The latest report from the receiver of Crocus Investment Fund ensures the four-year-long nightmare for Crocus’s 34,000 unitholders will continue into 2009.

This past spring, Russ Holmes, the Deloitte LP partner overseeing the Crocus receivership, had reported that he expected to be able to make distributions to investors as early as this past autumn. Now, however, Holmes’ latest report says, a number of matters need to be cleared up before any money is moved.

The major holdup, the report says, is completing settlement agreements with defendants in the $200-million class-action lawsuit.

“Progress is slower than anticipated,” Holmes’ report says. “Assuming the outstanding matters are dealt with in a timely manner, we would expect to be back in court in early 2009 to seek approval on a distribution to shareholders. The indemnifications to the directors and officers and underwriters as a result of the class action form the vast majority of the fund’s contingent liabilities.”

The report says Deloitte would be unable to pursue a distribution prior to the resolution of four events:

> the plaintiffs, Crocus’s directors and officers, and the receiver need to finalize arrangements for the settlements in the class action, and all settlements need to be documented formally;

> the agreements in principle between the plaintiffs and the other defendants need to be similarly documented;

> all settlement agreements need to be approved by the court; and

> all subject conditions need to be satisfied and the indemnification claimed by Wellington West Capital Inc. will have to be considered.

Last winter, the Province of Manitoba, the Manitoba Securities Commission, Crocus’s former directors and officers, BMO Nesbitt Burns Inc. and PricewaterhouseCoopers LLP agreed to pay out more than $12 million collectively so they would be dropped as defendants in the class action. Wellington West agreed to pay $500,000 in July.

A $3.1-million deal with the directors and officers did not receive court approval at a recent hearing but their lawyer, Ken Filkow, expects that to change shortly.

“There are agreements in principle with the defendants across the board,” he says. “The interrelationships are complicated, so there has been a lot of time spent trying to refine the agreement and address the relationships. I would expect it will advance to the point of a significant court hearing within the month.

“All of us,” he adds, “would like to see it move to the point of a distribution [to unitholders].”

Crocus, once the focal point of venture-capital activity in Manitoba, voluntarily stopped trading its shares in December 2004 amid serious concerns about the valuation of companies in its portfolio. Following scathing reports from the provincial auditor general and Deloitte, in which directors and officers were accused of “abdicating their responsibilities,” Crocus was forced into receivership. It never returned to market.

Bernie Bellan, the outspoken Crocus unitholder who spearheaded the $200-million class action, says he’s disappointed that his fellow investors must continue to wait for what is rightfully theirs.

“The receiver could very well distribute money regardless [of what’s happening with the class action],” Bellan says. “Since Holmes doesn’t explain why he isn’t, the onus is on him to give an explanation. I don’t understand why things have changed since June, when he said he would distribute money in the fall.”

Doug Brown, enforcement director at the MSC in Winnipeg, says the regulator’s hearings into the conduct of Crocus’s directors is still months away and can’t begin until the class action has been settled.

One of the motions brought forward by a director, Brown says, was that an MSC hearing couldn’t take place at the same time as the MSC was involved in a lawsuit on the matter.

For the year ended Sept. 30, the receiver reported Crocus had net income of $696,000. In the fourth quarter, net income was $139,000. The net carrying value of the remaining 18 positions in the Crocus portfolio is approximately $20.7 million. It also has about $64.4 million in cash and equivalents, a $1.5-million gain from the end of June.

As of June 2005, there were 46 investee companies in Crocus’s portfolio, with a gross carrying value of $64.1 million. Deloitte pegged Crocus’s share value as of Sept. 30 at $6.19. At the fund’s apex in 2000, its shares were trading at $15.39 a share.

Charlie Spiring, CEO of Wellington West, says he is doing everything he can to help shareholders get their money as quickly as possible: “We’re trying to get it in their hands and allow them to turn the market malaise into a market win by deploying the Crocus money at the bottom of the cycle.”

@page_break@The irony, Spiring notes, is that Crocus has turned out to be one of the best-performing asset classes in the country this year.

“It’s been better than holding cash,” he says. IE