Montreal lawyer sued in Portus case

Date: Tuesday, March 13, 2007
Author: Paul Waldie and Greg McArthur

KPMG alleges use of offshore accounts; Malcolm says he will fight allegation

A 76-year-old Montreal lawyer who has a penchant for preserving Scottish culture has emerged as an alleged culprit in the collapse of hedge-fund company Portus Alternative Asset Management Inc.

The court-appointed receiver overseeing Portus has filed a lawsuit against Anthony Malcolm, alleging that he set up a series of offshore accounts that Portus co-founder Boaz Manor used to siphon off $17.6-million (U.S.) of client money.

"There was no legitimate business purpose for the creation or use of these accounts," the receiver, KPMG Inc., alleged in a lawsuit filed recently in an Ontario court.

"They were only used for Manor's fraudulent diversion and misappropriation of Portus group funds . . . Malcolm knew or was so consciously indifferent that he must be taken to have known that Manor was misappropriating Portus group funds," the lawsuit alleged.

KPMG also alleged that Mr. Malcolm continued to help Mr. Manor move money after Portus was put into receivership in March, 2005, at the request of the Ontario Securities Commission.

The receiver is seeking $25-million (Canadian) in damages.

Mr. Malcolm declined to comment on the specifics of the lawsuit.

"As this matter is now before the courts, it is not appropriate for me to comment further thereon. I will be vigorously defending this claim," he said in a statement faxed to The Globe and Mail.

Until now, KPMG has blamed Mr. Manor for most of the alleged misconduct at Portus.

Mr. Manor left for Israel shortly after Portus filed for receivership. He has denied any wrongdoing at the company.

According to the lawsuit, Mr. Manor retained Mr. Malcolm to help create Portus in early 2003. By then Mr. Malcolm, who goes by the full name Thomas Ross (T.R.) Anthony Malcolm, had already enjoyed a varied business career.

He began practising law in 1957 at a Montreal firm and later worked on mergers and acquisitions at another firm called Chauvin & Venne. In 1964, he created the Canadian Unity Council, which bills itself as a non-partisan organization designed to "inform and to engage all Canadians in building and strengthening Canada."

Mr. Malcolm later set up a law office in Toronto. He has also been actively involved in the St. Andrew's Society of Montreal and the Quebec Thistle Council, which endeavours "to maintain and preserve the Scottish culture and tradition brought to Quebec by our forefathers."

The receiver's lawsuit alleged his duties at Portus consisted of setting up entities in the Cayman Islands and Turk and Caicos Islands as well as opening bank accounts in Switzerland and London. Mr. Malcolm had help from several "associates," the suit alleged.

"On Malcolm's instructions the associates signed false bank and brokerage account opening documents which misrepresented their beneficial ownership of the offshore entities," the suit alleged. It added that Mr. Malcolm allegedly made secret payments to his associates using Portus funds.

Mr. Malcolm received $2.7-million (U.S.) from Portus between February, 2004, and June, 2005, the suit alleged. "The funds were paid to Malcolm in consideration for his 'no questions asked' assistance to Manor in the misappropriation of the Portus group funds."

The suit alleged that under the Portus investment structure, client money was supposed to be put into investments linked to a group of hedge funds. Clients were guaranteed to receive their principle investment as well as a cut of any profits made by the hedge funds. Portus grew quickly and at its peak the fund had $800-million (Canadian) in assets and 26,000 clients.

In court filings, KPMG alleged that in fact most client funds were co-mingled offshore and substantial amounts were diverted for "improper purposes."

According to the suit, Mr. Manor directed Mr. Malcolm to move money around the offshore accounts after an Ontario court put Portus in receivership. For example, Mr. Manor allegedly told Mr. Malcolm to transfer $8.8-million (U.S.) to Hong Kong to pay for diamonds in June, 2005. The gems are still missing.