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Path cleared for Portus payouts

Investors in defunct Portus Alternative Asset Management Inc. will get some of their money back this fall, after a judge cleared the way yesterday for the first payouts from the hedge fund's receiver.

Mr. Justice Colin Campbell of Ontario Superior Court signed an order that will allow the receiver, KPMG Inc., to distribute some of the Portus assets to investors whose money went into limbo when the company's operations were frozen in 2005.

About 20,000 cheques will be mailed in "early to mid-fall" KPMG lawyer James Grout told Judge Campbell.

KPMG has about $130-million in Portus assets in cash, although somewhat less than that will be paid out in the first distribution, senior vice-president Robert Rusko said after the hearing. He would not specify the exact amount.

The payouts have been delayed because of complex tax issues and quirks of the Bankruptcy Act.

From 2003 until it collapsed in 2005 Portus collected about $800-million from 26,000 investors.

The company was shut down by regulators after they found that it had not, as promised, put the money into Canadian securities. The funds were allegedly misappropriated by company executives, although KPMG has managed to track down a substantial amount.

About $530-million of the recovered money is held in notes, issued by French bank Société Général SA, which mature between 2008 and 2011.

KPMG is in discussion with the bank to see if some of those notes can be redeemed before their maturity dates, so investors will get more money more quickly.

The receiver has said that eventually about 86 per cent of investors' money will be returned.

Meanwhile, Portus co-founder Boaz Manor, who faces a raft of allegations from the Ontario Securities Commission, has won a partial victory in a court case in Israel, where he now lives.

The Israeli Supreme Court this week overturned a ruling that would have seen Mr. Manor go to jail for contempt of court because he didn't turn over about $9-million worth of diamonds bought with Portus money.

Three Supreme Court judges ruled that "the location of the diamonds is unclear" because Mr. Manor and one of his associates each claim the other has them.

The case must go back to a lower court, which will have to rule specifically that Mr. Manor has the diamonds before he can be penalized for not producing them, the Supreme Court judges said.

Mr. Manor has also been trying to overturn a court order that prevents him from leaving Israel. He has said he wants to return to Toronto to prepare for the OSC hearing, which is scheduled for January.

© 2007 The Globe and Mail. All rights reserved.

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