Portus ignored warning

Date: Tuesday, April 11, 2006
Author: National Post

National Post - The two men behind the Portus group of funds were advised in early 2004 to stop accepting money from investors, long before the money manager's collapse left 26,000 investors fearing that $800-million of their funds might be gone.

According to documents released yesterday by the receiver for Portus Alternative Asset Management Inc., lawyer Joseph Groia and the accounting firm of Kroll told Portus managers Boaz Manor and Michael Mendelson that they should close their doors to new money.

Mr. Groia even suggested they should prepare to defend themselves in court.

Portus did not stop soliciting funds after the warning and, in fact, collected the bulk of the $800-million of assets it had when it collapsed, according to Robert Rusko, a senior vice-president at KPMG, which is overseeing Portus's bankruptcy.

"Clearly a very, very significant amount of money was taken in after the Groia and Kroll advice was received," Mr. Rusko said on a conference call. "It's approximately $500-million."

Founded in 2002, Portus grew quickly as investors snapped up notes that promised to protect buyers from any drop in stocks while giving them the chance to profit from gains. Portus collapsed in February, 2005, amid allegations that the firm's principals were diverting investors' money.