Manitoba

End of Crocus Fund saga within sight as Canad Inns, receiver reach provisional agreement

A provisional agreement over liquidation of assets has been reached between the receiver for the Crocus Investment Fund and the owners of Canad Inns, paving the way for a long-awaited conclusion to a made-in-Manitoba financial scandal.

Deloitte aiming for a final payment to Crocus Investment Fund shareholders in 2020, 16 years after scandal

The labour-sponsored Crocus Fund stopped trading in 2004 over serious concerns about share valuation practices. It was intended to raise capital for eligible Manitoba businesses through the sale of shares. (Submitted)

A provisional agreement over liquidation of assets has been reached between the receiver for the Crocus Investment Fund and the owners of Canad Inns, paving the way for a long-awaited conclusion to a made-in-Manitoba financial scandal.

In its quarterly report released last week, Deloitte — the court-appointed receiver for the venture capital fund — confirmed that on Sept. 13, 2019, an agreement in principle had been reached with Canad Corporation Ltd., after both parties participated in a judicially assisted dispute resolution process.

This comes after nearly a decade of unsuccessful negotiations with Leo Ledohowski, owner of Canad Corporation — the parent company that owns the local Canad Inns hotel chain.

The labour-sponsored Crocus Fund stopped trading in 2004, after nearly 12 years of activity, over serious concerns about share valuation practices. It was intended to raise capital for eligible Manitoba businesses through the sale of shares.

About 34,000 shareholders invested more than $150 million in the fund before Crocus stopped trading. Investigations by the auditor general and RCMP followed, eventually leading to a successful class-action lawsuit against the province.

The collapse of the fund led the courts to appoint Deloitte as the receiver.

The accounting firm was charged with recovering and distributing what was left of the fund back to investors — at the time, about $64 million invested across 46 companies, including Canad Corporation.

As it now stands, the majority of Crocus assets have been recovered by the receiver since it began its work in 2005. However, assets totalling $4.8 million owed to shareholders are still locked up with five companies. The majority of those assets are held by Canad Corporation.

In 2014, the receiver took Canad Corporation to court, seeking a court order to liquidate the company.

Deloitte's latest quarterly report states both parties are now "diligently working in good faith to enter into a definitive agreement on mutually acceptable terms," the details of which are not known. The deadline to finalize the agreement is Nov. 29, 2019.

As of June 2009 — the last time Deloitte published complete breakdowns of the Crocus Fund's investment portfolio — $5 million was shown to have been invested in Canad Corporation Ltd. when the fund was still actively trading a decade earlier.

The possible conclusion of this legal logjam now paves the way for a complete wind-down of the receivership, potentially putting an end to the Crocus saga.

In light of this, Deloitte says it is now aiming to make an application to the courts for a final distribution to Crocus shareholders in 2020.

Representatives for Canad Corporation could not be reached for comment.