Crocus Disguised $10M Loan, MSM Ignored Story
It was February, 2002, the dead of winter, and officials of the Crocus Investment Fund got wind of an unhappy investor who was talking to Opposition members of the Legislature.They did what the Crocus Manual on Disgruntled Investors called for---they threatened him with lawyers to shut him up. Then they paid a visit to the Opposition members with the same message.
It's now late spring, 2005, and the recipients of these "friendly visits" are talking about them for the first time. The threat of Crocus officials going all Sopranos on them is over. These days the only attorneys the former Crocus directors and managers are talking about, are criminal defence lawyers.
After the scorching report on Crocus management practices by Auditor General Jon Singleton, the province has announced it is bringing in a special prosecutor from Ontario to examine the details and determine whether any ex-Crocus alumni will be making the perp walk soon.
The Black Rod is big on justice, so we are providing the special prosecutor with Exhibit A.
* We have a special publication (distributed as a newspaper insert) from the opening of the MTS Centre, dated November 13, 2004. Mark that date.
* The 30 page booklet carries a full page ad from the Crocus Fund offering "Switch and Save". No money down. Switch from a safe, guaranteed RRSP into Crocus and take advantage of the tax break.
* Except that by November, 2004, the Crocus board knew full well the fund was in deep doo doo, and more importantly, knew that anyone who transferred their money from another institution was guaranteed to lose a huge chunk of their "investment" almost immediately. Yet they used the opening of the MTS Center to try to lure new investors. If that isn't criminal, then we have to stop watching Law and Order.
One thing we have been watching this week is how the news of the Crocus audit is being covered. We take note especially of Gordon Sinclair's mea culpa in Monday's Free Press. He writes how he and the rest of the reporting staff should have been more aggressive in pursuing the Crocus story.
But Gord, it's not your fault. Remember where you work. You work at a newspaper where:
* hard news stories are hidden in the Obituary pages
* the revelations of the worst political scandal in generations are not considered newsworthy and certainly not worth bumping Polar Bear statues off the front page
* Bob Silver, the paper's owner, read the revelation in The Black Rod-- four months ago -- that the $10 million that went to the Crocus Fund from the Fond Solidarite du Quebec was a disguised loan for some important but unidentified purpose and yet he didn't think it important enough to assign anyone to the story.
So don't blame yourself, Gord. You're simply a product of your environment.
Unfortunately we can't say the same about CJOB's Richard Cloutier, their "investigative reporter".
These days he's all "hard hitting journalist" as he interviews the principals in the Crocus scandal. But he, too, had The Black Rod's story on the Fond loan on his computer four months ago, and he did nothing. He did what most Winnipeg "investigative journalists" do --- he waited for the news conference. The first time he uttered the word "Fond" was after the Auditor did.
CBC Television has been devoting a lot of their scarce news time to the Crocus scandal, but its with a heavy sense of what-might-have-been.
Shortly after The Black Rod broke the Fond story, the Opposition raised it in the Legislature; CBC picked up on it and filed a story. Then, to their eternal regret, both the Opposition and TV station dropped the ball and let the issue die. CBC, of course, did not pass it along to their vaunted I-Team.
The biggest financial scandal in the province is not important enough for the I-Team's time. They have to devote their resources to other cutting-edge stories, like, well, what was the last I-Team story? Oh yeah. "Moss grows on the north side of trees; south side demands compensation". Wasn't that it?
The news media's sleepwalking has been matched only by the NDP.
Question Period has become a surrealist's dream. It's hard to say what is more bizarre---watching Finance Minister Greg Selinger's hair turn whiter by the day or listening to Premier Gary Doer, believe it or not, try to take credit for uncovering the Crocus scandal.
We know that for the last month or so Doer has been claiming credit for knowing nothing about what Crocus was doing and bragging that his government appointed a director to the fund with strict orders never, ever, ever, to tell the government what he knew, but to represent shareholders by never, ever, ever, ever telling them anything either - regardless how much they ask. (Hey, we said it was surreal.)
Now Doer wants credit for changing the law to let the Auditor General investigate the Crocus Fund, even though, in the years since he changed the law, the government never, ever, ever saw a reason why the Auditor General should investigate Crocus because they refused to see and hear every single warning about Crocus that fell into their laps. (Mr. Dali. Paging Mr. Dali)
Monday, Doer even went so far as to demand that the Opposition apologize to the government's appointed director Ron Waugh. For what? Apparently for asking what the government appointee to the board told the government about the board's decisions. The NDP feels the Opposition should know that the government appointee never, ever, ever tells anyone about anything and so earns every cent of his monthly honorarium.
And, needless to say, Doer never offered to apologize to the only person who deserves an apology, Tory MLA John Loewen, who tried to raise questions about the valuations of Crocus investments three years ago but was assured by Gary Doer, Greg Selinger and Industry Minister Drew Caldwell that Crocus was in excellent shape, thank you.
The government position post-Singleton is--- aww, you knew it already --- blame Gary Filmon. Doer never fails to point out that the Act setting up the Crocus Fund, passed by the Filmon government, puts all investment decisions in the hands of the Crocus Board with no interference permitted by government.
But Gary, this ain't the carny where the motto is "There's a sucker born ever minute." What part of Crocus's business plan of "let's trick more suckers into giving us money" do you and your appointee on the board consider normal investment decision making?
The ball's now in the Securities Commission court. Not that they've shown much initiative in the whole, sad story. They rejected every one of Bellan's complaints.
The Auditor found that they should have picked up on important clues from the minutes of Crocus meetings that the Fund was in trouble ie- valuations being defered from one financial quarter to the next and "additional scrutiny of the valuation processes and their application to a sample of companies was in order."
But no, the Manitoba Securities Commission didn't think for an instant, that 33,000 shareholders were at risk and needed to be protected. That millions of dollars were at risk as Bellan had warned.
No, they had bigger fish to fry.
Such as Shirleena Manchur de Escobar, a 58 year old repatriated Manitoban who ran a small classified ad in October 2003, looking for backers to support her quest to develop screenplays. With years of experience in the Hollywood scene and in Mexico as an actress and talent manager, she believed there would be demand for her May-December romance scripts and hey - unlike Crocus, she had actually done some due diligence, to prove agents were willing to help shop her scripts around Tinseltown and that she had a chance to bring Hollywood film companies to Manitoba to film her stories.
Not one person put money up in response to her ad. No one lost a dime.
But the MSC pursued Shirleena with
* clandestine phone recordings. The Black Rod has heard the tapes and the MSC investigator, who was trying to pretend to be an interested backer, was badly in need of acting lessons himself.
* a sting operation. The investigator convinced Shirleena to drive from her mother's farm through a blinding snowstorm to meet him in Dauphin, so he could surprise her by revealing his true identity and serve her with charges of violating the regulations.
* charges for not filing a prospectus. Even though they refused to put the wiretaps into evidence, call the one person who had responded to her ad as a witness, or produce a single person who had been fleeced by the former starlet, they took her to trial.
That sure was a lot of effort and time in court. Sure was important to teach her a lesson and protect the public.
Sure was worth $350, which is all the judge could bring himself to fine her.
With priorities like that, it is no wonder the Securities Commission couldn't be bothered to do their job and look into Bellan's warnings. That might have involved doing their job.
Which is why Exhibit B, that the Fond co-operated with Crocus in misleading the shareholders about their loan (at loanshark interest rates), should now also be looked into by the Securities Commission.
And if they are too busy maybe they can pass it on to the Special Prosecutor.