It's been quite some time since I've added anything to this website. Summer's almost over now, however, and the long lull in news about Crocus is about to come to an end. I thought it a good time to update readers of this site as to what's been happening with the lawsuit and other goings-on.
What's really surprising is how much Crocus has disappeared from the news over the past month and a half. What's happened to the attempt by the Manitoba Federation of Labour to regain control of Crocus? (Remember, the M.F.L. advanced the idea of appointing a new board composed of such discredited figures as former Free Press editor Nicholas Hirst and former Nesbitt Burns financial adviser Tom Waitt.) In fact, what the M.F.L. was really trying to do was muddy the waters so as to prevent the acting receiver who was appointed by the court to manage Crocus's affairs from doing his job properly.
By keeping the receiver uncertain as to how he should proceed, the M.F.L. has been working acting the interests of shareholders, who are desperate to hear that Crocus will be managed competently. With each passing day the possibility that shareholders will receive any value for their shares anytime soon becomes less and less likely, given all the uncertainty that the M.F.L. moves created. What is even more disturbing, however, is the total silence emanating from the M.F.L. ever since it was annonced that it was going to fight to regain control of Crocus. One can only see the hands of the N.D.P. spin meisters at work here, orchestrating some devious strategy meant to keep Crocus in turmoil for as long as possible.
As far as all the other legal maneuvering goes...yes, as I predicted much earlier on this website, Crocus has become a huge make-work project for Winnipeg lawyers. Every so often we hear of a motion being put forward in court. Right now many of the legal deliberations have to do with fees that lawyers acting for Crocus directors and officers are asking to be paid. What a mess!
The lawyers representing Crocus shareholders, however, have been busy preparing their case. In a short while the plaintiffs will be taking the initiative in pressing forward with what will eventually result in the certification of the "class".

To no one's surprise, Judge McCawley decided to go with the receiver's proposal to continue the orderly liquidation of Crocus assets. Russ Holmes may not be the most accessible guy, but he's competent and Crocus shareholders should not worry that he's going to give anything away.
As for Growthworks and the M.F.L., as I've said to various members of the media, strangely enough, there was a convergence of interests between Growthworks' objectives and the shareholders' objectives in the class-action lawsuit.
David Levi wanted to take over Crocus so that he could establish a presence in Manitoba for his national fund. (The only other province where he is not able to operate is Alberta, which does not presently allow any labour sponsored investment funds.) However, Levi said that he would not take over Crocus while the threat of the lawsuit is out there. (He said that the possibility of having to assume a huge liability in the event that there are cross-claims against Crocus from various defendants in the suit prevented him from making a legitimate bid to take over Crocus.)
So, I suggested to Levi that he could use his influence with the M.F.L. to get our lawsuit settled expeditiously. As a matter of fact, that option is still available to him. Here's how it would work: The M.F.L. would use its connections with the N.D.P. (to whom they're joined at the hip) to bring the government into the mix and effect a settlement that would involve the insurance companies that are really calling the shots for the various defendants named in our lawsuit. Since our NDP government was so deeply involved in Crocus's troubles - never mind their constant denials...what else are they going to say? - it's only a matter of time before the truth comes out and the full extent of the government's involvement in propping up Crocus for years after it should have been shut down becomes known. Look, when MaryAnn Mihychuck said that there were all sorts of "red flags" being raised within her Department of Industry about Crocus way back in 2002, and that the government chose to ignore them; and when Sherman Kreiner said that Crocus was protected by a "higher authority" within government (Hello, Eugene Kostryra), is anyone naive enough to buy Gary Doer's utter nonsense about having an "arms length " relationship with Crocus? (By the way, the government's stonewalling defence was crafted by their lawyer Bill Olson, who has told Doer, Selinger and the rest of the gang to hang tough, sweat this one out, and deny, deny, deny. Is it any wonder that Richard Cloutier, Dan Lett, Martin Cash, and a whole host of CBC reporters are competing to crack the government's defence? Poor Gary and Greg - the Conservatives are haplessly shooting themselves in the foot practically every day, but they've got the Crocus nightmare out there thanks to the sharks in the media who smell blood.)
By the way, by no means should anyone think that David Levi of Growthworks has abandoned his dream of acquiring Crocus. All that a smart guy like him has to figure out is how to get this damn lawsuit settled so that he can make an offer of a share swap to Crocus shareholders. Come on David, use your influence with Darlene Dziewitt to get Kostyra to the table.
Or, do we have to wait for Dan Lett of the Free Press to continue delving into the close connections between the NDP government and Crocus on page one of the Free Press every couple of weeks? How much more of those type of blockbuster investigations do we have to see before Gary Doer, a.k.a. the "Manitoba Candidate" (see "Crocus - the Movie" for more on this), begins to crack. What's going to be really rough for Gary to contemplate is the idea of some powerful friends of his in the labour movement, e.g. Rob Hilliard, Peter Olfert et al facing personal financial ruin if the class-action lawsuit succeeds. Remember, the total insurance for all the directors and officers of Crocus adds up only to $5 million. Once we're awarded damages, we'll be going after the personal assets of the directors and officers. Sorry, guys, that's how the the game is played.

Umlah buys $770,000 home on Park Boulevard

Speaking of personal assets, try this one on for size: James Umlah - he of the unflagging self-confidence and outrageous socks and ties, recently acquired a swank Tuxedo home formerly owned by Rick Bel and Ida Albo (owners of the Hotel Fort Garry). The sum paid was a staggering $770,000, which was $80,000 above the asking price of $690,000.
The home, at 605 Park Boulevard East (south-east corner of Park Boulevard and Grant), is actually registered in the name of Heather Welch, who is Umlah's girlfriend. (Protecting those assets aren't we, Jimmy?)
No doubt Crocus shareholders will be only too happy to know that the guy who is undoubtedly going to be blamed by all and sundry for all the crap that was going on at Crocus for years is not suffering financially from having had to leave his position at Crocus.
Gee - this is what we call "chutzpah", but Umlah never seems to have been short of that, has he?
(Sherman, what was it with Umlah and you? Was he some kind of Svengali, who had everyone totally mesmerized? Or have I just given away the line of defence that everyone's lawyer is going to use in the lawsuit?)
You have to hand it to Umlah, however: Through all the mud that's being thrown at him, he maintains that contemptuous attitude of smug superiority that shareholders were able to see firsthand each year at the annual meetings.
Note to Heather: If you and Jimmy split, do you get to keep the house or has he made sure that you have title to the house in name only? Remember, this guy is as slippery as they come!

Application for certification of class-action begins

The process by which the "class" of Crocus Fund shareholders will be certified by the court has now begun. It is expected that it will be a matter of months before we will be certified. According to lawyers for the shareholders, what is involved now is consultation with lawyers for the various defendants, and scheduling of a time for the case to be heard before a Queen's Bench judge.
One of the issues that has risen its ugly head is the claim by the officers and directors of Crocus who have been named in the lawsuit for indemnification by Crocus for their legal fees in this case. The receiver has said that he will pay the legal fees only for expenses that were incurred until the time he was appointed, which was the end of June.
The legal team representing the shareholders in the lawsuit will fight to the bitter end against the officers and directors being indemnified anything further than that. It was the officers' and directors' own carelessness that got us into this mess in the first place. (Yes, yes, we know everyone is going to blame Umlah for everything that happened, but what were these guys doing while Umlah was cutting his deals with investee companies? Didn't anyone there know how to read a financial statement? If I could figure out that Crocus was a pile of crap way back in 2001, and I was sending e-mails to Sherman, Bob Jones, the MSC, and a series of different NDP government ministers, what were smart guys like Wally Fox-Decent, Charles Curtis, et al thinking?)
We know now that the government knew full well that Crocus was in terrible trouble. As is usually the case when governments try to cover up unpleasant news, no doubt the NDP brain trust surrounding Doer was buying into Sherman's story that Crocus would be able to get itself out of trouble...all it needed was a little more time for some of those "fabulous" investments it had in its portfolio to develop. So, Gary - through his "fixer" Kostyra, gave Sherman that time.
Too bad it didn't work out the way you had hoped, Gary. Lucky for you the Opposition is in such disarray you're going to be able to stonewall on the demand for a public inquiry ad infinitum. Unfortunately, Mr. Premier, the undoing is always in the cover-up. Sooner or later, someone is going to start talking, especially when they're facing potential financial ruin - how do you like them apples, officers and directors of Crocus? MaryAnn Mihychuck gave us a taste of what lies buried within government vaults. We'll see how long the others who know where the bodies are buried can hang tough.

After today's prolonged court session, in which the Manitoba Federation of Labour made one last-ditch attempt to regain control of the Crocus Fund, I was left scratching my head, wondering what the M.F.L. is really trying to do.
The proposal that the M.F.L. brought forward, which was to have the Growthworks Fund from Vancouver take over management of Crocus, was so poorly organized that it is almost inevitable that Judge Macawley will give the receiver, Russ Holmes of Deloitte and Touche, total and permanent control of Crocus next Thursday, Oct. 21.
With all due respect to David Levi of Growthworks, who has spent a considerable amount of time preparing his proposal, the case that was put forward by M.F.L. lawyer Doug Ward never got at the substantive question just what it is that Growthworks could do for Crocus shareholders that would be such an improvement over what the receiver can do.
One might also ask why Ensis, also, didn't make more of an attempt to get involved at this point? Sadly, Bill Watchorn of Ensis was just never forceful enough in attempting to make the case for his fund. All that Ensis ever did in the past couple of weeks is propose that it work with the receiver in managing Crocus's holdings. Unfortunately for Ensis, since the receiver wasn't interested in its proposal any more than he was interested in the Growthworks proposal, Ensis's proposal was given short shrift and rejected out of hand.
Just ask yourself, Bill, why would the receiver want to give up control of Crocus? He's earning fabulous fees - probably enough to take him right into a golden retirement.

It's really too bad that neither Growthworks nor Ensis was willing to pony up with a legitimate offer to Crocus shareholders. If Growthworks had ever hoped to establish a presence in Manitoba, it was going to have to be through acquiring the assets of Crocus. Although Levi told me that he will consider applying for a charter for Growthworks as a distinct l.s.i.f. in Manitoba, given the nightmare that Crocus has become, it's hardly likely that the Manitoba government is going to allow any new l.s.i.f.'s to be created here.
As for Ensis - well, I would say that the pall cast over l.s.i.f.'s in this province as a result of the Crocus debacle will hurt them to the degree that their continued existence is now highly problematic. I had suggested to Watchorn that he pull out all the stops and make an offer to swap shares with Crocus shareholders, otherwise Ensis will likely have a tough time maintaining its credibility. I also told Levy that he'd have to come up with a hard offer, too.
Both men told me that, with the threat of the class-action lawsuit hanging over their heads should they attempt to take over Crocus, there was no way either one of them was going to make an offer, at this point, to Crocus shareholders beyond offering to manage the fund without actually owning it.
But, don't you see, Bill or David, if you had made a legitimate offer to Crocus shareholders that would have been attractive, we might have been able to talk about reaching a settlement of the lawsuit that would have removed any potential liability for you in taking over Crocus?
If the M.F.L. had any sense of purpose in all this, it would be trying to effect a settlement of the lawsuit before we actually get certified. How about it, Darlene Dziewitt of the M.F.L.? You're in a position to work to bring together the defendants named in the lawsuit. If you're seriously interested in having Growthworks take over Crocus in order to salvage your badly tarnished reputation, you're going to have to reach out to the Crocus shareholders.
All that I see in the M.F.L.'s posturing to this point, however, is a refusal to admit that the M.F.L. played a key role in Crocus's downfall and that you relinquished your right to have a say in Crocus's future long ago.
If you really want to get back in the game, Darlene, you're going to have to reach out to our group. And while you're at it, you can bring your friends who have buried their heads in the sand and have sworn that they never, ever, had any involvement in Crocus at all! (Talk about nose stretchers - Gary Doer. How are you going to fare under cross-examination...How did Alfonse Gagliano do?)

It's been quite a while since I've commented on what's going on with Crocus. Partly, that's because I've got to be more careful what I say... When I first created this website over a year ago, its primary purpose was to awaken people to all the crap that was going on at Crocus. That mission has been achieved. Look at what's happened in a relatively short period of time: All the main figures at Crocus are gone; Crocus shares are no longer being sold or redeemed; Manitoba's auditor general issued a damning report about Crocus; Crocus was placed into receivership; and finally, a class-action lawsuit against a wide range of defendants has been launched on behalf of all Crocus shareholders.
Yet, there is still so much confusion and uncertaintly as to what lies ahead for Crocus. Although the receiver, Russ Holmes of Deloitte & Touche, has done a very capable job of straightening out much of the mess at Crocus, we are now headed into a period where the future management of Crocus is up in the air.
Here's what I can tell you is going on: The Manitoba Federation of Labour, "sponsor" of the Crocus Fund (whatever that means), is opposing the receiver's proposal to manage the Crocus Fund from hereonin until all Crocus assets are totally liquidated - a process that the receiver estimates will take up to five years to complete. The M.F.L. has been working with David Levi, the manager of a Vancouver based national labour sponsored investment fund known as Growthworks, to come up with a proposal to take over management of the Crocus Fund.
Levi is a very personable, bright guy, who claims to be able to turn around floundering l.s.i.f.'s and produce more value for unitholders. His ultimate goal is to merge Crocus into his national l.s.i.f. - the Growthworks Fund, which is currently available for purchase in eight out of ten provinces (the lone holdouts are Manitoba and Alberta, - which does not have any l.s.i.f.'s.)
Levi proposes to offer Crocus unitholders shares in his Growthworks fund, commensurate with the value that Crocus would be worth. Let's say, for the purpose of argument, that Crocus shares are actually worth $5.00...if Growthworks shares are being sold for $10, every Crocus shareholder would receive half a share in Growthworks for every share in Crocus they owned. Also, Levi says he would redeem matured Crocus shares at the price determined by an outside valuation.
Levi says, however, that he won't begin this process until the question of the class-action lawsuit is resolved. Since that is not likely to happen for some time yet, no one, including Growthworks, Ensis or any other management group, is interested in actually buying Crocus. What various groups, including Growthworks and Ensis, are willing to do, is manage Crocus as a going concern with the receiver still in charge. Thus, rather than wind down Crocus, as the receiver proposes to do, in this scenario Crocus would continue to operate indefinitely, but under a third-party manager.
On October 19, the judge who is presiding over Crocus's receivership, Deborah Macawley, will consider various proposals regarding the future of Crocus that will be submitted, including the receiver's already submitted proposal and the proposal that will be coming from the M.F.L.
It will be interesting to see whether Ensis decides to make a concerted proposal, as an alternative to the Growthworks proposal. Ensis will likely play upon the fact that it is a Manitoba company, as opposed to Growthworks.
It is entirely possible that the judge may order a general meeting of Crocus shareholders, at which time the future of Crocus would be put to a vote. (That did seem to be the direction in which she was headed at the last court hearing, which was in September.)

Umlah buys $770,000 home on Park Boulevard

Application for certification of class-action begins

So, what about the class-action lawsuit?