Recent court decisions have repeatedly confirmed that David Ross ran a massive Ponzi scheme. The former principal of Ross Asset Management, who is serving a 10 year and 10 month jail sentence, has clearly established himself as one of the country's most notorious white collar criminals along with Rod Petricevic, Jacqui Bradley, Stephen Versalko, Alex Swney and others.

Ross left a trail of destruction as investors suffered large losses and incurred substantial legal costs trying to recover their money.

The only winners from the Ross saga are the legal profession. There have been a large number of related court cases, with one of the most important decisions handed down recently by the Supreme Court.

Ross, who was born in North Otago in 1950, moved to Wellington in the 1970s where he was employed as an equity analyst with one of the major trading banks. He was a quiet and unassuming individual who covered NZX-listed companies and played an active role in the New Zealand Society of Investment Analysts.


In the early 1980s he joined Peter O'Neil at Wellington-based Leadenhall Investment Management, one of the more aggressive and high-profile fund managers of the 1980s.

It is important to note that there was a huge difference between Wellington and Auckland in the 1980s. All of the major banks and most of the large fund managers - including AMP, National Mutual, MLC, CML, T&G, Government Life and others - were based in the capital, while individual investors were more dominant in Auckland.

Wellington fund managers had little time for Equiticorp, Chase and the other high-flying Auckland companies. That was until Ross and O'Neil returned from an Auckland visit and shocked Wellington brokers by placing large buy orders for Auckland-based investment and property companies.

This aggressive approach boosted Leadenhall's investment performance and by the mid-1980s Ross was a regular customer of most of the country's up-market restaurants, often hosted by grateful brokers.

The more conservative Wellington fund managers won out in the end, as more than two-thirds of the failed listed companies after the crash were Auckland based. Leadenhall's performance deteriorated because of its exposure to these companies.

O'Neil bought out Ross and Leadenhall was acquired by Southpac Investment Management in 1990 for a nominal sum, effectively bailing out the former high-flying investment manager.

Leadenhall's rise and fall clearly identified Ross, who was the company's main portfolio manager, as a high-risk investor with a strong preference for growth stocks and small and medium-sized Australian mining companies.

In late 1989 he established Ross Asset Management (RAM). There were no regulations at the time, nor any requirement to be licensed, and RAM managed money for individuals on an individual portfolio basis without the use of an independent custodian.

Investors deposited funds with RAM; assets were purchased and sold on their behalf and held by RAM. The investment performance of these funds was reported by RAM without any independent verification or audit.

RAM clients had their own individual portfolios and, as a consequence, could have widely differing investment returns.

The structure was similar to that used by Bernie Madoff in the United States, Hubbard Management Funds in Timaru and Jacqui Bradley in Auckland.

RAM's records showed $449.6 million of purported assets, of which $437.6m were held under the name of Bevis Marks. However, there were no records of broker transaction statements, portfolio valuations, broker contract notes or registry records in relation to any Bevis Marks investments.

Ross was known as a secretive, high-risk investor but there was no speculation that he was running a massive Ponzi scheme. Most investment people believed that he was just incredibly lucky and the old Securities Commission, which was based only 700m from RAM's head office, didn't appear to have any reason to believe that Ross was operating New Zealand's biggest Ponzi scheme.

Ross was known as a secretive, high-risk investor but there was no speculation that he was running a massive Ponzi scheme.


The fraud was uncovered in late 2012 following a complaint from a client. Ross pleaded guilty and was sentenced to 10 years, 10 months imprisonment in November 2013, with a minimum prison period of 5 years and 5 months.

Ross appealed his minimum sentence but this was dismissed by the Court of Appeal in 2014 with Justice Venning writing: "Between approximately June 30, 2000 and September 30, 2012 Mr Ross caused fictitious transactions for securities held by Bevis Marks to be entered into RAM's computer system".

"RAM provided quarterly investment reports to its investors generated from its computer system. The false accounting hid losses from investors and/or overstated the performance of some investors' portfolios. Information contained in quarterly investment reports was instrumental in attracting new investors and/or causing existing investors to either maintain their existing investments or invest future funds with the company. Mr Ross used the funds primarily to repay investment of other investors in the mode of a classic Ponzi scheme."

Although Ross pleaded guilty, and has shown remorse, the courts have been unwilling to grant him any leniency because of the length and severity of his offending.

One of the more interesting aspects of the Ross debacle has been the legal action taken by Hamish McIntosh against RAM's liquidators PwC.

McIntosh entered into a funds management arrangement with RAM in April 2007 and invested $500,000, which was borrowed from his bank. The money was supposed to be held in a separate account in the name of McIntosh, but according to the courts, "the $500,000 he paid to RAM was misappropriated within days of his making the investment and became part of a co-mingled pool of cash and securities held by RAM and associated entities".

"RAM paid the money from this pool to other investors who wished to cash up their investment and also paid various operating expenses of RAM, including personal drawings of its principal, David Ross."

In September 2011, which was more than 12 months before RAM's Ponzi scheme was discovered, McIntosh decided to cash up his investments. He received $954,047, comprising his original $500,000 and fictitious investment returns of $454,047.

In July 2013, PwC gave McIntosh a notice requiring him to repay all of the $954,047. A number of court hearings resulted in the following decisions:

• A High Court judgment required McIntosh to repay the $454,047 but not the $500,000.

• McIntosh appealed to the Court of Appeal and the liquidators cross-appealed. By a majority, the Court of Appeal upheld the High Court decision although Justice Miller dissented saying he would have ordered McIntosh to repay the full $954,047.

• Both parties appealed to the Supreme Court and by a majority decision, released on May 26, it upheld the decisions of the lower courts. McIntosh was ordered "to pay the respondents costs of $15,000 together with reasonable disbursements". Justice Glazebrook dissented, with the opinion that McIntosh should repay the full $954,047.

McIntosh was caught by the ability of receivers to claim back money paid out by insolvent companies in the 24 months prior to their receivership.

The McIntosh case hasn't been fully resolved, as "the question of interest on the sums involved" has yet to be determined.

David Ross has caused a huge amount of stress and grief to 700 RAM investors, most of whom he knew personally.

Ross has admitted his guilt, has received a long jail term and will be remembered for a long, long time as the operator of New Zealand's biggest Ponzi scheme.

But one major question remains: Why did he do it?