The head of troubled Retrocom Growth Funds Inc. has a number of roles as its single largest investor, raising potential conflict of interest issues at the frozen labour-sponsored fund.
Joseph Fashion, chief executive officer of Retrocom, is also the business manager, financial secretary and a pension plan trustee of Toronto local 353 of the International Brotherhood of Electrical Workers. The IBEW's pension plan has a $20-million investment in Retrocom. In addition, Mr. Fashion is a trustee of the Retrocom Mid-Market Real Estate Investment Trust, a significant holding of the labour-sponsored fund (LSF).
In December, Toronto-based Retrocom took the drastic step of suspending redemptions in the $48.9-million fund, attributing the freeze to a flood of investors wishing to exit. Last month, the real estate development fund warned its estimated 21,000 investors that "a significant reduction" in the value of the fund will be required.
Some of the 6,000 members of local 353 have been following developments closely. In 1995, local 353 was one of Retrocom's founding sponsor unions, and by 2003, about 5 per cent of the union's pension plan assets were held in the LSF. On Dec. 31, 2004, the plan was valued at $628.2-million.
Retrocom returns have been disappointing -- the fund lost 5.3 per cent of its value in 2003-- but the leadership of local 353 urged members to be patient. "Selling our shares in Retrocom when their value is low might do more damage to our fund than holding on to them in the hopes that the value will rise," pension trustees said in an April, 2004, bulletin. In addition, trustees assured union members that Retrocom's investments in the construction business had created more than three million hours of union labour.
Mr. Fashion was appointed CEO of Retrocom in June, 2004, and union members began to ask questions about the potentially competing responsibilities of the long-serving head of local 353, said Perry Speranza, a union member and electrician. The interest in Retrocom was an issue in the local's election in the summer of 2005. Mr. Fashion was re-elected business manager; but some union members filed complaints with the IBEW's Canadian national office.
The national office confirmed that complaints were filed but refused to comment. Members of local 353 allege the national office has moved slowly on the investigation, and on Friday, they held a demonstration at the IBEW's national headquarters in Toronto.
"We all knew Retrocom was going for a fall, and a lot of people were selling it off," Mr. Speranza said. "We had concerns about Joe Fashion and his conflict of interest in Retrocom."
Mr. Fashion did not respond to telephone calls last Thursday, and was unavailable Friday. In an interview, Don Leitch, business representative of local 353 said, "I don't have any concerns" about Mr. Fashion's roles within the union and the fund.
Some investors have raised concerns about Mr. Fashion's duties, Retrocom spokesman Paul McKenna said. But Mr. Fashion has kept his union and fund activities independent of one another, and forgoes any salary or honorarium for his work at the LSF, Mr. McKenna added.
Unions are closely tied to LSFs. For example, each fund must have a sponsoring union; 60 per cent of seats on a fund's board of directors are held by the sponsoring union.
Nevertheless, several sources in the LSF sector said Mr. Fashion's decision to serve multiple roles presents the appearance of a conflict. The Financial Services Commission of Ontario oversees more than 8,000 pension plans in the province. A pension plan trustee's interests cannot conflict with interests of the fund, and the board of trustees must have a conflict-of-interest policy.
Retrocom expects to release its delayed audited financial statements for the year ended Aug. 31, 2005, on Feb. 28.
Templeton, Dundee switch
Goodbye, Mr. Reed. Hello, Mr. Goodman.
This fall, Franklin Templeton Investments Corp. is leaving its digs at Yonge and Adelaide in downtown Toronto. Operations will be split in two, with the bulk of back-office staff heading to north Toronto and the rest of the team, including president and chief executive officer Don Reed, moving west on King Street.
Ned Goodman's growing financial empire will be taking over Franklin's five floors at One Financial Place. Dundee Wealth Management Inc. wants to consolidate operations under one roof, so Dundee Securities Corp., along with Dynamic Mutual Funds Ltd., will be moving from Queen St. W. and King St. W., respectively, to the new offices early next year.
It's an important strategic move for Mr. Goodman. In November, 2004, Dundee was granted a Schedule 1 bank charter from the federal Minister of Finance. Real estate industry sources say Dundee's plans include a street-level retail bank branch at Yonge and Adelaide.
Norshield update scheduled
Investors in Norshield Financial Group need to circle Feb. 21 on their calendars.
On that day, RSM Richter, the receiver of the troubled hedge fund, will hold a meeting in Toronto, with video conference links for investors in Montreal and Vancouver. There are 1,900 investors in various Olympus United funds managed by Norshield. Montreal-based Norshield was plunged into crisis in May last year when it suspended redemptions. RSM Richter expected to recover only a "nominal" amount -- about $8.5-million -- of the $132-million invested.
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