Yukon invested $223 million in ABCP in 2007 8

The Yukon government invested a total of $223 million in asset-backed commercial paper in 2007-8. All these investments violated the Yukon Financial…

The Yukon government invested a total of $223 million in asset-backed commercial paper in 2007-8.

All these investments violated the Yukon Financial Administration Act, says the Auditor General of Canada, in a letter contained in Yukon’s recently released public accounts for 2007-8.

Dennis Fentie, the premier and finance minister, has been “gambling with almost a quarter of a billion dollars of someone else’s money,” noted Liberal Leader Arthur Mitchell, citing the auditor’s letter.

“He is not acting responsibly on behalf of Yukoners,” said Mitchell in the legislature on Wednesday.

It has been common for Yukon governments to invest in asset-backed commercial paper — short-term investments that generate money from debt — for many years, said Fentie.

Since 1990, the territory has invested $1.9 billion in ABCP.

“The member is simply demonstrating to the Yukon public that he does not know what it is he’s talking about,” said Fentie.

Attention, until now, has focused on the $36.3 million the Yukon had invested in ABCP when the market collapsed in August.

That money is supposed to be safe, thanks to a deal crafted by investors to turn the short-term investments into longer-term ones.

But the money will be locked up for a long time. Most of the $36.3 million invested by Yukon will mature by 2016.

And Yukon has had to write down this investment by $6.2 million in its public accounts, leaving $30.1 million that is believed, at this time, to be recoverable.

As for the remainder of the $223 million invested in ABCP, “it all was bought and matured,” said David Hrycan, deputy minister of Finance, in an interview.

Most ABCP matured in 30 days. The total of $223 million appears large because money would be “rolled over,” month after month, into new investments, he said.

A little more than $18 million, re-invested each month, would total $223 million by year end.

The Yukon no longer has any asset-backed commercial paper investments, following introduction of stricter investment rules in January of 2008. Money once invested in the paper has since been put in treasury bills or other conservative investments, said Hrycan.

Finance officials followed the law as they understood it, said Hrycan. This is supported by the auditor general, Sheila Fraser, who found officials acted in good faith when they invested in ABCP.

But Fraser found Yukon’s asset-backed commercial paper investments did not meet a requirement of the financial administration act: they were not guaranteed by a bank.

That was the case with all $1.9 billion invested in the paper, said Hrycan.

He maintains Yukon’s asset-backed commercial paper investments received a “backing” from banks, which finance officials took to be a guarantee. It wasn’t.

“There was backstopping provided by the banks, and they never honoured that backstopping,” he said.

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