Portus's Manor Due to Return to Canada, Face Arrest

Date: Tuesday, November 13, 2007
Author: Joe Schneider, Bloomberg.com

Boaz Manor, who fled Canada for Israel 2 1/2 years ago as his Portus Alternative Asset Management Inc. hedge fund collapsed, is scheduled to return to Toronto tomorrow and will be arrested by officers from the Royal Canadian Mounted Police upon arrival, a lawyer said.

``The RCMP will be picking him up as he gets off the plane,'' James Grout, a lawyer for the accounting firm KPMG LLP, Portus's trustee, said today in a phone interview.

Manor, 33, and Michael Mendelson, 41, co-founders of the C$800 million ($829 million) hedge fund, are accused of misusing investors' money. Manor and Mendelson improperly used about C$110 million to pay referral fees and cover withdrawals, according to a KPMG report in May. Manor also arranged transfers of investors' funds to Caribbean bank accounts, the accountants said.

After fleeing Canada, Manor attempted to transfer $35 million from Caribbean banks to Europe, KPMG said. The effort was thwarted by an informant, according to court documents. About $18 million of investors' money, including $8.8 million worth of diamonds that Manor arranged to buy in Hong Kong, remains missing, KPMG said in court documents.

Manor is scheduled to appear in a Toronto court for a bail hearing later tomorrow on charges of fraud, money laundering and obstruction of justice, according to Grout.

RCMP spokeswoman Michele Paradis declined to comment. She said the police force's policy doesn't allow for comment until a person is taken into custody.

Arrest Warrant

``There is an arrest warrant out for Mr. Manor,'' she said in an October interview. ``If he comes back to Canada, we will certainly exercise it.''

Those comments still apply, she said today in a phone interview.

Manor's lawyer, Brian Greenspan, didn't respond to a request for comment.

An Israeli judge lifted an order that prohibited Manor from leaving the country, Grout said, approving an agreement under which a KPMG lawyer will accompany Manor and hold his passport. On arrival at Pearson International Airport in Toronto, the lawyer will turn over Manor and his passport to waiting RCMP officers, Grout said.

Portus, founded in 2002, attracted some 26,000 investors before it collapsed, after Ontario regulators inquired about the fund's transactions.

Manulife Clients

The fund's growth was attributed to an arrangement Portus had with companies such as Manulife Financial Corp., Canada's biggest insurer, which referred clients to Portus for a fee. Manulife refunded its clients and is now Portus's biggest creditor.

In an interview with KPMG investigators, Manor denied any wrongdoing and blamed the fund's collapse on Canadian lawyer Anthony Malcolm, who, Manor said, set up companies and bank accounts in the Caribbean.

``I know that a lot of things I'm saying are fantastic in nature,'' Manor told investigators, according to the KPMG's report.

``Going to Italy, going to Zurich, there's diamonds, there's hundreds of millions of dollars, if you lump it all together, it's sort of a fantastic story.''

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net .