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Kloogh's clients' missing $8 million

About $8 million of client money is missing from financial adviser Barry Kloogh’s accounts, it has been revealed.

Wednesday, August 7th 2019, 8:54PM 6 Comments

The Dunedin-based investment adviser's office was raised by the Serious Fraud Office in May.

A High Court judgment on the Financial Markets Authority's application to liquidate Kloogh's companies has been released, which shows the scale of money that is unaccounted for.

It shows that clients invested nearly $15.7 million with his companies, Financial Planning Ltd and Impact Enterprises Ltd, between May 2012 and April 2019.

But only $7.43 million was passed on to be held by Consilium or its predecessor, Discovery Portfolio Services.

About $450,000 went into Kloogh's private bank account.

Associate Judge Dale Lester said while a full analysis had yet to be completed, it seemed substantial funds had been used for Kloogh’s personal expenditure and the companies’ financial statements gave no hint as to what had happened to the $8 million that was unaccounted for.

The judgment shows one client invested $101,000 with Kloogh, who spent $35,000 of the money on his credit card and personal debt, used a further $9,000 to pay other investors, and invested just $41,000.

The client went on to pay regular monthly amounts totalling just over $54,000 and deposited another lump sum of $37,000 in 2016.

Of that, $33,700 was paid to other investors and $2,000 used for credit card payments.

When the client asked for $100,000 back for house renovations, the money was drip-fed, withdrawn from other investors' accounts.

Lester said the evidence in relation to the misapplication of funds was comprehensive and compelling. “The scale of the missing client funds accrued and the circumstances set out in the evidence in relation to Client A by way of an individual example create a compelling case for the appointment of interim liquidators.”

Kloogh’s companies were not registered to receive client funds.

Lester said the threshold for appointing interim liquidators was met by a wide margin.

It follows from what I have said that it was necessary for interim liquidators to take charge of and locate the two defendant companies’ financial and other records, to exercise control over and maintain the value of the companies’ assets and the assets they control and to, at the very least, prevent further losses and hopefully use the powers they hold to trace further client funds.

Tags: court FMA fraud serious fraud office

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Comments from our readers

On 8 August 2019 at 8:48 am Paul J Burns said:
While I've no interest in prejudging the case, but that Barry's company had the name "enterprises" in its title should have rung alarm bells early on, because such named companies tend to have more than their fair share of dodgy operators.
On 8 August 2019 at 9:14 am Steven Popodopolus said:
terrible stuff. feel for the victims. Unbelievable he could get away with it for 7 years under the regulatory regime. bet his Disclosure Statement was robust though.
On 8 August 2019 at 11:54 am Paul J Burns said:
Hearing you Steven P - and also feel as you do about the victims. As for myself however I don't find it as unbelievable, because we're living in times, where the increasingly onerous compliance and strict rules of conduct are fighting a losing battle with a society that's been corrupted with the insidious message that the "self" is supreme and ultimately autonomous.
On 8 August 2019 at 2:48 pm Walter Wallcarpet said:
Is it viable for investment advisers to not handle money in trust accounts or similar and only act as agents for the provider?
On 8 August 2019 at 2:55 pm Majella said:
Apparently, he'd been playing this game to some level, more or less, since the late 1980s. The period the SFO has referred to goes back exactly 7 years to May 2012 (the usual Statute of Limitations, I guess), but there will be plenty of others who have been fleeced prior to that and may only now be finding out.

Also, as in the case of the Chch AFA convicted earlier. Paul Hibbs, at the end of the investigation, there was still $5 million 'unaccounted for' which is to say missing. In this case, the unaccounted number is $8 million. Money stolen & spent can be stolen and stashed away cannot. Where is it?

On 8 August 2019 at 5:16 pm JPHale said:
WW a potential answer, but not one that's likely to change the outcomes with dodgy operators.

Client's trust advisers, it's fundamental to the whole situation. With that trust comes the potential and opportunity that the adviser can provide account details that are not the provider or the trust account. As this case as outlined above seems to prove.

The whole matching account name to number process change that was supposed to happen quite some time ago, clearly doesn't work. There are no checks that the name of account given is linked to the number of the account given and it's easy to provide documentation that says the right account but with an alternative account number.

And any regulator oversight and activity is only going to identify this if there is a complaint from a client, a whistle blower, or an Independant audit of the whole business.

And if we get to that point, many investment advisers will take the approach of bugger this, it's too hard, and working from a place of district is a horrible place to work from.

There isn't an easy answer to prevent this. And it can be the most likable and unpredictable people that this is a problem with too. Usually the most likable, it's how the little infringements that get them started let them slip through and it then becomes a case of increasing magnitudes.

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