Hockey Canada moved cash from fund used for sexual assault claims to avoid encouraging more claims: report

A controversial reserve fund that Hockey Canada publicly vowed it would stop using to settle sexual assault allegations is significantly depleted afterthe organization transferred millions of dollars in past yearsto another account, a new interim report reveals.

Former Supreme Court justice Thomas Cromwell'sinterim report onHockey Canada's governance, released last week, containsdetails about the organization's management of its National Equity Fund a fund Cromwell said is projectedbe in deficit by 2023.

Hockey Canada commissioned Cromwell's review in response tohockey parents'outrage afterlearningthat 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 ofthe existence of a third fund to whichHockey Canada's board of directors approved thetransfer of $10.25 million in reserve funds from the National Equity Fund (NEF) in 2016. Another financial analysis hasfound that at least another $7 million has been transferred from the NEF to the third fundsince 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 thatan 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," Cromwellwrote in his report.

In November2016,Hockey Canada'sboard of directorstransferredthe money from the NEFto another fund called theInsurance Rate Stabilization (IRS) Fund,which was created years earlier to "act as a buffer against future increases in insurance rates," the report said. Postmediaand 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 scopeof 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'sreport 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-Ongetold CBC Newsthat Cromwell's report shows "serious governance failuresthat 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 newboard [to] makethe necessary changes to create a healthy environment."

Kate Bahen, managing director of Charity Intelligence Canada said Cromwell'sreport showed her "there was an intent to hide funds."

By examining Hockey Canada's audited financial statements, Bahenfound the NEF's"true balance" was $15.7 million in 2016 before the organization ended up transferring $9.5 millionto 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 broughttheNEFdown closer to its $5.2 million level inthe previous year, before the accounting changes, she said.

Bahensaidshe alsodiscoveredthat Hockey Canada's board approved the transfer of$17 million from the National Equity Fund to the IRS Fund between 2016and 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 asit did on insurance claims.

WATCH |Hockey Canada's use of funds to pay sexual assault claims flawed: report

Hockey Canada's use of fund to pay sexual assault claims flawed: report

2 years ago

Duration 2:47

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 amountfor 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 December17.

'A culture of secrecy'

NDP MP Peter Julian sits on a parliamentary committee that heldpublic 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.

Sbastien Lemire, the Bloc Qubcois 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.

MEDIA/Hockey Canada board, CEO resign amid widespread criticism

Hockey Canada board, CEO resign amid widespread criticism

2 years ago

Duration 2:43

Hockey Canada has announced its CEO and entire board of directors are stepping aside after mounting backlash over its handling of sexual assault allegations.

Liberal MP Anthony Housefather asked Hockey Canada's interim board chair Andrea Skinner earlier this month if there were any other undisclosedfundsused 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 settlementssince 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 andgiven to complainants against perpetrators Graham James, Gordon Stuckless and Brian Shaw. All threenames were on a list given to Hockey Canada's insurer and excluded from insurance claims when Hockey Canada expanded its insurance policy in 1998to provide sexual misconduct coverage to the organization.

The tenth caseinvolved a historic claim of sexual assault against a referee someonethe insurer said Hockey Canada was aware of and should have warned the insurer about.The eleventhmatter was the 2018 group sexual assault allegation involvingmembers 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.