Ex-Supreme Court justice says Hockey Canada's handling of fund used to pay sexual assault claims was flawed

A new report commissioned by Hockey Canada says that a controversial reserve fund it used to settle a multi-million-dollar lawsuit alleging a 2018 group sexual assaultinvolving World Junior players was necessary, but there were serious problems with how that fund was administered, CBC News has learned.

CBC News has viewed and verified parts of a 100-page-pluspreliminary report written by retired Supreme Court justice Thomas Cromwell that recommends sweeping changes.

The report found Hockey Canada didn't have policies and procedures in place to govern use of its reserve funds,didn't fully disclose its funds in financial records, and broke the rules by failing to notify members of large payouts.

Hockey Canada hired Cromwell in August as calls mountedfor its leadersto resign after news broke that it had used its National Equity Fund establishedto cover uninsured or underinsured claims to settle sexual misconduct claims.

The hockey organization has been under intense public scrutiny since May,aftera woman filed a$3.5-million lawsuitalleging eight hockey players some of themmembers of the 2018 World Junior hockey team sexually assaulted her.

Hockey parents were outraged to learn that Hockey Canada used theNational Equity Fund made up in part of their registration fees to pay for a settlement in that case and others.

It was later disclosed in parliamentary testimony that another $7.6 million had been withdrawn from the fund since1989 for other alleged sexual abuse settlements.

'Protecting predators'

Cromwell reviewed Hockey Canada's governance structure and found that while some provincial federations knew the National Equity Fund responded to historical claims, those members said they "did not think its use would include 'protecting predators' going forward."

Hockey Canada is required to report to its members when new settlements, claims or judgments may cost more than $500,000, but Cromwell found the hockey organization has at times failed to notify members.

Cromwell identified six cases since 1999 involving settlementsexceeding half a million dollars that should have been disclosed. That didn't happen, the report said.

"Our review of members' meetings summaries over that period indicates that members did not receive formal notice of these matters," Cromwell's report said.

"However, Hockey Canada has advised that all of these discussions would occur in-camera and that they did not keep minutes of those in-camera portions of the meeting."

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Hockey Canada has announced its entire board of directors and CEO Scott Smith have left as the organization confronts widespread criticism over how it handled an alleged group sexual assault involving members of the 2018 men's national junior team.

Cromwell concluded that having the National Equity Fundto "address uninsured and underinsured liabilities is not only sound ...the failure to do so would be a serious oversight."

"It is appropriate to use [National Equity Fund] funds to address potential uninsured and underinsured liabilities for Hockey Canada and/or any participant for whose benefit the reserve is maintained," the report said.

Cromwell still made a series of recommendations.

More than half of players' fees goto National Equity Fund

Cromwell reported thatHockey Canada's website andinformation given directly to parents didn'treveal how much money from players' annual registration fees is being set aside to fund uninsured claims.

Cromwell found that out of the $20.80 insurance fee players are expected to pay annually,more than half ($13.65) goes toward the National Equity Fund. He said participants need to know that.

"Hockey Canada has not directly advised participants about the $13.65 deposited into the National Equity Fund every year to pay premiums, deductibles and to cover uninsured losses," Cromwell wrote.

The report found there were nopolicies and procedures in place to guide the use of Hockey Canada's reserve funds. He recommended coming up with guidance about who can access the funds, who signs off on payments and how such payments arereported to the board of directors, provincial federations and players.

The "Legacy Trust Fund," which Hockey Canadaestablished to cover uninsured claims for its members between 1986 and 1995, also "had no formal policy," Cromwell wrote. The Globe and Mail first reported on the fund, whichHockey Canada said has not been used yet.

Elizabeth Watson, an international governance expert, said the report shows this case is an "example of what can go wrong."

She is the founder of Watson Advisors, which has worked with hundreds of organizations ongood governance tools. Shesaid the report suggests a "culture of protecting the athlete" something she said she's seen before in cases wherethe rules weren'tfollowed because of the "high reverence for elite performance athletes."

"In this case, there were really no rules and it was a way to ensure that athletes were protected and without regard for the overall sense of values that the organization should stand for," said Watson.

Liberal MP Anthony Housefather said the report sounded "very much" like what a parliamentary committee looking into the Hockey Canada scandal "diagnosed."

"I think it's totally fine to have a fund like this to cover uninsured claims, provided that you're transparent about it," said Housefather,who hasn't yet seen the report. "And provided that those paying into the fund know what the fund is for and what they're paying for. That was missing here."

Hockey Canada's executives testified at a parliamentary committee reviewing the matter in July and said they used the National Equity Fund to help the complainant.

Hockey Canada's CFO Brian Cairo told MPs the organization settled the lawsuit because "we didn't know all the details of the night, but we did believe harm was caused."

Scott Smith, who stepped down as Hockey Canada's president and CEO this week, also testified this summer that there were "some questions" about Hockey Canada'ssexual misconduct insurance policy and "we were concerned it could take months and maybe years to clarify that."

"We made the decision to settle in the best interests of the young woman," Smith testified on June 20. "We didn't want to litigate this. We didn't want to go through the procedure and challenge her by putting her through that circumstance."

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Hockey Canada's interim board chair defended the organizations leadership when faced with pointed questions from MPs about multimillion-dollar payouts to settle sexual abuse claims. Her comments have prompted new calls for Hockey Canada officials to resign.

Julie Macfarlane ofthe University of Windsor's faculty of law calledHockey Canada's reasoning a "completely disingenuous argument."

"It was never necessary to run the victim through the court process," said Macfarlane, who is also the co-founder of a campaign to end non-disclosure agreements called Can't Buy My Silence.

"If they accept liability, there would have been settlement negotiations and no chance of a court trial. They also did not need to bind the victim to secrecy and silence in an non-disclosure agreement. That was entirely to cover their own backs."

Report recommends larger board of directors

Provincial hockey federations met virtually on Wednesday after Smith resigned and the board of directors said it would step down.

The provincial federations discussed the Cromwell report and are expected to meet in-person in Toronto on Saturday to vote on a series of recommendations in the report related to the voting process.

Cromwell's report also recommends ensuring better gender parity on the board, boosting the number of members from nine to 13 and extending the terms for directors.

The board of directors electionwas delayed by a month so this report could come out first, CBC News has reported.

The election is scheduled for Dec. 17.

When asked when Hockey Canada would release the full report publicly, the organization said "updates in relation to the ongoing governance review will be made in due course."