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.

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:

Sunday, March 12, 2006

Now is No Time for Fiscal Restraint

We don't need no stinking public inquiry into the Crocus Fund, said Premier Gary Doer last week.

He had, he told the public, questioned himself and found "I have nothing to hide."

Of course, the last person who went on the record with that same statement was Wally Fox-Decent, and we all know how that turned out in the audit of Workers Comp.

If Doer had shut up right there, it would have been bad enough. But he had to give more reasons for stonewalling. And with each reason, he made a stronger argument for holding an inquiry a-s-a-p.

It would cost too much, said the Premier.


Do you need any more proof to dispel lingering doubts?

Here's an NDP government that's overspent every budget by hundreds of millions of dollars -- suddenly worried about spending. They're draining the Rainy Day Fund during the sunniest years in history and they've decided to draw a line in the sand.

No public inquiry on Crocus.

We can't afford it.

Finally, some fiscal restraint.

Inquiries are expensive; we spent $4.5 millon on the Sophonow inquiry, Doer said.

The Black Rod has shown that the Sophonow inquiry was a charade from start to finish. And like shopaholics, the NDP can't resist writing a cheque---unless its to uncover the secrets behind the Crocus scandal.

Doer may say he has nothing to hide, but the NDP's prime supporters, the Manitoba Federation of Labour, the sponsors of the Crocus Fund, are acting like people with everything to hide.

Oh, and they're against a public inquiry, too.

They denied any major problems with the fund until the auditor general published chapter and verse. They fought putting the fund into receivership. When all the fund directors quit, they cobbled together an interim board to keep the books out of the hands of the receiver (but failed to convince a judge to accept them).

After the auditor exposed the mismanagement of the Crocus Fund, the MFL rejected every call for a shareholders meeting. Suddenly they're all for a shareholders meeting to get the receiver to sell the fund to GrowthWorks Capital, an out-of-province venture capital fund. The whole purpose of the Crocus Fund was to keep control of Manitoba venture capital in Manitoba.

Why do we get the sense that the MFL fears what investigators will find when they delve into the way the Crocus Fund operated? And why do we have the feeling that the government's fingerprints are all over the scandal.

Gary Doer says the government has already fixed the problems identified by the auditor. And there's an RCMP investigation underway. And The Manitoba Securities Commission has launched its own process. A public inquiry would just be overkill.

Of course Doer doesn't say he stalled any investigation of Crocus for two years after the first allegations of problems with valuations of investments were raised. The Securities Commission plans hearings into Crocus, but they've already been delayed a year and no one knows if they will begin as scheduled May 1st. Watch for Crocus to admit it made mistakes, pay the fines -- and avoid any public accounting.

The RCMP investigation has been ongoing for almost a year. And Doer would like someone, anyone, to be charged. This would give the government benches a perfect opportunity to deflect all questions. 'Charges have been laid. It would be inappropriate to prejudice a fair trial. Ask us in a couple of years when the trials have been held and the appeals are all over.' Remember, the tainted blood trials just got underway, three years after charges were laid and nine years after the Krever Report.

And don't forget the class action lawsuit, said Doer.

Right. The class action that was filed seven months ago and the only thing that's happened is that the original lawyers were found in conflict of interest and have had to be replaced. Moving right along...

Bernie Bellan, the whistleblower who sank Crocus, doesn't want a public inquiry, either. He, like many frustrated Crocus investors, wants to see an end to the ordeal and he's receptive to the GrowthWorks offer.

But the Crocus scandal has grown way beyond the class action lawsuit and the 34,000 shareholders who lost money.

There's now a question of the public interest.

Manitoba taxpayers subsidized Crocus investors through tax breaks. In the Nineties, it seemed like a good idea. Venture capitalists would sooner invest in North Korea than Manitoba in those days. Why not let the unions raise money and re-invest it in Manitoba. What was there to lose? And in the Nineties, you couldn't lose. The losing started with the tech bubble crash in 2000 ( nonetheless the love affair with the local media flourished for years after).

But Manitobans deserve to know whether the market crash turned the Crocus Fund into a government-supported Ponzi scheme in the years that followed.

Did Crocus need new investors to pay off the old investors, and did they reveal the truth about the poor investments to those new investors?

Don't forget that these were the years the Crocus board was giving money to every Blye-by-night operator in sight. The receiver is getting the bad investments off the books, even if he has to take ten cents on the dollar like he did with the million dollar-plus stake in the Blye Brothers film production scheme.

Were investments like this kept on the books at full value for years to deceive new investors?

And throughout those years, what did the NDP know? And what did they do about it?

We know for a fact they mocked the Tories for raising concerns about Crocus valuations in 2002. We know they had a government representative on the board supposedly sitting to protect the government's shares. And we know the NDP has silenced those successive government appointed directors.

We wonder how much Tim "Don't mention Hydra House" Sale knew. Sale was the NDP's point man on Crocus in the 90's, back when the living was easy.

If you listen to Gary Doer today, you'll hear that Crocus was a Gary Filmon initiative, and its the Tories who failed to act promptly after large investments like Westsun failed.

It's funny how Tim Sale sang a different tune in 1998.

During debate on Bill 40--The Manitoba Employee Ownership Fund Corporation Amendment Act, Sale sang hosanahs to Crocus

Well, in the case of Manitoba, that was one of the participating moments that caused the government of Howard Pawley to begin discussions with the labour movement towards the development of a fund that would allow for the investment of public funds, the workers' funds, pension funds in a Venture Capital Corporation, managed by the labour movement, that would enable companies like that company I referred to, the Varta battery company, to be taken over sometimes with the workers' involvement, sometimes without, but the whole purpose being to maintain the investment, to maintain the jobs, to strengthen the economic infrastructure of a city.


Now, it is quite a tribute to Manitobans' commitment to their own economy and a tribute to Manitobans' willingness to invest in a fund that was to be managed very professionally and very competently by the labour movement...


The Crocus Fund has a very careful investment screen. This is the term they use to describe the process by which they screen investments that might be made by the fund. They have some very important criteria which I think all members, and particularly the government, might consider when it is looking at economic development.

For example, they look at the question of whether the proposed investment is environmentally sound and environmentally sustainable. They look at the issue of whether the proposed investment will turn over some of its profits to its workers, and they look at the question of whether down the road the company is prepared to turn over ownership through an employee buy out or employee ownership transfer. They look at employment equity. They look at a whole range of good corporate citizenship, sound modern management practices, which will give companies the best possible chance to survive and thrive.


So really, it has had an outstanding success rate and some very good companies which have come on the Manitoba scene, including things like Westsun International, Green Gates Restaurant, and a number of other companies have been the recipients of Crocus investments.

Green Gates? Sound familiar? It's been in the news lately, although rarely connected to Crocus.

Green Gates was actually one of the Crocus Fund's prime experiments. You have to recall that Crocus CEO Sherman Kreiner was using the fund to promote employee ownership, one of the basic elements of the Mondragon model of labour capitalism that was the backbone of Crocus.
Here's how he saw this investment:

For us, Green Gates is not just an extraordinary country inn. It is also an opportunity to have significant labor market impacts on a sector which has generally viewed its workforce as transient and treated them poorly. Green Gates is dedicated to the proposition that high quality restaurant jobs, with good wages and benefits, career advancement opportunities, empowerment through participation, and financial security through ownership, will translate into high quality service.

If Green Gates is successful in proving this connection, they will put pressure on their competitors in this sector to match their practices and transform restaurant work into an occupation with a viable, long-term career track. We are assisting their effort through the provision of extensive supervisory training and financial education programs on-site.

Today, Green Gates lies in ruins, like so many Crocus investments.

Almost unnoticed in the stories of its demise is the mention of "approximately 30 individuals who partially owned the restaurant". Employee owners.

Crocus was always on the lookout for ways to promote employee ownership of the companies it invested in. It was very proud of Green Gates and Tim Sale bragged about the company in the Legislature.

The Crocus Fund has done outstanding work to make it possible for employees of, for example, Green Gates ... to develop an equity stake in these companies on the part of their employees. This obviously increases the employees' commitment to their companies, to their work. It allows for the fair sharing of the results of their hard work amongst all levels of the company. So this fund has been an outstanding success on the grounds of its fostering of capital pools and its fostering of employee ownership.


On second thought, we agree with Gary Doer that there shouldn't be a public inquiry into the Crocus scandal.

There should be an omnibus public inquiry. Crocus is the tip of Doer's iceberg.

The interrelations between the MFL, the Crocus Fund, the Workers Compensation Board, the Teachers Retirement Allowance Fund, and the NDP government all need to be examined under oath in a public inquiry. It should focus on

- how extensively the NDP government, aided and abetted the labour movement in funding and promoting its experiment in quasi-socialist labour capitalism,

- how much damage has been done to the provincial economy, and

- who in authority failed the whistleblowers, shareholders, and taxpayers -- and especially the employee/owners who live with the consequences of Crocus' failure to properly evaluate the criteria of ensuring the businesses invested in, had "the best possible chance to survive and thrive. "

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