Morrogh clients await €16m after collapse

ON this day three year’s ago the country’s only non-Dublin based stockbroking firm W&R Morrogh ceased trading following a massive internal fraud at the firm on Cork’s South Mall.

The sudden closure of a firm held in the highest regard sent shockwaves through the city’s tight-knit financial and legal community.

This has been, and will continue to be, a slow and torturous process but as usual it is the ordinary investor who is on the wrack. A full three years later Morrogh clients finances are being stretched as they cannot get their hands on more that €16 million owed to them.

Yesterday, a spokesman for receiver Tom Grace of PricewaterhouseCoopers said it is his intention to seek the permission of the High Court in July to make payments to the 2,500 investors whose €16.5m funds have been effectively frozen in the liquidation process.

A controversial High Court ruling by Mr Justice Roderick Murphy means that as much as 35% of these funds could go towards paying the receiver’s cost and the costs of High Court hearings into the dispersal of the funds. The costs are expected to come close to e4m when the receivership is completed. It is expected the court will rule the remaining shares will be sold at current values with the residual amount, after the deduction of the specified contribution to costs, paid to the beleaguered clients within six weeks of the High Court’s approval.

Most of the clients who will have money deducted from their holdings will be able to get the Investor Compensation Fund to cover these losses.

The fund will pay eligible investors 90% of an investor’s net loss up to a maximum of €20,000. This means that, where the net loss is €10,000, the compensation payable is €9,000 (90%).

When W&R Morrogh, formerly of 74 South Mall, Cork, went into liquidation with a shortfall of close to €12m on April 27, 2001 it ended an unbroken Morrogh family business dating back to 1887.

Minister for Finance Charlie McCreevy has ordered the establishment of two working parties to conduct an inquest into the demise of W&R Morrogh.

Yesterday, the Finance Department confirmed it hoped to name the members of the groups and their terms of reference in the near future on its website.

One group will look at the legislative and financial regulation issues and the other at compensation funding issues.

This is expected to include the fall-out for the Central Bank and Irish Financial Services Regulatory Authority.

Fine Gael Justice spokesman Jim O’Keeffe believes that there should be no upper limit on compensation and that at the very least it should be €1m.

Another group will look at the legislative and financial regulation. This is expected to include an examination of Mr Justice Murphy’s controversial High Court ruling.

This is a very serious problem for the trustees of pension funds.

Meanwhile, the clock ticks on and no one has been charged with any offence since the firm closed three year's ago despite a massive investigation by the Garda Bureau of Fraud Investigation which is understood to have received full co-operation from all the parties involved.