Bonuses that go bust and disappearing trust

VANOC deputy CEO Dave Cobb (left) and chief financial officer John McLaughlin at the Dec. 17, 2010 news conference. The post-Games financial report was released and a key element was missing: information about the Employee Completion and Performance Plan. Ex-staffers were surprised to learn Jan. 6, 2011 that the final instalment of bonuses was axed.

Number two on the list of the five corporate values adopted by the Vancouver 2010 Winter Olympics organizing committee was “trust”.

According to Webster, trust is defined as:

1 a: assured reliance on the character, ability, strength, or truth of someone or something; b: one in which confidence is placed
2 a: dependence on something future or contingent : hope; b: reliance on future payment for property (as merchandise) delivered : credit
3 a : a property interest held by one person for the benefit of another; b : a combination of firms or corporations formed by a legal agreement; especially : one that reduces or threatens to reduce competition
4 archaic : trustworthiness
5 a (1) : a charge or duty imposed in faith or confidence or as a condition of some relationship (2) : something committed or entrusted to one to be used or cared for in the interest of another.

VANOC disclosed in its report for the year ended July 31, 2008 that it created a trust on July 1, 2008 “for the purposes of holding certain of the assets of the Employee Completion and Performance Plan [the “Plan”]. Employees were to be rewarded, based on length of service and seniority, once when they finished their assignments and again several months later.

“The purpose of the Plan is to support the retention of employees through to the end of the term of their employment agreement (“completion entitlement”) and reward achievement of organizational performance results. The purpose of the Trust is to hold the contributions to be made by VANOC relating to the completion entitlement of eligible Operations employees. VANOC has accrued $8,600 at July 31, 2008 related to the completion entitlement, which will be paid into the Trust once the Trust has been fully set up. Transactions between VANOC and the Trust will be measured at fair market value at the date of contribution. VANOC has an economic interest in the Trust as it is a named beneficiary together with the eligible employees, and is entitled only to the interest, capital gains and dividends earned on the Trust’s assets.”

By Oct. 31, 2008, VANOC “accrued” $9.8 million. Another $731,000 was added by Jan. 31, 2009 when it stood at $10.601 million. By April 30, 2009, it was $14.534 million.

Three months later — when the fiscal year ended July 31, 2009 — the “fair value of the trust’s assets” was $16.3 million.

The last citation was in the Dec. 21, 2009-released report for the period that ended Oct. 31, 2009 when the trust was worth $17.774 million.

There was no mention in the Dec. 17, 2010-published, post-Games financial report.

On Jan. 6, 2011, ex-employees were notified via an email memo from chief financial officer that there would be no final instalment of the staff bonuses. Happy new year!

One trust disappeared and another trust was broken.

That’s how it ended. How did it begin?

VANOC planned to reward staff with bonuses, so as to prevent an exodus in the months before the 2010 Winter Olympics. The $44.576 million in the May 2007 business plan and budget for “additional compensation costs” was branded a “slush fund” by then-NDP Olympics critic Harry Bains.

The story had a second go-round in October 2009 when the $30 million Employee Completion and Performance Plan caused VANOC to go into damage-control mode while preparing for the Olympic torch relay.

“This helps us reassure our employees — particularly in the face of a challenging economy — that they can complete their commitments without the pressure of trying to find a new job or being recruited in the final months before the Games,” said a prepared statement from deputy CEO Dave Cobb in October 2009.

Shortly after he arrived at Olympia, Greece’s Amalia Hotel for the Oct. 22, 2009 torch-lighting, CEO John Furlong mentioned that he paid a visit to the publisher of The Vancouver Sun (a VANOC sponsor and no relation to Sun Media) to express his dismay at the paper’s coverage of the issue. It was an insult to the hardworking men and women of Vancouver 2010, Furlong said.

It’s no surprise that the bonuses went bust. We eventually found out a week before Christmas 2010 that VANOC got a $187.8 million bailout from taxpayers in order to show a balanced $1.884 billion operating budget. No taxpayers’ money was supposed to be used for operations. But the recession happened and VANOC was not prepared. Dollars were being shifted from department to department and account to account. Because of one of my sources, we now also know that employee bonuses were a casualty.

Certainly there may be some ex-VANOC workers who qualified for a bonus who may be feeling jilted about the post-Christmas memo. But there are many more taxpayers wondering: Why didn’t VANOC talk about this? It’s evidence that the organizing committee made sacrifices like the rest of us.

Ken Dobell, the chair of the finance committee, did not want to comment. McLaughlin did not directly reply to my queries. Spokeswoman Renee Smith-Valade claimed to be conveying a message from McLaughlin that:

“Page 8 of the final financial report indicates that compensation costs totaled $308.3 million across the organization for the duration of the project and that these costs were embedded in the reported cost of each division. The funds paid out of the trust were included in this total as they were part of the compensation costs.”

Not good enough. Show me.

This begs some simple, reasonable, key questions for VANOC.

1) What was the financial standing of the trust from Nov. 1, 2009 onward?

2) After diligently reporting the evolution of the trust since it was established, why was it omitted from the final report? (If you’re an eligible ex-VANOC employee, you are a beneficiary and have the right to ask for the statements of this trust.)

3) Was auditor Ernst and Young supplied sufficient information about the state of the trust after Oct. 31, 2009?

4) Finally, what else are you hiding from Vancouverites, British Columbians and Canadians?

As usual, I gladly accept answers at bob.mackin@sunmedia.ca and even plain, brown envelopes at 554 E. 15th Ave., Vancouver, B.C. V5T 2R5

2010goldrush.blogspot.com
News and views on Vancouver 2010 (and beyond) from Bob Mackin.

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