The receiver for crocus Investment Fund has been given the go-ahead to start liquidating the embattled labour-sponsored fund’s assets. But it is still uncertain whether long-suffering shareholders will be able to salvage any of their investments.

Manitoba Court of Queen’s Bench Justice Deborah McCawley denied a motion by the Manitoba Federation of Labour to appoint a third party to manage and administer the Winnipeg-based fund’s $85 million in assets. She subsequently approved a plan put forward by Deloitte & Touche Inc. , which was appointed receiver in June, to realize on the assets “over a reasonable period of time.”

Russ Holmes, the Deloitte partner in charge of the Crocus receivership, says his group has already begun dealing with the more than 50 companies in the Crocus portfolio.
“We’re having preliminary discussions on the companies’ thought processes as to where
this will head over the next short while,” he says.

Holmes declines to comment on whether any of the receiver’s work will soon result in buyers for one or more of the Crocus holdings. But, he says, he is not overseeing a fire sale. There is no timeline for the sale of the assets.

He also says it’s still too early to tell if or when Crocus’s more than 33,000 unitholders will get any of their money back. Of the $85-million value Deloitte has assigned to Crocus’s assets, $20 million of that is in cash.

“We would like to be in a position to pay some money out to shareholders,” he says. “We will probably make an application in court to do that as soon as is reasonably possible.
We don’t need all of that cash, but it’s the court’s decision.”

It has been a long and painful fall from grace for Crocus. After trading of its shares was halted last Dec. 10, it announced it would shut down. It has also been the subject of a scathing report by the provincial auditor general, a Manitoba Securities Commission investigation into allegations of “activities contrary to the public interest” and an RCMP investigation into allegations of criminal activity.

In addition, it has seen its entire board of directors and executives resign en masse because they could no longer obtain liability insurance. To top it off, Crocus has also been served with a $200-million civil lawsuit launched by a group of disgruntled shareholders.

The late October ruling effectively squashed the labour federation’s efforts to find a solution that would have kept Crocus an ongoing concern. But, MFL president Darlene Dziewit says, she’s not giving up just yet, especially because the receiver has said in court that the fund is not insolvent.

“If that’s the case, then we need to try to save it. Stay tuned, we’re trying to find options,” she says. She declined to outline any specific courses of action.

“We have talked with some people in the labour movement and we’re still looking at it,” she adds. “We’re not done yet. We want a labour-sponsored fund in Manitoba sponsored by the Manitoba Federation of Labour.”

Dziewit admits she was disappointed by the judge’s decision: “We still feel nobody has represented the shareholders. We don’t believe liquidation is the way to go. We believe the best way is to preserve this fund; $85 million in assets is a lot just to liquidate.”
However, others who believe that there’s still a role for the fund agree with the judge’s decision to leave the assets under the control of the receiver. “Because of the large number of lawsuits that are pending, until you know what those are, you need the protection of the receiver,” says Bill Watchorn, president and CEO of ENSIS Growth Fund, Crocus’s long-time competitor in the Manitoba market.

Watchorn has submitted a proposal to Deloitte and is optimistic he can convince the receiver that ENSIS can add value to “certain investee” companies.

“I wouldn’t say we would take over any [investees], but we could work as an agent of the receiver on various investees. We could join the board; we could provide additional funding if [investees] required and we could represent the interests of the shareholders,” he says.

Crocus, once the darling of the Manitoba venture-capital scene, has investments in many high-profile companies, including the American Hockey League’s Manitoba Moose, the Winnipeg Goldeyes independent baseball team, Wellington West Capital Inc. and WOW! Hospitality Concepts, a local restaurant operator. IE