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Suitor unfazed by allegations v. Norshield

Date: Tuesday, May 10, 2005
Author: Keith Kalawsky and Wojtek Dabrowski- Financial Post

The head of Aragon Investments Corp., which has signed a letter of intent to buy Norshield Asset Management (Canada) Ltd., said he "does not see any merit" to allegations against the asset manager and chief executivfe John Xanthoudakis concerning Cinar Corp.

In an interview yesterday, Ted Cantlon said the alternative-investments industry is growing, so acquiring the skills and experience of Mr. Xanthoudakis is an attractive opportunity.

"My investors, of course, are investing for a profit, and we see risk in it. But no pressure, no diamonds," he said from his office in Calgary.

Mr. Cantlon said he and his investors, whom he declined to name, came across Norshield after reading press reports about its alleged role in misappropriating funds from Cinar.

Citing the negative publicity, Olympus United Funds Corp., a division of Norshield, recently halted redemptions from some of its funds after droves of investors tried to withdraw money.

Cinar, a children's animation company in Montreal, was sold in 2003 to a group of investors, who are trying to recover money they say is owed to the company. At the heart of allegations is the transfer of more than US$120-million from Cinar to two firms in the Bahamas, Globe-X Management Ltd. and Globe-X Canadiana Ltd.

Liquidators of these two Bahamian companies have alleged Norshield executives were involved in helping former Cinar principals siphon money from the company.

In particular, the liquidators claim that Mr. Xanthoudakis and former Cinar executives created US$7.8-million in "fictitious" losses on foreign-currency transactions conducted by the Bahamian companies. Cinar covered these losses with funds sent to the Bahamas. However, liquidators allege the money actually flowed to another company called Killington Holdings, which is owned by Cinar executive Ron Weinberg, the deceased Micheline Charest, and former chief financial officer Hasanain Panju.

Police in Quebec are also investigating.

Mr. Xanthoudakis and Mr. Weinberg have denied any wrongdoing. Mr. Xanthoudakis and Norshield are also suing Cinar, the head of its litigation committee and the liquidators.

Aragon will conduct due diligence before finalizing the Norshield deal, Mr. Cantlon said.

"We don't feel that there is any risk with Cinar. We feel it's just a sidebar issue," he said. "As I said, we want to empower John and take his attention way from all this nonsense that's before the courts."

Aragon was incorporated in Alberta on April 27. Mr. Cantlon said he had no previous relationship with Mr. Xanthoudakis. They only met in person for the first time last week, he said.

Mr. Cantlon said he joined the investment industry in 1974. He worked for three small firms in Calgary as a stockbroker and, in 1991, started his own consulting firm to help public and private companies raise capital. He said he typically raises $1-million to $50-million for clients.

His offer for Norshield could come at a lucrative time. When redemptions are allowed by Olympus, investors will incur fees for withdrawing their money. According to a spokeswoman for Norshield, these funds will be paid to Aragon.

Asked if the redemption fees is an incentive to acquire the Norshield unit, Mr. Cantlon said, "No, not primarily. It's to take the focus and all of that burden off John, as I mentioned, to get him back to doing what he does well."