The Black Rod

The origin of the Usher of the Black Rod goes back to early fourteenth century England . Today, with no royal duties to perform, the Usher knocks on the doors of the House of Commons with the Black Rod at the start of Parliament to summon the members. The rod is a symbol for the authority of debate in the upper house. We of The Black Rod have adopted the symbol to knock some sense and the right questions into the heads of Legislators, pundits, and other opinion makers.

Name:
Location: Winnipeg, Manitoba, Canada

We are citizen journalists in Winnipeg. When not breaking exclusive stories, we analyze news coverage by the mainstream media and highlight bias, ignorance, incompetence, flawed logic, missed angles and, where warranted, good work. We serve as the only overall news monitors in the province of Manitoba. We do the same with politicians (who require even more monitoring.) EMAIL: black_rod_usher@yahoo.com

Tuesday, May 31, 2005

HOCUS CROCUS

And so, with a wave of the Auditor General's magic wand, the truth is revealed.

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)
Winnipeg, Manitoba:


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.

Oh yeah?

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?"

"You're out."
******
We'll have much more soon, including our look at how the news media played in the Crocus story. Stay tuned.

Monday, May 30, 2005

Crocus Fund and the Mystery Loan from Quebec

Today's topic: Will Crocus Bloom in Spring?
[originally published January 28, 2005]

You would think spring has sprung from all the references to Crocus this week.

Sadly, they were talking about the embattled Crocus Fund, and the only sign of rejuvenation at Crocus is the PR campaign launched to coincide with the month-end conclusion of an independent review into evaluations of the fund's investments.

First came the leaks to the Winnipeg Free Press over new board members. Then former director Wally Fox-Decent showed up on CJOB to say that while he always put investors first, but, well, James Umlah ...you know... I can't say any more.

Next, Bob Jones, the former director of marketing, popped up. He had quit the fund for another job, but now he's back and talking to the press. Saying little, but talking more.

And, wonder of wonders, the week was capped with the appearance of acting CEO Alfred Black right there in the flesh on CBC Television answering questions (NOT) for the lovely and talented Krista Erickson.

You would think that with the sudden blooming of all these Crocus spokespeople, that one of them, at least, would answer the question on the minds of all Manitobans---what happened?

What happened to turn the Crocus Fund from a good investment to frozen-until-we-announce-how-far-the-share-value-will-fall?

Amid the flood of words pouring out of these stalwart Crocus defenders, there was only the faintest hint of an answer---blame the Americans. Yeah, that's it. Blame it on the value of the American dollar. If Krista has pressed a little harder she might have got Black to demand the withdrawal of American forces from Iraq.

Readers of The Black Rod, however, know more of the answer:

James Umlah left (and the time line suggests it wasn't his decision alone); the new boys Laurie Goldberg and Jim Pelton stepped into the posts he used to hold with Crocus; within a few weeks they ran, panicked, to a third board member and to Alfred Black, who wasn't on the board yet; and the four of them hightailed it over to the Manitoba Securities Commission to tell them to immediately stop trading in overvalued Crocus shares (presumably because any further sales would, effectively, be fraud).

But, why? What did they discover that scared them so much? Again, The Black Rod has sifted through the clues (many of them right there in the 2004 Crocus Fund prospectus) and supplies more of the elusive answer:

* SLMsoft.com Inc. - Crocus invested $8.5 million.
The company filed for bankruptcy protection in 2003 and a receiver was appointed over the company's assets later the same year. SLMsoft.com remains on the Crocus list of investments.

* Blye Brothers Entertainment Inc., Prairie Production Centre Limited Partnership, and Minds Eye Pictures - Crocus invested more than $5 million. Current value?
Well, the owners of the Prairie Production Centre tried to sell it to the City of Winnipeg for a dollar. One dollar. The city said no thanks. All three companies remain on the Crocus list of investments.

* Novra Technologies Inc. - Crocus invested $1.5 million.
The value of Nora shares dropped 50 percent in 2004, ending the year at 12 cents. Novra
remains on the Crocus list of investments.

* OpTx Corporation - Crocus invested $8.5 million.
The assets of the company were sold last March to Varian Medical Systems for $18 million. At the time, Varian said the company's facilities in Winnipeg, Edmonton and Denver would be kept "substantially intact." Has the rise in the Canadian dollar changed that promise?

Meanwhile...
* Acting CEO Alfred "Speak No Evil" Black says he won't identify which of the companies that Crocus invested in are ailing.
* Premier Gary "See No Evil" Doer says he doesn't want to know anything about Crocus investments. He appoints someone to the board only to make sure Crocus invests in Manitoba companies like they say they will. Whether those investments are good or not is irrelevent to our Premier.
* Industry Minister Jim "Hear No Evil" Rondeau says the first hint he had of trouble at Crocus was when trading was halted in December, and he doesn't want to know more, either. The Industry Minister feels the less he knows about investment in Manitoba, the better a job he's doing.

It's clear from our government officials that while they are willing to subsidize Crocus through tax credits, they don't care whether the investors get a good return, or any return, on their money. If they are going to lose money, all the government cares about is that they lose it in
Manitoba. We guess that's the NDP Casino Model of Investment.

We are now told that we must now wait until at least March to find out what Crocus shares are really worth. However The Black Rod knows that the whole question of valuation is a shell game. It's a diversion from the real, unspoken story behind the failures of the Crocus Fund and whether it can recover.

To understand the Crocus story you have to understand its history.

The Crocus Fund was born of desperation. In the early 90's, as Canada struggled under the Mulroney Recession, nobody wanted to invest in Manitoba. Harsh, but true.

The Manitoba Federation of Labour stepped in with a plan. If the Filmon Tories gave them tax breaks, the MFL would start a venture capital fund to raise money from unionists and invest in Manitoba themselves. Given the choice between half a loaf and no loaf, the Tories went along.

Unspoken (in the advertising, at least) was the underlying philosophy behind the Crocus Fund. It was nothing less than a bold alternative to Capitalism. Crocus was designed to be the local beginning of an experiment in community-based regeneration pioneered by the Mondragon network of employee-owned enterprises in Spain. Here's how Sherman Kreiner, the former CEO, described it in 1995:

"That system, driven by a financial institution like the Crocus Fund, has created more than 170 for-profit businesses and community based ventures, employing more than 21,000 individuals. Ninety of the businesses are capital intensive, high-tech industrial companies, with the largest employing 2000 workers. The system also has created the only Spanish research center invited into the European R & D consortium, a chain of supermarkets, service and agricultural co-ops, a comprehensive occupational retraining system, and schools and colleges offering cooperative education."

Big dreams, indeed. But Crocus was built on them.

Little discussed in public was the big fat string Crocus attached to all its investments, a push for employee ownership, one of the foundation stones of the Mondragon model. People didn't realize that when Crocus boasted, as it always did, that it had created or sustained 13,000 jobs in Manitoba, that this figure was more important to it, than the percentage return on investment.

That's the secret behind the trouble at Crocus.

Just as the Premier and the Industry Minister don't care about the investments made by Crocus, the fund itself is less interested in its return on capital than on promoting employee ownership and building an alternative to capitalism as we know it.

Crocus officials say that next year 8 percent of Crocus investors will be able to redeem their shares. But wait a minute, is this Crocus counting at work again? The government changed the rules so that investors have to hold their shares for 8 years instead of seven before being able to cash out.

So does that mean that the 8 percent includes all the people who couldn't cash out in 2005 plus all those who become eligible in 2006? Or is that 8 percent only those who become eligible to redeem their shares in 2006? Which would mean that there could be double the number of potential redemptions in 2006.

Last year the fund paid out $ll million in redemptions. The year before they paid out $20 million. Crocus says it has enough cash on hand to cover the cost of redemptions whatever they will be.

They may need it.

We think its going to be a hard sell to convince Manitobans to invest money in a company where 7 of 15 directors quit without explanation in one year and the share value has fallen between 28 and 45 percent, depending whether the final valuation is $2 or $4 a share less.

(Tip to Free Press reporter Geoff Kirbyson. You've got word harder at protecting your sources. In the middle of Thursday's story on Crocus, and following many quotes from interim CEO Alfred Black, you mention "sources" which say Crocus is "predicting" a writedown between $2 and $4. Your sources refer to this as a "material writedown", the unusual and exact phrase used on radio the next day but none other than interim CEO Alfred Black.)

That could mean that next year is going to be all redemptions, no investment. And that's sure to spark even more fear among the remaining, locked in, investees.

The good news is that Alfred Black can confidently tell the press, "We have lots of cash."

Which, however, raises another interesting question about Crocus investment decisions and practices.

In November, 2002, the fifteenth to be exact, Crocus received an "investment" of $10 million from the Quebec Solidarite Fund -aka the Fond, another provincial labour-sponsored investment fund.

Okay, you might be wondering why The Black Rod put those quotation marks in. Are we being too suspicious about an innocent transaction?

Lets look at the facts:
This is a great deal for the Quebec fund, but what did Crocus get out of it?
Crocus agreed to guarantee ten percent interest to the Quebec fund. Not bad, eh? Have you seen how low mortgage rates are these days? In return for the money, Crocus created a new set of shares specifically for Quebec, the only category of shares that pay dividends.

While Quebec could redeem its shares after 18 months, Crocus wanted them to keep it in for two years. So they sweetened the pot. If Quebec kept its money in Crocus for two full years, Crocus would pay them an additional 10 percent. Yup. Twenty percent - 20% - on an "investment" of $10 million.

To us folk unfamiliar with Crocus economics, this sure looks like a loan.

But why would Crocus need $10 million in November, 2002, when they apparently have lots of cash, and, presumably, had lots two years ago as well.

Oh sure, there is the intriguing rumour going around town that Crocus has more money in the MTS Centre than anyone knows. And the arena project did hit a snag in June, 2002, when David Graves pulled out an expected $20 million; and by January, 2003, the True North group had managed to raise $18 million of that shortfall. But what's that prove?

All we know for sure is that Crocus paid off Quebec $5 million on November 15, 2004, two years to the day of the initial "investment".

And that November 15 was the day before the grand opening of the MTS Centre.
A remarkable coincidence.

Sunday, May 22, 2005

The Black Rod previews the Crocus Audit

The entire board of directors of The Crocus Fund has been replaced as a result of the provincial Auditor General's report.

We can't overstate this fact.

The entire board.

Yet, what should have been front page news, under a huge headline, has been reported in a whisper, proving once again how easily manipulated the mainstream news media can be.

The transformation of the Crocus board occurred in a piecemeal fashion to hide what was really happening.

The latest announcement has been a delay in the release of the Provincial Auditor's report until at least May 27, but The Black Rod sees no reason not to reveal what's in the report now.

So, based on half a dozen announcements made after those on the inside got to read a draft of the Crocus report, we will tell you today exactly what the Auditor's findings are.

The Black Rod's preview of the Crocus report is based on these developments:

1. Crocus plans to chop the value of its shares by almost a third as soon as trading re-opens.

2. Crocus is a labour-sponsored fund, yet every board member of the sponsor, the Manitoba Federal of Labour, has resigned.

3. Crocus Chief Financial Officer Jane Hawkins has gone public with her fears that the Auditor is making her the scapegoat.

4. Funding to the Crocus labour education centre has been cut.

5. The entire sales staff has been laid off.

6. Ron Waugh, the government representative on the board, has hired a lawyer.

Together, these announcements tell a sad story.

*******************

To begin with, the Auditor General's report has found that the Crocus Fund was disastrously mismanaged and the blame lies firmly with the board of directors which failed to apply any appropriate measure of oversight despite many loud and repeated warning signals.

The pending devaluation of Crocus shares proves that the fund has been overvalued for much longer than anyone has heretofore admitted---certainly well before November, when Crocus held a special board meeting to discuss devaluation; certainly well before October when an amended prospectus was approved; certainly before September, when the valuation sub-committee recommended a small drop in share value and just before Crocus Chief Investment Officer James Umlah left the building.

The big question left sitting there, like the 600 pound gorilla in the corner, is how far back will the auditor general track this reluctance on the part of the Crocus board of directors to admit the fund was overvalued? As far as 2004's RSP season? Or further back than that?

And how long before someone raises the F-word - and demands that the Fraud-squad start questioning the principles?

Perhaps first in the interview room will be the former directors appointed by the MFL? Their departure, en masse, speaks volumes.

The Crocus report, according to The Black Rod's preview, says the MFL directors had too much influence on the valuations and the direction of the Crocus Fund.
The MFL hired former Crocus CEO Sherman Kreiner and CIO James Umlah and supported their Mondragon "alternative to capitalism" ideology which sacrificed returns to shareholders to protect jobs at companies that Crocus invested in, even if that meant propping up a losing company and refusing to admit a drop in fund value.

The MFL has filled their appointed seats with new directors, including a former provincial auditor and an accountant (and well-known troubleshooter).

These appointments indicate a new direction for Crocus--- making shareholder value a priority. This has certainly not been the case for years, and if anyone knows that, it has to be Crocus CFO Jane Hawkins.

She miraculously managed to fly under the radar throughout most of the time the Crocus Scandal has unfolded.

But Hawkins has just learned a hard lesson, one that anybody who has watched a single episode of The Apprentice could have told her---the project leader carries the responsibility for the team's loss and is usually the first one to be fired.

Oh Jane - what part of Chief Financial Officer did you not understand?
Was it Chief?
Or Financial?

The disastrous performance of the Crocus Fund this past year, and indeed over the course of its existence, has to reflect the performance of the Chief Financial Officer.

The Black Rod wonders whether the Crocus report will delve into why Hawkins approved the disguised loan of $10 million from a Quebec labour fund, le Fond du Solidarite?

Crocus could have raised $10 million in half an hour in Manitoba, by offering Manitobans the same rate it paid the Fond, ten percent for one year and twenty percent for two years. Why were they so desparate to raise the money out of province, and hide its origin under the guise of an "investment".

Did that money go into the new Arena?

And why did Hawkins approve spending more than $100,000 a year for a labour education centre to train union members how to manage pension funds? This was an expense with no value to Crocus shareholders.

Did Hawkins ever say no to the Crocus fund's labour masters?

The Black Rod bets the Auditor's answer is no.

Hawkins will probably blame the valuations committee for pumping up Crocus shares. Yet she sat on that committee.

And obviously saw nothing wrong when, in November, the month the board sat down to discuss a major devaluation of fund value, Crocus was advertising a "no money down" offer to potential investors.

* In a full page advertisement distributed provincewide, Manitobans were invited to transfer their existing RSP's into Crocus and take instant advantage of the special tax deduction for labour funds. "SWITCH AND SAVE" indeed.

* This at a time the board knew that Crocus shares were about to be devalued.

* Anyone foolish enough to take the "no money down" deal was guaranteed only to lose their money.

Crocus made a big deal of promoting employee ownership in the companies it invested in. Propping up these new "owners" became paramount, even if it meant refusing to revalue Crocus shares so as not to discourage new investors.

If it wasn't for the large cash reserves the fund is sitting on to repay shareholders wanting to redeem their now devalued shares, the Auditor would be forced to call this the largest Ponzi scheme in the province.

**************************

The announcement that Crocus has cut its entire sales staff passed without comment in the press.

Crocus had two parallel sales tracks. The first was the existing network of mutual fund salesmen who emphasized the tax incentives of investing in a labour fund. The second was specially trained union workers who only sold Crocus shares and emphasized keeping capital in Manitoba.

The cut in sales staff refers to the union sales staff, who, believe it or not, were members of the MGEU-the Manitoba Government Employees Union.

Did anyone know that Crocus was staffed by government employees?

But cutting ties with its union sales staff is another indication that the auditor has found the MFL link too cozy for comfort. From now on Crocus shares will be sold by mutual fund sales people who will have to depend on returns to investors to interest new share holders.

And finally there's the interesting bit of news involving the government representative on the Crocus Board, Ron Waugh. It seems he has hired a lawyer to represent himself before the Manitoba Securities Commission.

Or rather, we the taxpayers, have hired a lawyer for him.

In another fascinating example of New Democonomics, the government is paying lawyers to investigate breaches of the Manitoba Securities legislation, paying lawyers to prosecute violators and, at the same time, paying lawyers to fight the prosecution.

We would expect the government to tell their representative on the board to meet with the Securities Commission, tell them the truth, the whole truth and nothing but the truth as he knows it, and let the Commission decide whether any laws were broken or not.

Instead, the government is acting like it has something to hide.

Which, of course, it has.

All along Gary Doer has been doing his best to wipe away the footprints leading from the Crocus Fund to his office door. And yet you don't have to be a member of CSI to see the trail:

· the government subsidizes investment in the Crocus fund through tax-benefits
· the government appoints its own member of the board of directors
· government employees (members of the MGEU) sell Crocus shares
· and best, of all, Crocus gets to call on an official NDP government cover-up when it needs one.

Crocus shareholders have been clamouring for months for an inquiry into the mismanagement at the Crocus Fund. The government stalled as long as it could, refusing to use its own representative to answer questions until now he can't under his government lawyer's instructions, and delaying the Auditor's Report until it can't be properly discussed in the Legislature.

There is no need to delay the release of the Crocus report. We know what the government's response is:

1. It's Gary Filmon's fault
2. Crocus has addressed its faults
3. The matter is before the Securities Commission so we can't answer questions
4. It's Gary Filmon's fault

The Black Rod knows Jon Singleton is going to excoriate the board and management of the Crocus Fund for their performance during their annus horribilis, the year 2004.

What the government is hoping is that the newsrooms in Winnipeg will overlook that the Auditor's terms of reference for investigating Crocus only applied to the year 2004, so that the question of how many years the mismanagement has been going on and how long the government has known about it, won't be answered in Singleton's Crocus report.

The truth will only come from a public inquiry.

Only the pressure of more than 30,000 Crocus shareholders can squeeze one out of the NDP.

Friday, May 20, 2005

CBC Confirms our Dumas exclusive / Support your local Bandidos

The Black Rod has learned that CBC television news has taped an interview confirming our exclusive story that Matthew Dumas was seen fighting with police in the back lane to Dufferin Avenue moments before he was shot to death.

But the CBC has chosen to suppress the information.

Our source, a CBC insider who is extremely familiar with their coverage of the Dumas shooting, has seen the tape and provided us with quotes.

This shocking information underscores how the mainstream media, like the CBC, act as self-appointed gatekeepers of information, releasing only that which supports their agenda. In this case the CBC agenda is to portray the police as villains who failed to act properly and handcuff Matthew Dumas when they had the chance and forestall the need to shoot him.

However, the evidence uncovered by The Black Rod, and now confirmed by the CBC, shows that Dumas was initially taken into custody by a lone policeman who found him hiding in a back yard. The teen was led back to the lane where the police officer came from and it was there, seconds later, that he was seen fighting with police officers. He broke free and led them on a chase and it was only then that police drew their guns, leading to the final, fatal confrontation.

A further slur by the CBC's coverage of the story is on the residents of the area who are portrayed as supporting the anti-police rhetoric of so-called native "leaders" who latched onto the shooting of Dumas to advance their own purposes. The Black Rod found this to be a slanted and inaccurate representation of the people who live in the community.

The news that the CBC prefers to knowingly present an inaccurate account of what happened between Matthew Dumas and the police proves how important bloggers like The Black Rod have become to the news gathering process. It may also explain why CBC's ratings have plummetted to 17,000 viewers, a shade ahead of A-Channel.

*********************

Still on the topic of crime, The Black Rod has learned that the Bandidos contingent in Winnipeg has grown to equal or surpass the number of Hell's Angels here.

There are currently up to 20 Bandidos members in the city, including some from Quebec, where the gang The Rock Machine flipped and adopted Bandido's colours on a probationary basis five years ago. Others are long-time Winnipeg bikers who have had their own battles with local Hell's Angels members.

But the Bandidos intend to uphold a worldwide truce between the gangs. They are keeping a low profile, reluctant even to show their Bandidos patches to avoid attracting the authorities.

But it appears they are just biding their time. They hold the local Hell's Angels in contempt, seeing them as weak and disorganized, and they have begun to set up their own "puppet club" just as the Hell's Angels have the Zig Zag Crew. This does not bode well.

Only a year ago Police Sgt. Cam Baldwin revealed that the value of cocaine trafficking in Winnipeg has reached an estimated $5 million a month. That's a month. And that's a tasty target for a new gang in town.

The expansion of the Bandidos in Winnipeg is another sign of the abject failure of the NDP to stop gang activity in the province.

Stop it? Hell, they can't even control it. Justice Minister Gord Mackintosh, aka Minister Huff-and-Puff, believes the best defence is an offence - of news releases and press conferences, where he gets to tell the public what he's going to do. Unfortunately, talk doesn't scare the gangs.

Last spring, MLA Greg Dewar was positively giddy as he spoke in the Legislature about the wonderful things the NDP was doing to fight gangs. (We guess Minister Huff-and-Puff was at a seminar on news release writing.) Dewar was speaking about something called the Criminal Organizations Deterrence Act, which was---you guessed it---going to deter criminal organizations from setting up in Manitoba.

Dewar mocked the Filmon Tories for spending $3.5 million on turning a seed plant into a courthouse to prosecute gang members. Somehow he forgot to mention that all those members of the Manitoba Warriors pleaded guilty to avoid going to trial in that courthouse, even as the NDP rallied around them. He also forgot to mention that the Manitoba Warriors regrouped under the NDP, to be joined by the Hell's Angels, and now the Bandidos.

No, Dewar wanted to talk about the NDP's new approach to fighting gangs.

We believe, Mr. Speaker, that we should have a holistic approach to organized crime, not like the Tories, who simply would build this big courthouse in Southdale, or south Winnipeg, which now sits vacant, a waste of valuable tax dollars, he said.

We now see the fruits of that "holistic approach" and we shudder.

It's a sad commentary on the state of things when we read that the province has to put sheriff's officers into virtual hiding, with special security around them because of threats from two prisoners linked to the Bandidos.

It used to be that criminals hid from authorities. Not any longer, not under Minister Huff-and-Puff's administration.

And imagine how high this puts the stock of the Bandidos. Their members are charged with cutting off the finger of someone who owed them money, and with scaring the pants off sheriff's officers.

The Hell's Angels? Wimps. One member is charged with punching a bus driver---a bus driver! Another Hell's Angels member was shot in the leg and had to be rescued by a hanger-on. Then, a few months later, the same gang member got beat up by a guy fresh out of high school and had to get his pals to gang up three-on-one on the tough guy. When the police broke up the attempted abduction, the tough guy refused to cooperate with them, showing his own contempt for the red-and-white.

It would be funny, except that the Bandidos can't help but see how pathetic the Hell's Angels are, how impotent Minister Huff-and-Puff is, and how great the opportunities to take over the drug trade are. It may be a long, hot summer yet.
**************************

Monday, May 09, 2005

O'LEARYGATE: Land development, NDP style


O'Learygate, the latest scandal sweeping over Manitoba's NDP, is remarkable for the disappointing facets of the government and the press that are being revealed. To see how this played out in Question Period has been very disturbing and only The Black Rod seems to be paying attention.

On its face, the scandal is about how Seven Oaks School Divison chairman Brian O'Leary managed to engage in land speculation under the noses of two NDP Ministers of Education, in blatant disregard of the Public Schools Act which expressly forbids land development with taxpayers money. Premier Gary Doer has ordered an investigation into how it happened.

But, as we've seen with previous NDP scandals (read Hydra House), an NDP "investigation" often means something entirely different to the government than it does to the citizens of Manitoba.

It's interesting to see how the mainstream media have successfully filtered out any mention of O'Leary's close connections to the NDP from their news stories. We wonder why, as this seems an important element in understanding what may have happened.

Nor has the media mentioned the previous scandal involving Brian O'Leary, which touched the NDP just prior to the election of 1999 that brought them to power.

Since the media cannot be counted on to tell the whole story, The Black Rod will do it for them.
*****************

In the summer of 1998 Brian O'Leary was the principal of Maples Collegiate, and a staunch opponent to the mandatory student testing policy of the Filmon government. The day before a mathematics test at his school, he breached department directions and broke open a packet of tests, taking one away. He gave it to a teacher at the school without telling the teacher who would be in charge of administering the test the next day. The test administrator reported the tampering to the Department of Education.

O'Leary was unhappy at being outed. He retaliated by having the teacher transferred to another school to teach a course he was not trained to teach, and he got a letter of reprimand inserted in the teacher's file -accusing him of insubordination and unprofessional conduct.

He managed to turn the situation from him being the guilty one, to him being the victim. Prime NDP.

There was an "investigation" of course. O'Leary admitted he opened the test packet, but so what, no harm done, eh. Righto, said the education department official conducting the investigation. That official happened to be John Wiens, the then-Superintendant of Seven Oaks.

The other political parties, unfamiliar with "NDP investigations", pointed out that there may be a perception of bias since Brian O'Leary was the campaign chairman of the NDP and John Wiens was an NDP policy analyst.

And the President of the Manitoba Teacher's Society, who should have been fighting for the teacher but wasn't, was running for the NDP in the election.

Pshaw, said the NDP. Leader Gary Doer said at the time he would not even reprimand his campaign manager because the wrongdoing was so minor.

But then months later an independent investigation, conducted by a labour arbitration board, found that "O'Leary exhibited a disrespect for the guidelines that bordered on contemptuous." It noted evidence that indicated O'Leary's actions "lacked objectivity and exhibited bias toward the Grievor." The board ordered the words "insubordination" and "unprofessional conduct" stricken from the letter in the teacher's file. And it let him go back to Maples Collegiate.

O'Leary dropped off the public radar after that. He went on to become the Superintendent of Seven Oaks and the NDP went on to become the government. And then Seven Oaks bought some land, ostensibly to build a replacement for West Kildonan Collegiate. However, O'Leary had other plans for that land, an entire housing subdivision.

Just as before, when caught, O'Leary admitted his misdeed, with the caveat "no harm done". After all, the school division made money on its land development. He passed the blame to the Public Schools Finance Board, which approved the land development at every step. The chairman of the Public Schools Finance Board is Ben Zaidman, who is coincidentally, the former chairman of the Seven Oaks School Division.

The government says the Department of Education determined in November, 2004, that land development was not permitted under the Public Schools Act. Coincidentally again, that very month the government announced that a replacement for West Kildonan Collegiate was needed and would be built after all. The announcement came as a surprise, since the Seven Oaks school board had not asked for a new school and no such school was on its Capital Priorities List.

The Opposition, however, thought it knew last December why the school was being built.
Said PC MLA Heather Stefanson:
"The decision to build a new West Kildonan Collegiate was clearly a political decision. Perhaps this is because former NDP campaign manager and current Seven Oaks School Division Superintendent Brian O'Leary and NDP contributor Ben Zaidman, the current chair of the Public Schools Finance Board, made that decision."

Oh.

The first day the Tories brought O'Learygate up in Question Period, Education Minister Peter Bjornson blathered repeatedly comparing the Filmon government record (he's bad) to his own (I'm good). He wouldn't even address the actual question, when it was raised that the Act was breached and asking what he knew about it. I had nothing to do with it, Filmon bad, we better.

When the Opposition produced a letter sent to Bjornson complaining about the land sales, he claimed he never saw the letter.

OOPS.

When the Opposition produced his written response to the letter writer, which was an embarassing attempt to blow him off, suddenly O'Leary had to start answering his own math questions.
- Like why did the school division buy 30 acres when the school only required 10 at most.
- Like why at least 5 of the lots were sold for a buck, instead of the going rate of $150-200,000.
- Like why the school division was allowed by the vaunted, trusted, Zaidman-led Finance Board, to engage in land speculation and development that was completely, totally and at all times, 100% against the rules.

Sheepishly the minister now admits he was warned by a whistleblower after all - eight months earlier - that the school division was engaged in land speculation. That eight-month delay was just long enought to finish construction, but, well, you know, these things take time to "investigate." And it will take, oh, another 30 days till I can say anything to the House.

At least the whistleblower wasn't slandered, which seems to be a part of any "NDP investigation".

One of Brian O'Leary's biggest defenders in Scandal #1 was NDP MLA Tim Sale, who sang hosannahs about O'Leary's admission that he broke the seal and took out a test. But then we know that Sale has little regard for whistleblowers.

When he was Family Services Minister, a whistleblower tried to warn him about the free-spending by the managers of Hydra House. Sale ordered an "NDP investigation" which found Hydra House - surprise - clean as a hound's tooth. Sale then stood up in the Legislature, praised Hydra House management to the heavens, and demeaned the whistleblower as a "disgruntled former employee".

But then, two years later, an independent investigation by the provincial auditor confirmed every one of the whistleblower's allegations about financial irregularities. Every One.

To which Tim Sale said: Oh those allegations; we didn't look at those allegations, we looked at the other allegations, didn't we tell you how we limited our "investigation?" And hey - it was Gary Filmon's fault !

Maybe Gary Doer's investigation of O'Learygate will be broader and more thorough than how Tim Sale conducts his "investigations." Or how seriously Bjornson took the complaint about taxpayers money being illegally gambled with in the first place.

Unfortunately we can't expect him to look too closely into that post-socialism branch of economics called New Democronomics.
That's where an NDP government:

  • pays twice for the same houses (Hydra House)
  • pays $3 million for a movie studio once offered for $1 (Prairie Production Centre)
  • collects $1 for land worth hundreds of thousands of dollars (Swinford Park)

This spring the practitioners of this exotic branch of economics were open extra hours, just like HR Block. The total cost for Hydra House - well the management conveniently didn't have receipts for many expenditures, so we will never know.

The PPC deal---with no business plan showing it can even break even, the sky's the limit.

And as for O'Learygate, the school division admits they made $700,000. But the money wan't used to keep the tax rate down, so where did it go? Will the Division be required to forfeit the profits of their illegal venture just like any other illegal business deal?