Payout law change call as Ponzi scheme victims hit by delays
CALLS have been made for changes in the law to ensure investors get faster access to compensation when financial firms collapse.
They come after it emerged that people who lost money in the Custom House Capital Ponzi scheme are still waiting on payouts - five years after it was shut down.
Custom House Capital collapsed in 2011 leaving almost 2,000 investors out of pocket. Many people had invested their pensions in the firm.
Claims amounting to close to €20m have been made but no compensation has been paid out by the Investor Compensation Company due to a delay in certifying claims by the liquidator.
Custom House Capital was a wealth management firm targeting professionals, such as lawyers and doctors.
It was put into liquidation in October 2011 after it was found that it was "systematically and deliberately" misusing more than €66m of its clients' assets and cash. Money was moved to property syndicates, mainly in Germany and France, without investors' knowledge.
The firm was previously described as a Ponzi scheme in the High Court.
Last week its directors Harry Cassidy, John Whyte and John Mulholland were handed the longest disqualifications in the history of company law.
Mr Justice David Keane said the conduct of all three was "deeply dishonest, continued over a protracted period of time until, for a variety of reasons, it could no longer be concealed".
However, the mess is proving so complex to unravel that more than 1,400 investors in the firm have yet to be compensated.
The Investor Compensation Company Limited (ICCL). set up to protect investors, said new legislation may be required to ensure they are compensated faster when investment firms go bust.
The compensation bill for Custom House Capital is estimated by the ICCL to reach €20m, with some €8m paid out so far, according to the ICCL annual report.
ICCL is funded by levies on the financial services industry.
Chairman of the ICCL Jim Bardon said legislative changes were needed to ensure faster payouts when investor firms fail.
Recommendations for changes have been sent to the Department of Finance and the Central Bank.
"The board has initiated an assessment of all aspects of the current claims process, as well as the lessons learned from [Custom House Capital] and other cases with a view to recommending changes to the compensation regime, including possible legislative amendments which would improve the outcome for eligible clients in future investment firm failures," said Mr Bardon.
He said there were ongoing efforts to advance matters, but he was disappointed that relatively little headway has been made in the certification of outstanding compensation claims in the Custom House Capital case.
"Notwithstanding the complexities arising in the liquidation of this firm, the prolonged wait endured by the eligible claimants concerned was never envisaged in investor compensation legislation.
"The ICCL has proposed to the liquidator that where possible, he should consider certifying the claims on an estimated or interim basis in order to accelerate the process.
"We will continue to seek progress in relation to all outstanding claims."
The firm was placed into liquidation by the High Court in October 2011 when Kieran Wallace of KPMG was appointed as its liquidator and administrator.
Mr Wallace had no comment.