New Report from CICTAR Shows How CPPIB Oversight Failure Lost Half a Billion in Canadian Workers’ Savings

OTTAWA, Ontario--(BUSINESS WIRE)--A new report, ‘CPPIB’s Orpea Debacle’, from CICTAR (Centre for International Corporate Tax Accountability & Research), details how the Canada Pension Plan Investment Board (CPPIB) failed in the governance of its major investment in Europe’s largest long-term care company, ORPEA.

The collapse, and subsequent French government bail-out of the ORPEA group business empire, brought untold misery for residents of care homes across Europe, their families and the workers who attempted to care for them. While the ORPEA scandal created major headline news across France this debacle received surprisingly little media and political attention in Canada, despite Canada’s largest and primary government-run default pension fund losing over half a billion dollars in workers’ retirement savings.

Despite flaunting its responsible investment policies, with a stated focus on transparency and accountability, CPPIB has barely acknowledged its failures in this high-profile international investment. The report raises broader concerns about major investments in the for-profit long-term care sector and other privately operated public services in Canada and globally by CPPIB and other large Canadian public pension plans, many of which follow the private equity industry’s pattern of extracting short-term profits, while squeezing consumers, exploiting workers and dodging taxes.

Jason Ward, CICTAR’s Principal Analyst said: CPPIB and other major Canadian investors are not abiding by their own stated responsible investment policies and desperately need to increase transparency and accountability on their massive global investments. Of course, these public pension funds need to generate returns to fund the retirement of Canadian workers, but not while harming society through purely extractive and destructive short-term investment practices.

A previous CICTAR report released in 2002 and developed in partnership with French unions, Fédération CFDT Santé-Sociaux and Fédération CGT Santé Action Sociale showed how the ORPEA group used care home revenues, funded in largely by public money, to finance the debt-fuelled acquisition of a vast European property portfolio, managed through a complex maze of corporate structures stretching from Luxembourg to the British Virgin Islands and largely hidden from the company’s own shareholders and the public.

Despite all CPPIB’s resources and expertise, they had failed to see the coming disaster.

The new report from CICTAR details how, despite holding two seats on ORPEA group’s board, CPPIB did nothing to stop a pattern of obvious mismanagement. Nor did it make any public interventions to stem the more than half-billion-dollar loss as the company collapsed and was bailed out with the French government-led intervention.

According to Jason Ward: We are concerned that this may not be an isolated case. The Orpea scandal, involving catastrophic treatment of elderly residents and care workers, raises broader questions about the nature of public pension fund investment in the private long-term care industry, which relies heavily on public funding and has a long-track record of failing to meet the basic human rights of society’s most vulnerable people.

Other Canadian public pension funds also have major investments in the scandal-plagued long-term care sector, and we are concerned about the level of scrutiny being exercised over both the standards of care and working conditions in those facilities. Anyone whose retirement savings are invested in privatised public services may be at risk of a similar collapse.