Morrogh clients' shares to pay fees

CLOSE to the 30% of the €10m to €11m in shares belonging to the clients of former stockbrokers W&R Morrogh will be used to pay some of the €5m plus in costs.

These costs have been run up by the receiver since the company was "hammered" in April of 2001.

And no payments or share transfers will be made until early next year to clients whose shares in publicly traded companies have been tied up since the closure of Cork's oldest stockbroking firm.

The firm collapsed as a result of the biggest securities fraud in the history of the state. Former Morrogh partner Stephen Pearson, aged 43, is awaiting trial on a number of charges over the misappropriation of €5.8 million of shareholders' funds.

Mr Pearson is facing a series of charges under the Larceny Act and Forgery Act and could face a jail sentence of up to 14 years if convicted. They relate to the alleged forgery of share transfer forms, fraudulent conversion and false pretences on dates between 1995 and 2001.

Clients with claims on the e6m to e7m in cash being administered by receiver/manager Tom Grace of PricewaterhouseCoopers will have to wait at least two years "and possibly more" before any cash will be released, a spokesman for Mr Grace said last night. Some of Mr Grace's fees will also come from the funds held as cash.

The spokesman revealed that the company is in the process of finalising the process of releasing the shares held by the receiver/manager and that this will involve consolidating the holding on all shares in the trusteeship of a single stockbroker.

In the coming weeks Morrogh clients will be asked to nominate a stockbroker who will take electronic receipt of their remaining shares. Once the shares have been transferred to the nominated stockbrokers, Morrogh clients will be free to liquidate their assets or keep their remaining shares. However, some shareholders will not get all the shares to which they believe they are entitled, as some shares which were held in common on a trustee basis by Morrogh Trustees. For example, shares in EMC held by Morrogh fall into the category of shares that were heavily plundered. The remaining shares will be distributed on a pro rata basis after the deduction of the estimated 30% of shares required to pay the receiver/manager's fees.

Meanwhile, a working group, the Compensation Funding Aspects, has been set up to examine and make recommendations on the structure of compensation schemes for clients of the financial services industry. Another, on Legislative and Financial Regulation Aspects, will examine and make recommendations on any changes, if any, required in the regulatory and legislative framework arising from the experience of the failure.