The two co-founders of Portus Alternative Asset Management Inc. were charged yesterday with multiple counts of fraud, money laundering and possession of property obtained by crime, following a two-year investigation into the collapse of the notorious hedge fund.
The RCMP accused Boaz Manor, 33, and Michael Mendelson, 41, of fraudulently using funds raised from Canadian investors to fund the operations of Portus - including paying management fees and salaries. The police allege investors were told the money was being invested in various securities, but it was not.
Mr. Manor, who moved to Israel shortly after Portus was shut down by regulators in 2005, was also charged with obstruction of justice.
Brian Verheul, the officer in charge of the RCMP's Greater Toronto Area commercial crime section, said police have been holding talks with Mr. Manor's lawyers and expect he will voluntarily return to Canada to face charges. "There is really great co-operation with counsel, and I expect that he will, in fact, make an appearance in Canada," Insp. Verheul said in an interview.
Mr. Manor's lawyer could not be reached for comment. Mr. Mendelson's lawyer said his client had no comment.
There was a brief court hearing for Mr. Mendelson in Toronto yesterday and he was ordered to reappear on Oct. 10. An arrest warrant has been issued for Mr. Manor.
An Israeli court has barred Mr. Manor from leaving the country at the request of KPMG, which is the receiver appointed to oversee the dismantling of Portus. The receiver requested the ban in 2005 to prevent Mr. Manor from moving to another jurisdiction.
Mr. Manor has asked the court to overturn the ban so he can return to Canada, but the case has been complicated by negotiations over conditions the Canadian authorities want him to accept to guarantee he will stay in the country. They include surrendering his passport and reporting regularly with the court.
KPMG senior vice-president Robert Rusko said yesterday the receiver would be happy to see Mr. Manor return to Canada once terms are negotiated.
"There is no question that it would be a good thing for him to come back - I think that's certainly to our interest," he said. "He left, he didn't tell us, and we've had to spend a lot of time and money trying to even speak to him."
The receiver has not recovered about $17-million of Portus funds, including diamonds estimated to be worth $9-million (U.S.) that Mr. Manor took with him to Israel. He later claimed he no longer had the diamonds.
In its early days, Portus appeared to be a runaway success for Mr. Manor, who founded the company in 2003. Over a two-year span, the company raised $750-million (Canadian) from 26,000 Canadian investors, and also managed about $53-million (U.S.) for 700 international investors. About $250-million (Canadian) of the money came from clients of Manulife Financial Corp., whose agents steered clients to Portus in return for fees. Manulife repaid its clients' losses following Portus's collapse.
In its charges yesterday, the RCMP alleged funds were used for purposes "in contrast to its disclosure and without investors' knowledge" - including paying management fees, performance fees, referral fees, trailer fees and salaries.
© 2007 The Globe and Mail. All rights reserved.
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