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Ross Asset investors may face 'gruesome legal fight'

Investors in Ross Asset Management face a "gruesome legal fight" to recover their funds if investigations by regulators show David Ross was running a ponzi scheme, investor spokesman Bruce Tichbon says.

The receivers of the Ross group yesterday applied to the High Court to liquidate the companies and a hearing date has been set for December 17. Receivers have uncovered only about $11 million of the $449.6 million purported to be under management.

Mr Tichbon is among investors who put money into David Ross's funds on the recommendation of an adviser and the Financial Markets Authority wrote in a letter to him yesterday that it was "actively engaging with such advisers and will take appropriate action where, after investigation, any breaches are discovered".

"Some people have done very well out of David Ross," said Mr Tichbon, who has lost almost $1 million. "There will be a terrible legal battle between those who put more money in and those who took more money out. First it has to be determined whether or not David Ross was running a ponzi scheme."

Mr Tichbon represents more than 50% of the affected investors. In an effort to develop a strategy he has been in contact "with the people running the Madoff unwind" in the US.

He declined to give details until the plan is developed. Bernie Madoff was jailed after pleading guilty to running the biggest ponzi scheme in US history, involving billions of dollars.

In Mr Tichbon's case, David Ross was recommended by a friend's accountant, though others may have been steered toward the funds by another authorised financial adviser.

"This is how he seemed to operate," Mr Tichbon says. "Why have an expensive marketing campaign when word of mouth is bringing you clients anyway."

Receivers John Fisk and David Bridgman of PwC yesterday sought the liquidation of four Ross companies: Ross Asset management, Bevis Marks Corp, McIntosh Asset Management and Mercury Asset Management.

They also flagged the liquidation of four more companies – Dagger Nominees, Ross Investment Management, Ross Unit Trust Management and United Asset Management – by way of a special resolution of shareholders, acting through the receivers.

Messrs Fisk and Bridgman are seeking to be appointed liquidators.

Mr Tichbon says he has already written off his losses and any return "would be a bonus".

Mr Ross, formerly a sharebroker, 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 Serious Fraud Office and the FMA are investigating his companies.

(BusinessDesk)

Comments and questions
12

Lawyers will be the only winners here.

That is cliche is probably true on the surface, although I suspect the receivers will do quite well out of it as well. But without lawyers there will not be any resolution of the competing claims, so while some parties will be 'losers' in the whole mess, they will lose less than they would have without proper advice.

Good news for negatively impacted investors to hear that Bruce Tichbon is on the side of the royally shafted. All the best for the fight ahead, Bruce.

What I find particularly interesting about the Ross Asset Management collapse is that the FMA stepped in only AFTER it became abundantly apparent something was very wrong.

I say this because of a conversation I had with a sharebroker five years ago. He relayed to me the difficulty of getting new clients in the retired or near retirement agricultural community in the Rangitikei, Hawke's Bay and Wairarapa as so many of them were besotted with David Ross.

And why were they besotted? Because just like Bernie Madoff, David Ross managed to outperform the market EVERY year. Through peaks and troughs he provided way higher returns than his competitors and never made losses.

So it was common knowledge among the broking community that this was too good to be true. Even if they had no proof it was a ponzi scheme their suspicions went way beyond professional jealousy - they knew he couldn't legitimately be doing what he claimed to be doing. No one was that lucky.

Which brings me to the FMA, formerly the Securities Commission. If suspicions were raised about David Ross years ago - and they clearly were - did the Securities Commission know? Surely they did. And if they did, what questions did they ask?

Or it brings you right back to the investors and their judgment.

Absolutely, there always has to be a major element of that. However, I'm simply pointing out that being in touch with such issues, which I'm sure were being highlighted and discussed within the professional investment community, on behalf of investors is part of the FMA/Security Commission's role, and it's one they don't seem to have carried out whatsoever.

I had a farming friend come to me and ask about David Ross. I have been investing in small cap mining stocks for a number of years but in 2007-08 my portfolio took a hiding on the market. Yet another farming friend of mine had made a mint with David Ross based on the takeover of Rio Tinto by BHP and a number of other small cap mining stocks he claimed to be invested in. I was blown away by this but something just did not feel right. As a seasoned investor I knew someone's luck was just not that good. I work as a financial adviser to the mining industry and I know this much - there is no easy money in this game!

Anyone who's raised concern to the Securities Commission in the last few years should come forward. Is there any way the government could intervene in this mess?

I agree. There must be people who knew 'something'. Their information would be extremely valuable right now. A cynic may suggest some who knew jumped on the bandwagon while the chips were up. However, there surely are honest folk who did know/report something, and they are urged to come forward.

Dear Investors

Please, don't expect much more than the $11m already identified as being uncovered to be added to. With the number of paper shufflers and lawyers salivating on the sidelines, after the monetary realisation of the assets, the amount to be distributed will probably waver between zilch and negligible.

Looks like a charade. Fight for investors / then write off your own investment for $1m. Show us the evidence. YEAH RIGHT / then concede there's no point as it's all dusted.

Any amount of money that is recovered from clawbacks, suing financial advisers, or whatever, will only be used to pay the lawyers and receivers. Total waste of time and energy, to make them richer. They will be waiting at the sidelines for the next fraudster and collapsed finance company, of which we have no shortage of NZ.