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Portus's global reach extensive, documents show

Date: Tuesday, April 12, 2005
Author: By PAUL WALDIE- The Globe & Mail

Collapsed hedge fund company Portus Alternative Asset Management Inc. had extensive international operations and a special sales team that targeted clients in Asia, court documents reveal. Toronto-based Portus is in receivership and under investigation by securities regulators from across Canada.
The receiver, KPMG LLP, is trying to track down roughly $750-million in assets on behalf of Portus's 26,000 clients. Portus co-founders Boaz Manor and Michael Mendelson have insisted all the money is safe. Documents filed in court by KPMG reveal that Portus's global reach stretched from Hong Kong and Taiwan to Bermuda, Costa Rica, Panama, Cayman Islands, British Virgin Islands, France and the United States.
According to KPMG, Portus created an "Asian sales team" to cater to international investors. The receiver said about 923 investors "may have invested up to $68.6-million [U.S.] in international managed accounts with [Portus]." Those investors included people who live in Canada, Hong Kong, Bermuda and Taiwan, KPMG said. Some of their investments may have been wired to a Canadian Imperial Bank of Commerce account in the Cayman Islands, KPMG said. It added that it is working with CIBC to trace the funds.
Portus also had two accounts at LOM Securities (Cayman) Ltd. in Cayman Islands, the documents show. That's a subsidiary of Bermuda-based LOM (Holdings) Ltd., which is under investigation by regulators in the United States and Canada over its roles in a series of alleged stock manipulations.
Those investigations are not related to Portus.
None of the allegations have been proven and LOM denies any wrongdoing.
When asked about Portus, an LOM official said the firm does not comment on individual clients. Michael Watson, director of enforcement at the Ontario Securities Commission, said the LOM connection is being reviewed. "Given the history of LOM, it's fair to say that it catches our attention when their name comes up in this context."
LOM has close ties to Canada. It was created by Bermuda businessman Donald Lines and his sons, Brian and Scott, who were born in Montreal. According to the British Columbia Securities Commission, LOM traded more than 800 million shares in Canada last year with a market total of $1.2-billion (Canadian).
The U.S. Securities and Exchange Commission has described LOM's trading activity in the United States as "staggering." In court filings the SEC said that in one two-week period last year, LOM traded 151 million shares in a variety of companies through one account. The SEC alleges LOM markets itself as an offshore brokerage where customers from around the world can trade behind a "cloak of secrecy."
LOM has said it operates in the same way as any other offshore broker. "To say, as has been reported in several recent articles, that LOM 'may be acting as a front for undisclosed investors' is entirely misleading, and makes a completely legitimate relationship sound sinister and improper," the company said in a statement. In its filings, KPMG said it is also investigating Portus's ties to Costa Rica, Panama and the United States.
"We have seen some indication of some flows of money or transactions with those jurisdictions," Bob Rusko, the KPMG partner leading the receivership, told reporters last week. The receiver is also looking into a $3-million transfer from a Portus affiliate to an offshore trust that is connected to company directors and officers.
Portus also had a subsidiary based in the British Virgin Islands and conducted transactions with Premier Derives Paris, which has an office in France.