Canadian Financier’s Rapid Climb Ends

By Sheldon Gordon

Published June 03, 2005, issue of June 03, 2005.
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TORONTO — Israeli-born financial wunderkind Boaz Manor generated national headlines earlier this year when he returned to his native country after being served with a court order by Canadian authorities investigating his failed hedge fund. Now, Manor’s father, Daniel, himself a leading businessman, is defending his son’s decision to head back to Israel.

Daniel Manor, one of the most successful entrepreneurs in Toronto’s 50,000-member Israeli community, told the Forward that he has “no idea” whether his son will return to Canada after being accused of attempting to misappropriate more than $1 million. But, he added, the younger Manor — the co-founder and very public face of Portus Alternative Asset Management Inc., previously Canada’s fastest growing hedge fund — is “absolutely” innocent of any wrongdoing.

“I think that he has been crucified by the establishment here, the banks, for being too successful,” the father said, adding that his son left Canada on the advice of lawyers. “They know how the justice machine — or injustice machine — is operating in Canada.”

The scandal has triggered a spate of antisemitic comments in online investor discussion forums excoriating Israel for being a haven for swindlers. In fact, Israel has an extradition treaty with Canada, though it is unclear whether alleged white-collar offenders would be as easily extraditable as violent offenders.

An Israeli embassy spokesman did not return calls from the Forward.

For the younger Manor, the decision to return to Israel marks what is probably the final chapter of his fairytale rapid rise up Canada’s financial ladder.

When Manor graduated from University of Toronto in 1996 with a bachelor’s degree in applied science, it appeared likely that he would join the family business. His father had emigrated from Israel in 1988 after a 30-year career developing defense systems for the Israeli military. In Canada, he built a flourishing company that makes cameras used for monitoring traffic.

Following a brief stint with his father’s firm, however, Boaz moved into finance, teaming up with Michael Mendelson, an entrepreneur originally from Texas. The two were initially involved in a venture capital fund investing in high-tech firms, but after the tech bubble burst in 2000, they were drawn to hedge funds, which are similar to mutual funds but are allowed to make riskier investments and are intended for wealthy, sophisticated investors.

Manor went to New York to learn the business from hedge fund maven James Park, chairman and CEO of Paradigm Global Advisors. By early 2003, Manor and Mendelson had formed Paradigm Asset Management (they changed the name to Portus last year, after Park objected to their use of the Paradigm name).

Despite his youth and extremely limited experience in the hedge fund industry, Manor succeeded in persuading established investment advisers to refer clients to Portus in large numbers. Critics said he accomplished this feat by offering unusually high referral fees.

Ramy Elitzur, a professor of financial analysis and associate professor of accounting at the University of Toronto who knows Manor, described him as “young, brash and tenacious.” Manor and Mendelson were good salespeople and the fund initially prospered, he said. “But one day, if you don’t know what you’re doing and you’re taking huge risks, you’re going to meet your nemesis and it’s going to sink you,” Manor said. “It wasn’t done, I think, because of an evil agenda. He just miscalculated big time. He was careless. He’s a bright kid. He should come back and face the music.”

Manor’s hedge fund had sold $605 million of its products to 26,000 investors over the past three years. But in March, the Ontario Securities Commission forced Portus into receivership as it investigated the fund for allegedly selling investments in violation of provincial laws governing hedge funds.

KPMG, the court-appointed receiver of Portus, recently filed a report claiming that the fund’s liabilities exceed its assets by more than $320 million, and that $2.4 million was fraudulently transferred to a private bank February 1, when Portus was already insolvent and under investigation. The KPMG report alleged that Manor “was attempting to misappropriate somewhere between $1.2 million and $1.6 million” of the transferred money.

Manor flew to Israel in March after an Ontario judge issued an order requiring him to co-operate with KPMG.

In his recent interview with the Forward, the senior Manor condemned the Canadian media and securities regulators for ruining his son’s business. The Ontario Securities Commission “barged in like a bull into a china shop,” he said. “It’s a very sensitive situation. They created a total brouhaha that caused the whole thing to collapse. He lost his business out of the insensitivity of the press and the commission.”

KPMG initially received a letter from Boaz Manor’s lsraeli lawyer stating that he would be willing to be interviewed by the receiver — but only in Israel. Now, however, the lawyer has written the receiver saying that Manor is too sick to be interviewed. The lawyer denied that Manor had misappropriated any money. The letters were filed as part of the receiver’s report. KPMG’s legal counsel said that should Manor not return to Canada, the receiver would retain lawyers in Israel and seek an order from an Israeli court upholding the Ontario court order.

“If he stays in Israel,” Elitzur, the University of Toronto professor, said, “I hope he doesn’t launch a hedge fund there.”






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