Canadian Lawyer

Tommy to remove his money, claiming his property rights had been violated by FIS in preventing him from doing so. One of the problems the FIS faced is that the Indonesian government had failed to prove Tommy's wealth was derived from corruption. "Indonesia faces huge prob- lems with their legal system, including the corruption of judges and prosecu- tors, and although there should be ample evidence available to support a cause of action against Tommy given the estimated US$800 million he alone netted during the 32 years of his father's regime, the Indonesian authorities have until now been unable to make a case stick," says Bell. "Without a domestic conviction, or at least the provision by Indonesia to the Guernsey authorities of some kind of clear evidence linking Tommy to criminal enterprise, it was impossible to secure a confiscation order for the funds in Guernsey." THE PORTUS CASE A nother offshore case that's entangled Canadian lawyers on both sides of the ramparts is Portus Alternative Asset Management Inc., a Toronto-based hedge fund set up by Michael Mendolson and Boaz Manor in 2003. Portus managed to raise $800 million from 26,000 inves- tors before it was shut down in 2005 amid allegations it was no more than a sophisti- cated Ponzi scheme. Of the money raised, about US$53 million was invested offshore by Manor, mostly in the Cayman Islands and Turks and Caicos. "We could not glean any legitimate business purpose of doing that," says John Finnigan, a founding partner with Thornton Grout Finnigan LLP who was hired by bankruptcy receiver KPMG Inc. to find the Portus money. "Absolutely [Manor] was trying to hide it." Because it was closed down by the Ontario Securities Commission for rea- sons of fraud, obtaining orders in Canada seeking offshore funds was not terribly difficult, but it turned out to be a long and expensive ordeal for Finnigan to find the money. For example, after hiring local counsel in the Cayman Islands, and getting the Canadian order recognized there, they discovered the money had been moved to the Turks and Caicos. "And so we had to go back before the Canadian judge and get the order amended, and local counsel would have it lined up with the judges in the Caribbean," says Finnigan. "We did that four or five times as we traced the money through these various jurisdictions before we ended up at this account in the Turks and Caicos. And we got the funds frozen before they could be moved again." Finnigan says they lucked out when the judge in the Turks and Caicos was also a former school chum of the Canadian judge overseeing the Portus bankruptcy, and he expedited the retrieval of the money. In the end, they pursued the Portus money through jurisdictions that, along with the Caribbean region, included Cyprus, Hong Kong, Israel, Italy, and France. And they had to fight in the Israeli courts to get permission to interview Boaz Manor himself, who had fled to Israel in 2005. But there was another wrinkle to the Portus affair that involved a lawyer. The person who set up Portus' offshore accounts was T.R. Anthony Malcolm, a veteran Montreal sole practitioner. All told, Malcolm was paid US$2.7 mil- lion to carry out this task, an amount Finnigan found to be suspiciously steep. KPMG concluded that at least US$1.2 million of the amount Malcolm invoiced "had no apparent connection to the Portus Group." "Malcolm was setting up the architec- ture offshore and he had contacts with the bankers and individuals who established these accounts," says Finnigan. "It struck us as a large amount of money to do that kind of work." Of the US$53 million that had gone missing offshore, Finnigan finally found US$35 million of it in the Turks and Caicos. But that still meant US$17.6 mil- lion was missing, an amount that's never been accounted for to this day (Manor apparently used $9 million of it to buy diamonds, which were not recovered). In 2007, KPMG launched a suit against Malcolm seeking $25 million over his involvement in the Portus scam. While the case was never pursued, the statement of claim alleges that Malcolm assisted Manor in diverting Portus funds offshore and that the lawyer "knew or ought to have known that the establish- ment of the Offshore Accounts and the transfer of tens of millions of dollars through these accounts were not acts in furtherance of and legitimate business purpose of the Portus Group." The claim alleges that Malcolm continued to assist Manor in his efforts to steal Portus funds even after Portus was placed in receiver- ship in March of 2005 and Manor had bolted from Canada. When Manor was interviewed in Israel by Finnigan in 2006, Manor blamed the entire Portus scandal on Malcolm, saying the Montreal lawyer engineered the fraud. The receiver found no evidence this was true (and Malcolm has denied any knowledge of the Portus swindle). The 37-year-old Manor was forced to return to Canada and, last year, was sentenced to four years in prison. In total, it cost a whopping $13.7 mil- lion in legal and other fees to hunt down and repatriate the Portus cash. "The courts in the Caribbean do not act quickly," says Finnigan. "It's exceed- ingly difficult to get a court date and very difficult to move things along. So you have this sort of 18th- and 19th- century machinery trying to catch up to 20th-century technology of moving funds around with a few keystrokes. So if the money is moved offshore there is no easy way to get your money back. It can be very costly, time-consuming, and frustrating." With files from Nicole Brewster. Bruce Livesey is a Toronto-based journal- ist whose book about investment fraud in Canada, Thieves of Bay Street, is being published by Random House in April. www.CANADIAN Lawyermag.com FEBRUA R Y 2012 31

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