UPDATE: Portus Founder Gets Two Years, Is Cooperating

Nov 20 2007 | 7:28am ET

Michael Mendelson, the co-founder of collapsed Canadian hedge fund Portus Alternative Asset Management, was sentenced to two years in prison yesterday after pleading guilty to one count of fraud. He has also agreed to cooperate with authorities, a potentially ominous sign for his co-founder, Boaz Manor, who pleaded not guilty to the charges last week.

In exchange for the plea, prosecutors dropped the remaining 11 fraud and obstruction of justice charges, and the Ontario Securities Commission dropped its criminal charges against him. He still faces OSC regulatory action.

In a statement of fact filed with the court, Mendelson said he and Manor, who returned to Canada last week after two years on the run in Israel, “talked about decision made by the Portus companies,” though Mendelson claims he “did not always know all the details.” He also admitted that “members of the public were induced to invest on the basis of dishonest representations.” He said C$106 million was misappropriated, by agreement between the co-founders.

Manor’s lawyer said that he was not consulted about the plea deal, the Globe and Mail reports.

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