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Leaked Crocus Document Shows Path to NDP Government's Back Door

Another week, another leak, another link between the NDP and the Crocus Fund crash-and-burn.

Or, if you're Gary Doer or Greg Selinger, another knot in the noose.

We learned this week that the Crocus Fund had a back-door channel to the NDP to circumvent the oversight of the Department of Industry. And, as it turns out, the Auditor-general, too.

Crocus wanted special dispensation to invest reserve funds in a technically invalid area, it went to the NDP's political people in government to smooth the way.

This week's leak was a fax from the Crocus Fund to Eugene Kostyra, the secretary of the shadowy Community & Economic Development Committee of Cabinet, who sent the Crocus communique to David Woodbury at the Treasury Board.

Both Kostyra and Woodbury were more than civil servants. They were high-level political functionaries of the NDP appointed to government jobs.

Their first allegiance was to the Party. Then to Big Labour. And then the public.

The Crocus Fund, in late January, 2002, was seeking immediate permission to invest $1.5 million in reserve funds in Smartpark, a research and technology park to be run as a subsidiary of the University of Manitoba.

"The timing of this is somewhat critical as the transaction is scheduled to close in February, 2002, and one of the conditions of closing the transaction is that this investment will be eligible for Crocus' reserve fund."

The fax to Kostyra was a draft of a letter from James Umlah, the Chief Investment Officer of the Crocus Fund, to Mary Ann Mihychuk, the Minister of Industry, Trade and Mines. The letter outlined the request for a waiver to allow the fund to invest in Smartpark. The law required Crocus to keep its reserves in Manitoba, municipal or crown corporation bonds, but Crocus argued that the University was close enough to a crown corporation to qualify.

Kostyra is asked to "Please review the attached letter regarding Smartpark."
He, in turn, asks Woodbury to "return to me asap."

Why are two political backroom boys being given a first look at the letter before the Cabinet minister to whom its addressed?

Why are they being given the opportunity to make changes and suggestions about content and wording and everything else that the word "review" entails.

Why are NDP appointees helping Crocus draft a letter for a minister who may wind up asking them for their opinion only days later?

It's no stretch of the imagination to see that the process could eventually involve the Finance Minister or the Premier who would be expected to grant pre-approval of a "request" to the Industry Minister. In other words, to okay an offer that couldn't be refused.

What's obvious is that Crocus was working in concert with certain highly-placed political operatives.

Eugene Kostyra was not only a former NDP cabinet minister in the Pawley government, but a staunch spokesman for Big Labour in government.
His Community & Economic Development Committee Secretariat
"Provides analytical expertise & administrative support to the Community & Economic Development Committee of Cabinet, which co-ordinates all major government initiatives relating to community & economic development in the province."

In other words, he was the perfect pointman to handle the Crocus Fund, which was becoming one of the top engines of "community and economic development in the province."

David Woodbury was associate secretary of the Treasury Board, reporting to a Treasury Board analyst. Sounds like a pretty minor role, eh.

Except that Woodbury's role, according to Premier Gary Doer, was to provide
"a liaison on economic development into Treasury Board to make sure that if there are companies that have opportunities, or if there are other issues that we are dealing with at the economic development side, that there is a connection between the economic development issues of government and the Treasury Board."
In other words, he represented the Department of Industry in Treasury Board.

He reported back to Industry Minister Mary Ann Mihychuk.

Did she know he was reviewing Crocus Fund requests for changes to regulations before she saw them?

The existence of this back-door channel to sympathetic political appointees raises many issues. For one, it clearly contradicts Greg Selinger's statements that the government had no say in the actual investments of the Crocus Fund.

He's used this claim to deflect accusations that the government has a responsibility to shareholders who lost their shirts when Crocus went down in flames. We dealt only with liquidity and pacing issues, not investments, he's claimed.

Now we see how Selinger is trying to mislead the public. Treasury Board did pass judgement on many of Crocus's investments.

* The fund asked for and received dispensation on investments six times.
* Four times the Progressive Conservatives changed regulations, to allow investments in Wellington West Capital twice, the Angus Reid Group, and the Boyd Group.

* In 2001, the NDP eliminated the need for changes to regulations and simply gave the Industry Minister the power to grant waivers, which she did for two investments, Minds Eye Pictures and SmartPark.

Yes, Crocus did get a waiver to invest in SmartPark, according to Katherine Johnson, senior account manager in the Department of Industry, Economic Development and Mines.

But they never got to exercise it.

Why? Because Tory MLA John Loewen (before he became a turncoat) picked that time to question the valuations of Crocus investments.

Crocus couldn't risk feeding the firestorm by making a non-liquid investment that needed a special waiver. The SmartPark deal had to be sacrificed while Crocus spent time strong-arming Loewen and P.C. Leader Stuart Murray into silence to protect the secret of the fund's shaky finances---they were going broke and the NDP knew it.

This explains why the NDP wasn't more vocal in defending Crocus during the Loewen days. They needed plausible deniability in case the truth about Crocus's overvalued investments was discovered.

The NDP coverup extended to the Auditor's investigation of the collapse of the Crocus Fund. Note how the report of Jon Singleton into Crocus says his list of objectives included

* To assess the monitoring of CIF by IEDM (that's the Industry and Economic Development Ministry - ed.) for compliance with The Crocus Investment Fund Act
* To assess the monitoring of CIF by MSC (that's the Manitoba Securities Commission - ed.)

Missing is any assessment of the monitoring of the Crocus Investment Fund by --- the Finance Department.

The series of recent leaks of Crocus documents are all coming out of --- the Finance Department.

Not one of these documents was addressed in the Singleton report. Bonnie Lysyk, Manitoba's Deputy Auditor General, told a Legislature committee in December that

- no government ministers were interviewed,
- the Premier was not interviewed,
- none of their documents were examined,
- there was no search for e-mails about Crocus in the computers of the Ministers, the Deputy Ministers or even David Woodbury.

The Office of the Provincial Auditor reviewed information on Crocus computers, but did not look for deleted computer files or memos or e-mails.

She was asked if the audit of the Crocus Fund involved looking for any political interference at Crocus.
Her answer was succinct: No.

Gary Doer says the Crocus Audit already dealt with everything raised by the new leaks.

We say not by a longshot.

Given the revelation of a back-door channel to the highest levels of NDP political operatives, we can now see why a public inquiry is imperative.

Crocus could use this channel to pass along information off-the-record to their ideological supporters -- and to bypass the bean counters who opposed their multiple bottom lines-style of investment.

And who's to say it was a one-way street?

Eugene Kostyra met almost daily with Premier Gary Doer. What if Doer's friend Costas Ataliotis needed a shot of new investment into his Maple Leaf Distillers? Could pal Gary pass the information to Eugene who passed it along to Jimmy Umlah who, lo and behold, saw his way clear to add on another little investment in Maple Leaf?

You might expect these issues to be explored in the pages of the city's largest daily newspaper, but the Winnipeg Free Press continues to pretend the damaging leaks of Crocus documents from the Manitoba Finance Department don't exist.

The latest leak of the Umlah fax may provide a clue as to why.

SmartPark was to be operated by the SmartPark Development Corporation, a subsidiary of the University of Manitoba. In July, 2002, construction of a $3 million multi-tenant facility was started. Crocus was obviously intending to put up half the cost.

The chairman of the board of the SmartPark Development Corp. was none other than Mr. Robert Silver, the co-owner of the Winnipeg Free Press. The FP may be reluctant to publicize the extremely tight relationship between its owner and the Crocus Fund.

The newspaper had no problem prying into the mayor's divorce records in the hope of finding some embarassing details (they failed), nor did they ever apologize for publishing false reports of non-existent investigations of the mayor into an alleged (by them) conflict of interest. But when the conflict of interest questions involve the Winnipeg Free Press, suddenly the newspaper has decreed that there will be no further coverage of the Crocus Scandal.

There was a time when they could get away with it, when the newspapers were the final arbiters of what was news and news was what they decreed it was, or was not. That time has long past.

Now, by ignoring the news of the Crocus leaks, the Free Press just looks foolish.

And guilty.
A Special Request

Will fellow blogger James Cotton, or anyone knowing how to reach him, contact The Black Rod at

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