“You were telling everyone to go out and take credit lines on their houses. Use your RRSPs and we’ll make you a good return on the money, better than the interest on the credit lines,” Mitrovic’s voice rings over the speakers. “Am I wrong?”
Dave Jones’ response comes quickly and candidly: “Well, in all fairness, who thought the world would have turned into this?”
Weeks later, just after the onset of summer, and soon after Madam Justice Barbara Romaine ruled in the Court of Queen’s Bench of Alberta that the directors of Concrete Equities were justified in their decision to stay on as GP and enlist the services of a receiver, Mitrovic still isn’t sympathizing with Jones.
“The buildings are still making money, so what’s he talking about?” says Mitrovic. “It had nothing to do with the markets. He used that to try to manipulate us.”
Just as De Palma suggests, more of the story remains to be told. But how he or Dave Jones expect Ernst & Young to exonerate them in the eyes of current and future shareholders remains more mysterious than the circumstances that made receivership necessary. Even if Dave Humeniuk’s efforts to build a new business are interrupted by confirmation of De Palma’s allegations, the question remains as to how such negligence can go conscionably unchecked, and why it seemed to continue after the former director’s “termination.” Questioning De Palma in court, Yorke-Slader asked what had happened to $398,000 one of its property managers had disbursed to Concrete between February and May of this year. De Palma said he didn’t know. But Humeniuk wasn’t there to be the fall guy, and the money didn’t go to investors.
But even if the story yet to tell ends well for investors, it’s already difficult to deny that, in many ways, the directors of Concrete Equities have won, even if the victory proves pyrrhic, considering the trust that has been lost. But Concrete’s decision to place the properties in receivership stands because Justice Romaine believed them to be insolvent in light of a late-entry list of creditors (amongst them, Vinnie Aurora’s dad). She also ruled that Concrete remain GP, based partly on her suspicion that the investors’ efforts were ill-informed, and partly upon the logic that, once removed, Concrete would have no incentive to co-operate with a new GP’s efforts to rebuild business. But, at De Palma’s request, she commissioned a management committee, consisting of him, a representative of the Strategic Group, Steven Butt, and the receiver to, as De Palma would say, “maximize the value” to investors. In the meantime, those investors continue to accumulate legal bills and see dividends deferred, regardless of whether their properties turn a profit.
“The bottom line is that the fox now gets to guard the henhouse. And get the eggs. It’s ludicrous from a shareholder’s viewpoint,” says Terry Town. “I almost felt like saying [to Justice Romaine], ‘You must think we are all just stupid, stupid people.’ Even if we make a stupid decision, does the vote of the shareholder not count anymore?”
It’s tempting to look at what has transpired between Concrete Equities and its investors as an advanced exercise in risk management. Like Mitrovic, Town sees long-term stability in real estate and the potential, in time, for profit. Implied is that a strengthened economy will keep risk at a relative minimum. Also implied is that an investment, subject to unpredictability of both markets and management, is not the same as a gamble. Somehow, trust investors place in their management is considered protection from uncertainty. Once that’s lost, they want control, for better or worse. Whether that’s possible here, even if Butt takes over, is a question without an answer. As Jones suggested – and as last year’s oil bust proved – no one can see, or calculate, the future. And that may be the most honest and least comforting thing you’ll ever hear from anyone holding a chunk of your life savings.
Town wonders now if they should have voted Butt in sooner. And with the investor uprising quelled, pondering what-ifs is about all he can do, besides trying to recapture the optimism that night at Southside Victory that, at the very least, prevented the sale of the buildings. After all, by most assessments, the Concrete properties started off as good investments. They could be again.
In contrast, Mitrovic plans to keep up the pressure as if it’s a battle yet to be won. “Why would we not fight for what’s ours?” he asks, despite recognizing that he and every other investor could emerge from this with nothing.
“We are putting a stop to their plans,” he says, whether it’s true or if he simply needs to believe as much. “Slowly but surely, we are.”
In the meantime, Mitrovic vows never to invest with anyone else ever again. The question Concrete has left him with is simple: Who can be trusted? If he’s going to be paying his money, he’s going to be sure the chances he takes are entirely his own.
Sidebars:
Rules and Regulators | Investor Beware
In Defence of Dave Jones | What Happens in Mexico
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