Shareholders of the Crocus Investment Fund have reached a $12-million out-of-court settlement with most of the targets of a class-action lawsuit, including the Manitoba government.
Lawyer Jay Prober, who is representing the fund's shareholders, said a settlement in principle will see audit firm PricewaterhouseCoopers LLP pay $6-million, the provincial government and the Manitoba Securities Commission pay $2.75-million, directors and officers of the fund contribute $3.15-million, and BMO Nesbitt Burns Inc. pay $100,000.
The agreements still have to be finalized and approved by the court.
The Manitoba government has repeatedly denied any responsibility for the fund's collapse, but Finance Minister Greg Selinger said yesterday a settlement with no admission of wrongdoing was the cheapest legal option.
"To prove that there was absolutely no fault on the part of the province might cost more than an actual settlement," Mr. Selinger told the provincial legislature yesterday. "And our objective here is to protect the taxpayers from an unnecessary expense."
The Winnipeg-based fund was created by the Manitoba government in 1992 to invest in small Manitoba companies. It saw its securities frozen in late 2004, amid concerns it was overstating the value of its holdings. A 2005 report by the province's Auditor-General alleged improper accounting and abuses of expense policies, allegations that have been denied by former executives.
Wellington West Capital Inc., one of the fund's former investment bankers, has not joined the settlement agreement. Lawyers for shareholders expect to be in court in June to seek an order to have their class action against the firm certified.
Mr. Prober said the negotiated payments, along with the estimated $88-million expected to be recovered by the fund's receiver will mean shareholders will recoup most of the losses from their investments.
Bernie Bellan, who heads the Crocus Investors Association, which launched the class-action suit, said the settlement with the Manitoba government is "the most pleasant surprise" of the agreement, saying he thought the government would hold out as long as possible.
Mr. Bellan added he hopes the settlements will clear the way for the fund's receiver to begin distributing money to shareholders.
A court denied a 2006 request by the receiver to begin making distributions because it was unclear how much liability the fund was still facing from the outstanding shareholder lawsuit.
© 2007 The Globe and Mail. All rights reserved.
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