The board of directors and senior managers of Manitoba’s Crocus Investment Fund failed to fulfil their responsibilities to the fund, the province’s auditor general said today.

Jon Singleton said he found “serious weaknesses” in Crocus’ operations in an investigation that was prompted by a big devaluation of the fund’s assets.

In his 240-page report, Singleton found several issues, including:

  • a lack of oversight by the fund’s board of directors.

  • flaws in the fund’s investment procedures.
  • abuse of the fund’s travel and expense policy.
  • the value of the fund’s assets appear to have been overstated.

    Crocus halted trading and redemption of its shares on Dec. 10, 2004. In April, the fund dropped the value of its shares to slightly less than $7, almost a third less than their value when trading was halted. The devaluation amounted to a $46-million decrease in the fund’s net asset value.

    Trading remains halted and more than 30,000 Manitoba investors are still unable to touch their investments, which total more than $150 million.

    “My report should not be read as an indictment of venture capital investing or of [labour-sponsored investment funds],” says Singleton. “Rather it should be read with a view to identifying opportunities to improve LSIF governance, and as a source of reference for improving the LSIF legislative framework in Manitoba.”

    The Manitoba Securities Commission is also investigating the fund.