Friday 15th November 2013
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Disgraced fund manager David Ross faces the longest jail-term imposed by the courts for a case brought by the Serious Fraud Office for his long-running Ponzi scheme which the judge said was motivated by a "twisted form of vanity" rather than simply greed.
Judge Denys Barry sentenced Ross to 10 years and 10 months imprisonment, with a minimum non-parole period of five years and five months, in the Wellington District Court today. Ross pleaded guilty to charges in August that he effectively ran a Ponzi scheme through his Ross Asset Management, and fictitiously recorded assets of some $384 million to attract new investors and retain existing ones.
A Ponzi scheme is a money-go-round arrangement which uses cash from new investors to pay returns to existing members, who typically think they're reaping the rewards of an astute investment plan.
"You stole from people who trusted you with their life savings," Judge Barry said in sentencing Ross. "The cold hard reality is you were a liar and a thief operating on a scale unprecedented in this country."
The judge adopted a starting point of 16 years and discounted that to take into account the early guilty plea, offer of reparations and some degree of remorse, and that rather than being motivated by greed, said the offending was driven by "some illusion, some sort of twisted form of vanity or hubris."
He rejected a submission not to impose a minimum non-parole period, saying a third of the final sentence "would not be enough to denounce deter or effectively punish this offending."
The jail term is the longest ordered by the courts for a case brought by the SFO, trumping a nine years and six months-term imposed on Michael Swann in 2009 for his $17 million defrauding of the Otago District Health Board.
In August, Ross pleaded guilty to four charges of false accounting and one of theft by a person in a special relationship, laid by the SFO.
He also pleaded guilty to charges laid by the Financial Markets Authority that he provided a financial service when he was not registered for that service, he knowingly made a false or misleading declaration or representation to the FMA for the purposes of obtaining authorisation to become an Authorised Financial Adviser, and he supplied information or produced documents to FMA which he knew to be false or misleading.
Judge Barry took the FMA charges into account when setting the starting point for sentencing.
"What you did was impugn the integrity of the regulatory and client arms of the Financial Markets Authority by your actions," the judge said.
Four investors, who were granted name suppression, read out their victim impact statements at the opening of the hearing, describing the emotional and financial stress each had been put under by Ross's offending.
One talked down the level of returns described by the media, saying they were "really no different to other investments we had" and that they were considering withdrawing from Ross Asset Management to chase better returns.
The judge said the "raw hurt and anger was palpable" in the victim impact statements, and that no sentence imposed by the court would provide solace for the investors.
Ross's lawyer, Gary Turkington, told the court a deed of settlement was entered into yesterday that would see Ross forgo his share of several properties including his family home to help make repayments.
Turkington said the losses to investors are in the order of $100 million to $115 million and that may be reduced by $1-to-$2 million by the latest settlement deed.
"It will be regretfully infinitesimally small compared with the losses the good people suffered. That's acknowledged," he said.
Ross Asset Management's assets were frozen and receivers appointed last year by the FMA after the watchdog received complaints about delayed or non-payment of investor funds. Ross wasn't available in the early days of the investigation due to his hospitalisation under the Mental Health Act.
Earlier this month, the High Court in Wellington extended asset preservation orders over the assets of Ross, RAM and related entities to include DRG Ross Family Trust, also known as the David Robert Gilmour Ross Family Trust.
PwC's John Fisk and David Bridgman were appointed to preserve the assets of the Ross family and related trusts as part of the wider investigation into Ross Asset Management.
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