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Hockey Canada jersey during a news conference in Calgary in 2017.Jeff McIntosh/The Canadian Press

Hockey Canada maintains a second multimillion-dollar fund where registration fees have been put toward protecting the organization from liability in lawsuits, without disclosing to parents and players how their money was being used, according to documents obtained in a Globe and Mail investigation.

The discovery of this fund, in which player fees intended for emergency medical and dental coverage have been used to insulate Hockey Canada’s top officials from liability, follows revelations last Tuesday that the organization created a special reserve for settling alleged sexual-assault claims outside court.

The Globe investigation was first to report last week that Hockey Canada built a fund through player registration fees and used that money to settle sexual-assault lawsuits without exposing those cases to outside scrutiny, including from its insurance company.

This reserve was known on Hockey Canada’s books as the National Equity Fund, and exceeded $15-million in recent years, the investigation found, though players and parents were never told how that money was utilized.

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The findings angered hockey parents, including several who said they didn’t want their child’s fees going to what some see as an effort by Hockey Canada to cover up sexual-assault allegations. After publication of the story, Prime Minister Justin Trudeau called the situation unacceptable.

A day after The Globe’s investigation, Hockey Canada announced Wednesday that it was immediately halting the use of the National Equity Fund to settle alleged sexual-assault claims and would examine the fund as part of an internal governance review.

Now, a second fund, which Hockey Canada represents to parents and players as an emergency plan known as the Health Benefits Trust (HBT) has also been found putting money toward liability coverage for its directors and officers (D&O), say court documents associated with an injury lawsuit against Hockey Canada. The trust, which is intended to cover items such as dental work and physiotherapy, is worth about $6-million, according to recent financial records.

“Hockey Canada maintains a self-administered medical/dental program, known as the Health Benefit Trust. The HBT is not regulated by any government agency,” the documents say.

“Hockey Canada has admitted to using the HBT to offset expenses associated with the D&O Policy.”

The documents say that Hockey Canada is effectively managing large unregulated insurance funds for its own purposes, without proper oversight or controls.

Hockey Canada is again set to appear before a federal parliamentary committee this week to face questions about its handling of sexual-assault allegations involving eight hockey players, including members of the 2018 Canadian world junior team.

The sport’s governing body settled a $3.55-million lawsuit in May with a woman who alleged that she was sexually assaulted by multiple players in a hotel room in London, Ont., after a 2018 Hockey Canada fundraiser. The settlement, for an undisclosed sum, was reached despite Hockey Canada saying it could not determine which players were allegedly involved, and without completing an investigation into the matter.

The London police have since reopened their investigation into the situation. And after recent reports by TSN of sexual-assault allegations involving members of the 2003 Canadian world junior team in Halifax, police in that city have opened an investigation.

The Globe’s revelations about Hockey Canada’s undisclosed use of player registration fees to build reserve funds to pay out sexual-assault claims and top up insurance funds for executives has raised questions about the organization’s handling of such cases.

The National Equity Fund allowed Hockey Canada to avoid subjecting such situations to outside scrutiny from its insurance company by settling allegations with a pool of internal money that few people outside the organization knew about – using the funds in a manner other than what registrants were told their money was for. However, it is unclear how many lawsuits Hockey Canada has used this reserve fund to settle.

At parliamentary hearings in Ottawa last month, Hockey Canada chief executive officer Scott Smith told MPs that the organization has been dealing with an average of one or two allegations of sexual assault a year for the past six years, a statement several MPs said they were shocked to hear.

Mr. Smith told the hearings that no federal money was used to settle the 2018 lawsuit with a claimant whose identity has not been disclosed. Hockey Canada later told sponsors none of their money was used.

Instead, Mr. Smith said Hockey Canada “liquidated a portion of our investments to pay for the settlement,” but gave no details.

The investigation found that the National Equity Fund keeps a surplus of player registration fees above what it spends on insurance coverage, and invests that money in stocks, bonds and other investment vehicles. According to Hockey Canada’s financial records, it earned more than $1-million in interest and capital gains some years, adding to the undisclosed reserve built from player fees.

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The Health Benefit Trust appears to have been used in a different way, with Hockey Canada diverting funds from money it collected for medical and dental coverage to top up insurance against lawsuits for directors and officers.

According to the court documents, Hockey Canada, which now discloses that it collects $2 from each player to fund insurance for directors and officers, didn’t start reporting this until about 2018, and before that was using the HBT for these reasons. It is not clear to what extent it continues to move money from the HBT into bolstering coverage for plans for its directors and officers.

Hockey Canada did not respond to questions posed Wednesday about the Health Benefits Trust and its use as an account where money can flow to other purposes not previously disclosed to its paying members.

Much like the lack of disclosure surrounding the National Equity Fund, the movement of money out of the Health Benefits Trust is also something that players and parents were not told about.

The trust is set up for players who don’t have supplemental insurance to cover dental or physiotherapy costs. Though registrants across Canada, from as young as beginner Timbits Hockey to senior leagues, are told that they’re paying into a trust, it appears Hockey Canada only considers it one in name.

Operating a trust requires placing controls on how money is collected and used, say lawyers who examined Hockey Canada’s various funds as part of a lawsuit against the organization by a player who was seriously hurt in a game in 2014.

Hockey Canada does not appear to have formalized the trust, court documents suggest. Instead, the organization can move money in and out of its various funds at its discretion without disclosing this to parents and players when they sign up to play, court documents allege.

“Hockey Canada has provided evidence in this case to the effect that, even though it has separate funds for various purposes, it looks at its funds in a universal manner in the sense that these funds are not watertight compartments,” says a memorandum from that case, detailing a statement of material facts that emerged from the discovery stage of that lawsuit.

That such large funds have few controls placed on them, and are used for multiple undisclosed purposes is a concern.

“This is not normal business practice,” Thomas Conway, a lawyer in the injury case, said in an interview.

“Others might justifiably characterize these as slush funds,” Mr. Conway said. “But either way, it appears to be a misuse of money collected from hundreds of thousands of Canadian families, money that Hockey Canada promised would be used to buy insurance for its members. Instead, some of it was used to protect Hockey Canada from claims of sexual assault. That is a betrayal of the members’ trust.”

Though contingency funds aren’t unheard of, organizations are required to disclose how they are using funds that are collected, and there are strict controls placed on these pools of money. Organizations must use any money gathered for the reasons they are purporting to collect it, and not for undisclosed reasons.

“The usual regulatory oversight for how these funds are accumulated, how they are expended and how they are maintained is absent when it comes to the management of Hockey Canada’s National Equity Fund and Health Benefits Fund. This means that Hockey Canada has been able to charge members a specific amount for insurance, but divert part of that money into these funds,” Mr. Conway said in the interview.

“The result is that Hockey Canada management can use these funds in a discretionary manner to settle claims for which Hockey Canada may not be liable, but which management considers to be embarrassing or damaging to Hockey Canada’s reputation,” he said.

The revelations have upset parents across Canada who were unaware how some of their fees were being used.

“I am absolutely appalled to know that – unbeknownst to me as a parent – the fees we paid for our son to play hockey helped settle sexual-assault cases,” said Patti Devine, a former hockey parent in PEI who was frustrated to learn about the National Equity Fund.

“The secretiveness of the fund is especially unnerving. In effect, hockey parents across the country have been unwittingly contributing to this culture of cover up and outright acceptance of sexual assault as part of the game.”

It is not known how much money has flowed out of the medical and dental fund in previous years to top up Hockey Canada’s liability insurance for directors and officers, nor is it known how much of the National Equity Fund has been used to settle lawsuits involving sexual-assault allegations.

In a statement last week in which Hockey Canada announced it was halting the use of the National Equity Fund for sexual-assault settlements, it said the majority of the money goes toward insurance costs and safety and wellness programs, and that between 2014 and 2021, 98 per cent of the funds were used for those purposes.

“Hockey Canada recognizes we have significant work to do to rebuild trust with Canadians. We know we need to hold ourselves accountable,” the organization said in the statement.

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