Trustee hopes to return 86% of funds, but investors get no promises,
June 22, 2006
PAUL WALDIE AND ANDY HOFFMAN
TORONTO -- About 500 investors in collapsed hedge fund company Portus
Alternative Asset Management Inc. gathered in a hockey arena yesterday
to vent their frustration and learn when they might get back some of
their money. After four hours, many left with more questions than
answers, and a good deal of anger.
"What a waste of time," said Shaun Collier, a financial adviser from
Ajax, Ont., who put two clients into Portus. "They didn't answer any of
The meeting was the first time Portus clients have had a chance to air
their views since the company was pushed into receivership last year by
regulators amid a flurry of investigations that now includes a criminal
probe. At its peak, Portus had about $800-million in assets and 26,000
Investors were told they might get back nearly 86 per cent of their
money under certain circumstances. But exactly how much they will
receive, and when they will get it, has yet to be determined. That left
many at the meeting furious.
"They say we'll get back about 85 per cent or something, but after all
the lawyers fees and government fees, we'll get probably half," said
Gary Hughes, who put $36,000 into Portus funds.
A former federal cabinet minister, who did not want his name published,
left the meeting shaking his head saying: "I guess 85 cents is better
than a kick in the pants."
Portus is now in bankruptcy and Robert Rusko, a partner at KPMG LLP,
which is serving as trustee, spent much of the meeting explaining the
bankruptcy process and outlining Portus's complicated investment
structure. In court filings, Mr. Rusko has alleged that Portus's assets
had been misappropriated and some funds siphoned off for personal use. "Portus
did not do what it said it would do," Mr. Rusko told the meeting.
Most of the company's assets are held in about a dozen investment notes
issued by Société Générale Canada. The notes were purchased for
$529.3-million between 2003 and 2004 but they each carry different
maturity dates, some out to 2011. Mr. Rusko said KPMG is going after
other Portus assets, including some allegedly held by company co-founder
Boaz Manor, which could increase the overall recovery.
After repeatedly being pressed for a definite recovery figure and a
timeline, Mr. Rusko said that depends on many factors including whether
investors want to cash in the notes or wait until they mature. "I'd love
to be able to answer your question with absolute certainty, but I
can't," he said.
That didn't please many investors who criticized Mr. Rusko and lawyers
involved in the bankruptcy for racking up $13.3-million in fees. Mr.
Rusko defended the fees by saying that as a result of the legal efforts
more money has been recovered. But many investors were not convinced.
"My mother has 50,000 bucks in this," said Carmine Mazzotta an
investment adviser from Ottawa who has 33 clients in Portus who invested
$4-million in total. "What has my mother got for 14-million bucks?
Absolutely nothing." He added angrily: "It's a travesty."
Other investors took wider aim during the meeting and lashed out at a
variety of perceived culprits. Some called for a class-action lawsuit
against the Ontario Securities Commission and other financial regulators
while others wanted to sue Mr. Manor, who left for Israel shortly after
the company collapsed (he has denied any wrongdoing at Portus).
"Somebody must be responsible," said one woman, who added politicians to
the blame list. "Someone must answer."
After the meeting, Mr. Rusko said he understood the frustration about
the process and the legal fees. "I would expect them not to be happy
about any fees," he told reporters. "It's not surprising. I hope that we
provided full answers to it."
The meeting was held to elect five inspectors to advise KPMG on the
bankruptcy and represent investors. Of the five elected, one is a lawyer
from Manulife Securities International Ltd., which has taken over claims
of 6,600 clients who invested $245-million in Portus. Another is an
official with Berkshire Securities Inc., which had the next largest
number of clients in the fund.
The OSC has laid charges in the Ontario Court of Justice against Mr.
Manor and his partner Michael Mendelson. Yesterday the OSC adjourned
administrative proceedings against the men pending the outcome of the