TEL AVIV, Israel (HedgeWorld.com)--This time the judge really, really means it.
A judge in Israel on Monday [Jan. 9] gave Boaz Manor, the founder of the now defunct Canadian hedge fund Portus Alternative Asset Management, seven days either to produce US$10 million in diamonds he bought with money from the hedge fund, or pony up the cash.
According to a report in the Toronto Globe and Mail, if Mr. Manor fails to do either, he'll spend a week in jail. Followers of the Portus saga might recall that an Israeli judge issued a similar order in December, only then Mr. Manor had three days to comply.
Mr. Manor then filed an affidavit saying he didn't have the diamonds and offered to testify in court, which he did for more than two hours on Dec. 26. After the questioning, conducted during a hearing that was not open to the public, nothing happened. Mr. Manor returned to court on [January 9], and the same judge issued the new order.
KPMG LLC, the court-appointed receiver for Portus, has alleged that Mr. Manor wired US$10 million in Portus funds to Hong Kong in the summer of 2005 to buy about 100 diamonds. His sister-in-law was supposed to pick them up. This transaction occurred after Mr. Manor had been ordered by Canadian courts not to have anything to do with Portus assets.
The receiver has hit numerous walls in its attempts to recover C$750 million (US$634 million) in assets belonging to roughly 26,000 investors, most of whom were Ontario residents. The biggest obstacle has been getting information from Mr. Manor. He left Canada for Israel early in 2004, shortly after regulators started looking into whether Portus had been selling shares to non-qualified investors and paying off investment advisers to refer clients to the fund.
Although KPMG officials had tried to question Mr. Manor in the past, he had refused to be interviewed, claiming through his attorneys that he was too ill. His psychiatrist recently claimed he could not sit for an interview with the receiver's representatives because of his mental condition, according to the Globe and Mail report. In a letter cited by the newspaper, the psychiatrist said Mr. Manor had an "emotional crisis" following Portus's collapse and suffered from suicidal thoughts, depression, dissociative states and incoherent thinking.
Since April, KPMG has been working to uncover the structures of the various Portus investments and to recover as many assets as possible. In September, KPMG recommended to a Canadian court that Portus be placed in bankruptcy and its recovered assets returned to investors on a pro rata basis.
In October, the Ontario Securities Commission formally charged Portus officials with misleading investors and misusing fund assets. The OSC said Portus and its various entities--including PAAM, Portus Asset Management Inc., and PAAM's British Virgin Islands company, which the OSC described as a "shell"--illegally distributed securities to non-qualified retail investors.
In November, attorneys for KPMG and Mr. Manor exchanged testy letters, in which KPMG suggested Portus's investors would have been better off putting their money into mattresses than with Portus; Mr. Manor's attorneys responded that their client had been cooperative and that KPMG was being unreasonable.
Contact Bob Keane with questions or comments at firstname.lastname@example.org.