Canada's Federal Police Begin Probe Into Defunct Portus Fund

Date: Monday, July 11, 2005
Author: Joe Schneider - Bloomberg

July 11 (Bloomberg) -- Canada's federal police said they've begun a probe of Portus Alternative Asset Management to see whether criminal charges are warranted following the collapse of the hedge fund, with C$717 million ($592 million) in assets.

``I can confirm that we have taken on the file,'' Royal Canadian Mounted Police spokeswoman Michele Paradis said in a telephone interview. ``Normally, we don't even confirm or deny that we're looking at something but because this has been very much in the public domain, we are confirming the obvious.''

The investigation won't be completed quickly because members of the RCMP's Commercial Crime Unit are sorting through a large number of documents, e-mails and transactions to see if there's any evidence of wrongdoing, Paradis said. She said she couldn't say how long the probe may take, or how many documents are involved.

KPMG LLP, the accounting firm appointed by an Ontario court to trace money invested in Portus, said last month it found evidence the fund's co-founder, Boaz Manor, had misappropriated at least $3.2 million and lied to the firm's investigators.

``That's not what they'll base their assessment on,'' Paradis said referring to the police investigators. ``What they'll base their assessment on is very much the documents that they've been given.''

She said the number of investigators on the case varies from day to day as specialists are brought in to review specific transactions.

Pace of Probes

The RCMP took four years to investigate the financial activities of Livent Inc., which had been North America's biggest theater producer with hits like ``Phantom of the Opera.'' It then took another two years before Livent's former chief executive Garth Drabinsky appeared for the first time before an Ontario judge, accused of fraud. A trial has yet to begin in the case.

Portus was founded by Manor and Michael Mendelson three years ago. It became one of the fastest-growing hedge funds in Canada.

The Ontario Securities Commission sued Portus in March over questionable transactions. Ontario Superior Court judge Colin Campbell ordered KPMG to seize the fund's assets and track down money that was moved out of Canada.

Manor went to Israel after losing control of the fund. He has refused to speak with investigators because he said he's too sick. He couldn't be reached for comment, and his lawyer's office was closed.

KPMG had found that Manor moved $2.5 million from an account in the Caribbean to a bank in Milan and $700,000 to his lawyer in Israel after the funds were ordered frozen.

The case is Ontario Securities Commission v. Portus Alternative Asset Management, 05-CL-5792, Ontario Superior Court (Toronto).

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