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Hockey Canada faced an existential crisis this fall after a controversy over its handling of sexual-assault allegations exposed a series of governance failings, a former Supreme Court judge told federal hearings on Tuesday.

An urgent change in management was needed, including the resignation of the entire board of directors, former justice Thomas Cromwell told a parliamentary committee investigating Hockey Canada.

“It was perfectly clear to any reasonable observer what had to be done,” said Mr. Cromwell, who was testifying about a governance review he conducted on Hockey Canada, which found significant transparency and oversight problems at the organization.

While the need for new leaders was evident, Mr. Cromwell said he was worried a sudden exodus would bring further instability to the organization.

“I became concerned from a governance perspective that the organization might be facing almost an existential crisis,” he said. “That is why I advised the sitting directors not to renew their term, not to stand for re-election, but not to simply precipitously all walk out the door.”

His findings were made public in October, a few days before the board announced it would step down, and called for interim directors to be installed this month with more diversity and management skills.

On Monday, a Hockey Canada selection committee announced nine proposed new directors. The list includes five women and four men with varied backgrounds in law, sports administration, accounting and mediation, in addition to those with hockey experience. Hockey Canada’s 13 provincial and territorial associations will vote on the nominees on Saturday.

The upheaval follows months of criticism over Hockey Canada’s handling of sexual-assault allegations involving members of the 2018 national junior team. MPs have accused the organization of trying to cover up the controversy in an effort to protect its reputation and brand, after Hockey Canada quickly settled a $3.55-million lawsuit without fully investigating the players alleged to be involved, or holding anyone accountable.

In his governance review, Mr. Cromwell raised numerous concerns about oversight and transparency, including Hockey Canada’s use of obscure reserve funds to settle sexual-assault claims, without properly disclosing how the funds were deployed or where the money came from.

A Globe and Mail investigation in July revealed the inner workings of Hockey Canada’s National Equity Fund, including that it was built using participant registration fees, and used to settle alleged sexual-assault cases. Across the country, parents and players said they were upset to learn their money had gone toward such settlements, and that the practice was kept hidden.

A subsequent Globe investigation in October revealed a second reserve, known as the Participants Legacy Trust Fund, which also set aside millions of dollars of registration fees that could be used in sexual-assault settlements. Mr. Cromwell’s report then found a third such fund on Hockey Canada’s books that also had not been properly disclosed.

“Once we started to realize that the reserve fund issue went beyond the National Equity Fund, we felt obviously that we had to look into that,” Mr. Cromwell told the hearing.

Serious problems have emerged regarding the funds. Mr. Cromwell said Hockey Canada could not produce documents outlining the rules or policies governing them.

“It wasn’t a matter that the documents were missing. As far as we could understand, the documents had never been created,” he said.

This meant Hockey Canada was amassing millions of dollars from registration fees in funds that it did not disclose, with no stated guidelines on how the money could be deployed.

“I recommended that the organization develop a set of policies governing the uses for these funds, and this contributes to enhanced transparency,” Mr. Cromwell said.

MPs asked Mr. Cromwell about one of the most troubling findings of his report, in which he determined certain statements Hockey Canada made publicly about the National Equity Fund were not true.

Following The Globe’s revelations about the fund in July, Hockey Canada stated to the public and to the media that it was used for various purposes in addition to sexual-assault settlements, including counselling for players.

However, Mr. Cromwell could find no evidence of these programs in Hockey Canada’s financial records. Later, the organization acknowledged he was correct; the National Equity Fund had not paid for such items, even though it had told the public and media it had.

Mr. Cromwell said Hockey Canada’s finances were opaque, making it difficult to determine where money went inside the operation without conducting a full forensic audit. “We noted some specific instances where there was no documentation for certain expenditures that the public had been told had been made,” he said.

Hockey Canada has since acknowledged the National Equity Fund, and therefore player registration fees, were used to settle numerous sexual-assault claims, including the lawsuit over the 2018 allegations.

A Globe investigation in November detailed how Hockey Canada has vast financial reserves, which have grown rapidly in the past few decades, despite its status as a non-profit organization that doesn’t pay income tax.

For decades, Hockey Canada did not pro-actively disclose its audited financial statements to the public. However, the Globe obtained nearly 20 years of audited financial records for Hockey Canada through Access to Information, which show the organization’s net funding reserves – a figure financial analysts use to measure accumulated profit – rose to $143-million in 2021, from $21-million in 2003.

Mr. Cromwell’s report called for Hockey Canada to be more transparent. The organization now says it plans to make its 2021-2022 audited financial statements public. The documents will be released on its website “in due course,” following their approval at this weekend’s annual meeting.

The governance review found Hockey Canada did not want its financial situation, including its audited financials, disclosed publicly because it believed if people knew how much money the reserves contained it would lose leverage when negotiating legal settlements.

“That was the explanation that was offered for the reluctance to disclose the size of those reserve funds,” Mr. Cromwell told MPs.

After the revelations about the National Equity Fund and its connection to player registration fees emerged in July, Hockey Canada faced heavy criticism from politicians, sponsors, parents and players. Around that time, the organization sought to change the public’s perspective on the fund. Board-meeting minutes Hockey Canada was forced to turn over to the parliamentary committee showed it wanted to cast the fund in a more positive light.

Mr. Cromwell was asked if he thought there was a link between the misleading statements made to the public about the National Equity Fund, the revelations in the board minutes about wanting to change the narrative, and Hockey Canada’s hiring of a crisis communications firm all within weeks of each other.

“I didn’t explore why the error was made, I simply tried to ascertain the facts about the use of the funds,” Mr. Cromwell said.

Once new directors are elected, the search for a new CEO is expected to begin. Then-CEO Scott Smith left suddenly in October, at the same time the board announced its resignation.

The interim directors will serve for a year, after which Mr. Cromwell has recommended the board be expanded to 13 people, to better ensure it is geographically diverse as well as having various backgrounds and skills represented. Though he was not involved in the selection process, Mr. Cromwell said the list of candidates indicates his report’s recommendations are so far being followed.

“It’s clear efforts have been made,” Mr. Cromwell said. “It will be for members and others to decide if those efforts have been successful.”

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