Last year Mr A needed an operation to remove a growth on his lung.
After 30 years’ investing through his financial adviser, Barry Kloogh, Mr A trusted his and his wife’s life savings were safe and secure, and never thought obtaining the $11,000 he needed would be an issue.
"I went in for the operation — the money hadn’t appeared — so two or three days after I got out I rang Barry up and he said ‘I’ll just get the office to organise it now. It will be there in the next couple of days’.
"He said ‘I must come around next Wednesday. We’ll go over your portfolio and I’ll take you two out for dinner’.
"Then two days later we saw everything in the paper."
Mr and Mrs A never got their $11,000 — or their meeting, or dinner, for that matter.
May 24, 2019’s Otago Daily Times front page lead — headlined "Financial records removed" — was like the first scene of a horror movie with hundreds of investors as unwitting and unwilling cast members.
Barry Kloogh had more than 2000 active clients on his database when the Serious Fraud Office, Financial Markets Authority and police investigators descended upon him the previous day.
Most are from Otago-Southland, although the ODT has spoken to investors from elsewhere in New Zealand, and some from abroad,
Given the web of deceit and deception Kloogh spun, it is not known precisely how many people have lost money, but best estimates are at least 200 people have lost more than $15million.
They have slim prospects of getting any of their savings back, and Kloogh has offered little explanation of what he did with it all.
Some of the money went to maintain the Ponzi scheme his Breathe Financial business had been for many years; some went on keeping him in the lifestyle of dining out and expensive cars to which he had become accustomed.
Some went on real estate — Kloogh was trying to buy one of Dunedin’s most expensive homes when he was raided.
Bewildered
But now Kloogh’s bank accounts are empty, and investors such as Mr and Mrs A — whose six-figure life savings have been lost — are left shaking their heads in sorrow, bewilderment and anger.
"It’s with me every day — from when you wake up in the morning you think things like ‘can I afford a new pair of shoes? Can I afford new trousers? Can we afford dinner on Saturday night?’," Mr A said.
"We do make a point of going out for coffee occasionally but whenever we do I can’t help but think about what we are spending because what we spend we are not going to regain."
When the As met Kloogh 30 years ago they had modest ambitions: an overseas holiday, updating their cars every few years and having money set aside for their retirement.
"It was all market rates. It wasn’t any of this ‘you can double your money in two years’ stuff. It was just correctly investing in known companies," Mr A said.
"Some were in shares, some were in term deposits — there were no big highfalutin interest rates or anything like that."
Mr A, who has relatives who lost a substantial sum in a fraud case in the 1980s, was determined he would not follow in their footsteps.
Before retirement, the As sat down with Kloogh to restructure their portfolio, removing any risk from it and focusing on vehicles such as term deposits with long-established companies.
They thought they were safe, and having used an authorised financial adviser they ought to have been.
Unbeknown to them, Kloogh was stealing money from one client to pay off another, in an increasingly desperate bid to stave off discovery.
"On one occasion we had some money which just appeared in our account, and Barry rang us up and said it was a mistake, just transfer it, and gave us a bank account number.
"We found out later this was how he did a lot of his money laundering — he just ‘made a mistake’."
Kloogh’s depredations have left Mr and Mrs A with "very little".
"We wouldn’t have had a flasher house and expensive overseas trips or a cruise every year, but we would have lived comfortably," Mr A said.
"Now I am working three days a week, not because I want to but because I have to."
Also contemplating returning to work is Mrs B, who with an estimated loss of $980,000 would rank as one of Kloogh’s biggest victims.
She and her late husband were referred to Kloogh by her brother-in-law a decade ago, as they had spare money to invest from a property sale.
That money was soon added to by an inheritance, further property deals and a matured life insurance policy.
"As we had spare cash we would hand it to him. On occasions he would ring us and say if we had any spare cash he had a deal on offer at a really good interest rate," Mrs B said.
"We did the first time. The second time he had put this proposal together for $200,000 but said we couldn’t touch it within two years."
The Bs invested but soon after their circumstances changed and they wanted their money.
"He hit the roof and said there was no way we could get our money and don’t dare do that again.
"We said it was our money, we can do what we want, but we were both quite shocked that he was telling us what to do with our money."
After another change of circumstances the Bs kept their money where it was, reassured by Kloogh that he was looking after their best interests.
‘No scruples’
"We went over with him at one stage about dishonesty and financial advisers going under due to embezzlement.
"He said ‘you’ve got no problems here — it is disgusting what people do’, but he had been doing it for 25 years and he looked us straight in the face ... He’s just got no scruples whatsoever — he’s delusional."
Mrs B considered withdrawing the couple’s money after Mr B’s untimely death, but decided it was best to leave it where it was.
The Bs, like the As, had had calls from Kloogh saying he had "accidentally" clicked the wrong button and put money into their account, and then transferred it elsewhere at his request.
That vital clue was missed though, and Mrs B augmented her portfolio with the proceeds of the sale of a house the couple were building just before Mr B’s death.
"He pestered me when I was a grieving widow," she said.
"I waited for his phone call — I thought any minute now he is going to ask me for more money because he knows I sold the house.
"At that stage it was getting close to him being found out, I think."
A recent cancer operation has left Mrs B wondering if she will be able to work again, but in a financial situation where she might need to.
Of her $980,000, Mrs B thinks she might get $4500 back.
"It took us over 30 years to build up those savings ... It would have been nice to have had that money behind me that I could fall back on, but he has taken that away from me, so I’m very bitter."
TIMELINE
- May 13, 2019: Financial Markets Authority, which had been investigating Dunedin financial adviser Barry Kloogh, refers the case to the Serious Fraud Office.
- May 23: SFO executes search warrants at Kloogh’s home and office.
- July 17: High Court hearing grants FMA application for Kloogh’s companies to be placed in interim liquidation.
- August 29: Financial Planning Ltd (trading as Breathe Financial) and Impact Enterprises Ltd officially placed in liquidation.
- September 4: FMA revokes Kloogh’s status as an authorised financial adviser.
- October 3: Official Assignee releases first report into FPL and IEL; at that stage, 170+ known creditors, owed $12million-$14million.
- October: Dunedin legal professionals group get together to help affected clients on a pro bono basis.
- November 18: Kloogh files for personal bankruptcy. He speaks to the Otago Daily Times, saying ‘‘If I was able to repay all that money, I absolutely would.’’
- February 20, 2020: Kloogh’s first court appearance, enters no plea to 12 charges laid by the SFO, remanded on bail.
- March 12: Kloogh pleads guilty to 11 charges, remanded in custody.
- March 20: Summary of facts released. ‘‘As well as funding client withdrawals, Mr Kloogh used the pooled client funds to keep various businesses running and for his own personal use. For example, he purchased trips for himself and/or his wife, paid deposits for cars and lent his family members money.’’
- April 30: Remaining charge against Kloogh dismissed.
- July 1: Liquidators’ six-monthly report says only one of the external assets listed as belonging to Kloogh’s clients was real; ‘‘it does not appear that there are transactions or assets which can be immediately realised in either liquidation’’.
- July 31: Kloogh sentenced to eight years and 10 months’ jail.
