When everybody walked out of the back room, everything was copasetic. There would be a lot of back slapping, man-hugs, and everyone would sing from the same hymn book. It was so simple back then.
Today, the fund has collapsed and the word scandal has been attached to Crocus and Fund. And the muscle comes in a different package.
Take the case of Winnipeg Free Press reporter Dan Lett. Last week he was merrily writing stories about a leaked heretofore unknown secret cabinet document that proved the NDP knew in 2000 that Crocus needed to become a Ponzi scheme or it would go broke. The NDP gave their blessing.
And then he got a call from someone he calls "my Grit source."
Like Saul on the road to Damascus, he had a mystical conversion. Hallelujah. Another sinner saved.
The truth, he wrote, had been there all along. Why couldn't people see it ?
* The cabinet note (the Selinger Memo) is old news. Everybody has known what's in it for years. The Opposition leaders are hypocrites. Fie on them.
* The Crocus Fund board of directors, under CEO Sherman Kriener, did the right thing to suspend sales when they realized they couldn't determine that share prices were fairly valued. They had a plan to sort things out, but couldn't stop critics from forcing the fund into receivership.
*Crocus was forced to make bad investments to comply with government rules.
* If only Crocus had operated under the same rules governing labour-sponsored funds in other provinces, none of this would have happened.
* The Selinger Memo is "dead wrong" when it says Crocus was violating its prospectus. Finance Minister Greg Selinger and cabinet were misled either deliberately or by accident. The Department of Industry always had it in for Crocus.
*The NDP "failed in its duty to make sure the legislation was tailored to give Crocus the best shot at success."
But who was this "Grit source" that brought such enlightenment to the Free Press newsroom?
What anonymous source would warrant such front page treatment?
Who, we ask, is friends and partners with Sherman Kreiner and would be in a position to sell the Crocus Fund's talking points as overlooked "details?"
Would you believe the Big Grit himself?
Lloyd Axworthy who came to Kreiner's defence when he was pilloried in the May, 2005, Auditor General's Report on Crocus.
University of Winnipeg president Lloyd Axworthy said he has "a very high regard" for Kreiner, who has served on the board of regents for about five years.(Key figures inexperienced?, Winnipeg Free Press, Paul Egan, May 31, 2005)
Lloyd Axworthy who sits with Sherman Kreiner on the board of the University of Winnipeg Community Renewal Corporation and who appointed Kreiner executive director to run the show. http://blackrod.blogspot.com/2005/08/crocus-ghost-walks-spence-street.html
Lloyd Axworthy who snapped his fingers and watched the Winnipeg Free Press do cartwheels when he didn't like what Ottawa reporter Paul Samyn wrote in a story.
Lloyd Axworthy who can count Winnipeg Free Press owner Bob Silver as a big fan. We know because Silver e-mailed The Black Rod and said he never wanted to hear from us again after we pointed out the shortcomings in a glowing story about Axworthy's op-ed column attacking U.S. Foreign Secretary Condoleezza Rice.
Oh, and that story "Cyberspace world all abuzz over Axworthy's Rice rebuke" ?
It was written by none other than -- Dan Lett.
At the risk of undermining Lett's new belief in Crocusology, perhaps a closer look at the "details" is warranted, starting with the "revelation" that there's nothing new in the Selinger memo to caucus.
Contrary to the cover-up campaign, the evidence clearly shows that the NDP did everything they could to hide the existence of the November 2000 memo-to-cabinet.
After the Auditor General released his Crocus Fund report in May, 2005, reporters questioned Finance Minister Greg Selinger about when he first knew about problems at the Crocus Fund, and how he missed the "red flags" that were the basis of the AG's report.
The report said: "Of note is that in January 2002, an official from the Department of Finance suggested that (Crocus's) continuing requests for legislative amendments may be a sign of management issues and that an independent review of (Crocus) operations may be in order."
Selinger first refused to say whether he saw the "red flag" memo from 2002.
The next day, he had refreshed his memory -- and denied every seeing it. He refused to release the memo to reporters.
He never mentioned that he had been warned about the fund's financial problems in 2000.
The first hint of what's in the Selinger Memo - anywhere - comes at a meeting of the Public Accounts Committee on Dec. 14, 2006.
It's undeniable that the Opposition Conservatives had no idea of the existence of the briefing note despite having read the auditor's report from cover to cover. They based their initial questioning on the earliest known warning of problems with the Crocus Fund as mentioned in the AG's report.
Ms. Bonnie Lysyk (Deputy Auditor General): At various points in time there would have been discussions and correspondence to that level, yes.
Mr. Hawranik: Was it as early as 2001?
Ms. Lysyk: Yes.
Mr. Hawranik: The Deputy Auditor General indicated that as early as 2001 and, perhaps, even sooner, there was documentation within Industry and Finance that indicated there was an awareness of liquidity issues around Crocus.
Mr. Hawranik: What was generally acknowledged, and I believe you mentioned it as well as the deputy minister, that Crocus certainly had liquidity issues as early as 2001. It was discussed, it seems, at the highest levels from at least 2001.
The deputy auditor general, while answering a question, revealed the reason why nobody knew of the existence of the Selinger Memo before it was leaked last week.
Ms. Bonnie Lysyk: During the course of audits, we accumulate a lot of documents and various forms, memos, correspondence, e-mails, draft documents, et cetera. In the report, when we write up a report, we may cite a couple of documents as examples. So, hence the comment that there are other documentations that we accumulate during the course of an audit that we don't refer to in the report specifically. So, in terms of the conclusions we've reached in the report, we do have audit files that contain documents that have a lot more detail than what we have in the report, but that's common.
Scott Smith, Minister in charge of the Crocus file, was the first to let the secret out.
Mr. Hawranik: Liquidity, obviously it seems like it was well known since at least 2001, both at the ministerial level and in the department level of Finance and Industry. Liquidity, in fact, it changed the value of the shares. In the meantime, the public, there's no warning. The public continues to buy shares in Crocus assuming everything is okay. So I ask the minister: Why didn't you bring the liquidity issue to the attention of the public?
Hon. Scott Smith (Minister of Competitiveness, Training and Trade): Obviously, discussions and discussions regarding in terms of pacing and liquidity were certainly brought forward. That is nothing new. That's something that was brought forward certainly over a period of time over the years from 2000, 2001 and onward.The Opposition was listening closely.
When it was Ron Schuler's turn to ask questions, he sought clarification from Hugh Eliasson (Deputy Minister of Competitiveness and Trade). Eliasson spilled provided more pieces of the puzzle, but not everything.
Mr. Schuler: Can the deputy minister tell us when discussions first began on the issue of liquidity difficulties at the Crocus Investment Fund?
Mr. Eliasson: There were ongoing discussions around Crocus's request for legislative changes probably from 2000, or so, on.
Mr. Schuler: Through you, Mr. Chair, to the deputy minister: So, starting in 2000, there were already discussions within the department, that you were involved with, with the issues of liquidity at the Crocus Investment Fund?
Mr. Eliasson: There were discussions around Crocus's request for legislative change and those continued from 2000 up through 2004.
Mr. Schuler: Starting with those discussions in the year 2000 on liquidity issues dealing with legislative change, I take it then that the department, through the deputy minister, would have been fully briefing the minister that there were now discussions on liquidity and thus legislative changes at the request of the Crocus Investment Fund.
See how the timeline changes in the questioning compared to Hawranik's earlier questions.
Mr. Schuler: When it became aware that there were liquidity problems at Crocus and discussions started 0as early as 2000, and then obviously they would have become more serious as time went on, at what point in time would you have advised-through the Chair, would the deputy minister have advised the minister that perhaps the liquidity problems were becoming such that perhaps there should be some kind of notification to the public?
Mr. Eliasson: That time never occurred.
Mr. Schuler: So there were not sufficient enough red flags being raised between 2000 and when the fund actually collapsed. On liquidity issues that would have warranted the minister, or by advice through you, Mr. Chair, to the deputy minister, by advice from the deputy minister to the minister is saying: We believe that there's sufficient concern here that there should be a public notice.
Mr. Eliasson: The answer is no.
Mr. Schuler: We've just heard from the deputy minister that that was as early as 2000. Would you concur with that?
Ms. Lysyk: As outlined in this report, there were indicators of concern in 2000.
Mr. Schuler: Again, to Ms. Lysyk. Did the documentation show that the information coming forward was increasing in seriousness insofar as the liquidity of the Crocus Fund?
Ms. Lysyk: The issue around liquidity and the relationship between liquidity and the requests for changes in the legislation, the discussion started around 2000-2001 in order to discuss what could be done to address potential issues around liquidity in the future.
Now note how little the Opposition knew about the concerns over the Crocus Fund's liquidity problems. They definitely knew nothing about the Selinger Memo.
Mr. Schuler: What we do know is that, as of 2000, there was some discussion taking place about liquidity. We know, obviously, that there was some difficulty with the value of the properties held, of the investments, because by September, there was a drastic write-down. We know that there were a lot of issues facing Crocus, and we do know that the government knew because of requests for legislative change that discussions were taking place. Was there, at any point in time in the correspondence you saw, correspondence given to the government that indicated either a moral responsibility or fiduciary responsibility to go public with the information and stop Manitobans from buying in because the devaluation was coming and there were liquidity discussions already taking place?
Ms. Lysyk: We did not see any documentation dealing with the discussion of going public or not going public on information of any type.
Mr. Schuler: So, even though Crocus, as of 2000, was facing some liquidity problems, there were discussions, obviously, government officials knew because there were requests for legislative changes, if Crocus was allowed to go into the marketplace and continue to sell shares to unsuspecting Manitobans, yet there was some knowledge that there were issues facing Crocus.
The questioning was getting too close for comfort. Minto MLA Andrew Swan broke it up with a point of order and Greg Selinger himself jumped in.
Mr. Chairperson: On a point of order, Mr. Swan.
Mr. Swan: I'm sorry to do this to Mr. Schuler, but the question he's asking is based on such an improper premise based on the evidence that's before us, including the evidence that Mr. Eliasson's given us in some detail about what was brought forward in 2000 and 2001. What Mr. Schuler is doing is he's putting an unfair question to the Deputy Auditor General based on no evidence at all and, in fact, in the face of evidence that's been presented very clearly this morning.
Mr. Selinger: When I read the report and looked at page 30, Mr. Chairperson, the Auditor General had put labour-sponsored venture capital funds in the context of the declining stock market after the dot-com boom had fizzled out in the early 2000 period, and it looked at all the labour-sponsored investment funds. It showed decline in the share value of all of those funds and then put Crocus in the context of that.
Note how Hawranik's questioning now incorporates the new information and why.
Mr. Hawranik: Yes, my question to the Deputy Auditor General: Liquidity issues were well known in the departments of Industry and Finance. I think it was well established here today, plus in the Auditor General's report. There were discussions about liquidity as early as 2000. That's what the deputy minister said today.
Mr. Hawranik: This question is to the minister. Again, the evidence is that it was well known that there were liquidity issues at Crocus, discussions about liquidity as early as 2000, directly from the deputy minister. Today, the Deputy Auditor General indicated that there's evidence that there were liquidity issues at Crocus since 2001, perhaps sooner, and the minister even had discussions, ongoing discussions about liquidity with Crocus.
The Opposition didn't know about Selinger's briefing note, even in December, 2006. We're betting Auditor General Jon Singleton didn't either. In fact, the evidence is that the NDP cabinet didn't share the information they had about Crocus even within government.
Mr. Hawranik: Did you ever think it was necessary to ask Crocus for some sort of long-term redemption plan.
Mr. Eliasson: I think saying it was generally acknowledged that Crocus had liquidity problems in 2001 is not a statement that I would support. It was quite evident that, following the whole period, shares could be presented for redemption and that the biggest sort of challenge that they had would have been in the years 2007-2008, I think. So there was the necessity to ensure that there was a plan in place in dealing with that. Those issues weren't presenting themselves in 2001, to our knowledge I don't recall being present at a meeting where Crocus discussed liquidity issues with ministers.
Does this mean that the deputy minister of the department entrusted to keep watch on the Crocus Fund was never told about the concerns expressed in the memo to cabinet ?
This becomes significant because Eliasson was appointed by the NDP to sit on the board of the Crocus Fund from April, 2000 to April, 2001. He sat on the board and the entire time was kept in the dark about Crocus's liquidity problems, even as the NDP changed laws and regulations to help the fund?
Even more questions were raised about the NDP's oversight of Crocus.
Mr. Cummings: Did the department monitor the minutes of the Crocus Fund?
Mr. Eliasson: Crocus was a private business entity, and the minutes of a private business entity are not provided to the government.
But Eliasson was a board member. Didn't he read the minutes? What was his role on the board? Actually, he was asked that.
Mr. Hawranik: You were on the Crocus board for about a year; and, after your appointment ended, did you report back to the minister with respect to issues at Crocus particularly relating to liquidity?
We'd like to give his answer, but Eliasson never answered. He dodged the question, talking instead about how he had never seen the 2001 e-mail from a senior manager in his department until he saw it in the Auditor's report and how it wasn't an in-depth analysis and how a real analysis would involve a variety of variables blah blah blah.
So, "does this briefing note contain new information about financial problems at Crocus?"
No. Not unless you consider it new that
· the highest levels of government were alerted to liquidity problems at Crocus in 2000, a year earlier than the Auditor General's report suggests.
· Crocus wanted permission to run a Ponzi scheme to stay afloat
· the NDP gave their permission
· the NDP changed laws to prop up the failing fund but never alerted the Manitoba Securities Commission, choosing to let people invest in a fund that was openly flaunting its prospectus commitments
· The NDP knew the truth when John Loewen raised the first questions about valuations of Crocus investments and said nothing
Nope, nothing new at all.
Does the Board of Directors deserve credit for recognizing the problems at Crocus and having a plan to fix them without shutting the fund down?
Yes, if you overlook the fact that they were alerted to the valuation problems by John Loewen and Bernie Bellan in 2002, a full two-and-a-half years before they stopped trading. Uh, make that a big NO.
Was the Crocus Fund hampered by a less than level playing field with other labour-sponsored funds in other provinces? Yes, if you ignore the fact that Manitoba was the only province with balanced budget legislation.
The government couldn't grant the Crocus Funds wish to sell as many shares as they wanted to each year so they could raise enough money to pay off early investors with the cash from new investors (the definition of a Ponzi scheme, BTW).
"Each of the Crocus requests could substantially raise the cost of the tax credit for both funds from $7.1 million in 1999 to $15 million or more in another four years."
"... the Province would be exposed to the possibility of a very large increase in sales at some point, and the attendant increase in the cost of tax credits. This has been the experience in Ontario, where there is no selling limit and annual sales of shares in Ontario LSIFs have ranged between $150 millionand $500 million. Such variations mean it is very difficult to predict the cost of the tax credit. This is a especially a problem in the context of balanced budget legislation."
It's right there in the briefing note, one of those pesky details that Dan Lett's "Grit source" would like expunged from the public mind.
Sort of like the $10 million loan from the Quebec Solidarity Fund which was needed to patch over the liquidity problems raised in the November, 2000, memo to cabinet.
And which is never mentioned by senior investigative reporter Dan Lett's "reality check."
Here's a reality check. Given that Greg Selinger and Gary Doer say there's nothing new in the memo, and that it formed part of the Auditor General's report, then they should have no objections to releasing all the documents provided to the AG.
Bonnie Lysyk says there are lots of documents that had "a lot more detail" than what was in the official Crocus report.
Let's see them all.
Freedom of Information, anyone? Now that's an article of faith.