Financial adviser allegedly pocketed $8 million of clients' investment cash

Wednesday, 7 August 2019

Barry Kloogh, of Dunedin's Breathe Financial Planning, is being investigated over missing investments worth $8 million.

Authorities are trying to track the whereabouts of $8 million in investments after a financial adviser went rogue.

The business of Dunedin-based financial adviser Barry Kloogh was raided by the Serious Fraud Office, with the assistance of the Financial Markets Authority (FMA), in May.

Breathe Financial Planning recently moved into this High St office in Dunedin.

A High Court judgment concerning Kloogh's company, Financial Planning Ltd, shows clients invested nearly $15.7m in his companies between May 2012 and April 2019.

Another $450,000 was deposited into Kloogh's personal bank account.

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Only $7.43m was passed on to his companies, leaving more than $8.2m unaccounted for.

Associate Judge Dale Lester said while a full analysis had yet to be completed on funds not deposited into his companies, it appeared 'substantial funds have been used for personal expenditure by Mr Kloogh'.

The FMA obtained updated bank balances and financial statements concerning Kloogh's companies, and found they were in a 'relatively modest financial position'.

Those financial statements gave no clue as to where the missing $8m of client funds had ended up.

The judgment shows one client invested $101,000 with Kloogh, who spent $35,000 on his credit card or his personal debt, used a further $9000 to pay other investors, and invested just $41,000.

More money was later invested by the clients who asked for it back two years later to complete renovations on their house.

FMA analysis shows amounts were drip fed back to the client, and came from accounts belonging to other investors.

In June 2017, that same client invested a further $300,000, with those funds used to pay other investors, credit cards connected to Kloogh and other accounts controlled by him.

Evidence provided by FMA over the client funds was 'comprehensive and compelling', the judgment noted.

The FMA sought liquidation on the basis that both Kloogh's companies were insolvent.

In addition, the FMA noted Kloogh's companies were not registered to receive client funds, and those funds were not held in appropriate trust accounts.

'Given that there is clear evidence that Mr Kloogh has inappropriately used investors' funds for personal expenses there is need to safeguard the interest of investors,' Judge Lester said.

The threshold for appointing interim liquidators was met 'by a wide margin'.

At the time of the raid on Kloogh's business, a man who worked at the address independent of Kloogh, told Stuff he arrived to find about 20 men 'turning the place upside down'.

Attempts to contact Kloogh have been unsuccessful.

Kloogh was also behind the financial programme Debt Breaker, and the author of The Money Cookbook.

The investigation into Kloogh's activities continues.