Clawback targets son’s inheritance
A young man has lost a chunk of an inheritance from his late father in a ‘‘clawback’’ by liquidators of Ross Asset Management.
The clawback was among nearly 200 from which liquidators have netted about $21 million but it is a fraction of the $125m that hundreds of swindled investors have claimed.
Jonathan Morris, known as Joe, was 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 now-jailed Hutt businessman David Ross who ran Ross Asset Management (RAM).
Ross was sentenced to 10 years and 10 months’ jail in 2013 and is due to be considered for parole in March.
A victims’ group is opposing his release.
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Even though the money was withdrawn long before RAM collapsed in 2012, a judge has decided that more than $250,000 should be clawed back from $2m, from various sources, still held in trust for Joe Morris.
At the High Court in Wellington, Justice Rebecca Ellis said many investors had lost almost everything but others who had withdrawn their money before RAM collapsed made well in excess of their original investment.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 in certain circumstances.
The liquidators lined up other clawback cases resulting in settlements with 195 investors for $20.9m, according to the latest liquidators’ report up to December 16, 2018.
Just 10 clawback claims, for $5.3m, were heading to court but settlement talks continue.
RAM investor Bruce Tichbon, who runs an investors’ support group, said it was heartening there might be a little bit more money to go around investors.
But the legal costs for clawbacks might make for a marginal return after liquidation expenses were deducted, Tichbon 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Liquidators found that in 2009, when Joe Morris’ funds were withdrawn, Ross was telling investors the company held assets totalling $353m but it is now known that the assets were only worth almost $54m.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 years.
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, the judge said.
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 bank 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 various legal costs in amounts not yet decided.
Stuff has asked Joe Morris for comment via his lawyer.