.

That he will serve half his sentence, leaving his victims to cope with his consequences for life, and some ruined, shows crime does pay. You can bet the proceeds are salted away in a Swiss bank account or some such nameless vault and will be enjoyed when five years is up. The SFO and Securities Commission congratulate themselves but they licenced Ross in the first place and gave him legitimacy. Shame !

5 yrs 5 mths - the real sentence as a he'll be a model prisoner in a low security prison farm - it isn't really justice. As much the US system of sentencing them to a zillion yrs so they never get out alive is stupid, our system is ludicrously soft... .. where was (being as its not reported here) the ban from being a director/running a business for life? & where's the $100m? He'll reappear in 10 same as all the dishonest buggers do & living off the $100m ...

It's good that fund management rules are being updated to try and prevent this kind of fraud, but it's frustrating to hear ex-SFO head, McFarley, say it's almost certain this kind of behaviour is still occurring, and will continue in the future.
To improve prevention, the penalties need to increase to provide a stronger deterrent. Currently, NZ is a fraudsters' paradise.

Taking Madoff as an example. The fraud by Ross is much larger than Madoff when it is taken as a proportion of the New Zealands worth compared to that of the USA. Yet Madoff will die in jail, even if he was to live to 150.

Now I do not hold the Yanks rules and ideas in that higher regard. But the fact that there is such a great disparity between the Ross and Madoff sentences means somethings not right.

And it wasnt $400 million that he stole or that is missing. Those numbers were fictitious in the first place. He did not get $400m from investors. A lot less was lost. The $400m is what he claimed to be managing. Yes if you keep inflating returns that is not hard to do.

For at least 12 years Ross sent false statements to investors. Some over that time took out monies they thought had been earned as income. Quite a few received monthly payments of income. Some also took their capital out. Each year Ross credited himself with his fee commission which was $2 to $4 million. Eventually between paying out profits that were never there and his fees, the money ran out. PWC say that the investors left at the end had put in about $110 million which they won't get back unless those who earlier got the false payments can be made to pay it back. Ross's fees went on his lifestyle. So there are no hidden funds. It adds up.

You can get three years in jail for careless driving causing injury while under the influence of alcohol to put this sentence in perspective. And that's just for injuring one person, but Ross injured thousands.

This person is a liar and thief. He has devastated the life of numerous people. It was heartbreaking to hear the victim impact statements read in court (I was there). This nasty piece of work has robbed me of years with my loved ones - because the stress lead them to an early grave. Ross's letter that was read out was the most bland, insincere and pointless nod at an apology. I really don't care if you have been unwell Ross. I don't believe you are - you were just doing anything possible to reduce the sentence. One of your supporters at an earlier hearing told someone I know that "you will only get fatter". Implying you have something to look forward to on release. No remorse. A gutless, heartless lowlife.

He will need money in jail to keep the mob off his back. I am sure they will be be the first to get to share his stash. After jail its off overseas for Mr Ross and a lifestyle that will leave his victims scandalized. Same old same old.