The official assignee has written to the hundreds of affected investors to inform them they were expected to get back less than 2.5c per dollar stolen by Barry Kloogh. Photo / Linda Robertson, File
The official assignee has written to the hundreds of affected investors to inform them they were expected to get back less than 2.5c per dollar stolen by Barry Kloogh. Photo / Linda Robertson, File
Hundreds of people defrauded by Ponzi scheme operator Barry Kloogh are to receive a minuscule amount of the millions he stole from them, despite a judge awarding them the majority of the profits from the sale of the fraudster’s holiday home.
Kloogh was jailed for eight years, 10 months in2020 after stealing nearly $16 million from clients.
On November 5, 2019, 13 days before Kloogh was adjudged bankrupt, an Earnscleugh property bought by trusts associated with he and his wife Svetlana Spectra was sold in a mortgagee sale for $1.115 million.
Once the mortgage was repaid a surplus of $455,442 remained. As legal action loomed against Kloogh, the money remained frozen in his lawyer’s trust account until a court hearing could settle the matter.
The official assignee, acting as the liquidator of Kloogh’s companies Financial Planning Ltd and Impact Enterprises Ltd and the adjudicator of Kloogh’s bankruptcy, sought all of the money in the trust account as the last known major asset of the almost penniless disgraced former financial adviser.
Barry Kloogh outside court in 2020. Photo / Linda Robertson, File
Kloogh did not oppose the application but Spectra claimed $35,000 held in her family trust, arguing that she contributed her own funds towards property purchases and that she had no knowledge of her husband’s offending.
Kloogh’s theft from his clients started in 1993 and continued right up until he was raised by the Serious Fraud Office in mid-2019.
The Insolvency and Trustee Service traced a Mosgiel property purchase by Kloogh in 2014 and determined his share of the deposit had been made using stolen money. As well as a loan, a further $35,000 from Spectra secured the property.
The following year Kloogh set up trusts for himself and Spectra, gave their shares in the Mosgiel property to the trust, and bought the Earnscleugh property.
“A further amount of $71,806, which was taken from client funds, was used for the deposit,” a High Court judgment said.
The Mosgiel property was sold and a further Dunedin property was purchased, and Justice Rachel Dunningham concluded that $365,344 of stolen client funds were transferred to the two trusts.
The official assignee submitted that it would be unjust for both trusts to retain any money which was known to have been stolen by Kloogh, or any capital gain made on the properties bought with it.
Spectra’s position was that the $35,000 was identifiable as her own money, and she had no knowledge of herhusband’s crimes and therefore was not complicit in them.
Barry Kloogh in Dunedin District Court. Photo / ODT, File
Justice Dunningham agreed and said as the funds were traceable to Spectra, they must be treated separately.
“Because Ms Spectra’s contribution is not tainted by Kloogh’s offending, a proportionate share of the capital gain and interest should remain in the hands of that trust.”
Justice Dunningham ordered $426,107 of the frozen funds to be paid to the official assignee and $40,823 — the original amount plus capital gain — to be paid to Spectra.
After receiving the judgment, the official assignee wrote to the hundreds of affected investors to share the judge’s decision, and to give them the bad news that they were expected to get back less than 2.5c per dollar stolen.
“Although the return to investors is low, the investigation and legal action taken does mean that the funds held can be released to the victims and Kloogh has no claim on them in the future,” the letter said.
