At least $8 million of funds belonging to clients of Dunedin financial adviser Barry Kloogh are unaccounted for, a court judgement says.
Two companies of which Kloogh was the sole director, Financial Planning Ltd and Impact Enterprises Ltd, were placed into interim liquidation three weeks ago by Associate Judge Dale Lester.
The judge's reasons, released to the Otago Daily Times yesterday, reveal that between May 1, 2012, and April 16 this year, $15.7 million of client funds was deposited into accounts held by the defendant's companies, and a further $450,000 of client funds was deposited directly into Kloogh's personal bank account.
''Clients' funds were paid ... on the understanding that they would then be held by FNZ Custodians Ltd and invested through either Consilium NZ Ltd or its predecessor Discovery Portfolio Services Ltd,'' the judgement said.
However, only $7.4 million of those funds was passed on by FPL and Impact.
''While a full analysis of what became of the funds not deposited with Discovery Portfolio Services Ltd or Consilium NZ Ltd has not been completed, it appears that substantial funds have been used for personal expenditure by Mr Kloogh.''
The Financial Markets Authority, which brought the interim liquidation application, had obtained bank balances and financial statements of the defendant companies and some details of Kloogh's personal financial position, the judgement said.
''Each of the defendant companies is at best in a relatively modest financial position based on their statement of financial position.
''The financial statements for the defendant companies give no hint as to what has become of the in excess of $8 million of client funds unaccounted for.''
Consilium is a conduit to a custodial service offered by FNZ. It has previously said it was assisting clients of Mr Kloogh where it could.
An affidavit filed by the authority detailed the case of ''Client A'', who in February 2014 deposited $101,000 into Impact's account.
Of that, only $41,000 was paid to Discovery, when the full amount should have been forwarded, the judge said.
''Just over $35,000 went to pay credit card debts or financing relating to Mr Kloogh personally, $9000 was used to repay other investors, and other amounts were used to pay accounts associated with Mr Kloogh or to unrelated entities,'' Judge Lester said.
For 30 months, Client A made monthly payments totalling just over $54,000.
A further $37,000 invested in February 2016 was instead paid to other investors, or went on Kloogh's credit card or into his business account.
When that November Client A asked for $100,000, ''an analysis undertaken by the FMA shows that amounts drip-fed to Client A were withdrawn from accounts held for other investors,'' the judge said.
When Client A invested a further $300,000 with Impact in June 2017, ''the funds received ... were used to pay other investors, credit cards related to Mr Kloogh, and other accounts controlled by him,'' the judge said.
''The evidence provided by the FMA in relation to the misapplication of Client A's funds is comprehensive and compelling.''
The authority referred the matter to the Serious Fraud Office on May 13, and the SFO subsequently executed search warrants at Mr Kloogh's home and business premises.
No charges have been laid against Mr Kloogh.
Associate Judge Lester said the threshold for the appointment of interim liquidators ''is met, and is met by a wide margin ... given that there is clear evidence that Mr Kloogh has inappropriately used investors' funds for personal expenses there is a need to safeguard the interests of investors.
''The need to maintain the value of assets managed by the two defendant companies is a compelling, indeed an overwhelming factor.''
A report from the interim liquidators is due to be delivered next week.