The Serious Fraud Office (SFO) is expected to release further details this week on its ongoing investigation into Dunedin financial adviser, Barry Kloogh.
Kloogh’s Breath Financial business was raided by the SFO in May following a tip-off to the Financial Markets Authority (FMA).
It is not clear whether the SFO has found evidence of a ponzi scheme but, according to industry sources, the scale of at-risk funds in the Kloogh case could surpass that of the infamous Ross Asset Management (RAM).
David Ross, RAM head, is serving a 10-year jail sentence after siphoning off about $115 million from clients via a reasonably unsophisticated ponzi scheme. RAM reported headline assets under management of about $450 million prior to being exposed as a sham in 2012.
However, while Ross operated in a regulatory vacuum – with no external governance or custodial arrangements – new regulations imposed in the wake of the scandal had supposedly closed down that loophole.
According to an Otago Daily Times (ODT) story in June, Kloogh also held “some funds” through the Consilium custodial wrap. The ODT reported Consilium had offered to transfer funds to other advisers or withdraw investments for some Kloogh investors.
“A Consilium spokeswoman said the firm had assisted investors who had contacted it where it could,” the ODT story says.
Neither the SFO nor FMA were able to provide further information.
“We are supporting the SFO in its investigation but there is some way to go,” an FMA spokesperson said.
Kloogh’s authorised financial adviser status was suspended in June. He has a long history in the industry dating back to at least 1992 as director of Impact Financial Services.
In 2006, Kloogh hitched his wagon to the ill-fated NZ venture of the-then Australian financial planning giant, Professional Investment Services (PIS). PIS more-or-less exited NZ within a couple of years while its Australian parent, after hitting regulatory trouble, was subsumed into the ASX-listed Centrepoint Alliance in 2010.
He is a current shareholder in eight separate companies and a director, or former director, of 29 companies.
A 2014 press release issued by his Debtbreaker business – a budgeting and savings software tool – described Kloogh as “one of New Zealand’s leading authorities on wealth management”.
In June this year he resigned as director and exited his shareholding in communications and life coaching business, Life Performance.
In an online endorsement of a life coach he says the coaching process “helped me to create and clarify goals”.
“I’m now onto the next set of goals and can’t wait to achieve them and move onto even better things!” Kloogh says in the blurb.
Coincidentally last week, the FMA announced the “end of a long battle” after a group of Ross investors independently filed a claim against ANZ.
In a statement, FMA chief, Rob Everett, said the regulator had subsequently dropped any further moves to pursue ANZ over any Ross claims.
“The Ross Asset Management Ponzi scheme was a major event for New Zealand’s financial markets and had a very significant impact on a large number of investors,” Everett said.
“For the past three years, the FMA has been responding to ANZ’s legal challenge to enable us to engage with and provide relevant information to Ross Asset Management investors.”
He said while the FMA could have continued to litigate, it had to consider the individual investor actions as well.
“This action shows the process is working, with investors exercising their private rights to make a claim,” Everett said. “It has taken a long time to get to this point, but we think that this is the right result.”
The Ross investor group filed claims against ANZ in the Wellington High Court last week alleging the bank breached its duties in managing the RAM accounts.
ANZ will defend the allegations, claiming Ross had also misled the bank.
Auckland-based litigation funder, LPF Group, is backing the Ross investor group action. LPF includes NZ Shareholders Association founder, Bruce Sheppard, and current Tower chair, Michael Stiassny, as directors.