Former clients of Morrogh to be paid €2.2m compensation
The director of the Investment Compensation Company Limited (ICCL), Patricia Fitzgerald, revealed yesterday that the company has been authorised by receiver Tom Grace of PricewaterhouseCoopers to pay out 2.23 million to former Morrogh clients who lost cash held in trust by the Cork stockbroking firm when it collapsed in April of last year.
The payments are the first to be made to former Morrogh clients. The amount of a payment from the compensation fund is fixed under the Investor Compensation Act 1998 at the lesser of 90% of the loss incurred or 20,000.
“We expect all claimants will have received their cheques by the end of next week,” said Ms Fitzgerald.
In all, 706 people made claims for refunds of cash to the Central Bank’s Investor Compensation Fund, which is operated by the ICCL, but 127 of these claims were rejected by Mr Grace.
However, the bulk of the former 2,563 clients of W&R Morrogh, who have claimed compensation from the Investor Compensation Fund for millions of euro in shares held by Morrogh, are in a limbo situation until the High Court adjudicates on how the shares or their value will be re-allocated to clients.
The value of shares held in trust by Morrogh since the company went into receivership has plummeted as the bulk of the shares were in hi-tech companies whose shares values have fallen by up to 90% in the intervening 15 months.
Many of the shares held in trust by Morrogh were held in fungible accounts where the shares were held en bloc in an interchangeable manner, which makes it impossible to determine exactly whose stocks were plundered before the company went into receivership. It is expected Mr Grace will go before the High Court in the near future in a bid to have the legal crux resolved, which arises from the fact that shares were held in trust for W&R Morrogh and not individual shareholders; and that there is a shortfall of shares held electronically, making it impossible to apportion losses to specific shareholders.
And the court may also have to determine if investors whose losses were exacerbated by the fall in the value of their shares should be compensated by the compensation fund.
The Investor Compensation Act 1978 says the value of shares “where possible” will be determined as being the day the court declared the company was unable to stay in business, which was June 18 2001 in the case of Morrogh.
Receiver Tom Grace told the High Court in May of last year that W&R Morrogh junior partner Stephen Pearson said he had become involved in gambling futures and options and his losses led him to embezzle funds from clients.
Mr Pearson said he was the only one involved in the fraud and neither staff nor his partner Alec Morrogh were aware of what he was doing.
Mr Pearson is known to be co-operating to the fullest possible extent with the Garda Bureau of Fraud Investigation.
