The CPP Investments’ loss of more than half-a-billion dollars in a scandal-hit nursing-home group reveals governance issues at the giant Canadian pension fund, charges a new report.
In 2022, French operator of long-term-care homes Orpea, then backed by CPP Investments among other investors, was accused of mistreating residents, including the rationing of food and incontinence products, and fraud by high-ranking executives.
“Despite holding two seats on Orpea’s board, CPP Investments did nothing to stop a pattern of criminal conduct and embezzlement by top management,” reads the report produced by the Centre for International Corporate Tax Accountability and Research (CICTAR), funded by the Canadian Union of Public Employees and other global organizations.
The scandal at Orpea, it added, raises questions about pension-fund investment in the private long-term-care industry, which “has a long track record of failing to meet the basic human rights of society’s most vulnerable people.”
Orpea did not immediately respond to the Star’s request for comment. CPP Investments did not address the Star’s request for an interview.
“Among approximately 3,000 assets in a vast portfolio, spread out in more than 50 countries exposed to virtually every conceivable sector of the economy, we inevitably dispose of certain holdings for endless reasons, including mismanagement by operators or underperformance against expectations,” CPP Investments’ spokesperson Michel Leduc wrote in an emailed statement.
“We were created explicitly to take risk,” he said, adding “investments occasionally fall short even as we deliver exceptional results overall. If those occasional disappointing outcomes didn’t happen it would clearly signify to stakeholders that we aren’t taking enough risk, and that would necessarily undermine the ability of the CPP to pay pensions to all beneficiaries who’ve earned them.”
In March 2023, CPP Investments announced it had exited its stake in Orpea after the group almost went bankrupt with more than nine billion euros in debt and was going through major restructuring. The fund had originally invested 421.8 million euros for a 15 per cent stake in Orpea a decade earlier, but walked away last year with only 26.1 million euros. Total adjusted losses amount to $640 million (Canadian), according to the CICTAR analysis.
That happened after dozens of Orpea retirement homes across France were raided by police over allegations of “institutional mistreatment” of residents in November 2022, according to Reuters. The accusations first came to light in the book “The Gravediggers” by investigative journalist Victor Castanet.
As of July 2022, two of 14 members of Orpea’s board of directors were appointed by CPP Investments.
“While there is no reason to believe that the CPP Investments-appointed directors to Orpea were directly responsible for or aware of alleged criminal activities, as directors they bear responsibility for oversight and should have been aware of irregularities in the company,” wrote CICTAR.
Orpea later confirmed evidence of some financial wrongdoing, including inflated labour expenses and suspicious payments, and apologized, according to Reuters. It denied the allegations of abuse.
More recently, the company rebranded to Emeis and continues to operate in more than 20 countries, mainly in Europe.
Canadian pension funds have invested millions of Canadians’ retirement savings into private long-term-care facilities. While they’re generally profitable investments, some argue that’s at the expense of residents’ well-being.
Several Star investigations during the pandemic revealed that Canadian for-profit long-term-care companies employ less staff than non-profit, operate older buildings and tend to skimp on services.
