Is Hockey Canada able to govern itself competently and responsibly?
Such concerns have reverberated from coast to coast all summer — ever since news broke in May that hockey’s domestic governing body had settled out of court with a young woman in London, Ont., who claimed four years ago she was sexually assaulted and threatened into silence by eight unnamed star junior hockey players.
A House of Commons standing committee is probing Hockey Canada over the matter, with MPs already having grilled hockey leaders at two riveting parliamentary hearings.
As well, a former Supreme Court of Canada justice is now investigating the organization’s governance, at the behest of Hockey Canada itself.
A three-part Postmedia special report, just concluded, has found that many top-level actions taken by the not-for-profit organization to quickly pay off the above woman were as troubling, and abnormal, as MPs have charged.
One of Canada’s foremost experts on the proper governance of businesses and not-for-profit organizations alike, Richard (Rick) Powers, says there are reasons for concern over how Hockey Canada leadership handled its most serious crisis to date.
First and foremost? The governance procedures they chose to employ. And more particularly, the operational norms they ignored. That’s the subject today of Part 1 of this report.
“What I am bothered by,” said Powers, an associate professor who specializes in board-director training at the University of Toronto’s prestigious Rotman School of Management, “is there appears to be no record of discussions of these very serious allegations, and decisions that were made by the board, not even by the chair … to serve as a record that they actually did things properly.
“Everyone is wondering, ‘How the hell did you come up with these decisions?’”
How indeed.
Millions of shocked, puzzled, outraged and even ashamed Canadians have been asking that since TSN started breaking bombshell news on May 26, that Hockey Canada — after cashing in just a fraction of its reported stash of $153 million in stocks, bonds, cash and other assets, we learned later — settled out of court with the young woman, only days after learning she was suing that national sports organization, plus other defendants, for $3.55 million.
For this special report, Postmedia consulted numerous Canadians possessing decades of executive-leadership or board-of-director experience, with for-profit companies and/or not-for-profit organizations. Most spoke candidly, on the condition of anonymity.
One of two who spoke on the record is Anthony Housefather, an MP on the Parliamentary Standing Committee on Canadian Heritage. He’s a lawyer, a former longtime general counsel and corporate board secretary for a multi-national technology company, and someone who has sat on some 30 boards. Housefather is a Liberal representing Montreal’s Mount Royal riding.
The other is Powers, who has taught and been intimately involved in Canada’s foremost directors education program at the Rotman School of Management (in partnership with the Institute of Corporate Directors) for the past 16 years.
“We help prepare directors for their important work in the for-profit and not-for-profit sectors in Canada,” Powers said during a series of phone interviews. “As the National Academic Director, I am certainly familiar with the territory.”
What’s more, Powers possesses decades of personal experience in serving on dozens of boards, including in sports as a past vice-chair of Rugby Canada, and currently as board chair for Commonwealth Sport Canada.
In consulting with such experts for this three-part report, Postmedia furthermore has found:
• There are indeed other troubling aspects as to how Hockey Canada settled with the alleged sex-assault victim of 2018, beyond governance procedures, as first raised by MPs this summer: (a) particularly how the organization claims it was acting solely in the best interests of the alleged victim but, originally, slapped a strict non-disclosure agreement her as part of the settlement, before buckling under public pressure and diluting it once news of its existence got out, and (b) and how Hockey Canada not only decided to not consult with any other named defendants in its breakneck dispatch to settle the civil suit, but did not care to know whether other named defendants even knew they, too, were being sued.
• That the existence of Hockey Canada’s improperly described internal “slush fund” — which it formally but vaguely named the “National Equity Fund,” and from which (i) it paid the alleged 2018 victim somewhere up to the full $3.55 million she had sought in civil court, (ii) and paid Hockey Canada’s investigative legal firm Henein Hutchison LLP for its work on the matter ($287,000) — not only should NOT raise any concerns, it’s a common contingency fund found in the ledgers of upstanding boards everywhere, whose organizations face ample risk of uncovered insurance claims.
• That Hockey Canada’s claims it used no public monies to pay off the alleged 2018 victim might be a dubious stretch at best.
• That Hockey Canada might not have given the person it appointed to launch its internal governance review, former Supreme Court Justice Thomas Cromwell, ample time to conduct a thorough probe by normal standards.
• And that Hockey Canada actually has acted dutifully and responsibly in some ways since the 2018 scandal broke, especially with respect to how and when it has tried to apply fixes and remedies in recent months.
To be sure, Hockey Canada’s decision to not log any decisions coming out of off-the-record, or so-called “in camera,” discussions involving top executives and directors at board meetings — pertaining to the alleged 2018 victim’s sex-assault allegations and 2022 payoff — is more than a little controversial.
And abnormal. Especially, as Powers observed, on a matter “as serious as that. We’re talking about a multi-million-dollar decision.”
Executives that Postmedia consulted for this story found Hockey Canada’s actions in this regard, from a responsible procedural standpoint alone, to be problematic at best, offensive at worst.
MPs on the House of Commons Standing Committee on Canadian Heritage — which in June launched its probe — were stunned in July to discover that Hockey Canada’s board minutes going back to 2018 contain no references to any decisions made on this matter. Nothing.
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“So basically, according to Hockey Canada’s practice,” MP Housefather said in questioning Scott Smith, Hockey Canada’s president and CEO, at July’s hearing, “you could never prove in the future whether the board did or did not do what you said. I can only say that you need better legal advice and you need better lawyers, if that is your practice, sir.”
It was only at that July 27 hearing — the second time the standing committee hauled up Hockey Canada’s top executives this summer, following a June 20 hearing — that MPs broke the news to the public of Hockey Canada’s decisions to not record anything, formally, about the 2018 incident, including the payoff.
To summarize the scandals currently plaguing Canada’s national pastime, the woman whose identity remains undisclosed claimed that eight star junior hockey players — many reportedly from the 2018 Canadian world junior championship team — gang-assaulted her sexually in a London hotel room, hours following a Hockey Canada Foundation fundraising gala in June 2018.
The woman furthermore alleged these players forced her, by way of threat, to cover it up.
Identities of those eight players were not determined following inconclusive investigations, circa 2018-20, conducted by London police and by the law firm (Henein Hutchison LLP) Hockey Canada hired, and their identities remain unknown. Both investigations were relaunched in July.
In late May the NHL opened its own investigation, as some of the alleged assaulters — now in their early to mid-20s — probably still are playing in the NHL.
Two other alleged incidents of gang sexual assault committed by Canadian junior hockey players are now being reinvestigated by local police — one in Halifax during the World Juniors championship in 2003, and one at a hotel room in Quebec City in 2014 by four visiting players then on the Gatineau Olympiques of the Quebec Major Junior Hockey League.
Smith, Hockey Canada’s president and CEO, told Parliament he is the person to lead the organization out of the crisis. And on Monday of this week, Andrea Skinner, interim chair of the Hockey Canada board of directors, doubled down — announcing that Smith has “the support” of the board.
As to how Hockey Canada handled the 2018 incident, understand there’s nothing ever wrong with directors and executives of any company or non-profit organization going off the record during a board meeting — nor of not keeping any record of who said what to whom, about what. It happens all the time. Standard operating procedure.
“The general rule is that’s why you go in camera — you don’t minute it,” Powers said. “The fact that any discussion like (the 2018 gang-sexual-assault allegation), the sensitivity of it, would cause any board to go in camera — no question about that. Generally speaking, minutes are not kept of in-camera. The whole idea is to allow the board to speak frankly.
“However, having said that, it would be normal practice for an important decision like that, where they do the discussion in camera and then come out, recording important decisions would be expected.
“Failure to do that lies on either one of two reasons. One, they didn’t want to have a record of it, with the thought of pending litigation which might come out and they just didn’t want to have a record of it. Or, two, it may have been covered by solicitor/client privilege. I don’t know if they had their lawyer in there with them. And why would you do that? You’d be concerned about reputation risk, and possible litigation risk in the future.
“But with something as serious as that matter, and we’re talking about a multi-million-dollar decision, the fact that it’s not minuted anywhere is certainly poor governance.”
But illegal in any way?
“No, it’s not illegal. No,” Powers said.
Housefather, though, in a phone interview nearly a month after grilling Smith on this very matter at the second parliamentary hearing, sounded no less insulted.
“You should come out of the in-camera portion,” he said insistently, “and you add something into the board minutes, saying the board of directors discussed the matter and it was resolved — moved by X, seconded by X — that the board authorized X to sign a settlement agreement with X, on the terms disclosed to the board.
“Resolutions are the most important things minuted. Authorizing a signature of a settlement agreement would be one of those things that normally a board of directors would vote on, to authorize someone to sign, and they would indicate that the board approved the terms of an agreement that they have reviewed.”
Housefather, as Powers and other sources noted, said it’s vital that any non-profit organization’s or company’s board record its material decisions and transactions. On this matter, Hockey Canada did not.
“What happens 10 years later if someone in the future board of Hockey Canada challenges this settlement agreement and asks, ‘Who authorized you, Scott Smith, to sign that? I don’t see that in your board minutes.’ You need to show, if you were the person signing that agreement, that you were authorized to do that. The person signing that agreement doesn’t have the right on his own to do it. The board needs to authorize it, and record that.”
Does the manner in which the Hockey Canada board handled this matter beg the question, well, if they’re doing THAT on this monumental matter, then what ELSE are they doing improperly, especially on the small stuff?
It sure does, several of Postmedia’s sources said.
“To me, it shows a lack of corporate governance that is of grave concern,” Housefather said. “And it may indicate that a lot of other things that should be properly governed weren’t either. Perhaps other things that needed to be minuted, to prove that they occurred, didn’t happen either.”
Powers concurred:
“I would be concerned about that. The whole idea of in-camera is to allow people to speak frankly, and have open discussions. It is not, however, to take advantage of, and hide information, from others. And that’s what appears to have happened.”
What’s more, given president/CEO Smith’s testimony in July before Parliament, it appears Hockey Canada’s board routinely does not record anything discussed or, far more importantly, determined during in-camera meetings — not just this past May in addressing whether to pay off the alleged 2018 victim, but on all matters ever discussed in camera.
Smith all but admitted as much during the following exchange at the July 27 committee hearing. Conservative MP John Nater asked Smith if the Hockey Canada board of directors was informed at a formal meeting in autumn 2018 about the inconclusive investigative report and recommendations then submitted by Henein Hutchison LLP.
Smith said yes, the board was given a copy that fall.
Nater: “Have the minutes of that board meeting been provided to this committee, as required?”
Smith: “All of the briefings with respect to this file were held in camera.”
Nater: “What you’re telling me is that no in-camera discussions have been recorded … ?!
Smith: “In-camera meetings have no recording and no minutes.”
Nater: “You’re telling me Hockey Canada has no minutes or notes taken of in-camera meetings on this?”
Smith: “There are no minutes from in-camera meetings, or from in-camera sessions within meetings.”
Smith did admit, when pressed by Nater, that he “may have notes from the board meetings, yes,” and would provide them to the board “if they would be beneficial to the committee,” but on condition they would not “prejudice any of the ongoing investigations.”
Commented Powers:
“It would be strange — almost absurd — that there would not be ‘some’ notes kept of these in-camera proceedings … Decisions made in-camera would normally be confirmed (obliquely if necessary) in a return to the regular meeting, and a motion to that effect.
“I often compare this to the determination of the CEO’s salary. The discussion typically takes place in camera, but somebody better write down what it is, to inform HR, etc…”
To Housefather, whether an executive-team leader or any board member scribbled private notes during in-camera sessions is beside the point.
“You can’t make decisions in the in-camera session and then not officially minute them — you can’t,” he said.
NDP MP Peter Julian, a member of the standing committee, summed up Hockey Canada’s governance and other actions on this matter as follows, in a phone interview:
“I think they left us with more questions than answers. The reality is that I think Hockey Canada has not been transparent, has not been accountable.”
If one wanted yet more proof to support the theory that Hockey Canada’s leaders — even after news of the payoff broke in May — tried to bury everything and anything about how it handled the mess, at every stage over nearly four years, Julian offered this big piece.
“What Hockey Canada did,” Julian said, “was dump loads of hundreds of pages of Board of Directors minutes (on our committee), rather than coming clean and saying that all the important decisions are made behind closed doors, in secret, in camera, with no minutes or written record of these decisions.
“And if they had come clean with that, then instead of having the committee poring over documents, and very clearly not finding what we had asked for, then we would have been able to press them more carefully.”
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