A controversial reserve fund, which Hockey Canada publicly promised it would no longer use to resolve sexual assault allegations, has been significantly depleted after the organization transferred millions of dollars to another account in previous years, such as a new interim report unveiled.
Former Supreme Court Justice Thomas Cromwell’s interim report on Hockey Canada’s governance, released last week, provides details on the organization’s management of the National Equity Fund – a fund which Cromwell said is expected to be in deficit by 2023 .
Hockey Canada commissioned Cromwell’s review in response to outrage from hockey parents after they learned the National Equity Fund — which consists in part of players’ registration fees — was being used to raise millions of dollars for sexual assault allegations without her pay off knowledge.
Cromwell learned of the existence of a third fund to which the Hockey Canada Board of Directors approved the transfer of $10.25 million in reserve funds from the National Equity Fund (NEF) in 2016. Another financial analysis 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 in the organization’s disclosures in its audited financial statements that “added several million dollars to the reported balance of the National Equity Fund,” Cromwell noted.
Cromwell concluded that the organization’s board feared that an account with more funds would result in more claims.
“Hockey Canada was concerned that this change in financial statements was artificially inflating the NEF balance, which could indicate a large pool of funds reserved for potential claimants and thus 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 fund said Report . Postmedia and The Athletic were the first to report on the new fund and cash transfers.
$17 million transferred
The board justified the transfer by saying it was a way to expand the scope of the IRS fund “to provide financial support for potential future uninsured claims,” Cromwell’s report said.
Cromwell said Hockey Canada had also expressed in general that changes to its transparency “were not well suited to their organization, such as releasing financial reports and minutes of membership meetings to the public”.
“Although Hockey Canada has achieved significant financial success over the years, Hockey Canada is concerned that being viewed as a ‘deep pocket’ organization may have some negative implications,” Cromwell’s report reads.
“This could affect their bargaining power in resolving legal disputes, for example, and it could also affect the amount of money sponsors would be willing to bid in the future.”
Sport Minister Pascale St-Onge told CBC News Cromwell’s report showed “serious government errors that have fostered a culture of silence”.
“They treated the allegation of sexual violence as an insurance claim,” she said in a media statement. “Now I’m expecting … the new board [to] Make the necessary changes to create a healthy environment.”
Kate Bahen, chief executive of Charity Intelligence Canada, said Cromwell’s report showed her “there was an intention to hide funds”.
In reviewing Hockey Canada’s audited financial statements, Bahen determined that the NEF’s “true balance sheet” for 2016 was $15.7 million before the organization eventually transferred $9.5 million to the other funds. (Cromwell’s report says the board approved a $10.25 million transfer, but the statements show $9.5 million was deferred, according to Bahen.) That transfer brought the NEF closer to her Level from $5.2 million a year earlier, before accounting changes, she said.
Bahen said she also found that Hockey Canada’s board of directors approved the transfer of $17 million from the National Equity Fund to the IRS Fund between 2016 and 2021.
“This was not just a one-off event in 2016 … Hockey Canada has kept its books closed and fought against financial transparency for years,” said Bahen, who received Hockey Canada’s audited financial statements, which were obtained under the Access to Information Act .
She said Hockey Canada spent about as much NEF money on staff pay, travel, meals and grants between 2014 and 2021 as it did on insurance claims.
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Hockey Canada said in June that it would no longer use the National Equity Fund to resolve sexual assault claims “effective immediately.”
Brian Cairo, the organization’s chief financial officer, said in July when telling Hockey Canada members and officers that the organization “ceased the outcome of our third-party governance review to resolve the sexual assault claims fund.” to use”.
CBC News asked Hockey Canada what funds were being used to settle sexual assault claims and was told the organization was awaiting Cromwell’s final report.
Bahen said the audited financial statements show the June 2021 NEF balance was $9.6 million. Since then, the fund has paid out the maximum amount for a $3.5 million lawsuit alleging a 2018 gang sexual assault involving eight hockey players, including members of the World Junior Team, she said.
The NEF’s new balance – which Cromwell says has been depleted – will be announced at Hockey Canada’s December 17 annual meeting.
“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 that this maze 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 organisation”.
“To learn that the fund, originally intended to help injured players, is now empty, in part because Hockey Canada has used it to resolve sexual assault lawsuits, only reinforces the idea that executives associated with this program should step down,” said Lemire.
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Liberal MP Anthony Housefather asked Andrea Skinner, interim chief executive officer of Hockey Canada, earlier this month if there were any other undisclosed funds being used to “fund these types of sexual liability or sexual assault claims.”
“I’m not sure I agree with the premise of the question, but I don’t think so,” Skinner replied.
“It reflects what I felt was a misleading statement on the committee,” Housefather said.
At the beginning of the interview, Skinner said there were “four main elements of Hockey Canada’s finances,” including “an insurance rate stabilization fund.”
According to Cromwell’s interim report, the NEF has paid 21 settlements since 1989, 11 of which were related to sexual misconduct.
Nine of those 11 settlements were based on historical cases and were awarded 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 were excluded from insurance claims when Hockey Canada expanded its insurance policy in 1998 to provide the organization with sexual misconduct protection.
The tenth case involved a historic sexual assault lawsuit against a referee — someone the insurer said Hockey Canada knew about and should have warned the insurer about. The eleventh matter was a 2018 group sexual assault allegation involving members of the World Junior Team.
Bahen said she has published all of the audited financial statements on her website and hopes other accountants and experts will look into them as well.
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