It's January, 2009, and still nothing from the receiver for Crocus as to when we'll get our first payment for our Crocus shares. Here's what I can tell you about what's been going on:
On January 7 lawyers for the receiver, the former officers and directors of Crocus, and the shareholders (in our class-action lawsuit) appeared before Justice Deborah McCawley. All parties were there to request that the judge impose something called a "bar order". The bar order would have prevented any further lawsuits from being filed against either the former directors of Crocus or the fund itself (as represented by the receiver). The receiver has been reluctant, it seems, to distribute funds to Crocus shareholders over concern that there might still be some further liabilities imposed upon Crocus by parties that have yet to file lawsuits.
Are the receiver's concerns legitimate? Who knows? What we do know is that the receiver first indicated that there would be a distribution to shareholders in the "late fall" of 2008. Then he amended that to say there would be a distribution in "early 2009".
If he had concerns about potential liabilities, there are two questions that need to be asked: 1) Why didn't he advise shareholders that this might be an impediment to a distribution when he first said there would be a distribution in the late fall?
2) Surely the receiver is going to hold back a certain portion of the funds that have now been accumulated (which by now are well over $85 million, including the monies received as a result of our class-action lawsuit). It's been over four and a half years since Crocus was placed into receivership. According to the receiver's own reports, there has been one dispute with an investee company that has been the subject of ongoing litigation, but for a relatively small amount. Why is the receiver being overly cautious in distributing something to the shareholders?
This past week, however, Justice McCawley turned down the request for a bar order. In effect, what she told the various parties was: "Work this out among yourselves. I'm not going to get involved."
Since the receiver never offers any explanations for his actions, however, shareholders are justifiably perplexed as to what's going on. I'll put the question out to Russ Holmes, then: "Russ, why the heck did you tell shareholders there would be a distribution by now if you were so worried about possible liabilities? It would have been better for you to say nothing than to give false hope to shareholders that they'd see something by now. But, the least you can do is communicate with us as to what your plans are."
Crocus shareholders have always been treated with disdain - whether it was by the officers and directors of Crocus who squandered our money, or by the receiver, who has refused to answer questions about his management of the fund. As I've said before: Crocus has been the gift that keeps on giving for whoever has control of Crocus - not for the individuals who invested in Crocus.

In a decision delivered Dec. 24, and one that almost went by unnoticed, the master presiding over the lawsuit filed by the receiver for Crocus against the Winnipeg Goldeyes ruled that there was insufficient evidence to prove that the Goldeyes actually owed the Crocus Fund interest on a loan that was entered into in 1999, even though there was a legal agreement stipulating that the Goldeyes were required to pay 8% interest on the loan..
In her decision Master Joy Cooper noted that the receiver for Crocus had not produced any witnesses to prove that the Goldeyes would have to pay interest, no matter what the agreement stipulated.
The key argument advanced by the Goldeyes was that, despite the wording to the legal agreement that the Goldeyes signed with Crocus, Sam Katz had received assurances from Crocus's then CIO, none other than the very well regarded James Umlah, that he wouldn't have to pay any interest on the loan.
(Sorry, I gave my copy of the decision to a Free Press reporter, so I'm going to paraphrase here:) According to testimony given by Umlah during the lawsuit, he had to give something to Crocus's board, otherwise even the slapheads on the board would have balked at a free loan that Umlah was intending to give Sammie. In effect, Umlah winked at our highly ethical mayor in a phone conversation in 2000, telling him not to worry about interest on the loan. After all, Crocus wasn't in the business of enforcing the terms and conditions of contracts when friends of Umlah were involved, was it?
This entire sordid affair simply serves to remind Crocus shareholders how crooked an operation Umlah was running at Crocus. Where was Kreiner all this time, you have to wonder? Was he so naive and out of the loop that Umlah was able to hatch all these crooked schemes unbeknownst to anyone?
Further, is anyone ever going to be able to pin  Sam Katz down on his total lack of scruples when it comes toso many of his business dealings? As I've written before, the Goldeyes and Riverside Park Management are engaged in a clever dodge designed to hide the true financial picture of the Goldeyes. Until Riverside's books are ever opened up, Katz will be able to maintain the ridiculous pretense that the Goldeyes aren't profitable - this in spite of all the overwhelming evidence that the Goldeyes are a huge cash cow.

Oh well, at least it won't be too long before the receiver begins to disburse the money that he's accumulated to shareholders. Ironically, given the huge hit that the stock market took in 2008, Crocus shareholders will have done not too badly at the end of the day. If Crocus had been allowed to continue operating without being put into receivership, as Dan Lett and Martin Cash have suggested it should have been allowed to do, you can be sure that its value would be zero by now.

It's been about two weeks since the Receiver posted his most recent quarterly report. In it he states that the hoped-for distribution of funds to shareholders has been postponed to 2009 instead of the earlier announced date of "late fall".
In his report the Receiver seems to be placing the blame for the delay on the fact that all settlements between Crocus shareholders and defendants to our class-action lawsuit have yet to be finalized. The Receiver says that "Even if settlements are finalized, further motions to the court will be required for its approval. Accordingly, the earlier forecasts of the Receiver for a potential distribution during the fall of 2008 have been delayed. Assuming settlements are reached, a distribution would take place sometime during 2009."
The fact is, however, that the fund has over $64 million in cash, of which a good portion is available for distribution. The Receiver had wanted to distribute a portion of that money almost three years ago, but Madame Justice McCawley turned down his request at that time because of uncertainties relating to the class-action lawsuit. Almost all those uncertainties have been cleared up and, while there is still some legal language that needs to be straightened out, the Receiver could very well have distributed a good amount to shareholders by now.
The Receiver has only himself to blame for leading shareholders into thinking that all issues relating to the class-action lawsuit would have been resolved by "late fall" of this year. He should have very well known that the myriad of lawyers involved in the class-action lawsuit were likely to drag things out. What else do lawyers do?
Oh well, at least Crocus shareholders can take heart in knowing that the value of their shares has been increasing due to the fact that moneys in the fund have been invested in safe, guaranteed securities ever since the fund was placed into receivership in June, 2005.
One has to laugh at the comment by Charlie Spiring, CEO of Wellington West, who said that Crocus is "the best asset class in the country", in Tuesday's Free Press. Isn't it ironic that Spiring would make a comment like that only after Crocus has been in receivership for almost three and a half years?

Beginning Dec. 21, 2003 and continuing through May 21, 2004 Maple Leaf Distillers made a series of payments to the Winnipeg Goldeyes amounting to $995,000.
In court documents relating to the lawsuit filed by a series of plaintiffs against former Maple Leaf principals David Wolinsky and Costas Atalitotis, eleven cheques are recorded as having been issued to the Goldeyes in that period.
Yet, in the lawsuit filed by the receiver for Crocus against the Goldeyes for $305,000 interest on loans that the receiver alleges were made to the Goldeyes, Sam Katz stated that "Until such time as the Goldeyes can have a financially viable season and can pay the interest on the Crocus debentures, it is not required to pay any interest to Crocus...The Goldeyes simply cannot afford to do this at this time."
Where then, did the Goldeyes get $995,000 to loan to Maple Leaf Distillers?
As noted before on this website, the obvious conclusion is that the money came from the Crocus Fund. Why would a baseball team that was close to selling out almost every one of its games need any money from Crocus? The answer is that it didn't. But, beginning in 1999 and continuing into 2000, Crocus funneled a little over $1 million into the Goldeyes. Whether that money was an investment or a loan is the subject of disagreement, but the more interesting question is what did Katz really did with that money. The answer is he flipped it to his friend David Wolinsky and that Wolinsky flipped it back to Katz.
Now, what was that flip from the Goldeyes to Maple Leaf and back to Katz all about? It would seem it was a convenient method for Katz's good friend David Wolinsky to get money back into Katz's pockets, using Crocus Fund money. The $995,000 is almost exactly the amount that Crocus either loaned or invested in the Goldeyes (depending upon whose version you believe - Katz's or Crocus's receiver).
Since James Umlah is likely never going to explain why the Goldeyes needed money from Crocus, since Sam Katz is likely never going to answer questions about that money, and since David Wolinsky is likely to remain steadfast in his loyalty to Katz, we're going to have to turn to other means of finding out what the deal was really all about.

And that's where the Riverside Park Management affairs comes in. Again, it's been asked on this website before: What is the purpose of Riverside Park Management? Evidently it's flowing with cash - both from rental fees on Canwest Park (over $1 million a year) and parking fees on the parking lot that has been so much in the news of late ($400-500,000 per year).
But, by serving as a convenient repository for Goldeyes cash, Riverside is able to help Katz maintain the pretense that the Goldeyes are "unprofitable". And, since the CRA is about the only agency that can shed some light on this whole sordid affair, only by prodding the CRA to take a look at the Goldeyes-Riverside relationship are we likely to find out what's really been going on.
While six city councilors may be frustrated over their inability to find out what Riverside is really about, I've got some news for you: Katz will stonewall you ad infinitum.
What this really requires is a complete forensic audit looking at the books of both the Goldeyes and Riverside, along with a cross-examination of James Umlah. Now that the RCMP says there's no basis for laying legal charges over Crocus (unless the RCMP comes to the realization that they goofed), and since Gary Doer's govenment is never, ever going to conduct an inquiry into Crocus, it's time for the CRA to step up and conduct a full audit of both Riverside and the Goldeyes.

Sam Katz's financial affairs were front and centre this past week...again. This time media scrutiny focused upon the assessed value of a gravel parking lot that Riverside Park Management leases from the city of Winnipeg; however, interesting as that story may be, there are so many other questions that need to be answered about what exactly Riverside Park Management is.
Let's go back in time. Riverside Park Management was an idea originally conceived by Izzy Asper as a not-for-profit corporation whose purpose would be to enable underprivileged kids to be able to go to Goldeyes games (or so Bartley Kives wrote in the Free Press this past week). Yet, somehow this supposedly charity-minded corporation seems to have become central to the cloak that Katz has thrown over the Goldeyes' finances.
For years now Riverside has become a huge cash cow, bringing in hundreds of thousands of dollars from fees collected on the parking lot that the city leases to it (and for which it paid no taxes at all for years, according to a CBC report), and additional hundreds of thousands of dollars from rent that the Goldeyes pay to it for  use of Canwest Park.
In fact, according to documents that surfaced in the lawsuit filed by Crocus's receiver against the Goldeyes, the baseball team has been paying $22,000 per game to Riverside for use of the park. Thus, when Katz argued that the Goldeyes have never made a profit even though his team has consistently sold out almost every game since the Goldeyes moved to Canwest, we can now see how he was able to arrive at what seemed, on the surface, an incredulous assertion.
Think of it: The Goldeyes pay close to a million dollars in rent to a corporation also controlled by Katz, but a corporation about which we know almost nothing. What we do know is that Katz was a director of that very corporation until April of this year (along with Sandy and Robert Shindelman, and the CFO of the Goldeyes).

So, what is Riverside all about?
This takes us back to the $1.1 million advanced by Crocus to the Goldeyes in 1999 and 2000. In 2001, at the very last Annual General Meeting held by Crocus, I asked our good friend, James Umlah, why the Goldeyes needed $1.1 million from Crocus if the Goldeyes were such a successful operation. I've noted before on this website that Umlah, in his typically sarcastic manner, responded by asking me whether I didn't think the Goldeyes were a solid investment.
Then, when we found out that the $1.1 million, which was described as a loan in Crocus's financial statements, was regarded as a convertible debenture by Katz, one furthermore that did not require any repayment until such time as the Goldeyes were profitable, we began to see what Umlah had really arranged with Katz.
And this is where the story really gets interesting... You see, Sam Katz was also one of the investors in Protos, a company headed by his very good friend, David Wolinsky. Crocus had poured millions of dollars into Maple Leaf Distillers, (a company that was part of the Protos group)- something that even members of Crocus's board finally balked at (much too late, as it turns out). Eventually Umlah was told not to put any more money into Maple Leaf.
So, what does he do? He gives Sam Katz $1.1 million -ostensibly for the Goldeyes. But the Goldeyes didn't really ever need any money. The team was a cash cow, but in order to keep its profits down to zero, it was handing over its revenues to Riverside Park Management in the form of ridiculously high rents.
We come back to the money that Katz had loaned to his buddy Wolinsky. After the Goldeyes got the $1.1 million from Crocus, it seems that Katz wrote cheques for close to that same $1.1 million that were given to Maple Leaf Distillers. That was confirmed in court proceedings during the lawsuit filed by various plaintiffs against David Wolinsky and his cohort, Costas Ataliotis.
Soon after, we are told, Katz was one of three investors to get their money back from Wolinsky before Protos and Maple Leaf collapsed (the others being Lorne Saifer and Ross Rutherford). Thus, it seems that the $1.1 million was simply flipped from Crocus to Katz to Wolinsky, then back to Katz, with Katz now claiming that he doesn't ever have to repay any of that $1.1 million. (Apparently we'll know within the next few months whether Katz wins the suit filed by Crocus's receiver against the Goldeyes. The judge has reserved decision.)
Where does all this lead? To Riverside Park Management, that's where. We're never going to find out what Riverside Park is really all about, unless the Canada Revenue Agency conducts an audit of its affairs and that's about as likely as them conducting an audit of the bribes that Brian Mulroney took from Karl Heinz Schreiber.
Riverside Park Management is an extremely murky corporation. What has it been doing with all the millions that it has been garnering over the years? Why is it a not-for-profit corporation when that title is usually reserved for socially minded groups such as amateur sports organizations?
Will we ever find out answers to the byzantine manner in which our mayor has arranged this particular aspect of his wheeling and dealing?
Not likely.

In yesterday's (August 3) Free Press we were treated to a lengthy diatribe supposedly penned by Mark Chipman and Jim Ludlow, two of the key figures associated with the True North project. Their article comes as a response to an article penned the previous week by Rocky Kravetsky, who was one of the main critics of the True North project.
In their article Chipman and Ludlow make the outrageous claim that "from the day we announced the project over seven years ago, all of the public contributions were made known and rigorously scrutinized by various members of the media and the public." Well, Mr. Chipman and Mr. Ludlow, the Crocus Fund had been front and centre as one the primary backers of the True North project, yet we have never been able to find out how much Crocus ever actually contributed to the project.
Crocus was constantly engaged in a shell game when it came to its investment in True North. Initially, it announced that it was going to invest $10 million in the project, but when shareholders voiced strong objections to an investment that was so ridiculous, even for the high flyers at Crocus who made a habit of making outrageous investments, it was announced at the AGM in 2002 that the investment had been scaled back to $5 million. According to Crocus's 2002 financial statements Crocus had $1,732,500 invested in the True North Limited Partnership, but by 2003 that investment had grown to $3,000,000; however, in 2002 Crocus held a $2,000,000 debenture for Megill-Stephenson Company Ltd., which is the real estate arm of the Chipman family. By 2003 that investment no longer appeared on Crocus's books. It would seem that some major sleight of hand was going on.
The same sort of charade appears to have been going on with Crocus's investment in the Manitoba Moose. In 2002 that investment was listed at $5,254,819, but by 2003, the investment had dropped to $2,567,253; however, in the Crocus receiver's report, there is an investment in Crocus Hockey Holdings Inc. of $5,067,254.
This is all clear as mud, and although Paul Sveinson has done stellar work over the years unmasking Crocus's shell games, there is still so much murk surrounding so much of what was going on at Crocus.
We are likely never going to know the truth about how much Crocus ever invested in either the Manitoba Moose or the True North arena project. What we do know is that those two investments were a major drain on Crocus's coffers. Well, at least Crocus shareholders can be glad to know that they were major contributors to the rebirth of Winnipeg's downtown. Oh - that hasn't exactly happened? Well, too bad. We can't blame Sherman Kreiner for dreaming about being the saviour of Winnipeg, can we? (urged on by his good friend Nick Hirst at the Free Press).
So, Mr. Chipman and Mr. Ludlow, would you care to tell Crocus shareholders where all their millions of dollars really went, since you're both so interested in true disclosure?

A lot of readers of this site have been asking me why I haven't updated it. I even suggested to Geoff Kirbyson of the Free Press that I may wind up this site. To be honest - I'm ambivalent about keeping it going. When I first started it in September, 2004, I had the idea in mind that no one was writing anything that resembled the truth when it came to Crocus. I wanted to dig deeper into the murk that surrounded the fund, which was very much a going concern at the time.
Since then much has happened - eh? (I suppose that might be considered an understatement.) I took on some very powerful figures in this province - from businessmen to politicians, and much of what I set out to do has been accomplished.
So, should I carry on? Well, for the time being, there is still too much crap that needs to be left exposed, and that will likely never be reported in the mainstream media. To the extent that this site has gained a fairly sizable audience, it still has the power to embarrass many of those same figures who played such a pivotal role in thousands of Manitobans unnecessarily losing tens of millions of dollars. When some more of that crap starts to get picked up on in the mainstream media, I'll shut this thing down. In the meantime, I get tips from too many people to say "that's it".
I should mention that this site has been changed from time, with certain sections having been omitted.. Apparently I hurt the feelings of certain individuals who were more than a tad embarrassed over some of the things I had to say. This is such a tight-knit city that the dirt that goes on stays within that small circle of guys who run things in this town. When a "maverick" like me comes along (The Free Press always refers to me as either an "outspoken" shareholder or a "maverick" shareholder. I guess I'll have that inscribed on my tombstone.), guys who are used to operating in the shadows wonder where the hell that guy came from? Gee, even Dan Lett says Crocus should have been allowed to continue operating. If only that Bellan guy hadn't opened his big mouth and started asking why tens of millions of dollars were being poured into highy dubious investments with all sorts of side deals being cooked up to benefit certain Crocus officers. Doesn't Bellan know that's the way things are done in the real world, especially in Winnipeg?

What did the class action lawsuit achieve?

To start with - I want to talk about the results of the class-action lawsuit. The lawsuit has now succeeded in obtaining settlements of some $12.5 million from all the various defendants who were first named in July/05, along with the Government of Manitoba, which was named as a defendant in a second lawsuit. Is that a disappointment to shareholders? For some, it will be. After all, when we first filed the lawsuit, we were asking for $150 million plus $50 million in punitive damages; however, the figure of $150 million was based upon the supposition that shareholders would lose every last cent they invested, and that Crocus was absolutely worthless. We sued for the maximum possible loss. It was never our thinking that we could get $150 million for shareholders because we always knew Crocus had some real value. How much that value turned out to be is what affected the amount we realistically hoped to obtain for shareholders.
Now there are many aspects to what went on this past year in negotiations with the various defendants that I am not free to report, at this point. When you consider that people like Dan Lett and Martin Cash were consistently attacking the lawsuit as a waste of time and a detriment to shareholders, the results now speaks for themselves. Who would have thought that Price Waterhouse would agree to pay $6 million and the Government of Manitoba $2.5 million? As for letting the officers and the directors off the hook for a relatively small amount (($3.4 million) - there was  much agonizing over what to do in that situation.
The fact is we knew we could go after certain officers and directors for a lot more than that. (Some of those individuals are known to be quite wealthy, and the likelihood is we could have obtained quite a bit more by going after them.) Our lawyers knew, however, that settling with the d's and o's, as they were referred to, would lead to further settlements with other defendants and so, the decision was made to accept less than we might have been able to obtain from the d's and o's (through their insurer), so as to smooth the way for what proved to be successful negotiations with all the other parties.
At the same time, we were mindful of the receiver's position in wanting to distribute funds to the shareholders and the potential legal obstacles that the lawsuit posed to that distribution. (Remember that Judge McCawley prevented the receiver from distributing as little as $1 per share to shareholders over a year and a half ago, citing the lawsuit as one of her reasons.)
All in all I think most shareholders should be happy that the lawsuit is over except for some minor rewording of language in the settlement agreements. We should see a significant distribution of funds as early as "late fall", according to the receiver for Crocus.  I have been saying that it should be in the $5 range, based upon how much cash the receiver says he has accumulated from the sale of Crocus assets, along with cash we will have received from the defendants to our lawsuit. The receiver now says Crocus shares are worth $6.18. Add to that an additional 60 cents per share from the lawsuit, and shareholders should eventually get something like $6.75 per share. (Again, that won't be all at once. The receiver says he has $65 million in cash, as of March 31, which translates into about $4.43 per share.)

Let's now look at the Goldeyes and Canad Inns

But, the receiver is having some problems liquidating  the remaining Crocus investments. Most of you have probably read or heard about our esteemed mayor's insistence that he has been losing money on the Winnipeg Goldeyes. Furthermore, the loans that Crocus made to the Goldeyes (over $1.1 million) actually converted to an "investment", according to Mayor Katz. (Sounds suspiciously like the Solidarite "investment" in Crocus of  $10 million back in 2001 that was actually nothing more than a loan at usurious interest rates.. Yes, I know the RCMP found no basis for laying criminal charges in connection with that little sleight of hand. Remember, this is the same RCMP that wasn't able to lay any charges in the Bre-X swindle. Also, Conrad Black and his cronies weren't charged in a Canadian jurisdiction. It was Patrick Fitzgerald in Illinois who went after them. We have toothless regulators and police authorities in Canada who spend millions of dollars in investigations that invariably lead nowhere. After having met the lead RCMP investigator on Crocus a long time ago, I had no hope that the RCMP investigation would lead to anything.)
Anyway, let's go back to the Goldeyes. It turns out that the Goldeyes actually have been losing money, but you know why? Because the owner of the Goldeyes had set up another corporation when he built his ballpark to which the Goldeyes pay rent. Apparently the rent was in the order of $16,000 per game, and it's now up to $22,000 per game. Not much wonder, therefore, how a ball team that comes close to selling out every game can lose money.
At least the receiver is going hard after the Goldeyes, not wanting to settle for our mayor's protestations that he doesn't have to pay Crocus back a cent. (As an added footnote, I remember well an ad that a few Crocus investee companies took out in the Free Press in February, 2002, coming to the defense of the Crocus Fund at that time over what they argued were wildly inaccurate suggestions from John Loewen of the PC's (who had just been ordered to shut up by his spineless leader Stu Murray) that the Crocus Fund was in real trouble. (Loewen had based his criticisms of Crocus in part upon information I had given him in 2001.)
Who do you think was front and centre in that ad? None other than Sam Katz. I guess if you've been handed over $1.1 million of Crocus money that you have no intention of every repaying, you'd want to make sure that the guys who handed you that money are propped up.

And, when it comes to handing out money - there's another well heeled figure in town who's waiting for a $7 million handout from the City of Winnipeg to build another play pen for this town (a water park): Leo Ledohowki of Canad Inns. But Leo, Crocus invested $5 million in Canad Inns a way back when. That investment still remains to be liquidated and word has it that you're not exactly cooperating with the receiver when it comes to liquidating that investment. Perhaps our esteemed city councilors might want to reconsider handing any money to Ledohowski until he starts to play ball with Crocus's receiver.

Oh yeah, what ever happened to Crocus's investment in True North anyway?

Finally, are we ever going to find out what happened to Crocus's investment in that other huge play pen - the True North arena (along with the Manitoba Moose). The Chipmans (and a few other well heeled investors) are able to obtain all the profits from what is now the MTS Centre, while taxpayers and Crocus shareholders put up the lion's share of the cost of building that arena. To add insult to injury, it's because of the MTS Centre's monopoly on holding events of a certain size in this city that it's become so damn difficult to get any kind of a stadium deal concluded.
Of course, any of the machinations that go on behind the scenes when it comes to deal making and the "scratch my back, I'll scratch yours" mentality that was part of Crocus's culture are not going to be reported in the pages of the Free Press. As Martin Cash says, it was having Crocus's crap exposed by the likes of me that has led to a decline in investment in this province. That's right, Martin, what we need are more behind the scenes deals that end up fleecing unsuspecting investors like Crocus shareholders along with the taxpayers. Too bad Crocus had to wither on the vine, eh Martin? No more of those glowing articles transcribing Crocus press releases like the one praising the Solidarite scam "investment" as a sign of how great Crocus was.

Martin Cash's article about Westsun again raises questions about whether anyone associated with Crocus was competent

The Crocus Fund's investment of $20.9 in Westsun Sound and Light was its single largest investment. I've written extensively about that investment in the past. In fact, in 2002,  it was when I saw how much Crocus had poured into that sinkhole, I first began to raise questions about just what the heck was going on at Crocus anyway. It also occurred to me that Crocus's share price was hugely inflated since the Westsun investment constituted a huge proportion of its total investment portfolio, yet the share price had remained relatively high.
I wanted to know what value Crocus placed on that investment at the time. I began asking questions about Crocus in the fall of 2001. According to Cash, Crocus wrote off its Westsun investment in early 2003. Questions still remain, however, about whether anyone associated with Crocus was asking any questions at all about the Westsun investment?

Following is a letter I just sent to the Free Press:

In the Thursday (May 8) issue Martin Cash wrote about the connections among the theatrical company, Livent; the sound and light company, Westsun; and the Crocus Fund.

Cash writes that "in early 2003, Crocus wrote off its entire stake in Westsun which was then valued at $20.9 million."

What Cash doesn't write is that Crocus poured the bulk of that $20.9 million  into Westsun at a time when the problems with Livent, Westsun's single-largest customer, were already well known. This one, single investment typifies the lack of sound judgement that both the auditor general and the receiver for Crocus found in their reports on Crocus.

Yet, even laypersons such as myself, with no special knowledge of Crocus's inner workings, could see that Crocus had put itself at great risk with its huge investment in Westsun. Following is an excerpt from an article that I wrote about Crocus's problems in February, 2002, for my own newspaper, The Jewish Post & News, in our Financial Guide supplement:

' In 1995, Crocus made six further investments, one of which was for $2.5 million in Westsun International - a builder and leaser of lighting and audio equipment to the entertainment industry across North America. Although the initial investment in Westsun did not stand out much from any other investment, over the years the investment in Westsun grew many times over. According to the Fund’s Annual Statement, as of September 30, 2001, the investment in Westsun International now stands at $20,915,442, of which $6,112,903 is in the form of equity, while $14,802,539 is in the form of debt and convertible debt.

Interestingly, the stake of Crocus’s investment in Westsun grew by $6,805,089 between 2000 and 2001. In my e-mail to Sherman Kreiner I asked him about the investment in Westsun: “Rumour has it that the Fund has lost $20 million on its Westsun investment. From your 2001 statement I see that there is an increase in Westsun’s debt held by Crocus of some $7 million, bringing Crocus’s total investment to over $20 million. Does this not mean that Crocus has more than 10% of its total capital invested in one company? Does this not constitute a violation of Crocus’s mandate? Further, is Westsun still in operation? Are there any prospects that it might be sold?”

Neither Sherman Kreiner nor Bob Jones answered my questions about the Westsun Investment. Mr. Jones did suggest that the performance of the Fund overall should be taken into account: “The Fund is of course always prepared to discuss the overall performance of the Fund as this is the true test of financial performance that is of interest to shareholders and one of the best indications available to financial advisors in making recommendations to their clients.”

In fact, Westsun had been one of the stellar performers in the Crocus portfolio until quite recently. With offices in nine different cities, including its head office in Winnipeg, Westsun had expanded rapidly since its inception in 1978. Unfortunately, several events conspired to have an adverse effect on the company’s fortunes, especially the failure of Livent, a theatrical company owned by Garth Drabinsky. Livent had been producing some of Toronto’s and New York’s major theatrical shows and Westsun had been actively engaged as providing light and sound support until Livent’s sudden failure.

Although attempts at contacting spokespersons for Westsun proved fruitless, I did manage to speak with an employee at the Winnipeg warehouse for Westsun. I was told that Westsun has a skeleton staff in Winnipeg, and that the bulk of its operations are now located in New Jersey.

As previously indicated, I attempted to have two members of Crocus boards comment on the Westsun investment. One of these individuals was quite surprised at what I told him about the size of Crocus’s investment in just one company, while the other admitted that members of the Board of Directors find the Westsun situation “worrisome”.

Rob Hilliard, President of the Manitoba Federation of Labour, was willing to offer thiscomment on the investment in Westsun: “Westsun has been in serious trouble and it’s a major investment (of Crocus). It’s one that’s given us our biggest headache. There are currently discussions happening about buyouts and a merger of Westsun with bankers, lenders and other potential buyers.” '

At the 2002 Annual General Meeting of the Crocus Fund, I attempted to ask questions about the Westsun investment, but Mr. Hilliard, as chair of that meeting, told me that I would not be allowed to ask any questions.

One wonders, therefore, based upon what happened with this one terrible investment, whether anyone associated with Crocus ever acted responsibly to safeguard the shareholders' interests.

Not only did I raise questions about the Westsun investment in the article that I wrote in 2002 (which the Crocus Fund was largely successful in preventing being published), I began to raise questions about that investment and Crocus's valuation methods with many members of the media (including Martin Cash), our provincial government, and the Manitoba Securities Commission.

Had anyone bothered to take my allegations seriously at the time, Crocus shareholders might have been spared tens of millions of dollars of losses if those agencies and individuals who should have been scrutinzing Crocus's affairs had been doing their jobs properly.

As I noted in an earlier entry, I have made a practice of reprinting, on this blog, letters that I send to the Free Press, so that readers can see for themselves how loath the deep thinkers at that paper are to print anything that might show how lacking their coverage of Crocus has always been. (Remember, this is the newspaper whose former editor made it a practice to send Sherman Kreiner letters that were critical of Crocus for Sherman to vet. None of those letters ever made it to print. They certainly maintain a high standard of editorial integrity over there, don't they?)
Here's my most recent letter to the editor of the Free Press:
"Dan Lett's most recent criticism of the Crocus shareholders' class-action lawsuit says that our "legal team is desperate to disown the $200-million price tag attached to the lawsuit at its inception".

 

You have to hand it to Dan Lett: He's not backing down from his self-appointed role as the sole repository of the truth about Crocus. In today's Free Press he takes shots at: The governmernt - for settling with Crocus shareholders; lawyers for the shareholders - because they might earn fees for their work; and yours truly - for suggesting that the truth about Crocus is not going to be arrived at in a courtroom.
All right, Dan - I admit that your head was rightfully spinning when the government announced that it was settling with Crocus shareholders for $2.75 million. After all, didn't you write that the government would never settle with shareholders and that the lawsuit was a waste of time? I had written letters to the editor of the Free Press warning them that there were going to be some surprises in store for you, Dan, but I couldn't have told anyone what those surprises were going to be. You found out what they were last Monday, and you were left scrambling to find a fallback position, which is: Attack the lawsuit for not getting $150 million for shareholders. (By the way, I predicted that you would do exactly that earlier on this blog.)
So, you go ahead and ask: Where did the figure of $150 million come from? And when David Klein, our lead lawyer who wasn't brought into the lawsuit until its second year, wasn't able to come up with a satsifactory answer for you, instead of doing a little more digging in your own archives, you  proceed to perform another one of your hatchet jobs on our lawsuit.
Here's how the figure of $150 million was arrived at, Dan: (And if you don't believe me, just go and reread Paul Egan's reporting on the subject. He was one Free Press reporter who did his homework.) When the sale of Crocus shares was halted on Dec. 10, 2004, the price per share was $10.45. Every $14.1 million of value in Crocus translated into $1 of share value. Thus, the total value of Crocus on Dec. 10, 2004, was approximately $150 million.
If Crocus had eventually been found to have 0 value (in a worst-case scenario), then the total loss to all shareholders would have been $150 million. When our lawyers at the time that we filed our original lawsuit in July, 2005  sued the defendants who were named at that time, they  sued for the maximum possible loss that shareholders might have suffered. (In addition, our lawyers asked for $50 million in punitive damages, which was also a standard request in lawsuits of this sort.)
But, in the passage of time, it became  clear that Crocus has a value. In his most recent report, the Receiver for Crocus pegs that value at $88 million, which translates into approximately $6.15 per share. Thus, the loss to shareholders is obviously substantially less than $150 million.
Now, insofar as the settlements are concerned, a couple of points are worth mentioning: In the first place, settling with defendants is always a matter of determining  what is realistically obtainable. Our lawyers have always had to weigh the risks of going through a long and protracted litigation process versus the advantages of settling with the defendants. As Geoff Kirbyson wrote in Friday's Free Press (At least there's one reporter there who does his homework), the class-action lawsuit is far from over. We still have one hold-out defendant in Wellington West, in addition to which new claims will be filed against the law firm of Fillmore Riley and the professional valuator Stafford Swain, for another $3.1 million. (Those claims have actually been assigned to us by the officers and directors of Crocus as part of the settlement agreement that was worked out with their insurance company.)
So, before you go on decrying the lawsuit as a waste of time, Dan, why don't you do a little more work (maybe check with Kirbyson) to understand how the figure of $150 million was arrived at and compare this lawsuit with others of the same type?
Finally, I've written before on this blog that the main obstacle to finding out what really happened at Crocus has been the Winnipeg Free Press's refusal to delve into what happened. Dan, last spring, you refused to report one word on any of those leaked e-mails from officials in Finance to the govenment warning them that Crocus was in severe difficulty. Instead, just prior to the election you treated us to your opus: "The last days of Crocus", which was nothing more than the unabridged Sherman Kreiner version of events.
If the Free Press ever decides to do some honest reporting on Crocus, we could probably get as true a picture of what happened as is possible. Sure, a public inquiry could do that, but we know that ain't going to happen while the NDP is in power. As for a trial - after seeing how many delays there were just to reach the point we did last Monday, I'm not sure how many Crocus shareholders would still be alive to see any results from a trial. Given the degree to which lawyers for the various defendants were able to prolong the process, it likely would have been years and years before anyone would have given any useful testimony in a trial.
I'll tell you what though, Dan: I've offered to cooperate with you guys at the Free Press in writing the true story of what went on at Crocus, but no one has ever taken me up on that offer. We have an Auditor General's report, a Receiver's report, and hundreds of stories written on the subject in various media. Why don't we get together and work on producing something that could be published in your paper that could actually amount to a useful expose of what went on at Crocus?
I won't hold my breath waiting for the Free Press to agree to that, however. After all, this was the same paper that used to print Crocus press releases ver batim and treat them as legitimate stories, not to mention those two supplements you produced for Crocus in 2002 and 2003 that were written and paid for by Crocus, yet carried bylines under each and every story saying: "special to the Free Press".

Readers of this blog will be well aware of the disdain with which I treat much of the coverage (or lack thereof) that the Winnipeg Free Press (or, as I like to call that paper: "Pravda on the prairie") has devoted to the ongoing Crocus scandal story.
The fact that there was nary a word on the editorial page about the settlements reached with four of the defendants to our lawsuit, in itself speaks volumes about the schism that is taking place at the most self-important media outlet in this province. How embarrassing it must be for the heavy lifters over on Mountain Ave. to think that, ever since they let Dan Lett run wild with his off-the-wall musings about how the class-action lawsuit was going nowhere, and that poor Sherman Kreiner was the victim in everything that had happened at Crocus, things haven't turned out quite the way Dan boy had predicted.
But, no matter whether a Free Press reporter (or is he a columnist?) was as wrong as wrong can be, the Free Press has to stand behind its man - right? (Well maybe not always. We still haven't read why they deep-sixed former editor Nick Hirst back in 2004, right around the time the Crocus scandal was first exploding. Could it have been that one of the paper's owners was taken aback at the level of cooperation between Hirst and Kreiner in keeping embarrassing revelations about the Solidarite transaction out of the paper?)
Still, there are two different types of decision-making going on at the Free Press these days. One type is the decision not to comment at all on the settlements reached with all but one of the defendants to the lawsuit. Even the Winnipeg Sun, which is hardly a serious paper, published a decent editorial lambasting the NDP government for its gross hypocrisy in agreeing to pay out $2.75 million to Crocus shareholders despite insisting for years that it would never pay a cent to us.
Then again, we knew something was up with the Free Press last winter when there was not one single word written about the leaked e-mails from officials in Finance warning the NDP government years ago that things were rotten at Crocus.
Yet, there is also another type of writing going on at the Freep that exemplifies a much higher standard, and that is Geoff Kirbyson's occasional reporting on the story. This past Friday Kirbyson wrote a succinct piece pinpointing Wellington West's awkward situation as the last holdout to a settlement. There was no editorializing in the story (unlike Lett's style, which is to mix in his own analysis with what appears to be straightforward reporting).
In fact, we have been told that the Free Press is quite torn how to proceed in its coverage of the Crocus story. The infighting is reflected in the letters to the editor. The occasional letter that appears related to Crocus invariably criticizes the lawsuit, often repeating the by-now well worn admonishment that "Crocus shareholoders have only themselves to blame for what went wrong". Since I am reasonably certain that the Free Press will refuse to print any letter from the likes of me that is terribly embarrassing to their star reporter Lett, when I do send them a letter, I also put it into this blog, just to let anyone reading it know how censorious certain individuals at Pravda on the prairie are when it comes to Crocus.
I've said it before, and I'll say it again: When the true story about Crocus is finally written, there are several players whose roles need to be examined much more fully. One, I've suggested, is the credit unions, and their all-too-easy willingness to steer their clients into buying Crocus. The other is the Free Press and its shilling for Crocus over the years - a legacy that continues to this day, and which is evidenced by its tortured inability to report on details that put the lie to so much of the crap some of its writers have been feeding us.

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