Portus tried to destroy data, investigator says

(March 24, 2005) Portus executives tried to destroy electronic files, says KPMG vice president Robert Castonguay, an expert in forensic technology. KPMG has been given more time by the Ontario Securities Commission to complete its investigation into the hedge fund firm.

In a sworn affidavit, Castonguay reveals that KPMG, appointed as receiver in the Portus case, secured 76 desktop and laptop computers and 21 servers from Portus offices in Toronto.

A review of the computer and server hard drives indicates that attempts were made to “deliberately and systemically” destroy data by deleting electronic files and folders and by re-formatting hard drives.

“It appears that individuals with the highest levels of system administration rights attempted to destroy data, thereby preventing anyone from analyzing the full scope of Portus’s activities,” explains Castonguay, a former RCMP officer and national director of KPMG Forensic.

KPMG has so far managed to re-format six hard drives, using a computer imaging technique. Castonguay says he’s been able to recover data from three of the six re-formatted computers, while three others appear to be “totally corrupted.”

In addition, Castonguay says nearly 4,000 spreadsheet files were deleted from a laptop found in Portus president Boaz Manor’s office. Efforts to recover the deleted files have been unsuccessful.

Recovery attempts are ongoing, but KPMG says it can’t say how much data will be saved.

The OSC froze Portus’s assets in February and appointed KPMG as receiver earlier this month. KPMG was scheduled to report to the OSC on Thursday, but asked for more time to complete its investigation. The commission has obtained a court order extending Portus’s receivership until April 8, at which time Portus will bring a motion seeking to terminate the receivership. On March 29, the OSC will hold another hearing, “seeking to obtain additional terms relating to the conduct of the receivership.”

KPMG senior vice-president Robert Rusko cites the “complexity of the corporate structure and transactions involved” at Portus for the delay.

“It would appear that the operational finances of Portus Alternative Asset Management, Portus Asset Management and BancNote were intertwined,” Rusko said in an affidavit.

“[KPMG] has been unable to open a direct line of communication with anyone at Portus who is willing and able to fully explain the complex legal and financial relationships between and among the Portus companies,” he added. “Accordingly, the receiver has had to develop a picture of Portus’s business and affairs based in part on incomplete documentation and salvaged electronic records.”

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