RAM investor Hamish McIntosh ordered to repay $454,000 'profit'

Tuesday 23rd June 2015

Former Ross Asset Management investor Hamish McIntosh, who lost name suppression in a Court of Appeal ruling last week, has been ordered to repay $454,000 in fictitious gains from his investment, but he can keep his $500,000 principal payment.

In the High Court in Wellington, Justice Alan MacKenzie ruled the liquidator's bid to claw back funds from former Ross investors didn't need an 'all or nothing' approach, and the principal invested could be viewed as separate from the investment scheme's fictitious returns. McIntosh was entitled to the principal back because convicted fraudster David Ross hadn't used it as claimed, instead using it to prop up his Ponzi scheme.

"There is no suggestion that the respondent was other than a good faith recipient of the payments," Justice MacKenzie said in his written judgment. "He is in all respects an innocent investor."

However, the liquidator's claim for the $454,000 of 'profit' paid to McIntosh was successful. The judge found a reasonable person should have been aware of potential litigation once Ross Asset's precarious position was first made public, and dismissed McIntosh's defence that his circumstances had subsequently changed because of a property development investment, on Wellington's Palliser Road, which involved taking on $3 million of debt, pushing the venture into negative equity.

Justice MacKenzie said the funds McIntosh got from Ross Asset were used to buy property in Queenstown rather than being ploughed into Palliser Road.

Because of the publicity over the collapse of Ross Asset, "investors knew that the returns which had been reported to them were fictitious," the judgment said. "The proposition that an investor who had been paid fictitious returns would be entitled to retain those returns (which, on the information then available, must have come from the funds of other investors) must have been at least questionable."

McIntosh took legal advice on the potential risk, though the judge didn't accept that as a strong enough defence because other out-of-pocket investors could have taken their own legal action.

The judge reserved his decision on costs, saying the parties can make submissions if they can't agree on how to divide them.

McIntosh unsuccessfully sought permanent name suppression.

Wellington-based Ross built up a private investment service by word of mouth, producing regular reports for shareholders indicating healthy but fictitious returns. Between June 2000 and September 2012, Ross reported false profits of $351 million from fictitious securities trading as part of a fraud that was the largest single such crime committed by an individual in New Zealand.

In June last year, the Court of Appeal turned down a bid by Ross to reduce his 10-year, 10-month jail term, which carries a minimum non-parole period of five years and five months.

Liquidators John Fisk and David Bridgman of PwC took the action against McIntosh as a test case, and have previously said they would pursue other investors who pulled out their funds before Ross Asset's collapse. The defrauded investors are expected to receive 3 cents in every dollar invested.

BusinessDesk.co.nz

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