Hockey Canada used player fees to build a second fund for sexual assault claims

Hockey Canada used player fees to build a second fund for sexual assault claims

Scott Smith, Hockey Canada president and COO, left, and Hockey Canada CFO Brian Cairo appear at the standing committee on Canadian Heritage in Ottawa on July 27.Sean Kilpatrick/The Canadian Press

Several years after Hockey Canada began using player registration fees to build a large financial reserve known as the National Equity Fund to cover sexual assault claims and other lawsuits, it channelled a significant portion of that money into a second multimillion-dollar fund for similar purposes.

Known as the Participants Legacy Trust Fund, the reserve was created by the organization and its members with more than $7.1-million from the National Equity Fund. The money was earmarked “for matters including but not limited to sexual abuse,” according to Hockey Canada documents obtained by The Globe and Mail.

The trust, with its vaguely worded name, is another example of a large financial reserve created by Hockey Canada and its member branches to cover sexual assault claims, among other things, with funds gathered from hockey registration fees, without fully disclosing to parents and players how their money was ultimately being used.

The Globe first reported in July that Hockey Canada used a little-known reserve called the National Equity Fund, built through player registration fees, to settle a $3.55-million lawsuit filed this year by a woman who said she was sexually assaulted by several members of the 2018 World Junior team.

The lawsuit was settled in a matter of weeks for an undisclosed sum, without completing a full investigation into the incident or requiring players to co-operate with the probe. The settlement came despite Hockey Canada chief financial officer Brian Cairo saying, “We didn’t know all the details of the night, but we did believe harm was caused.” Police in London, Ont., where the alleged assault occurred, have since reopened their investigation, while lawyers for the unnamed players in the lawsuit deny the allegations.

Amid the controversy, Hockey Canada, the sport’s governing body, reassured sponsors and government that none of their money was used to settle the lawsuit. Though Hockey Canada previously disclosed very little about the National Equity Fund and how it operated, officials later acknowledged at federal hearings in July that it was used to pay settlements on nine sexual assault claims totalling $7.6-million since 1989, not including the claim settled this year.

But the National Equity Fund wasn’t the only such account. Documents filed in Alberta Court of Queen’s Bench reveal details of the Participants Legacy Trust Fund, which was created in 1999 for Hockey Canada’s member branches, including provincial hockey organizations, by transferring millions of dollars out of the National Equity Fund into this new reserve.

The trust was set up to handle claims against Hockey Canada’s member branches from incidents occurring from 1986 to 1995, before Hockey Canada began purchasing insurance for sexual assault claims and other liabilities. It covered an era when the sport was hit with numerous sexual abuse cases, including those associated with disgraced coach Graham James.

However, the trust was set to be dissolved on May 15, 2020, which was listed in the documents as its intended Division Date. But in late 2018 and early 2019, Hockey Canada and its members went to court to alter the terms of the trust – ensuring that it would be kept in place until 2039.

“The trustees believe that more claims will be brought after the Division Date as currently defined, and this is the primary reason to extend the duration of the trust,” Mr. Cairo said in an affidavit filed in January, 2019, in the Alberta court.

“The original purpose of the trust continues to exist and will likely subsist beyond the Division Date,” Mr. Cairo said.

Asked what further claims Hockey Canada expects will emerge from the timeframe the trust was intended to address, Hockey Canada spokesman Jeremy Knight said the affidavit was not pointing to anything specific.

“Mr. Cairo’s statement was not based on knowledge of a specific claim or incident, or any specific anticipated claims or incidents,” Mr. Knight said.

“It is important to keep in mind that since 1999, when the trust was first formed, Canadians’ understanding of the nature and extent of claims of sexual abuse has improved significantly. We now know that these claims often arise many decades after the alleged incident occurs, which is why it was reasonable to apply to extend the trust beyond 2020.”

He said the trust is not listed on Hockey Canada’s balance sheet because it is not considered an asset. Though Hockey Canada is a beneficiary of the Participants Legacy Trust Fund, any distributions from the trust go to Hockey Canada’s member branches. He said the trust has not been used, but remains available for its stated purpose.

Hockey Canada has said in recent months that reserve accounts such as the National Equity Fund are an example of prudent risk management. But MPs on a parliamentary committee investigating Hockey Canada’s handling of sexual assault question that assertion, given the revelations about these multimillion-dollar funds and the amassing of player fees.

MPs say there has been insufficient disclosure about how the money is used – particularly in the 2018 case, where Hockey Canada settled the lawsuit with fees collected from registrants, who were not told about it, rather than holding the players involved financially accountable.

Similar to the revelations of the National Equity Fund this summer, details of the Participants Legacy Trust Fund drew sharp criticism from MPs when they were told of its existence.

NDP MP Peter Julian questioned why Hockey Canada didn’t divulge the trust, or that Hockey Canada had sought to extend it to 2039, when it was questioned at parliamentary committee hearings in July about how it uses money collected from registrants.

“The name of the fund is designed to conceal and there is no doubt that that is the attempt,” said Mr. Julian, who has called for a full audit of Hockey Canada. “This is another example of stonewalling and concealing of information that hockey parents and the general public need to know.”

Conservative MP John Nater said the committee and the public should have been told, in full, any details of this and other cash reserves set aside for sexual assault settlements.

“This is a blatant omission of pertinent information that our committee and Canadians really need to know about,” Mr. Nater said.

“When families put their money into registration fees, they assume it’s going to be related to their kids, to their families, their participation in the sport. And to hear that funds are being used for matters of significant wrongdoing, this fails the test on transparency.”

When asked about the purpose of the trust, Hockey Canada told The Globe it was used to address injury claims, among other things. The court documents detailing the trust, however, specifically list sexual abuse.

The Participants Legacy Trust Fund “exists to fund uninsured liabilities, including but not limited to bodily injuries, concerning incidents that occurred between September, 1986, and August, 1995,” Mr. Knight said.

Liberal MP Anthony Housefather, whose background is in corporate law, questions Hockey Canada’s assertion that the trust is for injuries. Though sexual assault claims can be made many years after the fact, injury lawsuits are governed by statutes of limitations that usually require them to be filed within a few years of the incident to be valid.

“How could there be a potential for all of these claims they say they think could occur, when the statute of limitations for most civil claims would have long since expired?” Mr. Housefather said.

Asked about how an injury claim could be brought nearly three decades later, Mr. Knight said, “While unlikely, it remains possible for an historical individual bodily injury claim to be brought forward from that time period.”

Mr. Housefather said he is concerned about the lack of disclosure about the trust, similar to the concerns about transparency with the National Equity Fund. Hockey Canada has since suspended the use of that fund in sexual assault cases pending a review.

“The question of whether or not they made clear to people who are paying into it what it was for, anybody who was contributing to it should know,” Mr. Housefather said. “You should explain this is the fund and this is what it does. If your registration fees are paying into that fund, I believe there needs to be disclosure.”

After being pressed to disclose more details about the National Equity Fund this summer, Hockey Canada issued a statement in August saying that, of the $23.80 participants pay to the organization on their registration fees, $13.65 is paid into the fund for various insurance costs. However, it did not disclose how much is kept aside for settlements handled outside of Hockey Canada’s insurance policies, or without the involvement of an insurance investigation.

Hockey Canada said on its website in August that it “never kept its use of the fund to pay uninsured claims secret.” However, when Hockey Canada was asked by MPs at federal hearings in June where it got the money to pay out the claim relating to the 2018 allegations, CEO Scott Smith said nothing about the existence of the National Equity Fund or the use of registration fees. Mr. Smith said only that no federal money was used and that the organization “liquidated a portion of our investments” to pay the settlement.

The committee hearings are set to resume Tuesday with testimony from Hockey Canada’s past board chair, Michael Brind’Amour, who resigned in August in the fallout from the 2018 sexual assault case, and its interim chair, Andrea Skinner, who replaced him.

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