The $200-million class–action lawsuit against now-defunct Crocus Investment Fund has been settled with its last defendant, finally setting the stage for the fund’s court-appointed receiver to make payments to Crocus’s 34,000 unitholders.

Wellington West Capital Inc. , the former lead underwriter of the labour-sponsored investment fund, has agreed to pay $500,000 to have itself dropped from the class action.

Kish Kapoor, president of Winnipeg-based Wellington West, says the payment was the “best solution” for all parties involved. Even though he was confident his firm would have prevailed had the lawsuit gone to court — neither the auditor general nor the receiver found fault with its conduct in a pair of detailed investigations, he notes — it would have cost Wellington West between $3 million and $5 million to defend itself. “We made this decision because we felt it was in the best interests of shareholders,” Kapoor says. “This avoids expensive litigation costs and time and money.”

Russ Holmes, a partner with Deloitte & Touche LLP in Winnipeg-who is overseeing Crocus’s receivership, issued a written statement after being informed of the Wellington West deal. He says that assuming the settlement receives the necessary approvals, “a major impediment” will have been removed to asking the court for permission to give money back to shareholders.

“If everything falls into place,” he says, “we would like to be in a position to make a distribution to the Crocus shareholders by late fall.”

In Deloitte & Touche’s latest quarterly report on the fund, it pegged the value of Crocus shares at $6.18 each as of June 30, down 3¢ since March and up from $6.12 a year ago.

During the fund’s heyday in the summer of 2000, Crocus shares peaked at $15.39. After the third of three major writedowns in the spring of 2005, the shares were knocked down to about $7.

The Wellington West deal means the class action has now secured agreements for more than $12 million from defendants, including the Province of Manitoba, the Manitoba Securities Commission, BMO Nesbitt Burns Inc. (an underwriter for the fund) and PricewaterhouseCoopers (the fund’s auditor), as well as the fund’s directors and officers.

This last group was undoubtedly breathing a collective sigh of relief in mid-July, when the RCMP issued the results of its three-year investigation into activities at the fund before its shares were frozen in December 2004. After examining more than 60,000 documents and interviewing almost 100 people, the Mounties have said no arrests are warranted.

Sgt. Line Karpish says although there was significant evidence of poor governance; a weak investment-management process; a lack of internal controls, policies and procedures; and poor expense management practices at Crocus, none of that added up to “criminal behaviour.”

Fund officials aren’t completely out of the woods, however. The MSC is continuing to pursue its own investigation into the valuation practices of Crocus’s board of directors and hopes to have a hearing as early as this fall.

In addition, the provincial Tories have reiterated their call for a public inquiry into the role Gary Doer’s provincial NDP government played in Crocus’s demise.

Bernie Bellan, the maverick investor who spearheaded the class action more than three years ago, says that although he is glad that tentative settlements have been reached with all the defendants, he is still hoping to secure more money for shareholders from Filmore Riley, the law firm that provided general counsel to the Crocus board of directors, and Stafford Swain, an independent business valuator who worked on contract for the fund.

Bellan says the plaintiffs’ legal team will receive a 33% commission and therefore has earned more than $4 million in fees.

Crocus, once the focal point of venture-capital activity in Manitoba, ceased trading amid serious concerns over the valuations of the companies in its portfolio.

The LSIF was placed into receivership in June 2005, and the receiver has been systematically selling off its assets ever since. At the same time, Bellan launched the class action, claiming Crocus officials misled investors by overstating the value of assets held in the fund. IE