Norshield Receivership of RSM Richter Inc. Continued

Date: Thursday, July 14, 2005
Author: CNW

Today, the Ontario Superior Court of Justice granted a motion brought by the Ontario Securities Commission for the continuation of the appointment of RSM Richter Inc. as receiver for Norshield Asset Management (Canada) Ltd. and several related companies, including Olympus United Funds Corporation. The receivership is continued until such time as Richter has completed its administration of the estate and applied to the Court for its discharge.

Receiver hunts for offshore Norshield money
Over $300-million in client funds missing
By PAUL WALDIE

Friday, July 15, 2005

TORONTO -- The receiver for an embattled hedge fund company, Norshield Financial Group, is trying to locate more than $300-million of client money that was sent offshore. That amount includes $135-million invested by about 2,000 retail investors and $175-million (U.S.) invested by a group of institutional clients. According to documents filed in court by the receiver, RSM Richter Inc., the money appears to have moved through several entities based in the Caribbean, but it's not clear where it is now or how much will be recovered.

"The overall goal is to track the money. So far we don't have our hands on it," Grant Moffat, a lawyer representing RSM Richter, said during a brief court hearing yesterday.

Norshield, once one of Canada's largest hedge fund companies, was put into receivership last month by the Ontario Securities Commission amid concerns about mounting redemptions and a lack of co-operation with regulators.
The Montreal-based company has been in turmoil since May 2, when it suspended redemptions after clients withdrew $375-million (Canadian) over the previous nine months. The company blamed bad publicity from a lawsuit against Norshield and its founder, John Xanthoudakis, for the redemptions.

In June, the OSC and Quebec securities regulators ordered the company to appoint RSM Richter as a monitor. RSM Richter alleged in court documents that Norshield officials, including Mr. Xanthoudakis, failed to co-operate.
The firm also alleged that the company's internal records were "incomplete and unreliable."
The regulators won a court order putting Norshield into receivership. Yesterday, an Ontario judge extended that order and expanded some of the receiver's powers.

After the hearing, Raymond Massi, a partner with RSM Richter, said it is too early to say how much money will be recovered. "You have to understand it's a very complex structure and there are a lot of layers that have to [be] unravelled," he said.

Mr. Massi added that Mr. Xanthoudakis is now co-operating with the receiver. "It was more difficult but we have developed a dialogue with Mr. Xanthoudakis and some of his other people and we are working through the issues," he said.

Documents filed in court indicate that much of the client money went through Barbados and ended up in Olympus Univest Ltd. and Mosaic Composite Ltd., both based in the Bahamas.

Any recovery by the receiver is complicated by competing claims for Norshield's assets stemming from lawsuits related to Cinar, an animation company that allegedly invested $122-million (U.S.) in two offshore funds without board approval.

There are allegations the money ended up in Mosaic, Univest or other Norshield-related entities.
Norshield and Mr. Xanthoudakis have strongly denied they were involved in the disappearance of Cinar's money. Lawyers for Cinar and liquidators for the offshore entities have filed a range of lawsuits in an attempt to recover the money. Quebec's provincial police force is also investigating the money trail.

RSM Richter has also hired lawyers in Barbados and the Bahamas to make its case for the cash. When asked if the competing claims will make recovery difficult, Mr. Massi replied: "We'll know better in the near future."