Receiver Identifies Portus Accounts

Date: Tuesday, September 6, 2005
Author: James Armstrong- Hedgefund.net

According to a report issued by the receiver for troubled Canadian hedge fund firm Portus, investigators have identified over 130 accounts at numerous institutions in Canada, the Cayman Islands and the Turks and Caicos Islands with investor funds.

So far, court-appointed receiver KPMG has located CAN$132.8 million ($111.8 million) in Canadian currency and an additional $35.9 million denominated in U.S. dollars. The largest chunk, CAN$106 million, was in an account at RBC Dominion Securities under the name of the Portus Market Neutral Preservation Fund.

KPMG said there remain assets the receiver has identified but has so far been unable to secure. KPMG has commenced proceedings to secure those assets.

The receiver has set aside CAN$10 million for a hardship fund to compensate investors in immediate financial need. The hardship committee has received 209 applications for immediate aid and approved 179 of them.

It is unclear exactly how much Portus owes investors due to the complexity of the investment structure, the deliberate destruction of firm records and the lack of cooperation from Portus co-founder Boaz Manor.

Manor left Canada and resumed his residency in Israel after authorities began investigating Portus. KPMG has tried to interview Manor, but he has declined to speak with them, citing health reasons. Israel has no extradition treaty with Canada.

KPMG estimates investors had CAN$19.2 million directly in the Market Neutral Preservation Fund and CAN$730.6 million in notes linked to the fund, as well as $52.8 million in U.S. dollar-denominated foreign accounts. There may be additional liabilities investigators have not yet identified.

Insurance giant Manulife referred thousands of investors to Portus while collecting lucrative fees. Manulife has offered to buy back the shares in Portus bought by anyone referred to the firm by a Manulife agent. So far, all but one of the investors referred by Manulife have accepted the offer, making Manulife the largest single creditor of Portus.

Tracking down investors’ funds has not been easy. Though provincial courts froze all Portus assets in February, unauthorized transfers have been made as recently as July, including more than $8.6 million transferred to accounts in the name of Yossi Meirov and his company, Meirov International Diamonds. Those funds currently remain in Hong Kong.

In a letter, Manor’s lawyer told KPMG his client had invested $11.6 million of Portus assets in precious metals and precious stones. According to the receiver, those investments were not only inconsistent with the disclosure given to investors, but were also made after a court appointed KPMG as receiver and were thus completely unauthorized.

Manor has not returned any of the precious metals and stones he allegedly purchased with investor money.

Investigators traced an additional €728,000 ($909,000) of investor funds to a Credit Suisse safety deposit box where it was then removed by John Dallas Campbell, a long-time friend of Manor.

The probe is not without cost. The receiver has transferred CAN$11 million in Portus assets to its own account in order to fund the ongoing investigation.

KPMG expects to issue another report soon describing the complex investment structures of the Portus Group.