Distribution plan could split investors
Liquidators of New Zealand’s largest ever ponzi scheme have laid out options to return a portion of money to investors, but already there are warnings of legal challenges.
Five years after Ross Asset Management (RAM) collapsed, liquidators PWC will soon apply to the High Court to consider three different models for how to distribute what has been recovered.
Run by David Ross from offices on the Terrace in Wellington, hundreds of investors believed the company was generating remarkable returns, collectively managing almost $450 million on their behalf. In fact the operation was a fraud, for which Ross was jailed for more than 10 years.
PWC had recovered just over $14m by June, including around $9.5m clawed back from investors who managed to withdraw money before the collapse, under threat of being taken to court. The liquidation has cost around $5m.
While the distribution will, under any scenario, recover just a tiny fraction of the money the investors entrusted with RAM, the three options could lead to significantly different results.
Two of the models are similar; either a simple pro-rata distribution of of the net amount lost by the investor, or a variation which gives slightly more to those who had their money in RAM longer.
According to PWC the second option is the one which complies with New Zealand legal precedent, and its lawyers will argue for the court to choose that option.
But after lobbying from some investors, a third option will be put to the court. This model would consider any money withdrawn by investors before the collapse of RAM as a distribution.
Under that option, investors who had withdrawn some of their money from RAM would not play a further part until other investors had been paid as much as a proportion of their total investment.
This would mean some investors who withdrew a chunk of their money before RAM collapsed, even though they did not know the scheme was a fraud, may get nothing.
Meanwhile those who withdrew nothing prior to the collapse would get more than under Pwc’s preferred model.
Bruce Tichbon, who invested in RAM and never withdrew any of his original capital, said the alternative model represented ‘‘a little bit of equality’’ for those in his position, who were the majority of those who suffered losses.
‘‘This isn’t a general election, where you count the votes, but if you did count votes. it makes more people better off.’’
The issue was likely to be ‘‘incredibly divisive,’’ Tichbon said, and could prompt further court battles, whichever option was chosen.
‘‘I think it is very likely that we will be compelled to mount a legal challenge if we lose.’’
Pwc’s John Fisk said there was ‘‘some merit in the argument’’ put forward by Tichbon and others in his position, however insolvency law only took account of the net losses suffered by creditors, unless payments prior to collapse were voidable for some reason.
‘‘You don’t take into account that, because they got something earlier, so they should get nothing now,’’ Fisk said.
‘‘Some of the larger investors who might have got a small amount of their capital back [before RAM collapsed], in the alternative model that [Tichbon] is talking about, would get nothing in the distribution,’’ Fisk said.
‘‘Any investor that thinks that there is a model that is fairer or better than [the preferred option], then we would not stop them from being heard in court and they could argue their position.
Fish was not concerned about the threat of legal challenge.
‘‘What we want to do is get a court to confirm what they consider is the fairest way to deal with this. If a court decides that an alternative model is appropriate then we’ll abide by that.’’