It was an immigrant investor fund — a way of collecting cash from would-be Canadians willing to pave their way, transferring their money into venture capital for Newfoundland and Labrador.
The Newfoundland Government Fund Ltd. (NGF) was established in November 1995 with the blessing of the federal government, promoting the idea of immigrants contributing to the development of private companies in the country where they chose to live.
But the NGF died quietly in March of this year, dissolved after its accounts were closed.
The fund handled only two real investments in its lifetime — both into construction projects for the public sector, rather than private enterprise.
And given there was no requirement for immigrants to live where they invested, it is unclear if any new residents came to the province.
The NGF was an incorporated entity, with accounts into which qualifying investments were transferred. It had a board of directors, led by representatives from the Department of Finance and what would now be Innovation, Business and Rural Development.
Investment dollars came from the sale of buy-in “units” to immigrant investors, each one with the promise of a $250,000 contribution. Of the total taken in, 10 per cent would cover administrative costs, 20 per cent was kept for returns in case visa applications were rejected or individuals had a change of heart and 70 per cent was to be made available for local enterprises.
The NGF gathered a total $16.1 million in venture capital.
Decisions on investments were made under Liberal governments from about 1999 to 2002, including the decision to invest $14.1 million on construction of a new hospital and school.
The hospital and school were to be built by a private company at a set rate, then leased over time to the health authority and Newfoundland and Labrador Education Investment Corp. (absorbed by the province).
“I do not foresee many circumstances where this particular program is likely to result in anybody losing their money,” said Bruce Hollett, deputy minister of what was then known as the Department of Industry, Trade and Technology, in a meeting of the public accounts committee in 2000.
A $9.4-million loan for construction of a K-12 school in Lawn went from the NGF to a company called School Leasing Services in 1999. And a $4.7-million loan for the new hospital, the Bonne Bay Health Centre, went to Hospital Leasing Services in 2002.
In both cases, according to available records, the companies did not complete the projects on their own, but contracted out to Marco Services.
Costs ran beyond the value of the loans. A dispute arose between the NGF and the shareholder and “directing mind” of the contracting companies, who was also president of Marco.
There was a default on both loans by the services companies and the province picked up both the school and the hospital.
Records remaining from the days of the NGF are scarce prior to 2007. The Telegram sought earlier records of the fund through the province’s legislative library, only to find a single “annual activity report” from 2003, with an audited financial statement. It was the only available document of its kind for the period 2000-07.
Similar activity reports from 2007 onward, all available online, note no requirement to produce audited financial figures.
Information on the fund was also sought through the Department of Finance, but again documentation was apparently never produced in the first place, or was not kept on file.
As one staff member said in explanation, there was no requirement to produce reports for official record until the Transparency and Accountability Act came into effect. That legislation was introduced in 2006, with two years allowed for full compliance.
By then, the provincial government was already deep into a civil suit launched in June 2007 against Christopher Hickman, the “directing mind,” and Marco Services.
The legal case went back and forth for almost two years, while the province paid $1.6 million to cover shortfalls at the NGF. Then the case went quiet, with no activity from 2009 to 2012.
With no attempt by the province to prove its accusations in court, the case was dismissed in March 2013, for “want of prosecution.”
Meanwhile, the federal immigration program birthing the NGF had required an investment of five years into some sort of Canadian enterprise for immigrants to benefit. Apart from the hospital and school construction, no other projects were identified for NGF dollars and roughly $2 million, committed by 11 separate immigrants, remained in escrow as a result.
“It is noted that one of these investors will have waited up to 13 years (eight years to 2006 plus five years investment period) to obtain the required five-year investment necessary to fulfil their visa requirements,” noted a report of the provincial auditor general, released in January 2007.
Those idled investors and their money were moved into a new federal program in 2008.
On Monday, The Telegram asked why the prosecution of the civil case relating to the NGF was left idle — why the government’s accusations against an individual and company were not pursued.
The minister was not available for comment. No written statement of response was received as of press time.