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

An embarrassing multi-million-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 Federal Court judge has signed off on a combined class-action 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 mistake by not factoring provincial 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 affected 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 compensation 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 into effect in mid-March.

Former veterans ombudsman Guy Parent originally uncovered the accounting error in 2018.

A CBC News investigation the following year showed how VAC covered up and downplayed the error to the former Conservative government, which was at the time engaged in a massive deficit-cutting exercise. According to internal records, no one was held accountable for the decision to keep silent and shortchange veterans.

The Liberal government's compensation program began 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 number 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 lawsuit, 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 landmark legal battle with the federal government over military 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 getting involved, he said.

"Nobody has been held accountable and that's extremely frustrating," he said.

"I think, just on a fundamental 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 somebody that operates in the highest offices and makes decisions with big budgets and big money, we want those people [to be] responsible and accountable."

He said the federal government has shown no interest in finding out who was responsible, even with a massive settlement hanging over it.

Veterans Affairs Minister Ginette Petitpas Taylor declined CBC's request for an interview.

CBC News reached to the current veterans ombud, retired 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 settlement agreement. Lawyers for the veterans uncovered additional errors in the government's calculations, he said — mistakes that could affect future payments going forward.

"If you're taking somebody to Federal Court and you want a remedy, one would think you would want that remedy to be a permanent remedy," he said.