Bt Investments Blog

The Winnipeg Free Press has mysteriously released Gordon Sinclair from his cage. Is Bob Silver in the Dominican Republic? Who let the dogs out? Go, Gordon!

Mayor's excuse divorced from reality
So Goldeyes can't afford to pay Crocus? Doesn't add up
Winnipeg Free Press
Thursday October 18 2007
Gordon Sinclair Jr.

AT least Mayor Sam Katz and his wife Baillie could agree on one thing when they were going through a divorce last spring.
They didn't want their young daughters damaged in any way by the media getting hold of divorce documents that normally are publicly available at the courthouse.
Given what else was in their affidavits, though, there were also clear political benefits to keeping the documents from the public eye.
But this week it all came unglued for Sam Katz.
On the same day the Free Press reported that Katz's Winnipeg Goldeyes baseball team was being sued for $305,000 in interest on loans from the defunct Crocus Investment Fund, there were other media reports of the financial he-said, she-said details of their stormy marriage and divorce.
Such as?
Well, if you must know, there are the personal expenses Baillie claimed Sam billed to the baseball team in which he has a majority interest. Things like "physiotherapy, cleaning services, entertainment, meals, car and travel."
Sam denied that in his affidavit.
Although he did acknowledge one personal expense the Goldeyes "initially" paid for.
Nannies.
Katz said that while the cost of employing the nannies was run through the baseball team, he subsequently made an "adjustment" to his "draw" that accounted for the payments.
Which neatly segues to the salaries the Katzes took home from the minor-league operation.
Yes, salaries -- plural.
According to her affidavit, Baillie has been on the Goldeyes' payroll since around the time she and Sam married in 1998, earning between $60,000 and $65,000 a year as of last spring, according to Sam.
Plus the occasional Christmas bonus.
That doesn't sound all that unusual.
Except Baillie claims that she has never worked for the money.
"I was never hired by the Goldeyes or by Sam to do any work whatsoever," Baillie stated in her affidavit.
Sam answered by claiming she was hired.
But she "simply refused to attend work on a regular basis."
Baillie had more to say about her Goldeyes earnings, though.
"Sam also told me that the salary that I am paid by the Goldeyes lets him split some of his income with me."
Countered Sam: "It is not true that I said that the original intention of paying Baillie was merely income splitting as she alleges."
In any event, the old "splitter" -- to borrow a baseball term -- isn't an uncommon accounting practice because it allows the spouse who's employed to pay tax at a lower rate.
It's just that normally, as one accountant told me, there's an expectation that the person drawing the salary works for it.
Then there's Sam's salary.
He may well have adjusted his draw from the team to pay the nannies. But between 2003 and 2005 his salary as president of the Goldeyes went up.
Not down.
In 2003 -- the year before he became mayor -- he took home $171,138 from his piece of the baseball team's proceeds.
By 2005, he was making $216,788 as the club's president and majority owner.
Of course, that doesn't include his salary as mayor.
According to the city clerk's office, the mayor's current salary is $110,266.78.
But that doesn't allow for the one-third of his civic salary that isn't taxable. When that's calculated, Katz's salary as mayor of Winnipeg jumps to more than $130,000.
Premier Gary Doer makes only $124,509.
Now, on the surface, all of this digging through a divorce file might seem little invasive of the Katzes' personal privacy.
I suppose it would be if it weren't for the 34,000 Crocus investors whose money was shovelled into the baseball team for a total of $1 million in equity and loans. And on whose behalf the receiver is arguing that the Goldeyes must at least pay interest on the money.
I say that because, given what Sam Katz alone has been drawing from one of the most successful teams in minor-league baseball, it's hard to believe there's nothing left over for the little people who invested their savings.
Sam sees it differently, though.
"As I understand it, until such time as the Goldeyes can have a financially viable season and can pay the interest on the Crocus debentures, it is not required to pay any interest to Crocus, or at this stage to its receiver Deloitte and Touche Inc.,'' Sam said in his affidavit. "The Goldeyes simply cannot afford to do this at this time, nor to my knowledge do the shareholders concur that Crocus can be paid to the exclusion of the rest of us."
So there you have it.
Our mayor the businessman is not only arguing his team has no legal obligation to pay any amount, interest or otherwise, to Crocus at this point, but also that his team doesn't have the cash to pay back any interest claimed.
I'll leave the legal question to the lawyers and the court to sort out.
But not financially viable?
C'mon, Sam.
This is a team that routinely leads the league in attendance, pays the city $1 for the use of the park, then gets more than $400,000 a year in refunded entertainment and property taxes, also from the city.
I'm not sure what more the Goldeyes can ask for to make them "viable." The team also controls the concessions, parking and the outfield advertising.
You could look at it another way, though.
If the Goldeyes aren't viable, how can they afford to pay Baillie $60,000, plus the occasional Christmas bonus?
For doing nothing?
Anyway, I have an idea, Sam. Not that you asked.
Why don't you do for the Crocus investors what you did for the nannies?
Adjust your draw from the Goldeyes.
After all, you do have that handsome second salary we pay you as mayor.
As I was suggesting, Gary Doer should be so lucky.

gordon.sinclair@freepress.mb.ca

A Manitoba judge has approved settlements with the final three defendants in a lawsuit filed against the Crocus Investment Fund nearly three years ago. The decision clears the way for 34,000 Manitobans who invested in the Crocus Fund to finally receive money they have long been awaiting.

Originally posted here:
Final settlements reached in lawsuit against Crocus Investment Fund