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A long-running dispute over pay for the top investing professionals at Ontario Municipal Employees Retirement System has spilled out into the open, with a former managing director filing a lawsuit claiming he’s owed $65-million as a reward for his deal-making.

Tim Patterson’s statement of claim, filed Friday in Toronto court, alleges OMERS fired him and one other professional in the pension fund’s private-equity division for refusing to accept changes to their pay plans, and says eight others have resigned. The claim says OMERS has paid $3.5-million in retention bonuses to others to keep them from leaving.

Mr. Patterson’s lawyer, Howard Levitt, said he believes it’s the largest individual claim in Canadian employment law history. The allegations contained in the lawsuit have not been tested in court.

CUPE Ontario calls for review of OMERS’ investment processes after pension manager posts a 2.7-per-cent loss in 2020

OMERS spokesperson Neil Hrab said the pension manager cannot discuss details of a legal matter involving an employee’s departure, but said the claim “is entirely without merit” and OMERS will contest it.

“It is also OMERS’ responsibility to ensure that compensation plans are consistently applied in accordance with their documented terms rather than allowing for individual interpretations,” he added in an e-mailed statement.

The dispute relates to an incentive plan for OMERS Private Equity Inc. professionals that allowed them a cut of profits from their deals, a commonplace arrangement in private-equity firms outside the pension world. Mr. Patterson, who joined OMERS in February, 2010, after leading the Toronto office of a Vancouver-based private-equity firm, CAI Capital, says in his statement of claim that OMERS repeatedly scaled back the terms of the incentive plan, making it less lucrative for him and others.

The plan, which Mr. Patterson says began in 2013, allocated a share of profits to the investment professionals as long as their batch of deals – pooled in a defined fund – achieved an annualized 8-per-cent return over the course of their life. Unlike a private-sector plan that split profits 80-20 between the investors and the dealmakers, the OMERS plan set aside 10 per cent of profits for the private-equity professionals.

Mr. Patterson says in his claim he led a $366-million investment in a company called Caliber Collision, in which OMERS sold a majority interest five years later for gains of more than $2-billion. He says that Caliber and another investment, Premise Health, “are performing superbly” and are expected to ultimately generate $3-billion to $4-billion in gains for OMERS pensioners.

“He was far and away OMERS Private Equity’s highest performer, meaningfully outperforming his managing director peers,” Mr. Patterson’s lawsuit alleges. He claims he was personally responsible for generating 60 per cent of the realized profits at OMERS Private Equity over the past eight years.

However, OMERS changed the incentive plan a number of times after 2013, according to Mr. Patterson, introducing a lifetime cap on employee earnings, lowering an annual earnings cap and cutting the share of profits on deals.

In 2019, Mr. Patterson alleges, OMERS cut the employees’ share, going forward, to either 5 per cent or 2.5 per cent of profits, depending on whether OMERS was a majority or minority investor. In 2020, Mr. Patterson says, the plan was rewritten to require an 8-per-cent return each year, rather than cumulatively.

Mr. Patterson says he and nine other managing directors and directors have never signed the 2020 plan. “There was an employee revolt,” he alleges.

And in late 2020, he says, OMERS said it would replace the incentive plan altogether with a “bridge plan” with further restrictions. Mr. Patterson says the bridge plan would pay him $12.8-million, versus $20.7-million under the previous restrictive terms of the incentive plan. His $65-million estimate of damages owed is based on the original terms of the plan.

Mr. Patterson’s claim says “OMERS made clear that Mr. Patterson and others would be fired if they refused to sign” – and when he refused, he was fired on Jan. 14 “for the very purpose of depriving him of the considerable compensation he was entitled to.”

He says another plan participant was fired, while eight others signed, received a bonus, then resigned. “OMERS has had to introduce ‘stay bonuses’ totaling $3.5-million in an attempt to stem the outflow of talent.”

Editor’s note: The location of CAI Capital’s head office has been corrected in the online version of this story.

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