Hockey Canada moved cash from fund used for sexual assault claims to avoid encouraging more claims: report
Hockey Canada sent $17 million from the National Equity Fund to another fund over 5 years, says expert
A controversial reserve fund that Hockey Canada publicly vowed it would stop using to settle sexual assault allegations is significantly depleted after the organization transferred millions of dollars in past years to another account, a new interim report reveals.
Former Supreme Court justice Thomas Cromwell's interim report on Hockey Canada's governance, released last week, contains details about the organization's management of its National Equity Fund — a fund Cromwell said is projected be in deficit by 2023.
Hockey Canada commissioned Cromwell's review in response to hockey parents' outrage after learning that the National Equity Fund — made up in part of players' registration fees — was being used to pay out millions of dollars for sexual assault allegations without their knowledge.
Cromwell learned of the existence of a third fund to which Hockey Canada's board of directors approved the transfer of $10.25 million in reserve funds from the National Equity Fund (NEF) in 2016. Another financial analysis has found that at least another $7 million has been transferred from the NEF to the third fund since then.
The money was moved after Hockey Canada's auditors recommended a change to the organization's disclosure on its audited financial statements that "increased the reported balance of the National Equity Fund by several million dollars," Cromwell found.
Cromwell concluded that the organization's board of directors feared that an account with more money would attract more claims.
"Hockey Canada became concerned that this change on the financial statements inflated the NEF balance artificially, which might signal a large pool of funds set aside for potential claimants and thus might increase the likelihood of additional claims," Cromwell wrote in his report.
In November 2016, Hockey Canada's board of directors transferred the money from the NEF to another fund called the Insurance Rate Stabilization (IRS) Fund, which was created years earlier to "act as a buffer against future increases in insurance rates," the report said. Postmedia and The Athletic were the first to report on the new fund and the money transfers.
$17 million transferred
The board justified the transfer, saying it was a way to expand the scope of the IRS Fund "for the purpose of providing financial support against potential future non-insured claims," Cromwell's report said.
Cromwell said Hockey Canada also broadly expressed that changes to its transparency were "not well suited for their organization, such as making financial statements and minutes of Member meetings available to the public."
"Although Hockey Canada has achieved considerable financial success over the years, Hockey Canada is concerned that being seen as an organization with 'deep pockets' could create some negative implications," Cromwell's report said.
"For example, this could have an effect on their bargaining power with respect to the settlement of lawsuits, and this could also influence the amount of money that sponsors would be willing to offer in the future."
Sport Minister Pascale St-Onge told CBC News that Cromwell's report shows "serious governance failures that have been fostering a culture of silence."
"They treated the allegation of sexual violence as an insurance issue," she said in a media statement. "Now, I am expecting ... the new board [to] make the necessary changes to create a healthy environment."
Kate Bahen, managing director of Charity Intelligence Canada said Cromwell's report showed her "there was an intent to hide funds."
By examining Hockey Canada's audited financial statements, Bahen found the NEF's "true balance" was $15.7 million in 2016 before the organization ended up transferring $9.5 million to the other fund. (Cromwell's report said the board approved a $10.25 million transfer, but the statements show $9.5 million was moved, according to Bahen.) That transfer brought the NEF down closer to its $5.2 million level in the previous year, before the accounting changes, she said.
Bahen said she also discovered that Hockey Canada's board approved the transfer of $17 million from the National Equity Fund to the IRS Fund between 2016 and 2021.
"This wasn't just a one-off occurrence in 2016 ... Hockey Canada has for years and years kept its books closed and fought against financial transparency," said Bahen, who was given Hockey Canada's audited financial statements obtained under the access to information act.
She said Hockey Canada spent about as much of the NEF's money on staff salaries, travel, meals and grants between 2014-2021 as it did on insurance claims.
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Hockey Canada said in June that, "effective immediately," it would no longer use the National Equity Fund to settle sexual assault claims.
The organization's chief financial officer Brian Cairo said in July when he told Hockey Canada members and executives that the organization "stopped using the fund to settle sexual assault claims pending the outcome of our governance review by an independent third party."
CBC News asked Hockey Canada what fund would be used to settle sexual assault claims and was told the organization is waiting for Cromwell's final report.
Bahen said the audited financial statements show that the NEF balance in June 2021 was $9.6 million. Since then, the fund has paid out the maximum amount for a $3.5 million lawsuit alleging a group sexual assault in 2018 involving eight hockey players, including members of the World Junior team, she said.
The new balance of the NEF — which Cromwell said is depleted — will be released at Hockey Canada's annual general meeting on December 17.
'A culture of secrecy'
NDP MP Peter Julian sits on a parliamentary committee that held public hearings on Hockey Canada's handling of sexual assault allegations.
"[The funds transfer] proves once again this labyrinth of funds was designed to avoid public scrutiny and accountability," he said.
Sébastien Lemire, the Bloc Québécois sports critic, said the existence of a "third fund is not surprising and is a testament to the culture of secrecy that exists within the organization."
"To learn that the fund that was originally supposed to help injured players is now empty, in part because Hockey Canada used it to settle sexual assault lawsuits, only reinforces the idea that the executives associated with this scheme should resign," said Lemire.
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Liberal MP Anthony Housefather asked Hockey Canada's interim board chair Andrea Skinner earlier this month if there were any other undisclosed funds used to "fund these types of claims related to sexual liability or sexual assault."
"I'm not sure I agree with the premise of the question, but I don't believe there is," Skinner replied.
"It reflects what I thought was misleading testimony at committee," said Housefather.
Earlier in the questioning, Skinner said there were "four main elements of Hockey Canada's financials" which included "an insurance rate stabilization fund."
The NEF has paid 21 settlements since 1989, 11 of which were related to sexual misconduct, according to Cromwell's interim report.
Nine of those 11 settlements were based on historical cases and given to complainants against perpetrators Graham James, Gordon Stuckless and Brian Shaw. All three names were on a list given to Hockey Canada's insurer and excluded from insurance claims when Hockey Canada expanded its insurance policy in 1998 to provide sexual misconduct coverage to the organization.
The tenth case involved a historic claim of sexual assault against a referee — someone the insurer said Hockey Canada was aware of and should have warned the insurer about. The eleventh matter was the 2018 group sexual assault allegation involving members of the World Junior team.
Bahen said she's posted all the audited financial statements on her website and hopes other accountants and experts dig into them too.
Clarifications
- This story has been updated from an earlier version to include more details about testimony at the parliamentary committee studying funds administered by Hockey Canada.Oct 21, 2022 6:00 PM ET
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