KPMG Still In Pursuit Of Portus Diamonds

by Glen Shapiro, LawAndTax-News.com, New York

18 May 2006

KPMG says it has asked a Hong Kong judge to force Yu Jieying, sister-in-law of Boaz Manor, founder of bankrupt Canadian hedge fund Portus, to reveal the whereabouts of the $8.8 million worth of diamonds bought with investors' money.

It is known that Manor bought the diamonds from diamond merchant MID in June, 2004, with cash from a Bermuda bank. The gems, including one of 22-carats, were picked up from a shop on four visits by Yu Jieying, and passed on to private banker Yitzhak Toiv. Yu says that she acted on instructions from Manor's wife, Wendy Yu, and had no idea what was in the packages. Manor himself has told Israeli questioners that Toiv still has the diamonds; but Toiv says he returned the gems to Yu.

Meanwhile, back in Canada, Boaz Manor and co-founder Michael Mendelson have been charged by the Ontario Securities Commission with failing to act in good faith with clients. Mendelson was also charged with unregistered trading and issuing securities without filing a prospectus. The maximum penalties are C$5 million and five years in jail.

Earlier, Commission had successfully browbeaten 55 investment and mutual fund dealers into agreeing to repay investors all fees received from the failed hedge fund, totalling $12m. The payments will be made by 31st May.

But KPMG is not yet offering a time-horizon for payouts of the bulk of Portus's assets. The firm says that $662.15 million (Canadian) and about $37.2 million (US) 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 by Portus. 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.

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