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Israeli Courts Order Portus Founder To Stay Put

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

28 October 2005


Collapsed hedge-fund Portus's receiver KPMG says that founder Boaz Manor, who left Canada for Israel in February after the collapse, has been ordered by an Israeli court to remain in the country until he has been interviewed by KPMG investigators.

Fearing that Manor would leave Israel if he became aware of proceedings against him, KPMG obtained the ex parte orders last week from Judge Judge H. Weinboum-Waletzky of the Tel Aviv Court of Peace and Judge Magen Altuvia of the District Court of Tel Aviv. KPMG also says that it has obtained a lien on up to $20.7 million over Manor’s property in Israel, representing $3.1 million that Manor allegedly transferred to his lawyer and $17.6 million missing from Portus's funds.

KPMG is also reported to be pursuing Boaz Manor’s sister-in-law in Hong Kong, Yu Jieving, because it believes she may been given US$7.5m worth of diamonds illegally bought with Portus money. A court order had been obtained in Hong Kong ordering her to submit to an examination, but she did not attend. KPMG are now trying to get the local police to track down Ms Jieving.

The Ontario Securities Commission, which has filed charges at the Ontario Court of Justice against Manor, alleging he destroyed material documents and submitted misleading information to the OSC, will hold a hearing on November 14 to consider the charges against Portus, Boaz Manor and his colleagues Michael Mendelson, Michael Labanowich and John Ogg.

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 have been frustrated by lack of access to Mr. Manor. He has been saying through lawyers that 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 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.

The Ontario Securities Commission is said to be preparing to attack some of the 1,000 financial advisers who put their clients into Portus. Many of the advisers concerned have said they are willing to return principal amounts to investors, or return commissions to the receivers of Portus, KPMG, and Manulife Securities International Ltd, which referred many clients to Portus, has guaranteed the principal investments of those clients, providing C$40m in its accounts for that purpose.

The OSC, however, is set to pursue advisers who may not have fulfilled their 'kyc' or know-your-client obligations when recommending Portus. Some 26,000 individual investors will lose money through the Portus affair, and many of them are people who should never have entered such an investment, say regulators.


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