The Crocus Investment Fund stands before us exposed as a bedraggled panhandler and not the jaunty bon-vivant we have always believed.
Auditor General Jon Singleton has shown us a nearly broke fund with a useless board of directors made up of the deaf (to complaints), the blind (to truth), and the dumb (and we don't mean mute), who have been misleading Manitobans for at least three years over the true value of its investment portfolio.
Foremost in his recommendations were a series of references to numbered sections of the Criminal Code. We are sure the Special Prosecutor from Ontario will bring his handy-dandy pocket version to refer to, as he wades through the miriad of findings of questionable conduct and misleading statements.
But we will help the layman, by explaining that the sections refered to by the Auditor for legal review generally start with "F" - he was too polite to use the word, but it rhymes with "broad".
And right smack in the middle of the scandal sits the mysterious $10 million loan from the Solidarite Fond du Quebec.
Only The Black Rod has been raising questions about this strange injection of millions into Crocus (we've reposted our very first Fond story from January for your convenience).
We knew there was something fishy about this loan at loanshark rates; we were the only ones who called it what it was, a loan, while everyone else tippy-toed around and called it an "investment" just like the Crocus board wanted you to.
We knew and said that they were hiding the true purpose of the loan by the way they tried to disguise it as something else.
Not only were we correct about that cover-up, but now it will be interesting to see if the Special Prosecutor determines that the Quebec Fond should also face charges, for being complicit in the deceit of Crocus shareholders by agreeing to mask their loan as an "investment" on the books.
But not even we expected that this $10 million loan was made to prop up the failing Crocus Fund at the very moment the directors were pretending everything was hunky-dory, never better, jolly good, pip pip.
And those directors. Not so mighty now. Not like in February, 2002, when the Crocus board were the Princes of the City as they launched a preemptive strike against John Loewen for even thinking about questioning the valuations of the Crocus Fund.
Under threat of a lawsuit, Loewen had to agree to make a public apology to Crocus and, to make his humiliation complete, to buy shares in the fund. Having humbled him, the board then issued a joyous news release, which, today, sounds Oh so ironic.
Read it yourself before it disappears from the Crocus website (all emphasis ours):
Crocus Investment Fund
FOR IMMEDIATE RELEASE
Wednesday, February 13, 2002 (4:22 pm)
Mr. John Loewen, Finance Critic for the Manitoba Progressive Conservative Caucus today made false and inaccurate statements about the Crocus Investment Fund. These statements were made by Mr. Loewen without any investigation or research by him as to the accuracy of his comments. At no time prior to making these statements did Mr. Loewen speak to the Fund, its auditors PricewaterhouseCoopers, or to Wellington West Capital Inc., the Fund's lead broker. These false statements are irresponsible and damaging to Crocus, its shareholders and the Manitoba economy.
More than 30,000 Manitoba shareholders and Manitoba's financial services community can be assured that the Crocus share price accurately reflects the current value of the Fund's underlying assets. Investment performance is monitored on a continuous basis and is reflected in the weekly share value. Crocus uses valuation methodologies that meet the highest industry standards including obtaining independent valuation reports, and concurrence reports prepared by external chartered business valuators (CBV).
Further external verification of business valuations occurs as part of the annual audit process conducted by PricewaterhouseCoopers LLP, and through the extensive annual due diligence undertaken by the Fund's lead broker, Wellington West Capital Inc., in accordance with industry standards.
The Crocus Investment Fund is proud of its success in Manitoba. The Fund has $166 million in assets under administration and has invested in more than sixty top small and mid-size Manitoba businesses. These investments have earned shareholders a competitive long-term rate of return on their investment, and helped create, save and maintain more than 11,000 jobs, most right here in Manitoba.
Got it? Manitobans were "assured" the share price "accurately reflects" the Fund's assets. Crocus only uses the 'highest industry standards" and you can count on Wellington West Capital to back that up.
We note that Wellington West failed to leap to the ramparts yesterday to defend Crocus from the mean old auditor's flail.
Funny, since Wellington West staked its professional reputation on the very "due diligence" which was ripped to confetti-sized shreds by the Auditor.
Well, Wellington West may be speechless, but former director Peter Olfert wasn't. He was "shocked and dismayed" by the Auditor's findings. But that pretence of surprise is wearing thinner than a Sunday edition of the Free Press.
Olfert's shock can only be believed if he can pass a lie-detector test to prove that:
* he never heard of Bernie Bellan, who has been writing, emailing, pigeon-holing everyone in sight for three years warning all and sundry about Crocus valuations
* he never heard of John Loewen, who was threatened with a lawsuit to force him to apologize for questioning Crocus's phony valuations and who had to agree to a two-year gag order
* he doesn't remember that December meeting cited by the Manitoba Securities Commission at which he expressed concern over the refusal of senior officers to sign a prospectus - because they knew the shares were overvalued, and he, Olfert, was worried the Fund would miss RSP season.
* he was the only person in Winnipeg who didn't know Jim Umlah's penchant for high living.
Ahh, James Umlah, once vaunted Chief Investment Officer "CIO" of the Crocus Fund.
In the late 1980's through 1996, the name "James Umlah" regularly popped up - not in social calendars, but rather in the court dockets named as respondant by a number of recognizable companies, like Zellers, American Express, the Westin Hotel, ICG, Dean Witter Reynolds, Buckwold Asper Henteleff, the St Charles Country Club, in nearly a dozen civil and small claims suits.
Records show that in 1997 and 1998, a family matter resulted in Notice of Garnishment of Umlah's wages being served on the Crocus Investment Fund and on Crocus Capital Inc. Yet after 1998 his name disappears from all such court actions.
Presumably the income and expense account he derived from Crocus became sufficient to ward off any creditors while he hopscotched on the shareholders dime to investment meccas like Cancun, Aspen and Las Vegas.
Meanwhile, the NDP government still clings to the imaginary excuse that the government appointee to the Crocus board was not supposed to tell them anything about the workings of the fund.
His only responsibility was to the shareholders, goes the government chorus.
You mean like when he studiously ignored those shareholders who have been demanding answers since at least December?
Of course Gary Doer and Greg Selinger hope nobody asks them about the government's Class G special shares. What are those, you ask?
Crocus gave the government of Manitoba $2 million worth of Class G (for Government, get it?) shares in return for letting the government appoint a director. That, of course, means the government is a shareholder, and that the government representative, Ron Waugh, had the responsibility to keep at least the Class G shareholders fully informed.
But then perhaps Waugh is a graduate of the NDP school of the official cover-up. Readers just have to see our post on O'Learygate to see Prof. Tim Sale give a lecture on Coverup 101.
"What shares? Oh, those shares. We didn't mean those shares. We meant those other shares."
We wonder how Ron Waugh will answer under oath to what he told the government. Or how he'll excuse collecting $600 a month for sitting on the board to do nothing, see nothing and hear nothing.
But then, isn't that another example of New Democonomics in action? Spending money with nothing in return?
The Crocus Fund is sponsored by the Manitoba Federation of Labour, whose president, Darlene Dziewit (pronounced JEV-et), has just been appointed to the Crocus board. In March, the Winnipeg Free Press quoted her in its story comparing the budgets of the provincial Tories and NDP.
She told the paper,"What I saw under the Filmon government was a bunch of bean counters who were really only interested in the bottom line."
Well, we know for a fact now that Crocus has never been really only interested in the bottom line. In fact, we know that the labour fund sponsored by the MFL is a practioner of New Democonomics---spend all the beans and con the public into giving you more.
When the movie Enron opened in Winnipeg, Manitoba labourites unanimously praised the depiction of capitalism gone wild. Isn't this scandal a wonderful opportunity for a Manitoba filmmaker to pick up the camera and begin filming a new movie, called Crocus, depicting socialism gone wild ?
But wait, maybe Danny Schurr is looking for material for a new play. What a casting opportunity.
Who to be Playboy Jimmy, who to be smiley Wally, who to play doer Gary.
Woody Allen as Sherman Kreiner. Nathan Lane as Jim Rondeau. Toni Collette as Jane Hawkins. Krista Erickson as Krista Erickson.
And what to call it? But then, what naturally follows "Strike?"
We'll have much more soon, including our look at how the news media played in the Crocus story. Stay tuned.