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Judge orders Portus co-founder to return for KPMG interview

Date: Saturday, April 9, 2005
Author: By PAUL WALDIE and SINCLAIR STEWART - The Globe & Mail

An Ontario judge has ordered that the co-founder of Portus Alternative Asset Management Inc. be told to show up for an interview with a receiver that's trying to track down $750-million worth of company assets.
If Boaz Manor fails to attend the examination, "we'll take things to the next step," Mr. Justice Colin Campbell of the Ontario Superior Court said yesterday during a brief court hearing.
The collapsed hedge fund company has been under investigation by securities regulators for more than a month, and recently teetered into receivership. The court previously ordered three senior executives -- Mr. Manor, Michael Mendelson and Ali Hamid -- to submit to examinations by the receiver, KPMG, which is trying to locate money for Portus's 26,000 clients.
KPMG has interviewed Mr. Mendelson and is expected to meet Mr. Hamid next week. Mr. Manor left for Israel last month. Yesterday, he indicated through his former lawyer that he would make himself available for the interview in Israel.
That frustrated John Finnigan, a lawyer representing KPMG, who told the court he was "surprised and disturbed" by Mr. Manor's departure. Mr. Finnigan asked Judge Campbell to send him a message "in the strongest possible terms" to show up for the interview in Toronto. Otherwise, he said the receiver will be forced to hire lawyers in Israel to enforce the Ontario order. Mr. Manor "did know the order had been made before he left," Mr. Finnigan told the court. Judge Campbell told Sharon Wong, a lawyer in the firm that used to represent Mr. Manor, to advise him to show up.
Outside the court, Bob Rusko, a KPMG partner leading the receivership, said it is important for him to meet Mr. Manor. Portus used a "a very complicated structure" for its funds, he said. "Clearly we would definitely like to speak with Mr. Manor because we don't understand [the structure] without someone describing why these things were done." In a report filed in court, KPMG said investors may only recover 62 per cent of the estimated $750-million they invested in Portus funds. KPMG said the firm appears to have nearly $1.1-billion in liabilities, including $238-million worth of unexplained offshore wire transfers, but only $662.4-million in assets.
During the hearing, James Grout, a lawyer for KPMG, said the receiver is expecting to recover more than 62 per cent. He said that is a preliminary figure and the final amount will likely be higher. Mr. Rusko said it is too early to indicate how much will be recovered. The court was also told that some Portus investments appear to have been sent to several offshore locations including Panama, Costa Rica, British Virgin Islands and Cayman Islands. In addition, $3-million from a related firm was sent to an offshore location. However, the receiver is not certain who received the cash. KPMG is also considering putting Portus into bankruptcy, Mr. Rusko said, in order to offer greater powers to track down money.
Manulife Financial Corp., whose brokerage arm was the largest single source of referrals for Portus, has already promised its customers that they will receive all of the money they sank into the hedge fund. About 6,300 customers of Manulife Securities International Ltd. invested about $235-million with Portus.
Class-action lawsuits have been launched against both Manulife and Berkshire Group of Companies, a Burlington, Ont.-based investment firm that is a sister company to AIC Ltd. A lawyer leading one of the suits has estimated about 5,000 Berkshire clients have placed $75-million in funds managed by Portus.
Berkshire and its founder, Michael Lee-Chin, have been silent on the issue since Portus began to unravel last month. Mr. Lee-Chin refused to answer questions on Portus yesterday following a speech in Toronto, and was whisked away from reporters by a pair of personal security guards.