'Financial upheavals' ate up US$1m of Gerald Chow's money, court told
College consultant sued for return of money paid by Chow Sang Sang's boss for sons' enrollment blames financial upheavals
An American college-admissions consultant who received US$2.2 million from a Hong Kong family to support their sons' education in the United States says more than half of the money has been lost in investments.
Mark Zimny is facing a US lawsuit filed by Gerald Chow King-sing, executive director of the jewellery giant Chow Sang Sang Holdings, and his wife, Lily, for the return of the money after their sons failed to enter Harvard University.
The plaintiffs did not know about the investment losses until they launched the legal action in a court in Massachusetts in 2010, Zimny told the South China Morning Post this week.
He said the couple had paid the US$2 million for consulting services and support rendered over five years for their two sons to be educated in the US.
That was in 2007, when the two children were aged 16 and 14, court documents showed. The couple now accuse Zimny of fraud and breach of contract after he failed to get the children into Harvard as promised.
Zimny said they had given him the mandate to invest the money, but were not concerned how it was distributed in the stock market.
"Not once did Gerald Chow call me and ask how the investment was going," he said.
Chow's lawyer, Marjorie Cooke, said in a court statement that the tycoon did not believe the money had been invested for the family but had been converted by Zimny "for his own use".
A report submitted to the court shows that the investment was made under Zimny's name. Its market value stood at more than US$660,000 on January 1, 2010, and the net value dropped to less than US$233,000 by the end of the month.
The Chows filed their lawsuit three months later.
Zimny attributed the losses, estimated at more than US$1 million, to financial upheavals between late 2009 and early 2010.
The couple had agreed to Zimny's proposal to invest the money, and the investment returns were meant to pay the monthly consulting fees, tutoring expenses for the sons and development contributions to schools, according to the statement filed by Cooke.
"Zimny never disclosed to [Gerald and Lily Chow] how or where he was investing their money," the statement said.
"Upon information and belief, when Zimny requested that Mr and Mrs Chow provide him with US$2 million as a retainer, he did not intend to invest those funds for their benefit, but instead, without Chow's knowledge, intend to and did fraudulently convert those funds for his own use."
It said the couple were told that the HK$2.2 million "would be part of a big pool of money contributed by similar Asian, mainly Korean, families".
The pool "was to help their sons and daughters to gain admission to colleges of their choices in the United States", it said.
Zimny said there was "nothing" he could give the family, saying he had delivered his services and did not know what the couple wanted.