Ross Asset Management (RAM) group records show funds withdrawn by investors over the last five years exceeded funds contributed by more than NZ$60 million, receivers John Fisk and David Bridgman of PwC say in their first receivers' report.
The report, which covers RAM and a series of related entities, notes that the records - such as they are - show significant net cash outflows to investors over the last five years suggesting the group has lacked adequate funds to meet further withdrawals.
"Funds withdrawn by investors over the last five years have exceeded funds contributed by more than NZ$60 million," Fisk and Bridgman say. "Due to lack of available records we have only been able to complete this reconciliation back until 2000."
David Ross was the sole director of all entities and appeared to have sole responsibility for all funds management, research and investment decisions made by him on behalf of clients or by RAM. He was supported by two administrative assistants.
After complaints from RAM investors about delayed or non-payments, the Financial Markets Authority (FMA) launched an investigation and exercised a search warrant on founder and director David Ross' offices on The Terrace in central Wellington and at his home between October 31 and November 2 last year. It then had RAM assets held within New Zealand frozen and brought in PwC as receiver. PwC has identified just NZ$9.8 million of assets (see chart below). PwC says, however, RAM records suggest the total value of investor portfolios at September 30 last year was NZ$449.6 million, held on behalf of about 900 investors.
PwC has previously suggested RAM has the characteristics of a Ponzi scheme. David Ross is now cooperating with PwC, the FMA and Serious Fraud Office after a spell in hospital getting compulsory treatment under the Mental Health Act. See a video interview with FMA boss Sean Hughes on RAM here.
In their report Fisk and Bridgman confirm the majority of assets found thus far that are owned by the group are in the form of shares in New Zealand and overseas entities and cash held in various accounts. Bevis Marks, a purported depository broker, is the recorded depository for NZ$437.6 million worth of stock across 205 different listed securities at November 7, 2012.
"If the holdings are valid, they must be held through broker/financial institution nominee companies through relationships with the Ross Group. We have not identified any such material holdings actually held by Bevis Marks at this point," the receivers say.
Fisk and Bridgman also say the records aren't of a standard they'd expect to see given the nature of the business, the number of investors and level of funds allegedly under management.
"Whilst there is an electronic database that tracks the level of investors' funds received, withdrawn and held and a similar system that records investments transacted and held by the Ross Group, the interface between those databases is not ideal."
"The databases are not always updated and reconciled on a regular basis to reflect transactions," the receivers say.
They go on to say that they've been required to locate, and in some cases, recreate records.
"Furthermore we have been informed by the two staff members of the Ross Group that much of the business activity relating to overseas investments was undertaken outside of the Group's offices by Mr Ross and no reliable records exist for these transactions at the Group's offices," Fisk and Bridgman add.
They say Ross has properties held in a trustee capacity, household affects, art work and limited cash. They're still assessing the value of these assets, whether Ross has any beneficial ownership or interest in trust assets, or whether any RAM funds have been used to buy trust assets. The receivers are also undertaking a reconciliation of RAM's banking records to work out the flow of funds through various entities and bank accounts over as long a timeframe as is "reasonably possible."
Fisk and Ross say approaches have been received from parties interested in buying RAM assets, both shares and Ross' properties, but no sales have yet been made. An appendix to the receiver's report includes five properties with three in the Wellington region, one in the Wairarapa, and a section at the May Hills, near Lake McKerrow/Whakatipu.
RAM's brief list of creditors includes NZ$201,000 claimed by Mercedes Benz Financial Services Ltd for a motor vehicle.