The eyes of Ontario’s financial community will be on the Ontario Securities Commission this afternoon as the OSC considers a settlement agreement in relation to three figures in the Portus Alternative Asset Management Inc. investment debacle.
Settlement hearings will take place at 2:30 p.m. for Portus president and director Boaz Manor; at 3 p.m. for former Portus chief compliance officer Michael Labanowich; and at 3:15 p.m. for John Ogg, who succeed Labanowich in the role of chief compliance officer in May 2004.
On Friday, the OSC announced a tentative settlement with the three Portus execs. An OSC panel will consider the settlement today and make details available on its web site if and when it approves it, says OSC spokeswoman Alison Ford.
The case has been going on for years following the shutdown of Portus in 2005 amid allegations the Toronto-based hedge fund, which had by then raised $800 million from 26,000 investors, was nothing more than a sophisticated Ponzi scheme. Of the money raised, Manor invested about $53 million of it offshore in the Cayman Islands and Turks and Caicos, Canadian Lawyer reported this February.
Despite the OSC action, the case has degenerated into a long battle by bankruptcy receiver KPMG Inc. to track down the offshore funds. After hiring local counsel in the Cayman Islands and getting a Canadian order recognized there, for example, the parties discovered the money was in fact in the Turks and Caicos. That led to more legal efforts in a variety of international jurisdictions.
The case also involves a lawyer, Montreal sole practitioner T.R. Anthony Malcolm, who received US$2.7 million to set up Portus’ offshore accounts. In an interview by a lawyer for KPMG, John Finnigan of Thornton Grout Finnigan LLP, Manor blamed Malcolm for the scandal. But the receiver found otherwise and Malcolm has denied knowledge of it.
Michael Mendelson, the co-founder of Portus, pleaded guilty to a single count of fraud in the case. In late 2007, he was sentenced to two years in jail in exchange for agreeing to testify against Manor.
In a deal with prosecutors last year, Manor received a four-year prison sentence for breach of trust and disobeying a court order in relation to the affair. He’ll learn what else awaits him at the OSC today.
Update: Aug. 28
The OSC approved all three settlements yesterday. Manor was permanently banned from acting as a director or officer of any issuer, and also from trading in any securities, except for mutual funds as part of his RRSP, which must be done through a registered dealer. He was also ordered to pay back $8.8 million for the benefit of Portus shareholders. But according to reports, Manor's lawyer Robin McKechney told the commission yesterday that his client is essentially broke so "does not at this time" have the money to satisfy the order.
Former compliance officers Labanowich and Ogg were each barred from acting as a director or officer of any reporting issuer for six years, and ordered to pay $25,000 in costs to the commission.