Investor in Ponzi scheme avoids forced repayment

The Supreme Court has upheld a compromise over what should happen to the funds that innocent investors in Ross Asset Management withdrew before the investment company’s collapse.

Ross Asset Management (RAM) director David Ross fleeced investors out of $115 million and was jailed for 10 years in 2013.

Wellington lawyer Hamish McIntosh withdrew $954,047 from RAM before it was discovered that the company was fraudulent – a Ponzi scheme, as the Supreme Court described it.

The Court of Appeal – and now the Supreme Court – upheld a High Court ruling that RAM’s liquidators were entitled to make McIntosh repay the profit he made from his investment, which totalled $454,047, but not the $500,000 he originally invested.

McIntosh had appealed the Appeal Court ruling saying he should be allowed to retain the entire $954,047, while RAM’s liquidators also appealed, saying he should repay the whole sum.

The Supreme Court dismissed both appeals in a majority ruling yesterday.

The ruling has implications both for investors who didn’t get their funds out – some of whom have been left destitute – and at least some of those that did.

RAM’s liquidators, John Fisk and David Bridgman of PwC, have recouped several million dollars by settling with dozens of the latter investors over the return of their profits, and the ruling is expected to help further recovery efforts.

However, it means losses won’t be evenly shared between investors who got out of RAM in time and those who didn’t, as other investors – like McIntosh – who cashed in their investments before RAM’s 2012 collapse may be able to keep their original capital.

One Supreme Court judge, Susan Glazebrook, issued a dissenting judgment, saying she would have sided with RAM’s liquidators, in requiring McIntosh to repay the entire sum.

Tax accountant Bruce Tichbon, of the Ross Support group – which advocates for victims of David Ross – criticised the ruling.

He said it ‘‘lacked empathy for widows we are acquainted with who were once well off after a lifetime of hard work, now living in bed-sits on a benefit and antidepressants’’.

The Supreme Court is the highest court, meaning there is no further avenue for appeal.