Liberals ask auditor general to investigate errant $36.5 million investment

The Yukon Liberals are asking Canada’s auditor general to investigate a $36.5 million territorial investment currently in financial limbo.

The Yukon Liberals are asking Canada’s auditor general to investigate a $36.5 million territorial investment currently in financial limbo.

In a letter, Liberal leader Arthur Mitchell has asked auditor general Sheila Fraser to probe the government’s investment in two asset-backed commercial paper trusts.

The government made the investments in July and August. It expected to reap a return on its investment 30 days later when the funds were supposed to mature.

Several months later, the government doesn’t know when, or if, it will recover its money.

“The money is being held hostage and we can’t get to it,” said Mitchell in an interview.

The Finance department failed to follow investment guidelines set out in the Financial Administration Act, wrote Mitchell in his letter.

Despite the repeated comments from the government that the auditor general “was advised in detail of the actual third party asset-backed investments,” Mitchell said in an interview he doubts Fraser is aware of the situation.

Acting Finance Minister Elaine Taylor referred to Fraser’s comments from 2006.

“The auditor general of Canada is fully cognizant of these investments, is fully cognizant of the proposed restructuring and has been fully advised of the detail of these investments,” said Taylor during question period.

The federal auditor signed off on the public accounts for the fiscal year ending March 31, before the summer investments were made, said Mitchell.

“Things have changed significantly from where they were one year, two years ago and something that may have seemed like a safe investment then shouldn’t have seemed as safe recently,” said Mitchell.

“There is no indication the auditor general has issued a letter specifically addressing the issue of reinventing this issue in July and August 2007, when armchair investors, like myself, were aware in May and June that this was risky investment and there was a meltdown coming.

“Surely Finance Minister (Dennis Fentie) should have been aware of this. If he was, then he acted imprudently. If was not, then he acted ignorantly.”

Other governments and private businesses that invested in the same funds have written down their expectations of their returns by 20 to 35 per cent.

If the territory was to do the same, it would stand to lose about $12 million.

Potential buyers of some frozen, asset-backed commercial paper trusts were offering 50 cents on the dollar in early trading Wednesday morning.

A consortium of banks, asset providers and investors are trying to extend the funds’ payback period to between five and 10 years.

Final details will be released December 14, the government has been told.

The Yukon Party government spent most of question period Tuesday afternoon answering opposition questions about the 30-day investment, which consolidate car loans, mortgages and credit card debt into trusts for investors. The investors profit from the interest on the loans.

Taylor read answers from a script. Every question was answered with identical statements.

“There has been no loss on the investment and the third party asset-backed commercial paper is secured by assets, unlike other commercial paper, which is not, and is backed by the banks,” said Taylor on Tuesday.

“Again, the auditor general has stated that, in her opinion, all transactions that have come to her notice have been in accordance with the Financial Administration Act.”

Five times Taylor mentioned the auditor general is “fully cognizant” of the investments.

The auditor general and her officials do not comment on specific investigations, said a federal spokesperson on Wednesday.

When a request to investigate a financial matter is received, the office will evaluate its merits before proceeding, said the spokesperson.

The Liberal office sent the letter to Fraser on Tuesday morning.

“As I see it, the two trusts invested in, $23.5 million in Symphony and $13.5 million in Opus, were not guaranteed by any government; were not issued as a bank paper and therefore could not be guaranteed by a bank; and only the security rating institution . . . chose to rate these trusts,” wrote Mitchell in his letter to Fraser.

“I feel the Yukon government did not adhere to the (act) when investing in these trusts. I encourage your office to look into this matter.”

The government is starting to blame the Finance officials for the investment, added Mitchell in the interview.

“By figuratively wrapping their arms around the officials and saying ‘We’re standing by our excellent officials,’ they’re really shifting the blame to the officials,” said Mitchell.