Crocus Fund board 'abdicated responsibility': receiver

A Manitoba judge has released a report by the receiver who took over the Crocus Investment fund after its 2005 collapse.

Deloitte and Touche has been overseeing the fund's remaining assets; through its access to literally millions of documents, the company produced hundreds of pages in a report that provides the closest look yet at what went wrong with the fund.

The report's summary includes strong words for the board of Crocus, its officers and the auditors who were responsible for reviewing the fund's performance.

It attacks the valuation of the fund's investments, its prospectus, and the manner in which the prospectus was prepared.

Some of the report's most stinging commentary concerns Crocus's board of directors, which was made up of members of the Manitoba Federation of Labour, a representative appointed by the province, and others.

"It is the receiver's view that the directors fundamentally abdicated their responsibility to manage the business and affairs of Crocus," the report's summary says.

Following that rebuke, the receiver suggests ongoing legal support for Crocus directors and officers be terminated, relieving the receiver from paying their legal costs as they defend themselves against a $200-million lawsuit launched last year by Crocus investors.

Lawyers for the plaintiffs in that lawsuit said that may pick up the pace of the civil suit, which names several parties including the fund's auditor, board and the government of Manitoba.

"We believe that certainly the investors the shareholders will be entitled to receive their fund back. I think we have a very good case," said Lawyer Norman Boudreau.

Boudreau called the receiver's report the most significant event in the Crocus collapse since the auditor general released in 2005 the findings of his examination of the fund's operations.

In that report, the auditor general found serious weaknesses in the fund's operations and governance. The report also found that the NDP government missed warning signs that the fund was headed for trouble.

Disappointed, frustrated: labour federation

Manitoba's NDP government did not comment on the release of the receiver's report Thursday.

A spokesman for Finance Minister Greg Selinger said the minister has not yet seen the report, but pointed out the government supported the release of the report.

The spokesman suggested Selinger may be in a position to comment on the report on Friday.

But the Manitoba Federation of Labour called the report a waste of time and money.

"They've been investigated by the RCMP, by the Manitoba Securities Commission, by the Office of the Auditor General, and I'm really disappointed and rather frustrated that the receiver undertook it himself with no request from anyone to spend $700,000 of shareholder money to conduct yet another investigation," said MFL president Darlene Dziewit.

About 34,000 Manitobans had more than $150 million invested in the labour-sponsored venture-capital fund, which promoted its mandate to invest in companies in the province. It stopped trading in December 2004 over concerns about the true value of its shares.

In April 2005, the fund dropped the value of its shares to just below $7 almost one-third less than their value when trading was halted.

The fund went into receivership in June 2005.