A Wellington lawyer ordered to repay money to the liquidators of a collapsed Ponzi scheme will also face a hefty interest bill.
Earlier this year Hamish McIntosh was ordered to repay more than $454,000 in fictitious profits he withdrew from Ross Asset Management prior to its collapse.
McIntosh was allowed to keep the original $500,000 he invested in Ross Asset Management but later withdrew.
Ross Asset Management, a low-profile investment firm in Wellington turned out to be a Ponzi scheme, believed to be the largest ever in New Zealand.
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The Financial Markets Authority raided the company’s offices after clients began claiming they could not contact Ross. Weeks later it was placed in liquidation, with investors facing the prospect of getting only a fraction of their original deposits back.
Although the major issues of McIntosh’s legal battle against liquidators PwC had already been dealt with by the Supreme Court, the issue of what should happen in terms of interest on the money has only been determined now.
A media release accompanying the ruling said the Supreme Court had ruled that McIntosh would have to pay interest on the money at a rate of 5 per cent per year, from the date of liquidation.
“This Court has found that the purpose of an interest award is not punitive, but rather to compensate for the loss of the use of money in circumstances where the party in receipt of the money has had the benefit of its use.
“In this case, the appellant had the use of the money since he was paid by [Ross Asset Management] and as a result the company had been deprived of the use of that money. Accordingly, there was no reason in principle not to award interest in this case.”
A quick calculation shows the interest bill faced by McIntosh will be around $100,000, based on more than four-and-a-half years passing since the company collapsed.
A Ponzi scheme is a fraudulent investment operation where organisers to use the deposits of new investors to generate returns or cover withdrawals for older investors, rather than from genuine profit or trading.
Hundreds of generally affluent Kiwis entrusted their money to David Ross, the company’s founder and principal, who worked out of a simple office on The Terrace in Wellington.
While his clients collectively believed he was managing almost $450 million on their behalf, the sums were based on highly inflated returns.
He was later jailed for 10 years and 10 months.