Business Irish

Thursday 8 December 2016

Disabled client hit by Custom House 'Ponzi' scheme

1,500 people face losses after 'misuse' of funds

Published 30/10/2011 | 05:00

AN adult with special needs is among the 1,500 clients facing losses after the investment company Custom House Capital (CHC) went into liquidation about a week ago.

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The High Court appointed a liquidator to the Dublin firm after its inspectors uncovered the "systemic and deliberate misuse" of more than €56m of assets and cash belonging to clients of CHC. Last weekend, a High Court judge said that CHC came across as "a sort of Irish Ponzi scheme" in the inspectors' 198-page report on the company.

The Garda Fraud Squad is now investigating CHC and, within the next few months, expects to question those who ran some of the investment products where this misuse occurred, according to a source close to the garda investigation.

"Some individuals are facing losses of between €4m and €5m," said the source. "One individual is an adult with special needs who was left money by his parents. This individual was relying on the money in the fund."

The Sunday Independent understands that some client money was invested in properties in Berlin, Germany -- without the knowledge or approval of clients.

The report also states that some clients will lose money after about €9m of their money was invested in an uncompleted Spanish property development, which is now worth "considerably less than €9m".

CHC also used client money to pay the day-to-day bills of property projects.

Some holders of the Government-backed pensions, Personal Retirement Savings Accounts (PRSAs), could also lose money following the liquidation of CHC.

The Pensions Board, which regulates the pensions industry, and the Revenue Commissioners approved CHC as a provider of PRSAs about eight years ago.

One of the funds that CHC invested money in on behalf of its PRSA holders was Destiny Cash. Most of the €10.4m in the Destiny Cash PRSA fund was "improperly taken" from the fund "to invest in or support CHC-promoted client property investments", according to the inspectors' report.

The Pensions Board suspended its approval of CHC as a PRSA provider last July -- and since then no more money has been paid into CHC PRSAs.

The Pensions Board would not disclose how much money had been invested in PRSAs sold by CHC.

When asked when it became aware of the financial irregularities at CHC, a spokesman said that "throughout their investigations", the Central Bank had kept the Pensions Board informed of its inquiries.

The Central Bank's investigation into CHC began in 2009. "We could not take any action until the investigation was completed," said the spokesman for the Pensions Board. "The prudential supervision of CHC is a matter for the Central Bank."

A spokeswoman for the Central Bank said that it expected to recover a "substantial amount" of the €56m of client money misused by the firm.

The Garda Press Office said it "wouldn't confirm the names of any individuals or companies it is investigating".

Sunday Indo Business

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