Former Crocus CEO tries to quash auditor general's report

A former top official with the Crocus Investment Fundtried to have a 2005 report on the fundby Manitoba's auditor general quashed by the courts Tuesday.

Jon Singleton's scathing report into thelabour-sponsored venture capital fundaccusedits senior managers of mismanagement and misrepresenting share prices.

Sherman Kreiner, former president and CEO of Crocus, asked a Court of Queen's Bench judge to declare that Singleton had erred in his investigation and findings.

On Tuesday afternoon, Justice Morris Kaufman put over the matter until mid-December to give him time to decide what evidence the lawyers will be allowed to present.

Crocus stopped trading on Dec. 10, 2004, over concerns about the true value of its shares. In April, the fund dropped the value of its shares to just below $7, almost a third less than their value when trading was halted. The devaluation amounts to a $46-million decrease in the fund's net asset value. The fund went into receivership in June 2005, a month after Singleton's report came out.

About 34,000 Manitobans had more than $150 million invested in Crocus,which promoted its mandate to invest in Manitoba companies.

Singleton'sreport found serious weaknesses in the fund's operations and governance.He said Crocus's entire investment processes and procedures were significantly flawed.

Alleges wrongfully blamed

Kreiner alleged that the report wrongly blames him, and he was not given a fair chance to respond to the auditor general's investigation, despite having undergone a nine-hour interview by investigators.

He also contended his explanations of certain areas of concern were deliberately left out of the report. Kreiner said he's seeking a judicial remedy for those issues.

Lawyers for the auditor general's office tried to have Kreiner's motion thrown out Tuesday, with lawyer Bill Haight calling it "frivolous, an abuse of the legal process."

Haight said that if Kreiner has issues with the auditor general's report, he should file a legal claim rather than seek a judicial remedy.

However, filing a legal claim could cost Kreiner up to hundreds of thousands of dollars and take a long time to complete.

By asking for a judicial remedy in the Court of Queen's Bench, Kreiner is avoiding those costly legal proceedings.

In July 2005, a group of Crocus investors filed a $200-million lawsuitnaming Crocus, two brokerage houses and the Manitoba government, citing Singleton's report as the basis for the statement of claim.