Fareport Capital cancels debentures, commences litigation

TORONTO, July 19 /CNW/ - Fareport Capital Inc. (TSX -V: CAB). Further to
the recent departure of senior executives of Fareport Capital Inc.
("Fareport") and investigations following thereon that have been ongoing for
several months under the supervision of Fareport's Board of Directors, the
company commenced litigation today in the Ontario Superior Court of Justice
against a number of former insiders including a number of former officers,
directors and advisors to the company, as well as parties affiliated with or
related to them.
In pursuing this litigation, Fareport is seeking to recover over $12
million in respect of company funds and assets that it believes were
unlawfully appropriated by the defendants over a period of several years.
Fareport's external audit firm, Harris & Partners LLP, is a defendant in
the action and, accordingly, has resigned its appointment. The Board of
Directors has appointed the firm of Segal & Partners to act as external
auditors in their place. This appointment remains subject to shareholder
ratification at the next annual or special meeting of the Company.
In addition, as a result of the investigations, Fareport has determined
that it is both appropriate and requisite to cancel certain debentures held  
by the defendants and purportedly issued by the company in 2003 in the
aggregate principal amount of $921,000 (representing 58% of the outstanding
debentures) and to cease paying interest in respect of them. As a result of
the non-payment of interest in respect of the cancelled debentures, the
holders of the cancelled debentures issued a demand in respect of them on  
July 15, 2005. The debentures form part of the subject matter of the
litigation and it is expected that the demand for payment will be dealt with
in that context.
The law firm of Lax, O'Sullivan, Scott LLP has issued the Statement of
Claim and will be representing Fareport in the proceedings.
As a result of the investigations giving rise to this litigation, the
Company can now confirm that its reported revenues and earnings in certain
prior periods were significantly understated and that its losses have been
similarly overstated, although the actual extent of variance remains to be
determined. In addition, the Company's prior public disclosure as it relates
to the matters under investigation, including certain related-party
transactions, appears to have been incomplete or inaccurate in material
respects. With assistance from Segal & Partners and others, Fareport is now
undertaking the work required to complete a restatement of its historic
financial results.
In addition to commencing this litigation, the Company has reported its
findings to the Ontario Securities Commission and is co-operating fully with
an investigation into these matters that is being undertaken by it. The
Company has also reported all relevant matters to the Investment Dealers
Association.
The extent and timing of recovery as a result of the litigation in
relation to the loss suffered by Fareport and its shareholders remains
uncertain.

Neither the TSX Venture Exchange, nor any other Regulatory Authority,
has approved or disapproved of the contents of this news release.