Receiver finds nearly $600,000 intended for Portus

Fifty-six investors who had planned to invest in Portus will get their money back after receiver KPMG revealed that their cheques and bank drafts, totalling $594,244, were dated after regulators issued an order preventing the failed hedge fund from accepting new clients.

In its latest report released last Friday, KPMG said it is seeking a court order to return each of the cheques and bank drafts to the investors. In the event the investor cannot be located, KPMG will ask permission to void the cheques.

The 23rd KPMG report also revealed several new developments in the long-running debacle.

Portus did not invest approximately 13% of the funds it received from investors. Instead, the money was apparently used to cover operating expenses, but KPMG has been unable to confirm this since most of the Portus records were destroyed or are in poor condition. RBC has been asked to analyze its Portus bank account records in an effort to find out what happened to those funds. The bank has said it will cooperate with the request and expects to report back to KPMG by early June.

The receiver will also ask for permission to convert $36.8 million US recovered from a financial institution in the Turks and Caicos into Canadian funds. Since claims to investors will eventually be distributed in Canadian dollars, KPMG argues the conversion makes sense in order to eliminate exchange rate risk.

The report notes that KPMG has renewed a consulting agreement with Northwater until the end of June. Northwater has been asked to advise KPMG as it whether or not the receiver should replace Portus Alternative Asset Management as the investment manager of an umbrella fund. The return of investments from the umbrella fund will determine the rate of return on notes purchased by the Portus Group from Société Générale Canada.

On income tax issues, KPMG says it has confirmed with the Canada Revenue Agency that the Portus bankruptcy and the activities of the receiver have not affected the tax status of the registered investment products. KPMG has mailed former Portus employees their T4 slips and other relevant forms to ensure they can file their income tax returns. The receiver has also provided Portus investors with appropriate tax slips for 2004, as the company apparently failed to do so.

Finally, the receiver’s report addresses some confusion related to the legal status of Portus president Boaz Manor, who fled to Israel shortly after the fund collapsed in February 2005. KPMG says it “erroneously reported” last week that the Israeli Supreme Court would hold a hearing on April 13 to consider Manor’s appeal of a lower court order for his imprisonment for failing to return some diamonds allegedly in his possession. In fact, April 13 was the deadline for Manor to file supporting documents related to his claim that he was unable to return the precious gems. KPMG has seven days to respond and a hearing date will then be set by the Israeli court.

The latest KPMG requests will be dealt with in court on Wednesday. The first meeting of Portus investors is scheduled for June 21.

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