Lawsuit over massive Veterans Affairs accounting error to cost Ottawa almost $1 billion

An embarrassing multi-mil‐ lion-dollar accounting error that was covered up for years at Veterans Affairs Canada (VAC) will end up costing taxpayers almost $1 billion, now that a Fed‐ eral Court judge has signed off on a combined class-ac‐ tion settlement.

More than 272,000 former soldiers, sailors and aircrew most of them elderly - were short-changed on pension and disability payments for almost eight years, starting in 2002.

VAC staff made the mis‐ take by not factoring provin‐ cial tax credits for individuals into their calculations. The department discovered the error in 2010.

The oversight was fixed but officials decided at the time not to notify the af‐ fected veterans and not to offer reimbursement for the missed payments.

The affected veterans who include some former members of the RCMP - sued and have now been awarded an additional $817 million on top of $165 million in com‐ pensation earmarked by the federal government.

The Liberal government chose to settle the case rather than fight it out in court. A settlement agreement struck last fall was approved by Federal Court Justice Catherine Kane on Jan. 17, 2024.

The settlement comes in‐ to effect in mid-March.

Former veterans ombuds‐ man Guy Parent originally uncovered the accounting er‐ ror in 2018.

A CBC News investigation the following year showed how VAC covered up and downplayed the error to the former Conservative govern‐ ment, which was at the time engaged in a massive deficitcutting exercise. According to internal records, no one was held accountable for the de‐ cision to keep silent and shortchange veterans.

The Liberal government's compensation program be‐ gan making payments in 2019 and early 2020, but to date only 48 per cent of the funds have been dispersed, according to VAC.

When the compensation program was announced six years ago, a substantial num‐ ber of the affected veterans 170,000, most of them from the Second World War and the Korean conflict - had passed away. Some of their survivors and other veterans joined the class action law‐ suit, which eventually grew to encompass 330,000 military and RCMP veterans.

'It's about integrity,' veteran says

Dennis Manuge, who fought and won a separate land‐ mark legal battle with the federal government over mil‐ itary disability, was one of the plaintiffs in the case.

The idea that VAC could hide the mistake without consequences was one of his biggest motivations for get‐ ting involved, he said.

"Nobody has been held accountable and that's ex‐ tremely frustrating," he said.

"I think, just on a funda‐ mental level, it's about the dishonest nature of how everything kind of unfolded … It's about doing the right thing. It's about integrity, honesty. And when some‐ body that operates in the highest offices and makes decisions with big budgets and big money, we want those people [to be] respon‐ sible and accountable."

He said the federal gov‐ ernment has shown no in‐ terest in finding out who was responsible, even with a mas‐ sive settlement hanging over it.

Veterans Affairs Minister Ginette Petitpas Taylor de‐ clined CBC's request for an interview.

CBC News reached to the current veterans ombud, re‐ tired colonel Nishika Jardine, who was not available to comment.

Manuge said there is some disagreement among the class-action plaintiffs and their lawyers about the set‐ tlement agreement. Lawyers for the veterans uncovered additional errors in the gov‐ ernment's calculations, he said - mistakes that could af‐ fect future payments going forward.

"If you're taking some‐ body to Federal Court and you want a remedy, one would think you would want that remedy to be a perma‐ nent remedy," he said.