For­mer Moun­tie keeps odd com­pany

Vancouver Sun - - Business - DAVID BAINES

It’s curious how things work out some­times. In late 2003, Cpl. Bill Ma­jcher was ap­pointed in­spec­tor in charge of the new RCMP In­te­grated Mar­ket En­force­ment Team in Van­cou­ver.

It was viewed as an un­ortho­dox ap­point­ment be­cause, first of all, it was a big leap for a cor­po­ral to make. Se­condly, Ma­jcher had pre­vi­ously worked as an un­der­cover of­fi­cer, and was known more for his free- wheel­ing style and spon­ta­neous per­son­al­ity than his ad­min­is­tra­tive abil­i­ties.

But he knew se­cu­ri­ties. Be­fore join­ing the RCMP, he had worked as a bond trader in Lon­don, and as a fu­tures and op­tions trader.

He was also a quick study. It wasn’t long be­fore he was in hot pur­suit of some very worth­while tar­gets, mainly ju­nior com­pa­nies l i s ted on the TSX Ven­ture Ex­change and the OTC Bul­letin Board in the United States.

“ The Bay Streeters se­duce you with nice man­ners, fancy din­ners and fancy de­grees,” he told Cana­dian Busi­ness. “ In B. C., they don’t waste your time with all that — they just screw you.”

He and his staff sub­mit­ted sev­eral briefs rec­om­mend­ing charges to Crown, but they didn’t get any­where. Ma­jcher be­gan to think he could “ ef­fect more pos­i­tive change” by go­ing into pol­i­tics. While still work­ing as an RCMP in­spec­tor, he ran for the fed­eral Con­ser­va­tive nom­i­na­tion in Rich­mond.

Al­though he failed in his bid, his su­pe­ri­ors — who weren’t even aware he was seek­ing nom­i­na­tion — were not amused.

They were also not amused by the fact that Ma­jcher was as­so­ci­at­ing with Ke­van Gar­ner, whom he had pre­vi­ously caught in a money- laun­der­ing sting op­er­a­tion. Gar­ner had done hard time and now they were talk­ing about do­ing a movie deal to­gether.

RCMP in­ter­nal af­fairs of­fi­cers had other un­spec­i­fied is­sues with Ma­jcher. What­ever they were, Ma­jcher was sus­pended with pay in July 2005. The mat­ter dragged on and was not re­solved un­til sev­eral months ago, when the two sides reached a set­tle­ment and Ma­jcher of­fi­cially re­tired.

Still, he re­mains a bit of a celebrity, due mainly to his Hol­ly­wood­style un­der­cover work. In Septem­ber, he was fea­tured in a Cana­dian Busi­ness cover story, com­plain­ing that the crim­i­nal jus­tice sys­tem is too soft on white col­lar crime and stacked in favour of crim­i­nals.

Mean­while — and this is the curious part — he has agreed to serve as ex­ec­u­tive vice- pres­i­dent and di­rec­tor of a Van­cou­ver ju­nior com­pany called Dis­as­ter Pre­pared­ness Sys­tems Inc., which is pur­port­edly de­vel­op­ing equip­ment and tech­nol­ogy tar­geted to home­land se­cu­rity, dis­as­ter re­sponse and emer­gency pre­pared­ness.

Dur­ing the nine months end­ing Aug. 31 ( its last re­port­ing date), the com­pany gen­er­ated only $ 38,299 in rev­enues and racked up $ 535,663 in losses. Its as­sets to­talled only $ 1,134 and it had a se­ri­ous work­ing cap­i­tal short­fall and neg­a­tive eq­uity. It plans to quote its shares on, gulp, the OTC Bul­letin Board, which is known as a gath­er­ing place for scoundrels and scan­dals.

In Septem­ber, Ma­jcher also joined the board of Evolv­ing Gold Corp., a small ex­plo­ration com­pany listed on the TSX Ven­ture Ex­change and co- listed on the bul­letin board and equally un­ruly Frank­furt Ex­change.

It has a hand­ful of un­ex­cep­tional min­eral prop­er­ties and the usual cadre of in­vestor re­la­tions con­sul­tants. Its stock has dou­bled in the last cou­ple of months to 75 cents, but there is still lit­tle to dis­tin­guish this com­pany from the morass of penny stocks that in­habit Van­cou­ver.

I’m not sug­gest­ing there is any­thing il­le­gal or even un­eth­i­cal about th­ese com­pa­nies. I just find it strange that Ma­jcher would be­come part of a com­mu­nity where they don’t waste their time with fancy din­ners or fancy de­grees, they just screw you.

De­spite re­cent weak­ness, North Amer­i­can eq­uity mar­kets have gen­er­ally been on a roll, which high­lights just what a bad in­vest­ment the Work­ing Op­por­tu­nity Fund has been.

WOF is a labour- spon­sored fund com­pany that in­vests in B. C. start- up com­pa­nies. Peo­ple who in­vest in WOF funds get a 15- per­cent pro­vin­cial credit and a 15per- cent fed­eral credit, plus the usual tax de­duc­tion if the shares are bought in an RRSP.

The fund did well dur­ing the high- tech boom of 1999 and 2000, but has been gag­ging ever since. Deal­ers who once touted the com­pany’s im­pres­sive re­turns are now em­pha­siz­ing the “ 55- per­cent cash back” tax sub­sidy.

The the­ory be­hind the tax cred­its is that stim­u­lat­ing small­busi­ness de­vel­op­ment is good for the over­all econ­omy and, there­fore, good for tax­pay­ers. Prob­lem is, judg­ing by WOF’s in­vest­ment re­turns, it isn’t pro­vid­ing very much small- busi­ness stim­u­lus.

Dur­ing the last five years, WOF’s mar­quee fund, the Bal­anced 1 Fund, has lost four per cent per year. If you fac­tor in tax cred­its, it made 0.6 per cent per year. Ei­ther way, that’s far less than the S& P/ TSX com­pos­ite in­dex, which has gen­er­ated 20.4 per cent per year, ac­cord­ing to Morn­ingstar Canada.

Since there’s an eight- year lock in, in­vestors who bought shares five years ago are fac­ing a huge op­por­tu­nity cost ( rel­a­tive to the TSX in­dex) un­less the fund makes a mirac­u­lous re­cov­ery in the next three years.

WOF pres­i­dent David Levi ar­gues that the TSX in­dex, be­cause it is be­ing driven by the hot re­source mar­ket, is not a fair bench­mark.

My f irs t re­sponse is that in­vestors re­ally don’t care. It’s suf­fi­cient for them to know that, by sim­ply buy­ing a mu­tual fund that mir­rored the TSX in­dex, they would have been bet­ter off. I think tax­pay­ers would also have b e e n b e t t e r o f f , b e c a u s e in­vestors’ money would have been di­rected to more pro­duc­tive busi­nesses.

But even if we use the Nas­daq 100 — which Morn­ingstar calls “ the best- known tech­nol­ogy bench­mark in the world” — WOF does not com­pare well. This in­dex re­turned 9.6 per year dur­ing the past five years, com­pared with just 0.6 per cent for the bal­anced fund, even af­ter fac­tor­ing in tax cred­its.

The thing that re­ally ran­kles me is that ev­ery year WOF pays a man­age­ment fee equal to about 2.5 per cent of the fund’s as­sets to the fund man­ager, GrowthWork­s Cap­i­tal, which is owned by six labour unions and Levi.

They are get­ting rich from a scheme that is heav­ily sub­si­dized by tax­pay­ers, but in my view pro­vides no net pub­lic ben­e­fit.

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