Federal government looking to settle lawsuit over $165 million error in veterans benefits

The federal government is in exploratory talks on settling a combined class-action lawsuit over a $165 million accounting error at Veterans Affairs Canada that shortchanged more than 250,000former soldiers, sailors and aircrew most of them elderly CBC News has learned.

The legal action (which began asfive separate lawsuits thathave sincebeen amalgamated)was certified by a Federal Court judge on Dec. 23, 2020.

The error stems froma bungled calculation of disability awards and pensions by Veterans Affairs staff an oversight that began in 2002 and ran undetected for almost eight years.

When the department discovered and corrected the indexing mistakein 2010, it did not notify any of the 272,000 veterans who were affected or offer to reimburse them.

The matter did not become public until former veterans ombudsman Guy Parent blew the whistle just before his retirement in the fall of 2018.

A CBC News investigationin 2019uncoveredinternal federal documents that explained how the error happened and detailed some of the flawed assumptions bureaucrats used to bury the mistake when it was discovered.The lawsuits were filed following the publication of thatstory.

The class-action certification order a copy of which was obtained by CBC News said the consortium of law firms overseeing the case can only begin canvassing for those affected after March 1, 2021. The delay is meant to allow for "without-prejudice settlement negotiations between the parties."

The Liberal government owned up to the accounting error and promised to reimburse veterans, beginning in 2020.

Compensation process is underway, says department

The process is not yet complete but it is well underway, said a spokesperson for Veterans Affairs Minister Lawrence MacAulay.

John Embury said that, as of January 11, more than 107,000 of the quarter-million veterans andsurvivors affected by the errorhad received upwards of $77.3 million in reimbursement.

The individuals who have been compensated by the federal government to date have tended to beveterans who are still alive, or family memberswhowere easily reachable. The approximately 140,000 remaining cases involve the estates of former soldiers, sailors and aircrew who have passed away.

Veterans Affairsis working on an advertising campaign to bring the outstanding files to a close, said Embury. There's no timeline yet for closing out all of those cases.

Embury would not comment on thepreliminary settlement negotiations, saying the matter is before the courts.

Plaintiffs and the law firms involved havehad very little tosay publicly about the case to date,other than they're pleased it'smoving forward.

The certification order indicates thatthe legal team has,through federal informationaccess law,amassed a trove of federal documents about how the federal government dealt with the enormous error.

WATCH: How Ottawa shortchanged veterans

Ottawa short-changed veterans at least $165 million

6 years ago

Duration 2:03

More than 270,000 ex-soldiers were short-changed by Veterans Affairs Canada for over eight years because of an accounting error worth at least $165 million.

The 2019 CBC News investigation showed how Veterans Affairs officials made the mistake in the first place by reacting to changes in Canada Revenue Agency forms related to the 2001 overhaul of the Income Tax Act.

Documents obtained by CBC News alsodemonstrate how Veterans Affairs officials tried to gloss overthe benefits calculation error when itwas discovered.

To justify not repaying veterans, officials operated on the assumption that they had the law on their side because the legislation was "silent" on the precise method of conducting the calculations and the "Pension Act does not specify the calculation for the annual adjustment."

But while the law may not be precise,the documents showed the regulations supporting the legislation do spell out the proper method for calculating the adjustment.

Some of the plaintiffs involved in the lawsuit have called for accountability.Conservative leader Erin O'Toole, himself aformer veterans minister,called foran investigation into how the mistake was covered upin 2019.

Embury saidthe federal Office of the Controller General didconduct a review of the case a copyof which was quietly posted online last fall.

The reviewdid not find faultwith federal officials but did recommend that,in future, Veterans Affairs should have clear "interpretations of legislation" and that those interpretations should be"obtained from, as well as regularly confirmed and validated with, relevant [experts]."