Portus's Manor in court as gem case drags on

Date: Monday, January 8, 2007
Author: Carolynne Wheeler, Globeinvestor.com

TEL AVIV -- After nearly two years in exile, co-founder of bankrupt investment firm Portus Alternative Asset Management Inc. Boaz Manor is embroiled in a new round of hearings aimed at solving the case of the disappearing diamonds, alleged to have been bought with nearly $9-million (U.S.) in investors' funds.

Mr. Manor, 36, who fled to his homeland of Israel from Toronto in March, 2005, after Portus's collapse and remains in the country under an Israeli court-ordered travel ban, slipped into a cramped Tel Aviv courtroom yesterday to watch the latest proceedings.

Mr. Manor listened as lawyers representing him and a middleman argued for yet further delays in receiver KPMG Inc.'s long-running efforts to retrieve assets they believe to be connected to Portus.

About 100 diamonds purchased by Mr. Manor following the company's collapse went missing after a series of handoffs in Hong Kong involving Mr. Manor's sister-in-law, Israeli financier Yitzhak Toib and someone called Madam Ho Ho.

Mr. Toib says he returned the diamonds to Mr. Manor's sister-in-law as instructed and retains only his fee for the transaction, while Mr. Manor says he believes the diamonds are sitting in a Viennese bank under Mr. Toib's control.

Efforts to get further details from Mr. Toib began in July, 2006. The latest hearings suggest delays in the files of both Mr. Manor and Mr. Toib are likely to continue well into 2007.

On Christmas Day -- a regular working day in Israel -- a Supreme Court justice gave Mr. Manor and KPMG's Israeli representative David Tadmor another 90 days to produce evidence of their attempts to retrieve the missing gems. Mr. Manor is appealing a lower court order to produce the diamonds or face possible jail time on contempt of court charges.

Yesterday, lawyers acting for Mr. Toib -- an ultra-orthodox Jewish businessman said to conduct deals in the secretive diamond industry on the strength of a handshake -- argued in a Tel Aviv district court that the judge should recuse himself, since he is the same judge who ordered Mr. Manor to turn over the diamonds or face prison time one year ago.

Mr. Toib did not appear in court, but his lawyer, Ron Dror, said Judge Shmuel Baruch has access to confidential files from previous hearings, which could prejudice his opinion in this case.

"It didn't immediately cause bells to ring with me because this case is so filled with pages," Mr. Dror said in explaining the six months it took his side to make the request.

Mr. Manor was in court yesterday to watch the proceedings. Clad in the same blue-and-white checked button-down shirt and tan pants he has worn in previous hearings, he appeared pale and fidgeted with his hands and a briefcase.

Portus, worth an estimated $800-million (Canadian) when it was pushed into receivership in March, 2005, is presently in bankruptcy proceedings; an estimate last summer suggested its 26,000 investors will recoup about 85 cents on the dollar. Mr. Manor is facing seven charges under the Ontario Securities Act, each of which carries a maximum penalty of five years in jail and a $5-million fine; his former business partner, Michael Mendelson, faces six charges. None of the allegations have been proven in court.