Canadian Regulator Attacks Portus Founders

by Leroy Baker, for LawandTax-News.com, New York

11 October 2005

The Ontario Securities Commission last week launched proceedings against Portus Alternative Asset Management, its co-founder Boaz Manor and his colleagues, alleging they misled investors and engaged in illegal distribution of securities over a period of two years.

The OSC will hold a hearing on November 14 to consider the charges against Portus and key players Boaz Manor, Michael Mendelson, Michael Labanowich and John Ogg. The OSC said it is also filing charges with the Ontario Court of Justice against Manor, alleging he destroyed material documents and submitted misleading information to the OSC.

Portus was put into receivership in March and in June administrators KPMG won an Ontario court order compelling Boaz Manor to account for all the money originating from the now-insolvent hedge fund. But KPMG says that attempts to unravel the tangle of Portus transactions has been frustrated by lack of access to Mr. Manor. He left for Israel in February and has said through a lawyer he is too ill to co-operate.

Manor could face up to 15 years in prison if convicted of the three counts of violating Ontario's securities act, and a fine of $1 million fine per count. However, Michael Watson, head of the OSC's enforcement branch, admitted that while it is possible to try Manor in abstentia, he can't be forced to return to face the charges in Ontario. "Most provincial statute offences would not be subject to extradition and, in fact, most provincial statute offences - even if the person were here - wouldn't be subject to arrest," Watson said.

The RCMP is also investigating the affair and may stand a better chance of attacking Manor under Federal laws - but they were very slow to begin investigations and there has been no news about their progress.

KPMG said in a recent court report that managers of defunct Canadian hedge fund Portus skimmed up to 13% of assets; KPMG wants to make Portus bankrupt in order to speed up distributions to the 26,000 cheated investors. The report says that to date, about $662.15 million (Canadian) and about $37.2 million (U.S.) have been found and secured in 130 Portus bank and investment accounts in Canada, the Turks and Caicos and the Cayman Islands, out of more than $800m that was collected.

The majority of Portus assets remain tied up in notes issued by France's Société Générale which were purchased for $529m, and mature between 2008 and 2011.

Although all investor funds were supposed to be invested by Portus, KPMG says on average 13.3% or roughly $90m was deducted from the BancNote Trust and BancLife Trust Investor Funds and used to pay management fees, performance fees, referral fees, trailer fees, managed account redemptions, undetermined fees and to generally finance Portus operations.

Although most of the Portus assets have been identified and can be recovered, it is thought that it will take years for investors to get their money back.

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