Portus Director Accused Of Fraud

by Carla Johnson, Investors Offshore.com

20 May 2005

As receiver KPMG alleges fraud against Boaz Manor, co-founder of insolvent Canadian hedge fund Portus Alternative Asset Management, the Ontario Securities Commission has extended an order against the fund barring it from carrying on any business activity pending a hearing now rescheduled for Sept. 16. The order was set to expire May 17.

Manor, who left precipitously for Israel after the fund started to unravel in March, has told KPMG he is too sick to speak with investigators probing allegations of fraud at the fund, KPMG said in a court filing. Manor's lawyers have refused offers of interviews in Amsterdam or Israel.

According to a brief filed in the Ontario Superior Court by KPMG, officials at Portus Alternative Asset Management Inc. fraudulently siphoned $3-million from the hedge fund company into a private bank account while it was under investigation by regulators. KPMG said Portus was already insolvent when the money was transferred on Feb. 1 and alleged that this amounted to a “fraudulent conveyance.” The funds were purportedly earmarked for a trust set up to cover legal expenses for executives and directors of the fund company.

Portus had about 26,000 clients and more than $800-million in investor assets, some of which flowed offshore. KPMG has found roughly $662-million worth of bank notes issued by Société Générale that were designed to protect investors' principal investment, but has not yet been able to sort out exactly who is the beneficial owner of the notes because of their complex ownership structure.

KPMG has filed motions in court to place Portus into bankruptcy and this week it moved to place a related business into bankruptcy as well. KPMG has told the trustees to hand over all remaining funds in Portus's accounts but has not received any reply.

In a previous court report, KPMG drew attention to $238-million in "unexplained" offshore wire transfers. Newspaper reports in Canada suggest that Portus sent C$246 million to bank accounts in the Cayman Islands while regulators across Canada were already scrutinizing its operations. KPMG is also reported as saying that attempts were made to destroy corporate records.

The RCMP continues to consider whether there are grounds for launching a criminal investigation into Portus's affairs.

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