Norbourg shut down amid fraud allegations

(August 25, 2005) Montreal-based Norbourg Asset Management has been shut down by regulators in Quebec who allege that $70 million belonging to mutual fund investors has been embezzled. As many as 5,000 investors may be affected.

At the request of the Autorité des marchés financiers (AMF), the Bureau de décision et de révision en valeurs mobilières (BDRVM) has ordered Norbourg to cease all activities. Police have also been asked to begin a criminal investigation.

The RCMP’s Integrated Market Enforcement Team and the AMF searched offices in Montreal, Quebec City, and the Estrie region, Quebec’s securities regulator said in a statement today. Reports suggest police also raided an office in Toronto.

Norbourg, headed by Vincent Lacroix, manages the Norbourg and Evolution fund families.

The AMF alleges that nearly $70 million belonging to investors in the Evolution and Norbourg funds were embezzled through various schemes. The regulator also says that a discrepancy of $71 million exists between the latest financial statement and Norbourg’s assets under management and that it found “misrepresentations” in the firm’s financial statements for the past three years.

“BDRVM has issued a freeze order on the bank accounts of Norbourg and of the companies related to Mr. Lacroix and it orders the companies not to dispose of their assets,” the AMF said. “As well, BDRVM has ordered the Evolution and Norbourg family of funds not to dispose of their assets to securitize assets under management. BDRVM has also ordered the suspension of the rights granted by registration to Norbourg and Mr. Lacroix as an advisor.”

Quebec’s finance minister has appointed an administrator from Ernst & Young, who will value the assets currently held in the funds and determine whether Norbourg can continue operations.

IFIC issued a brief statement today saying it is aware of the situation involving Norbourg, but cannot comment on an investigation involving one of its members.

As of June 30, Evolution has 19 funds with $143.2 million in assets while Norbourg has eight funds with more than $56 million in assets, according to Morningstar. Last month, the company announced plans to merge a number of Norbourg and Evolution funds with overlapping mandates.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com