Receiverships don’t come cheap, details of Ross Asset case show

Receivers and their legal counsel for Ross Asset Management discounted their charges but still could not extract their full fees from the liquid assets left in David Ross's group of investment companies, the High Court has been told.

The Financial Markets Authority got High Court approval on November 6 to appoint John Fisk and David Bridgman of PwC as receivers and managers, with the assistance of brokerage First NZ Capital, after complaints from investors about non-payments.

Their work identified only $11 million of the purported $449.6 million of investments managed by Ross.

PwC, law firm Bell Gully and First NZ Capital outlined their schedule of charges in a High Court hearing yesterday where they sought assurance that they could sell property of the Ross Group to recover their fees.

The schedule shows that from November 4-12, PwC charged out 40.8 hours of a partner's time at $450 an hour for a total of $18,360 and 90.3 hours of a PwC director's time at $400/hour, or $36,120.

In addition, there was 4.8 hours of an associate director's time at $350/hour, nine hours for a manager at $300/hour, 50.5 hours of a senior associate's time at $220/hour and 25.7 hours of support services charged out at $110/hour.

Bell Gully racked up 27.5 hours of partner fees at $490 an hour, 41 hours for a senior associate at $350/hour, 1.5 hours for a solicitor at $295/hour and 34 hours for a law clerk at $148/hour. While that adds up to about $33,000, the law firm's overall fee was reduced to $24,625, the schedule shows.

First NZ Capital did not break down its charges, which totalled $9400, plus costs of $565.

Total costs were $153,683, including rent of Ross Asset's offices, travel and accommodation for the receivers and other incidental costs related to the assessment of the group's records.

The FMA wrote to Bruce Tichbon, convenor of a group of more than 50% of the investors in the Ross Group, assuring him that the receivers had been asked to approach the case "in a cost-effective way".

"All parties are cognisant of the costs impacting on investors' interests," FMA head of enforcement Belinda Moffat wrote.

PwC is expected to apply to liquidate the group of companies later this week, though Mr Tichbon asked the High Court yesterday to put the liquidation out to tender so professional fees did not "devour" the remaining assets.

Ms Moffat said in her letter that such a tender process could delay realisation of the assets and give rise to further costs. In deciding on a liquidator, cost was only one of the factors the court took into account.

She suggested the investor group negotiate directly with PwC on a "cost mode" for the work.


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Investors should probably get real. The amount of time and cost in reconstructing the fictitious accounts and determining who gets what of the tiny scrap that remains will be significant and won't leave much change. Based upon what I have read, the shares are likely to be in illiquid high-risk companies with little ability to sell the shares at anywhere near their current 'market value', so the realisable value may be somewhere between $5 mill and $10 mill.

Investors should probably arrange themselves now into camps that are split into "I put money in and got nothing out" and "I got more money out than I put in" and arrange their own advocacy groups.

These two camps will obviously have completely different appetites to clawing back money from those who got out more money than they put in.

I would be asking Bruce Tichbon exactly what his position is, as he will obviously be advocating one way or the other, dependent on his personal circumstances.

If you are in the camp that got completely screwed over, I’d advocate for a PwC or someone with the guts to go after those in the other camp. If you are in the camp that got money out, you obviously want the liquidator with the cheapest fee schedule and low willingness to litigate.

If you don’t arrange yourself into your right camp now, you leave yourself open to being represented by self-appointed advocates who will push their own bandwagon.

This is a special note to those on the sidelines thinking that Bruce Tichbon (or whoever) will look after their interests. Make sure his interests are aligned with yours or be left behind.


Hourly rates of $450 and $400. That all? Think yourselves lucky. I got tied up in the MF Global collapse and Deloitte's charged $AUD 650 per hour


That's good advice, Anon - and it's free!


The fees seem as expected. The outrageous fee is the 4.4m pa the owner paid himself.


What really, really completely gobsmacks me is, I own, with two partners and some minorities overseas, a totally legitimate asset management company. We work through banks and institutional clients, but we handle a lot of their private wealth clients, so we need prospectuses, constantly filed and refiled at the Company's Office, recently reviewed by the FMA, which pointed out to a series of mainly formal, but fair remarks, that have all been addressed with the utmost urgency as we cultivate the respect of the regulators as God's Fear ... nothing to do about that, it is our cultural background, and I come from Europe, where rules are written in codes and enforced most of the cases.

Our size is much smaller than what Ross Asset management was (purported to be?) but all our unit trusts are independently audited, surveyed by trustees, the company is independently audited, and we added, due to my European habits, two extra features - a depositary service with Public Trust (i.e., we DO NOT hold the shares, a Crown's entity holds them) and an independent accountant who certifies the NAV of all the unit trusts.

All this means we shell out in compliance just above a third of our revenues, and the director's pay cheques are considered laughable compared to so called "industry standards".

Now, with all this said, I still think that a guy who could command all that trust from the public, would have been better off running a legitimate operation than losing his mental sanity in the mess of a ponzi scheme, with purportedly $30 millions in fees racked up. Although he may have never posted 30% returns (I am good at numbers, that kind of return makes me suspicious immediately), they are what a statistician call "outliers" and what a normal person will say smell fishy.

But all this leads to my second question. With all due respect, why the regulators are stuffed with just lawyers and accountants? Someone with market experience, who had traded a penny and settled market trades, would have been able to pinpoint the smell of rotten at first glance. No depositary bank, no mark to market cut off times but "valuations" and all this signs that could have even nailed a Madoff well before. Always ignored and overlooked by lawyers and accountants who keep reacting and seem incapable of preventing any of this ponzis. Hire some seasoned back and front office men from capital market units of banks and fund managers who mange real money...and these things will disappear in 3 years' tops, WITHOUT any need to legislate and add more cost to the compliance burden that is already onerous. Try it, give it a go...


That's fine in theory but why would someone with real world experience who is good at their job want to go and work for the FMA?


Your sentiments re the FMA are very similar to those expressed by Harry Markopolos re the American SEC in the wake of the Madoff scandal.
Harry was right, and so are you.


It's already happening in Australia. A mate was COO at the Sydney branch of a French bank. They moved his job to HK and made him redundant. So he's gone to work for ASIC. Perfect experience - 15 years trading, making markets in FX Options, 5 in middle office (compliance). MP is on the button. The wrong people are hired to look for something that they don't know what the are looking for. My mate woud would smell a rat in a nanosecond.


Happen to know someone who did apply for a job at the FMA in much the role that you describe. The person would have been ideal - has worked in the NZ market since the 1980s, knew the processes and participants inside out. Could spot dodgy trading with eyes closed. Got rejected on the basis of lack of "legal" experience. In other words, they were looking for yet another lawyer. Sigh.


Dealt with some in the FMA and SFO before – they came from NZX compliance department.

Individuals who have no idea how the real world operates and are completely process-driven. They think rules and more rules will stop fraud and non-compliance!

Happy to elaborate if I get challenged by them.


Just sell David Ross's house, and all the things he would've puchased while charging such high fees.
If he is complaining that his wife has had to pay his legal fees, as I have read previously, then he should think what he has done to so many hard-working people.


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