‘Ponzi’ claw back cuts son’s bequest
A young man has lost a chunk of an inheritance from his late father in a ‘‘claw back’’ by liquidators of Ross Asset Management.
The claw back was among nearly 200 from which liquidators have netted about $21 million, but it’s a fraction of the $125m that hundreds of swindled investors have claimed.
Jonathan Morris, known as Joe, was only about 13 when his father, Bruce, died in 2005. His father had invested in what turned out to be a doomed Ponzi scheme run by nowjailed businessman David Ross who ran Ross Asset Management (RAM).
Ross was sentenced to 10 years and 10 months’ jail in 2013. He is due to be considered for parole next month. Victims are opposing this.
The RAM investment made up part of Bruce Morris’ estate that was to be shared by his three children.
Even though the money was withdrawn before RAM collapsed in 2012, a judge decided that more than $250,000 should be clawed back from $2m, from various sources, still held in trust for Joe Morris.
In the High Court at Wellington, Justice Rebecca Ellis said many investors had lost almost everything but others who had withdrawn money before RAM collapsed made well in excess of their original investment.
But that excess came mainly from fresh capital invested in RAM, not income earned on investments.
In a test case in 2017, the Supreme Court confirmed the liquidators’ ability to ‘‘claw back’’ at least some of those false profits. The liquidators lined up other claw back cases resulting in settlements with 195 investors for $20.9m, according to the latest liquidators’ report up to December 16. Just 10 claw back claims, for $5.3m, were heading to court but settlement talks continue.
RAM investor Bruce Tichbon said it was heartening there might be a little bit more money to go around investors. But legal costs might make for a marginal return after liquidation expenses were deducted, he said. At least Morris was getting the original investment back while others were getting about 14 per cent, he said. ‘‘Good luck to him. He’s kept his capital.’’
Liquidators found that in 2009, when Joe Morris’ funds were withdrawn, Ross was telling investors the company held assets totalling $353m, but it was now known that the assets were worth just under $54m.
For Joe Morris, a RAM investment was part of his father’s estate to be shared with his brother and sister when each turned 25. The older children had already reached 25 when their father died. But Joe Morris did not turn 25 until 2017, and he is yet to get his money. In 2009, executors controlling Morris’ money had his share of the Ross investment, $329,215.06, paid into a bank. It was $258,910.73 more than the $70,304.33 that was Morris’ share of the original investment.
With other money from his father, the account rose to $729,154, and was to reach $2m when topped up with proceeds from a property sale. The $2m pot was agreed in a settlement of a dispute with former executors of his father’s estate.
After hearing the liquidators’ claim to Morris’ RAM money, the judge found its withdrawal had prejudiced other RAM creditors.
She also decided that events after the 2009 payment, including the 2012 settlement with the former executors, had not put the money beyond the liquidators’ reach.
The trustees now in charge of the money should pay ‘‘reasonable compensation’’ to the liquidators, which was the $258,910.73, plus 5 per cent interest from December 2012, the judge said. The trust will also pay legal costs.
Stuff has asked Joe Morris for comment via his lawyer.