Portus Co-Founder's In-Law Sought for Questioning in Hong Kong

Date: Monday, November 7, 2005
Author: Bloomberg.com

Nov. 7 (Bloomberg) -- KPMG LLP, the accounting firm investigating the defunct Canadian hedge fund Portus Alternative Asset Management, plans to ask a Hong Kong judge to order the sister-in-law of fund co-founder Boaz Manor to answer questions again about diamonds bought with investors' money.

Yu Jieying picked up $8.8 million worth of diamonds, including a 22-carat gem, which Manor arranged to be purchased, KPMG lawyer John Finnigan said at a court hearing in Toronto today. She ignored a Sept. 14 order to submit to questioning Oct. 13.

``We're seeking remedies against her,'' Finnigan told Ontario Superior Court judge Colin Campbell. He declined to elaborate after the hearing.

Portus, founded by Manor and Michael Mendelson in 2002, became one of the fastest-growing hedge funds in Canada. The fund's customers invested more than C$750 million ($630 million), as companies including Manulife Financial Corp. referred clients to the fund. Manulife refunded its clients their investments and is the fund's biggest creditor now.

KPMG is attempting to trace about $17.6 million missing from bank accounts in the Caribbean. The money vanished after Manor fled Canada for Israel following the start in February of an Ontario Securities Commission investigation of Portus transactions.

The accounting firm said Manor transferred $2.5 million to a bank account in Milan and used $700,000 to pay his Israeli lawyer. The diamond purchase was bigger than KPMG said last month because Manor arranged the purchase of an additional $1.3 million of diamonds through a second gems merchant, Finnigan said.

Hong Kong I.D.

Yu Jieying used a Hong Kong identification card and a passport, both of which had her named as Yu Wan Wang, KPMG said in a report.

An Israeli court yesterday ordered Manor to submit to questioning by investigators on Dec. 4, Finnigan said at the Toronto hearing. Manor can have a doctor present.

He had refused to answer investigators' questions for the past six months because he's suffering from ``mental health problems,'' Manor's lawyer told the Israeli court yesterday, according to Finnigan. Robert Rusko, a KPMG vice president, declined to elaborate on the statement.

In a letter to KPMG, Yehuda Weinstein, Manor's lawyer, said Portus investors could get all their money back if the fund isn't put into bankruptcy and investments are left in place until maturity.

The would mean the interest collected on the investments would offset the money Manor misappropriated, Finnigan said at today's hearing.

Perverse Logic

``The perversity of that logic is really breathtaking,'' Finnigan said. ``It's an indication that Manor has really lost it and isn't connected to reality.''

KPMG plans to ask Campbell Nov. 9 to place Portus into bankruptcy, allowing the accounting firm to find out exactly how much money is owed to investors and how much is available to pay them, Rusko said.

``We still don't have the full story,'' he told reporters after the hearing. The accounting firm is relying on ``corrupted documents'' and ``destroyed documents'' to build a statement of assets and liabilities, he said.

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