Documents lift veil on top salaries at Tarion
Home warranty corporation spends millions on advertising, conferences, employee bonuses
The CEO of Tarion, the corporation created by the Ontario government to protect new homebuyers, earned more than $3.4 million between 2008 and 2013, including bonuses totalling more than $1 million, newly uncovered documents show.
In 2013 alone, Howard Bogach, who has been at the helm of the new home warranty program since 2008, earned a total of $700,117, including a bonus worth more than 60 per cent of his base salary. Tarion is currently under review by former associate chief justice J. Douglas Cunningham, who was appointed by the province last year to find ways to improve consumer protection.
The financial documents, publicly available in the United States — but not in Canada — list a variety of Tarion expenditures in U.S. dollars. The Star has used exchange rates contained in the documents to convert the figures back to Canadian dollars, the currency in which the amounts were originally paid.
Other figures in the documents show that Tarion spent more than $27 million on legal costs, travel, advertising and conferences over the recent six-year period.
Bogach did not comment to the Star when asked about his remuneration, but Mark Basciano, chair of Tarion’s board of directors and president of homebuilder Mountainview Homes, said in an email, “We are confident that our executive salaries are in line with what other public and private sector organizations pay.”
Tarion has previously refused to provide the Star with details of senior management salaries.
“What are the bonuses based on? I would be interested to see how they are calculated to ensure the bonus is consistent with consumer protection,” said Toronto homeowner Alex Patinios, who spent more than three years fighting Tarion over whether certain deficiencies in his new home were warrantable.
Tarion, formerly called the Ontario New Home Warranty Program, was created by the Ontario government in 1976 to administer the province’s New Home Warranties Plan Act, which provides warranty protection to Ontarians purchasing new homes or condos.
A Star investigation three years ago found Tarion’s online builder directory was not disclosing all instances of poor or incomplete work by homebuilders, meaning buyers could not get a full picture of builders’ track records.
Now, thanks to documents Tarion filed with the Internal Revenue Service in the U.S., the public has a window into how the private non-profit operates in greater detail. The documents, known as Form 990s, are informational returns that non-profit corporations must file with the IRS if they have gross receipts or total assets over a certain amount.
Because Tarion earned investment income through its holding of U.S. securities in its guarantee fund — used to pay out warranty claims on new homes — the tax-exempt corporation was required to file these forms with the IRS.
The documents, posted online by public interest journalism website ProPublica, shine a light on Tarion’s expenditures between 2008 and 2013. Tarion said it was not required to file Form 990s in 2014 or 2015.
The Star asked the Ministry of Government and Consumer Services, which oversees Tarion, if it believes the expenses revealed in the documents were a fair use of the organization’s funds. Christine Burke, a spokesperson for Government and Consumer Services Minister MarieFrance Lalonde, said the province is “committed to ensuring there are strong consumer protection measures for new homebuyers.”
“Although Tarion is a self-financed, independent, administrative authority, we want to ensure that it fulfils its mandate to deliver high quality services that protect consumers,” Burke said in an email.
“That’s why we appointed the Honourable J. Douglas Cunningham, QC to review Tarion specifically looking at accountability, transparency and board governance.”
Most of Tarion’s revenue comes from “home enrolment fees” usually paid by buyers. Because the organization is not funded with tax dollars, its salaries are not included on the province’s Sunshine List for public sector employees making more than $100,000 a year.
Other high earners at Tarion were David Guiney, senior vice-president, who earned a total of $494,336 in 2013, including a bonus worth 49 per cent of his base salary of $295,800, and vice-president and general counsel Tim Schumacher, who earned a total of $404,742 in 2013, including a bonus worth 36 per cent of his base salary of $261,050.
Tarion board chair Basciano said executive compensation is determined by assessing five areas: financial performance, risk management, leadership, strategy and stakeholder relations. He said the committee that sets executive salaries uses an external consultant to act as an adviser.
“We believe Tarion, through its careful and professional executive compensation process, has struck the proper balance in providing appropriate compensation for challenging and rewarding positions,” Basciano said.
The documents also show that between 2008 and 2013 Tarion spent the following amounts :
$2.7 million on “conferences, conventions and meetings”
$4.7 million in “advertising and promotion” $5.7 million in travel expenses $14 million in legal costs Tarion spokesperson Laurie Stephens said attending conferences, meetings and seminars is “part of how our organization remains current in respect of industry developments” and that all conferences involved Tarion staff learning about industry issues and best practices.
As for advertising and promotion costs, she said Tarion has statutory and contractual obligations with the province to create awareness about the warranty program.
Stephens said about 70 per cent of travel costs related to “field inspectors, enforcement investigators or educational/risk mitigation.”
When it comes to legal expenses, she said, they are an “expected and ongoing cost” for the organization and that the vast majority of these include managing appeals and disputes raised by builders, representing Tarion in collection actions against developers and fighting illegal building in Ontario. She said a small proportion of legal costs relate to homeowner appeals, some of which end up at the province’s Licence Appeal Tribunal.