Charges laid today against David Ross

13 June 2013

Charges laid today against David Ross

Charges have today been laid in the Wellington District Court against David Robert Gilmour Ross (63). The charges laid by the Serious Fraud Office (SFO) allege he operated a $400 million Ponzi scheme. They follow a joint agency investigation between SFO and the Financial Markets Authority (FMA).

The Wellington financial adviser faces four Crimes Act charges of false accounting and one charge of theft by person in special relationship.

The joint investigation into Ross Asset Management (RAM) and related entities commenced in November last year after complaints were received regarding the delayed or non-payment of funds to investors. Following enquiries FMA undertook in October 2012, FMA took immediate action to preserve investors' funds by obtaining asset preservation orders and orders appointing receivers and managers to the Ross Group of entities. These orders were obtained under the Financial Advisers Act and remain in place. Initial inquiries by receivers showed investments of only $10.2 million actually existed.

In response to the potential loss, large number of victims, concerns of the receivers, complexity of the case and the significant public interest, both FMA and SFO commenced the joint investigation.

The charges laid by SFO allege that Mr Ross conducted a Ponzi scheme which he disguised by falsely reporting clients' investments. They allege that large portions of client portfolios shown as invested through a broker ‘Bevis Marks' were fictitious and never existed, resulting in an overstatement of investment positions by more than $380 million.

More than 1,200 RAM client accounts have been affected by Mr Ross' scheme.

SFO's Acting Chief Executive, Simon McArley said, "The allegations made amount to serious criminal matters. However the saddest fact of all of this is the position that Mr Ross' clients find themselves in. The joint activity between SFO and FMA demonstrates that we can work effectively together to both address the serious criminal offending and protect as far as possible the interests of the victims of that offending."

FMA Head of Enforcement Belinda Moffat said, "FMA will now complete its investigation into conduct by Mr Ross under the Financial Advisers Act. We will also shortly release best practice guidance for financial advisers providing discretionary investment management services to ensure our expectations are well understood by advisers, as well as guidance for investors considering using such services."

SFO and FMA acknowledge the assistance provided to them by the receivers of the Ross Group of entities and their advisers as well as the many investors who have provided information.

ENDS

For further information

Andrea Linton
Serious Fraud Office
027 705 4550

Tony Reid
Financial Markets Authority
021 739 052

Note to editors

Background to investigation

Since 1989, David Robert Gilmour Ross has operated a funds management business, Ross Asset Management Limited (RAM). The RAM office was located in Wellington. RAM was the key trading entity for the Ross Group and Mr Ross had sole responsibility and decision-making authority for all aspects of RAM.

Mr Ross was approved as an Authorised Financial Adviser (AFA) by FMA on 12 July 2011. His authorisation was suspended in November 2012 and his registration as a financial services provider cancelled in February 2013, which resulted in the termination of his authorisation as an AFA.

Mr Ross and RAM were placed into receivership in early November 2012 along with Mr Ross' other associated entities. Eight of the Ross entities were placed in liquidation in December 2012.

Crimes Act offences

Section 220 Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person-
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.

(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.

(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.

(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.

Section 252 False accounting by officer or member of body corporate
(Pre 2003 amendments)
Every one is liable to imprisonment for a term not exceeding 7 years who, being a director or an officer or a member of any company, or body corporate, with intent to defraud,-
(a) Destroys, mutilates, alters, or falsifies any book, account, valuable security, or document belonging to the company or body corporate, or concurs in so doing; or
(b) Makes or concurs in making any false entry in, or omits or alters, or concurs in omitting or altering, any material particular from or in any such book, account, valuable security, or document.

Section 260 False accounting
Every one is liable to imprisonment for a term not exceeding 10 years who, with intent to obtain by deception any property, privilege, service, pecuniary advantage, benefit, or valuable consideration, or to deceive or cause loss to any other person,-
(a) makes or causes to be made, or concurs in the making of, any false entry in any book or account or other document required or used for accounting purposes; or
(b) omits or causes to be omitted, or concurs in the omission of, any material particular from any such book or account or other document; or
(c) makes any transfer of any interest in a stock, debenture, or debt in the name of any person other than the owner of that interest.

About SFO

The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.

SFO's role is the detection, investigation and prosecution of serious or complex financial crime. SFO's focus is on investigating and prosecuting criminal cases that will have a real effect on:

• business and investor confidence in our financial markets and economy
• public confidence in our justice system and public service
• New Zealand's international business reputation.

SFO operates three investigative teams:

• Evaluation and Intelligence;
• Financial Markets and Corporate Fraud; and
• Fraud and Corruption.

SFO operates under two sets of investigative powers.

Part I of the SFO Act provides that it may act where the Director "has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud."

Part II of the SFO Act provides the SFO with more extensive powers where: "...the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed..."

SFO's Annual Report 2012 sets out its achievements for the past year, while the Statement of Intent 2013-2016 sets out the SFO's three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz

About FMA

FMA was established on 1 May 2011 under the Financial Markets Authority Act 2011, in response to the need to address failures in the financial markets, made evident from the global financial crisis. The Government recognised that New Zealand required a single conduct regulator to proactively monitor and enforce securities legislation.

FMA is an independent Crown entity and has the following functions:

• to monitor compliance with, investigate contraventions of, and enforce securities and investment law, financial reporting law, and companies law, in respect of financial markets participants;
• to promote confident and informed participation in the financial markets;
• to license and supervise particular financial markets participants, including financial advisers, trustees and statutory supervisors, auditors, and securities markets;
• to monitor and conduct inquiries and investigations into financial markets and financial markets participants; and
• to keep the law under review.

FMA is committed to taking enforcement action against those whose behaviour threatens market integrity and investor confidence in New Zealand.

More information about FMA can be found at www.fma.govt.nz