The Crocus Investment Fund and Greg Selinger - A Matter of Privilege

Below is the text of a Matter of Privilege I raised in the Legislature on Wednesday April 4:

Mr. Gerrard: Mr. Speaker, under Beauchesne's rules 114 and 115, as the Speaker knows, matters of privilege are serious matters. It must be demonstrated there's a prima facie case for a matter of privilege and that the matter has been raised at the earliest possible opportunity. I, today, allege that the Minister of Finance has intentionally and deliberately misled this House in a most grievous and egregious matter, and that the fact that the minister has misled this House has caused many thousands of Manitobans to lose millions and millions of dollars, perhaps as much as $100 million.

Mr. Speaker, I refer you to the words of the Minister of Finance in his budget speech of April 22, 2003, in which he said, and I quote: "Our economic prosperity depends in part in putting our savings to work here at home. Our existing laboursponsored investment funds, Crocus and ENSIS, have been very successful in this regard."

I want to emphasize, Mr. Speaker, that the Minister of Finance did not say that Crocus was a highrisk venture capital fund. He did not even say that Crocus was just successful. The minister said that Crocus was very successful...

The Minister of Finance's comments were consistent with other actions of the NDP government and comments by other members of the government which provided a message from the government, and I will document this in due course, that the Crocus Investment Fund was doing well and that Manitobans should therefore be encouraged to invest in the Crocus Investment Fund.

Mr. Speaker, while the Legislature was in recess, and since we last were sitting in this House, a Cabinet document became public on February 23, 2007, which shows clearly that the Minister of Finance misled the members of this House when he made this statement on April 22, 2003, that the Crocus Investment Fund was very successful. This, and other statements of his government have so misled many Manitoba citizens that they have lost millions of dollars as a result. The Cabinet document to which I refer is a submission by the Minister of Finance to Cabinet. It's dated November 27, 2000, and it's signed by the Minister of Finance. It shows that the Minister of Finance not only knew of the information in this document, but he authored the document and presented the matters in the document to all other members of Cabinet. I now table a copy of this Cabinet document.

The document refers to the fact that Crocus management have approached the minister and/or his staff to advise that they have a potential for liquidity crisis. In this context, Mr. Speaker, a liquidity crisis means the fund may run out of money. This is certainly not the same as what the minister said when he said Crocus was very successful. In the document, it is clear that the future of the Crocus Investment Fund was described as poor with the fund going downhill with respect to value, performance, and cash. I quote again: "Crocus has prepared a number of scenarios to estimate the impact of redemptions and an annual selling limit on its investment assets. In each scenario, Crocus forecasts a liquidity problem as redemptions exceed new sales and liquid reserves decline." What the document signed by the Minister of Finance is saying is this: that Crocus has done a variety of forecasts for the future and in every single forecast, that is whatever Crocus does, it is in trouble. My point here is that it was very clear. Whatever scenario the Crocus Fund management tried, they knew and the Finance Minister knew from this document that the Crocus Investment Fund was heading for deep trouble.

In order to fully understand the extent of the difficulties of the Crocus Investment Fund, I now quote from page 2, paragraph 2 of the Cabinet document: "Crocus is seeking to use money from new investors to pay redemptions by existing investors." Mr. Speaker, there's only one reason that Crocus would need to use money from new investors to pay for redemptions by existing investors and that is if the Crocus Investment Fund was heading for big trouble and was not earning a sufficient return on its investments to be able to pay shareholders or unit holders who redeemed their shares at the listed value of the shares.

Mr. Speaker, it is important to note here that the words of the Minister of Finance were not isolated. The words in 2003 were matched by actions taken by the minister's government within days of the November 27, 2000 Cabinet document, which I have tabled.

Indeed, nine days after November 27, the government, of which the minister was and is a member, introduced Bill 4 which eliminated the coolingoff period for Crocus shareholders. This bill was designed specifically to encourage existing shareholders to reinvest in Crocus. The message from this bill to all Manitobans is that we are eliminating the coolingoff period so that you, as a Crocus investor, will receive a financial reward in the form of a tax credit for reinvesting in the Crocus Investment Fund. That's in Bill 4 introduced nine days after November 27. That is on the first possible day of the legislative session. On December 5, 2000, a bill was introduced to give people a new financial incentive to re-invest in the Crocus Investment Fund.

The government, through its action to speedily introduce Bill 4 and hastily pass this bill -- by December 15, had passed all stages in the Legislature and received Royal Assent -- sent a very clear signal to Manitobans just as the Minister of Finance did in his 2003 budget speech when he said that Crocus was very successful. The signal sent by Bill 4 was the Crocus Investment Fund is a good deal. We give you a new financial incentive to invest.

My point here, Mr. Speaker, is that the Finance Minister, as we now know from the Cabinet document of November 27, 2000, knew full well that the Crocus Investment Fund was in trouble and yet, instead of publicly cautioning people about the high risk of investing in the Crocus Investment Fund, he and his government passed legislation to promote further investments in the Crocus Investment Fund.

I need, at this point, to document the impact that the government's promotion of the Crocus Investment Fund had on Manitobans' decisions to invest in the Crocus Investment Fund. After the November 27 Cabinet meeting, Manitobans invested more than $22 million in the Crocus Investment Fund in 2001. In 2002, Manitobans invested more than $25 million in the Crocus Investment Fund. In 2003, Manitobans invested more than $29 million in the Crocus Investment Fund. In 2004, Manitobans invested more than $20 million in the Crocus Investment Fund. The total investment in the Crocus Investment Fund, after the November 27, 2000 Cabinet meeting, was more than $97 million.

It should be noted that those individuals who chose to invest in the Crocus Investment Fund after November 27, 2000, have lost money on their investments directly as a result of the misleading actions and words of this Minister of Finance and his government.

Mr. Speaker, I raise this issue now because until we had the Cabinet document of November 27, 2000, we did not know in this Legislature that we, in the Legislature, and the people of Manitoba generally have been so badly misled by the Minister of Finance. I am raising this issue, as the Speaker knows, because it is among the most serious of all offences, to deliberately mislead the members of the Legislature through statements and actions in this House.

It is now time for me to address the issue of why I believe the Minister of Finance not only misled the members of the Legislature, but deliberately and intentionally misled members of this Legislature. The Minister of Finance and his government had a motive. The Minister of Finance and other members of his government were looking for money from the Crocus Investment Fund to do a coinvestment with them in a new arena project and a project like the Maple Leaf Distillers project.

The Minister of Finance wanted his government to be able to benefit from announcements made by the Crocus Investment Fund in partnership with his government. Such announcements would be less likely if there was decreased investment by Manitobans in the Crocus Investment Fund, as could result if the minister had emphasized in this Legislature the highrisk nature of the Crocus Investment Fund.

Mr. Speaker, there was a motive for the minister to mislead Manitobans. The question is: Did the minister knowingly or deliberately mislead Manitobans? I believe that a critical review of this file will confirm my belief that he did. The minister knew full well that his actions and words were having the effect of supporting and encouraging Manitobans to invest in the Crocus Investment Fund, and as we know, many, many Manitobans did so.

To make a claim that the actions of the minister and his government in introducing Bill 4 and the statement of the Minister of Finance in his budget of 2003 were accidental or that he was misquoted or that his actions were misinterpreted is just wrong. The budget speech is not just everyday speech. Every word in a budget speech is crafted with great care so that it sends a clear signal to all Manitobans. I can only conclude that the minister's actions and his remarks were not accidental. They were deliberate and the minister deliberately misled Manitobans.

The matter of privilege has great importance today just before an anticipated budget speech by the same minister who, I have now provided substantive evidence, deliberately misled members of this Chamber and the general public of Manitoba. Mr. Speaker, it's very difficult to argue that a government bill and remarks in a budget speech are not deliberate actions. It is very difficult to argue that with what is now known from the Cabinet document of November 27, 2000, that the Minister of Finance did not mislead this House and the people of Manitoba. Thousands of Manitobans were misled into investing more than $97 million into an enterprise that the Finance Minister knew was in big trouble.

I now move, seconded by the MLA for Inkster (Mr. Lamoureux), that the Minister of Finance be replaced with a minister who has not so deliberately misled this Chamber and the people of Manitoba.