Third Session, 41st Parliament

(2018) OFFICIAL REPORT

OF DEBATES

(HANSARD)

Tuesday, May 29, 2018

Afternoon Sitting

Issue No. 145

ISSN 1499-2175

The HTML transcript is provided for informational purposes only.

The PDF transcript remains the official digital version.

CONTENTS

Routine Business

Reports from Committees

Parliamentary Reform, Ethical Conduct, Standing

Orders and Private Bills Committee, report on Bill Pr401, May 2018

M. Elmore

Second Reading of Bills

Bill Pr401 — Canadian Chinese School of Theology

Vancouver Act

T. Wat

Committee of the Whole House

Bill Pr401 — Canadian Chinese School of Theology

Vancouver Act

Report and Third Reading of Bills

Bill Pr401 — Canadian Chinese School of Theology

Vancouver Act

Orders of the Day

Committee of Supply

Estimates: Ministry of Attorney General

(continued)

J. Yap

Hon. D. Eby

S. Furstenau

M. Lee

L. Throness

S. Bond

P. Milobar

Proceedings in the Douglas Fir Room

Committee of Supply

Estimates: Ministry of Advanced Education, Skills and

Training (continued)

S. Gibson

Hon. M. Mark

J. Tegart

R. Sultan

J. Thornthwaite

D. Barnett

S. Bond

S. Cadieux

S. Sullivan

Estimates: Ministry of Energy, Mines and Petroleum

Resources

Hon. M. Mungall

T. Shypitka

S. Bond

A. Weaver

TUESDAY, MAY 29, 2018

The House met at 1:32 p.m.

[Mr. Speaker in the chair.]

Routine Business

Reports from Committees

PARLIAMENTARY REFORM, ETHICAL

CONDUCT, STANDING ORDERS

AND

PRIVATE BILLS COMMITTEE

M. Elmore: I have the honour to present a report of the Select Standing

Committee on Parliamentary Reform, Ethical Conduct, Standing Orders and

Private Bills.

I move that the report be taken as read and received.

Motion approved.

M. Elmore: I ask leave of the House to move a motion to adopt the

report.

Leave granted.

M. Elmore: I’d like to make some brief comments. The Canadian Chinese School

of Theology Vancouver Society is seeking authority to continue the

Canadian Chinese School of Theology Vancouver Society, previously

incorporated under the Societies Act as the Canadian Chinese School of

Theology Vancouver Society, and to allow it to grant degrees, diplomas

and certificates in theology, including honorary degrees in theology

within the province of British Columbia.

On May 28, 2018, the Parliamentary Reform, Ethical Conduct,

Standing Orders and Private Bills Committee met and considered the

proposed private bill and asked questions of the designated solicitor

and a representative of the association. I’m pleased to note that the

recommendation for the private bill to proceed was unanimously supported

by the committee.

Mr. Speaker: The question is the adoption of the report.

Motion approved.

Second Reading of Bills

BILL P r 401 — CANADIAN CHINESE

SCHOOL OF THEOLOGY

VANCOUVER ACT

T. Wat: I move that the bill be now read a second time.

[1:35 p.m.]

This private bill will enable the Canadian Chinese School of

Theology Vancouver Society, previously incorporated under the Societies

Act, to be continued as a school of theology for Canadian and

international students under the name Canadian Chinese School of

Theology Vancouver and will be able to grant degrees, diplomas and

certificates in theology, including honorary degrees in theology, within

the province of British Columbia.

Mr. Speaker: First, shall leave be granted?

Leave granted.

Mr. Speaker: The question is second reading of the bill.

Motion approved.

T. Wat: By leave, I move that the bill be referred to a Committee of the

Whole House to be considered forthwith.

Leave granted.

Motion approved.

Bill Pr401, Canadian Chinese School of Theology Vancouver Act, read a

second time and ordered to proceed to a Committee of the Whole House for

consideration forthwith.

Committee of the Whole House

BILL P r 401 — CANADIAN CHINESE

SCHOOL OF THEOLOGY

VANCOUVER ACT

The House in Committee of the Whole (Section

B) on Bill Pr401; R.

Chouhan in the chair.

The committee met at 1:38 p.m.

M. Hunt: I would like to seek leave to make an introduction.

Leave granted.

Introductions by Members

M. Hunt: I recognize that we set a record on that this morning. But in the

gallery this afternoon will be three different groups coming from Frost Road

Elementary in my riding of Surrey-Cloverdale. This is one of those cute

anomalies that we have in Surrey. These young people all think they live in

Fleetwood, but because of the way the boundaries are drawn in Surrey, the

east side of Fleetwood is called Surrey-Cloverdale.

I just want to introduce them and let the House make them feel

welcome.

Debate Continued

Sections 1 to 13 inclusive approved.

Preamble approved.

Title approved.

T. Wat: I move that the committee rise and report the bill complete

without amendment.

Motion approved.

The committee rose at 1:39 p.m.

The House resumed; Mr. Speaker in the chair.

[1:40 p.m.]

Report and

Third Reading of Bills

BILL P r 401 — CANADIAN CHINESE

SCHOOL OF THEOLOGY

VANCOUVER ACT

Bill Pr401, Canadian Chinese School of Theology Vancouver Act,

reported complete without amendment, read a third time and

passed.

Hon. M. Farnworth: In this chamber, I call continued debate on the estimates of the Ministry

of Attorney General. In the Douglas Fir Room, Committee A, I call the estimates

of the Ministry of Advanced Education, Skills and Training, to be followed, when

that’s complete, by the Ministry of Energy, Mines and Petroleum

Resources.

Orders of the Day

Committee of Supply

ESTIMATES: MINISTRY OF

ATTORNEY

GENERAL

(continued)

The House in Committee of Supply (Section B); R. Chouhan in the

chair.

The committee met at 1:43 p.m.

On Vote 14: ministry operations, $470,469,000

(continued) .

J. Yap: Just before the break — I appreciated the debate with the minister

— we established that, yes, there is an issue with money laundering. But

the minister agreed that based on the statistics from FINTRAC, the

federal agency that tracks reporting of suspicious transactions, in

fact, casinos represent, at last reporting, about 7½ percent of reported

money laundering. And the vast majority, 93 percent, is in other venues,

and the minister agreed.

I would like to just share with the House some comments that the

minister made. As I’ve said earlier, he has been vocal publicly about

the problem of money laundering in casinos.

[1:45 p.m.]

For example, on January 10, 2018, the minister was interviewed on

the Jon McComb Show , and he said this: “Hundreds of millions of

dollars in cash that we know of that has passed through Lower Mainland

casinos was unregulated and lacked oversight.”

On Voice of B.C. on March 1, the minister said this:

“I’ll crack down on this. We are anticipating that there will be a

financial impact, and the impact is significant. We’re talking $40

million to $60 million of impact, because there was $400 million to $600

million worth of gambling activity, apparently, that was taking place in

this.” These are what the minister had stated publicly.

Given his comments and, generally, his sense of urgency about what

he asserts is the problem of money laundering in casinos…. The interim

report from Dr. German made two recommendations. One we canvassed just

before the break: that effective immediately, meaning December 2017,

there would be, on a 24-7 basis, a regulator from GPEB, the government

regulator, at every casino, or at least the high-volume

casinos.

We’ve heard from the minister that that has not happened. I wonder

if the minister can comment on this.

Hon. D. Eby: It’s hard to know where to start to disagree with the member, but

maybe I’ll start with what we agree on. I agree that there is a sense of

urgency in this government that is new to government in British Columbia

on this issue, and unfortunately so. The issue of transnational money

laundering in British Columbia was so pervasive, so serious, that a

professor in Australia who was training anti-money-laundering officials

in that country, Professor Langdale of Macquarie University, taught them

about something called the Vancouver model of money

laundering.

I don’t know what the member’s definition of serious is. It seems

like he’s trying to advance a theory that this is not a serious issue or

perhaps that I have blown it out of proportion. That one fact alone

about the Vancouver model, I think, should illustrate the seriousness of

the issue.

In any event, the member conflates reporting with FINTRAC with

criminal activity called money laundering, which is attempting to

conceal the source of funds that are generated through some kind of

illegal activity. Simply because you provide a report to FINTRAC does

not mean that money laundering has taken place. FINTRAC collects reports

from all kinds of different organizations, including casinos and gaming

facilities. That does not mean, when a report’s filed, that money

laundering has taken place. What it means is that the threshold for

reporting has been met that requires reporting under the law.

The member said that I said a number of things that I did not say.

I encourage any member that’s curious about what I did say to refer to

Hansard . I disagree with the member if his thesis is that

there is not a serious issue here, and I share the concern with the

member that we are not yet 24-7 in the facilities.

I’ve had a conversation with the regulator. They have had a

challenge in hiring people with the background required. They’ve hired

three people. They are hiring two more. The necessary staff they need to

deploy this, that they need to train up, is six to eight people. They’ve

hired three. They’ve got offers going to two more. It has been a

challenge for them to get through the PSA process and get people hired

up and trained, partly due to the background that’s required for this

kind of work, partly due to the fact that unemployment in British

Columbia — in our economy, which is doing very well — is less than 5

percent, but not because there is a lack of urgency on this

issue.

I do appreciate the member’s question about why we’re not there. I

share his concern on that. We’re moving as quickly as we can. I think

the member will benefit greatly by reviewing Dr. German’s report — and

I’m trying to get it out as soon as possible — just to let him know,

apparently, about what has been happening in British Columbia, which was

the key task that I assigned to Dr. German, whose background is

anti-money-laundering law and policing.

I asked him a number of questions. What’s been happening? How did

we get here? What can we do to fix it? Has it affected any other areas

of the economy?

[1:50 p.m.]

Here’s another area of agreement that I have with the member. We

can address this issue in the casinos, but that does not mean that it

will not move somewhere else, nor does it mean that it wasn’t taking

place somewhere else. This type of activity can take place in parallel

in different areas, in luxury cars as well as in casinos as well as in

real estate, all at the same time. You can displace it from the casino

and push on it like a waterbed, and it goes to other areas. So unless

you’re ensuring that you have the resources to pursue it, then it will

just move, and you will not have addressed the issue. People have

described it as Whac-a-Mole, and I think that’s an accurate

description.

The bottom line on money laundering and the transnational money

laundering that has made international officials in this area concerned

about what’s happening here is that we need two things. We need the

provincial government to be working together to address that. We’ve got

the regulator and B.C. Lottery Corp. Our service providers are all on

side, all worked with Dr. German on his report, all provided him with

all the information he needed to make the necessary recommendations, and

all have committed to support implementing those recommendations.

Everybody is on side to deal with this. That’s one piece.

The second piece is we need a strong federal partner here. To that

end, I travelled to Ottawa and made a presentation to an all-party

committee, the Finance Committee. I said to the federal government: “All

parties. This is a non-partisan issue. We need the federal government to

dedicate more resources to the RCMP. There are serious financial crime

investigations. There are international crime investigations. You need

to pay attention to what’s happening in the Lower Mainland.” I’m worried

that the message wasn’t getting over the Rockies. “In addition, we need

you to use the Canada Revenue Agency, and we need to make sure that

you’re dedicating resources.”

I feel like these FINTRAC reports that the member is interested in

get filled out. Everybody has good compliance on getting those forms in.

Then where do they go? What happens with them then? Do they just sit in

a warehouse? What good is that to anybody? I took that message to Ottawa

because we need a good federal partner at the table on this issue as

well.

The member asked a lot of questions or had a lot of assertions on

that. Obviously, I agree with some. I disagree with others. But I am

grateful for his interest in this issue because I do think it’s a

serious issue and one that we need to deal with in British

Columbia.

J. Yap: Thank you. I appreciate that from the minister. I heard him say

that three 24-7 regulators have been hired, and I heard him say a few

more are going to be hired. How many regulators will be needed with this

program to ensure that, on a 24-7 basis, there will be a regulator on

site at the casinos?

Hon. D. Eby: The gaming policy and enforcement branch is on their fourth

posting of hiring for these positions. Part of the challenge for hiring

has been that these have been not permanent positions. The reason

they’re not permanent positions is…. Dr. German made an interim

recommendation on this. There is certainly the possibility of

restructuring, and then you’ve got a bunch of people in a position

that’s going to be replaced by some other position. So the

recommendation was not permanent. That has led to challenges in

hiring.

The gaming policy and enforcement branch has 18 investigators

currently. They have offers prepared and going out to two more

additional investigators. Their target is two to three more.

[1:55 p.m.]

The actual recommendation is risk-based 24-7 rather than absolute

24-7. We don’t want somebody sitting by themselves at 5:30 in the

morning at the River Rock Casino. We wanted…. When I say we, Dr. German

wanted investigators to be there at the peak times and to focus on the

risk-based and to be available outside of Monday to Friday, nine to

five. That has been achieved. What has not been achieved is to get the

gaming policy and enforcement branch to the full cohort that we would

like to see to maximize that risk-based presence in the casinos. We’re

on our way, but I share the member’s concern that we’re not there yet.

Work continues on this important area.

J. Yap: I heard the minister confirm that we don’t have the resources yet,

but I also heard the minister say just moments ago that this is not

going to be the implementation as per Dr. German’s recommendation, at

least from what we’ve heard. The government’s news release stated…. I’ll

read it directly: “Government regulators must be seen on site at large,

high-volume facilities on the Lower Mainland and available” to the

service providers. Then it says here: “In the Lower Mainland on a 24-7

basis.”

I’ll read again. This is a direct quote from the news release:

“Our government has made clear the urgency around addressing issues of

money laundering at B.C. casinos, and we will ensure these first two

recommendations are not only implemented as soon as possible but

enforced on the ground.”

He goes on to say: “We can take immediate action to end criminal

and suspicious activity in B.C. casinos.”

It sounds to me that, according to the minister’s news release,

this was seen as an urgent matter requiring immediate action. But we’ve

just heard the minister say two things: that that recommendation from

Dr. German has not been implemented and, it sounds like, that it’s being

changed somewhat to a risk-based basis. I wonder if the minister can

confirm that’s what’s happened.

Hon. D. Eby: The gaming policy enforcement branch met with Mr. German on

implementation of his recommendation. During those meetings, the

discussion was about: does this mean that you need a regulator in every

one of the casinos, 24 hours a day, seven days a week — every one of the

five casinos that I was talking about? The answer was no. You need to be

available 24-7 at the high-volume facilities.

The issue — from his perspective, from my perspective and from

most people’s perspective — was that previously, a physical regulator

was available Monday to Friday, nine to five. People could reach out.

But this is a change in policy. That part of the recommendation has been

met.

Gaming policy enforcement branch still does not have the cohort

that we would hope for, so they have reassigned regional resources to

make this recommendation reality. They’re trying to hire two to three

more people in order to be able to fulfil this recommendation. The

challenge has been that these are interim hires as we begin the work of

implementing the German report recommendations on a permanent basis, not

just the interim recommendations but the permanent recommendations that

may have implications for these particular positions. You don’t want to

hire people on a permanent basis if there’s going to be some kind of

restructuring. That’s the issue.

I disagree with the member’s assessment that the recommendation

has not been fulfilled. It has been. It’s not been fulfilled to the

level that I would like, which is that GPEB is not reallocating

resources here and there. It isn’t fulfilled in the way that the member

interprets it, which is not the way that it was interpreted in

discussions with gaming policy enforcement branch and Dr. German and, at

first blush, it might appear in the recommendation, which is that there

should be a regulator present in all five casinos, 24 hours a day, seven

days a week.

[2:00 p.m.]

The recommendation, as it is understood by gaming policy

enforcement branch based on their conversations, is that the regulator

needs to be available and that one regulator can move between the

different casinos and be available as required.

J. Yap: I appreciate the minister sharing that. That’s not what the news

release says, but I’ll move on. I would like to know…. The minister has

said today that there are five high-volume casinos that will have 24-7

risk-based coverage of regulators. Can the minister advise which five

casinos those will be?

Hon. D. Eby: The Hard Rock, the River Rock, the Parq, the Grand Villa and the

Starlight.

J. Yap: Earlier the minister mentioned that there will be…. We shared some

quotes of the minister that he had made publicly regarding the impact on

revenue with the implementation of the banning of $10,000 cash buy-ins.

Can the minister clarify if that suggestion to ban $10,000 cash buy-ins

at casinos has been implemented?

Hon. D. Eby: The recommendation was that necessary steps be taken, when someone

brings in more than $10,000 in cash, to actually confirm where the cash

came from — not just, “Oh, you know, I got it from here,” but actually

ensure that we know where the funds came from.

I can tell the member that the B.C. Lottery Corp. prepared their

projections about the impact of a policy change on the assumption that

there could be a ban on cash transactions above $10,000. That was the

basis for their attempt — and it is an attempt; it’s a challenge to

project these things — to project the impact of a reduction in gambling

activity based on additional anti-money-laundering controls.

When they had that forecast done for them by a third party, the

assumption forecast a reduction in net win revenue of $60 million, which

is a net revenue contribution to government of $30 million — reduction.

Just to provide a little bit more detail about my earlier answer and to

fill in on this answer, if the member is interested in revenue to

government, the impact is $30 million net income from BCLC. If the

member is interested in the reduction in net win revenue at BCLC, it’s

$60 million.

These figures are all for the 2018-19 fiscal year, and they were

based on an admittedly crude measurement, but the best available. It was

a total ban on cash transactions above $10,000. The interim

recommendation was to create an obligation to find the source of the

cash that’s showing up in the facility before you accept it. It wasn’t a

total ban. It was “establish the source.”

J. Yap: The minister referred to his visit to the Finance Committee in

Ottawa at the House of Commons, and I’d just like to share one quote.

The minister said this on the record: “Large, suspicious cash

transactions continued unabated from 2009 until late 2017, when our new

government instructed casinos that they…no longer accept large cash

transactions when they didn’t know where the cash was coming from.” That

was the minister’s comment on the record in Ottawa.

I am sure the minister knows that suspicious transactions, in

fact, have dropped, from 2015 to 2017, by about 60 percent. Will the

minister correct this comment that he made on the record in

Ottawa?

[2:05 p.m.]

Hon. D. Eby: The member has chosen one sentence. I do believe that I expressed

quite clearly to the committee that the peak, the now notorious peak

under the previous administration, of $20 million in a single month in

suspicious currency transactions, in July of 2015, was in fact the peak

and that the average monthly suspicious cash transactions ranged between

$3 million and $5 million. Some months exceeded — June 2016, somewhere

in the neighbourhood of $12 million; February of 2017, somewhere in the

neighbourhood of $6½ million in suspicious currency

transactions.

I can tell the member about the effectiveness of the measures that

we’ve taken. In February of 2018, $200,000 in suspicious cash

transactions. In March of 2018, $200,000 in suspicious cash

transactions. Compare that to when we took over government. It was $2.3

million in July of 2017 in just $20 bills, $5.5 million in suspicious

cash transactions in that month.

We’ve gone from $5.5 million, when we took over government, to now

$0.2 million in the most recent month for which we have data, in March

2018. It is an unfair comparison, I’ll acknowledge, because it’s not

month to month, year over year. If you look at March 2017, $3.6 million

in suspicious cash transactions. In March 2018, after we put the

measures in place, $0.2 million, or $200,000. So I think we’re on

track.

J. Yap: The minister has often referred to hundreds of millions of dollars

laundered through B.C. casinos. I would just like to ask what evidence

the minister is referring to.

Hon. D. Eby: The German report will certainly provide more detail to the

member, but this issue of suspicious currency transactions has been an

issue in British Columbia since 2011-2012. The issue and the public

concern about it has been an issue for a while, but that is when, in my

opinion, the growth really started.

I can tell the member that in 2011-12, total suspicious cash

transactions, $64 million; 2012-13, $82.4 million; 2013-14, $118

million; 2014-15, $176.4 million; 2015-16, $119.1 million; 2016-17,

$66.3 million; and 2017-18, $34.6 million. The peak was 2014-2015, at

$176.4 million in suspicious currency transactions.

I’ll underline for the member that not all of those transactions

will be money laundering. Some people just will have brought in a lot of

cash to the casino. But when you add up all those totals, that’s a lot

of money. And there are concerns that have been raised about bank drafts

and other non-currency instruments as well. These are only suspicious

currency transactions I’m giving the member figures for.

J. Yap: So the minister…. I heard him say that suspicious transactions do

not necessarily mean money laundering. Is that correct?

[2:10 p.m.]

Hon. D. Eby: Yes. The mistake that the member made in his earlier question was

conflating a report with FINTRAC with actual money laundering. The two

are not the same. A report might be generated to FINTRAC around a

currency transaction that may have indicia that make it either

suspicious or meet the legislated requirements for reporting. It may not

be money laundering.

Other transactions might not be reported to FINTRAC. If someone

shows up with a bank draft that they bought from somebody else for cash,

that might not be reported to FINTRAC. It might actually be money

laundering. So it is a false equivalency to equate FINTRAC reports or

suspicious currency transaction reports or any reports to FINTRAC with

money laundering. They are not necessarily one in the same.

What you can do, though, is you can look at trends. You take the

information from law enforcement. You take the information from the

regulator. You take the information from the B.C. Lottery Corporation —

the concerns that they’re raising, the issues that they’re raising, the

activities that the operators are seeing and that they’re reporting to

the B.C. Lottery Corporation, that they’re reporting to government. And

you can say, “Okay, something’s not right here,” when someone’s showing

up with this cash or when they’re having cash dropped off to them at the

casino — $20 bills bound with elastic bands, the indicia of money

laundering.

The challenge with prosecuting money laundering, as I’ve learnt,

is that it’s quite difficult to tie the cash to what’s called the index

offence. Money laundering, as the activity, is concealing the source of

the funds that were generated through some sort of illegal activity. But

what illegal activity? And being able to tie a bundle of 1,000 or 10,000

$20 bills to a specific crime or series of crimes or tax evasion or some

other kind of illicit activity is quite difficult. And in order to prove

money laundering, you have to actually prove that this cash is tied to

that specific offence and, as I understand it, that the individual who’s

attempting to money launder has some knowledge of that, which is a

challenge. So it is difficult.

If the member’s point is…. It’s like global warming. Can you

definitively prove that person X’s carbon emissions are leading to a

forest fire somewhere? Very difficult to prove. But can you look at

broad trends? Can you look at the information from service providers,

from the Crown corporation, from the gaming policy and enforcement

branch and from the police and identify a very serious issue, to the

level of international concern, about what’s happening in Vancouver?

Yes, you can.

I’ve given the member some of the numbers that raised the

concerns, and appropriately so, within the B.C. Lottery Corporation and

the gaming policy and enforcement branch and the service providers about

activities that were taking place.

J. Yap: The minister referred to the suspicious cash transactions

reporting, and I agree with him that a suspicious cash transaction does

not necessarily mean money laundering. But it is, as he says, worthwhile

tracking trends.

Again, to what we canvassed earlier, according to the FINTRAC

reporting of suspicious cash transactions, the vast majority — at last

report, 93 percent — of suspicious cash transactions reported have been

outside of casinos. The minister did agree that there are other modes

that criminal elements use. He mentioned cars. He’s mentioned real

estate. But the fact is, according to FINTRAC, the vast majority of

suspicious cash transaction reports to FINTRAC are from the financial

institutions — from the banks, from the credit unions, from the trust

companies.

Would the minister agree that, in fact, if we agree that they are

a proxy for potential concerns with money laundering, the vast majority

of money laundering likely happens somewhere else than in

casinos?

[2:15 p.m.]

Hon. D. Eby: So a couple things. FINTRAC requires reporting from a large number

of different industries — real estate, banks, credit unions, casinos,

all kinds of these different industries that deal in cash. The reason

why they collect the reports, I’m told, is so that law enforcement can

use the information to develop intelligence about potential criminal

activity and FINTRAC itself can identify trends of concern and raise

those issues with law enforcement.

Now, I worry about the connect between the information that

FINTRAC collects and actual enforcement activity on the ground. I’ve

raised that concern many times.

I can tell the member that while I am giving him figures for

suspicious currency transactions — and this is estimates; we try to give

concrete numbers — what raised the concern of the B.C. Lottery Corp.,

the gaming policy and enforcement branch and the police with the reports

that were coming in wasn’t just the fact that there were a lot…. These

are big numbers. I mean, when you’re talking $5 million a month, which

the member calls a reduction, in suspicious cash transactions, that’s a

lot.

In any event, it wasn’t just the numbers. It was who’s involved.

Are these people that are known to be associates of people involved in

criminal activity? Are they people with no known source of income that

would justify them bringing in this level of cash? The nature of the

transaction — is the cash being dropped off in a paper bag, wrapped with

elastic bands, in the parking lot of the facility? What does the cash

look like? Is it coming with a bank wrapping on it, or is it coming

wrapped with elastics and in all kinds of condition? What is law

enforcement saying about what’s happening?

When you put all these things together, that is what raised the

concern of the B.C. Lottery Corporation and the gaming policy and

enforcement branch. That’s is why, when I showed up as minister

responsible, I said: “Man, this is a serious issue that we need to get a

handle on.”

If someone had said to me, “You know, these are standard numbers

in terms of reports generated,” I’d say: “Fair enough.” But the

information I was given was that there are concerns from law

enforcement. There are concerns by a third party business firm that went

in and did a review at a facility in British Columbia and made a number

of findings of concern. There are concerns about the nature of the way

this cash is coming in, in hockey bags or in boxes or in paper bags, and

how it’s being passed.

When you put all those concerns together, and then the concerns of

law enforcement and who’s involved, that is when the concern is

generated.

I understand the member being inclined to: “Well, there are

100,000 reports from the banks, and there are only 5,000 reports from

the casinos. Doesn’t that mean that there’s more money laundering at the

banks?” Maybe; maybe not. Maybe they’re just doing that many more

transactions involving cash.

You need to look at other indicia as well. You can’t look at just

one in isolation.

J. Yap: At the Standing Committee on Finance in Ottawa, March 27, the

minister, during his presentation, stated: “Gamblers could walk into a

casino with illicit cash, fill out a form, buy chips, gamble and then

cash out and get a cheque or walk out with chips.” Based on our

research, a gambler would not be able to get a cheque that would have

cleaned the money, which is what I assume the minister was alleging or

suggesting.

In fact, what casinos confirmed to me…. Their practice is to

ensure that what cash is brought in that remains, not the winnings, will

be returned in cash, not a cheque, and that winnings, if any, could be

in the form of a cheque.

Can the minister clarify his statement?

Hon. D. Eby: Absolutely, that is what should be happening. When somebody brings

in cash to a casino, gambles a nominal amount and then attempts to cash

out, they should get the same cash back. They should not receive a

negotiable instrument.

It has been a practice to provide a cheque that is marked “not

winnings” — a reimbursement or some marking of that kind — in some

cases, to individuals. There has been concern about the ability of

people to walk out of facilities with chips — not cash, the chips. So

turn difficult-to-manage $20 bills into chips.

Some of the work of loss prevention and security and the regulator

and BCLC is to try to track how many chips come and go in the

facilities, and if someone shows up with a bunch of chips that we don’t

know where they came from, to address that issue on the

floor.

[2:20 p.m.]

If the member is asking, “Is it impossible to get a cheque in this

situation?” the answer is no. The practice, when a cheque is issued, is

to mark on it — let me get the exact wording: “Not gaming winnings.

Return of funds.” If, let’s say, law enforcement, down the road, is

doing an investigation and the person said, “Oh, I’ve just been very

lucky at the casino,” they can pull the cheque, and then the cheque has

the indication on it, “Not winnings. Return of funds,” so law

enforcement knows those aren’t actually casino winnings.

I should tell the member that the nature of the Vancouver model

outlined by Professor Langdale of how the money laundering works,

because I had the same tutorial that the member did, is a very devious

and a very ingenious way to get around these regulations. A criminal

gang is not the gambler. The criminal gang facilitates transferring bulk

cash to the gambler, who is coming from a jurisdiction where there are

cash or currency restrictions that prevent them from bringing money out

of the country — namely, China. So if you’re coming from China, you

can’t bring money with you to gamble.

You’d like to gamble. The criminal gang provides cash to you. You

transfer money to an account in the control of the criminal gang. What

the gang has done is they’ve unloaded a bunch of $20 bills that are

difficult to manage. They’ve managed to get that money into a bank

account that they control. What the gambler has done is they’ve got the

cash to gamble with. They are the ones who walk the cash into the

casino. They are the ones who actually gamble with it.

I’ll tell the member — I hope this doesn’t reveal too many

secrets; I hope BCLC isn’t upset — the house always wins.

Interjection.

Hon. D. Eby: Yes, yes. Don’t tell anyone. The house always wins.

They walk the money into the casino to gamble. They gamble. They

lose. They actually lose some money; sometimes they win. You can always

win, but in the vast majority of cases, you’re going to lose. The odds

are in favour of the house. So they go and gamble. They lose some of the

money.

They’re legitimately gambling. All the activity is gambling

activity. They’re losing money. So it was always an understanding:

“Well, how could this be money laundering if the person is gambling and

losing?” If they get a cheque that says “Not winnings,” it’s not a big

deal, because the person who’s gambling is not trying to fool someone

about where the cash came from. They’re just trying to get some money to

gamble with, because that’s what they like to do when they’re visiting

Vancouver.

That is the devious and problematic nature of it, and it’s why the

safeguard of marking “Not gaming winnings” may not have been sufficient

— it clearly wasn’t sufficient, in my opinion — to deter the kind of

activity that I’m talking about.

It’s also why BCLC, gaming policy and enforcement branch, service

providers and law enforcement were concerned about what was taking place

and why we needed to take the action that we did around the source of

funds — the interim recommendation of Dr. German around source-of-funds

declarations. Where did this cash come from? Where did this money come

from, and can you prove it to a sufficient level? It’s also why we asked

Dr. German to do this review and make recommendations to us.

S. Furstenau: I have a variety of questions, not too long, but I just want to

ask a few things.

Last week I met with Ken Matthews. He’s the owner of Speedy Auto

Glass in Duncan. They have five staff, really well-paid staff. These are

people that are going to spend their whole careers in his

shop.

Ken and his peers have also heard that Rod’s Auto Glass and

Upholstery in Duncan were distressed when they received a letter from

ICBC at the beginning of May informing them of several changes to

pricing and policy. For Ken, the most difficult was the increase to the

NAGS part discount, which has been 11 percent and will soon be 25

percent. He’s also concerned about the re-introduction of the best-price

policy and the mould changes….

Interjections.

S. Furstenau: ICBC.

Hon. D. Eby: I’ve got a whole different set of staff for ICBC, so I don’t know

if the member wants to maybe….

Interjection.

[2:25 p.m.]

Hon. D. Eby: No, the members aren’t quite done with gambling yet. So I wonder

if we can just wrap the gambling questions, if the timing will work for

the member. Otherwise, I’m going to need to change my staff.

J. Yap: We will be getting to ICBC momentarily, but I do just have a

couple more questions.

We’ll go straight to this. The minister has, in his media work,

referred to: “Our province’s reputation is in tatters.” I think that was

an exact quote. He referred again today to the so-called Vancouver

model. We have done an FOI to the minister’s ministry requesting

information on what the Vancouver model is, but we haven’t received

anything yet.

I did hear the minister refer to, I believe, an Australian

professor who did a presentation and referred to a scheme with the title

of Vancouver model. The minister today has referred a couple of times,

maybe three times, to it. Other than this Australian professor, has any

other agency or organization or any other academic referred to this

scheme as the Vancouver model?

Hon. D. Eby: There is a full presentation of this individual, who has done

training. This person’s job, in addition to being a university

professor, is to train anti-money-laundering officials in Australia. I

don’t know how many courses, training sessions, Professor Langdale has

done, teaching people about the Vancouver model. I don’t know the extent

of his work on international presentations at conferences and so on. I

don’t know how many people have cited his work that describes this. He

would be a good person to ask about that.

What I can tell the member is that I recall filling an FOI request

for this — the full slide presentation that Professor Langdale uses that

was identified by Dr. German and brought to my attention. Obviously, it

caused me a great deal of concern. I believe that I should be able to

provide the member with that presentation. I know for a fact that I am

mispronouncing the name of the university. It’s Macquarie University in

Australia.

I would encourage the member to check in with Professor Langdale —

at times, those are a little challenging — in terms of the extent to

which he has educated people about what he calls the Vancouver model. I

think that the issue, though, about whether it’s called the Vancouver

model or anything else…. The fact that somebody on the other side of the

globe knew about it, is teaching people about it, raised concerns for me

that he was not the only person, although others might call it that, and

it may have been a topic of conversation at a number of international

venues.

In any event, it underlined for me the reasons why we needed to

take action on this, even if there’s a fiscal consequence to government,

which we’ve discussed, and especially because we want gaming to be a

sustainable industry in British Columbia that reinforces tourism, that

is an entertaining option for British Columbians, and that British

Columbians, when there’s a suggestion that a facility open in their

community, can have confidence that it will be done properly.

I know we have good partners in the gaming policy and enforcement

branch, in the B.C. Lottery Corporation, in the service providers and in

law enforcement to make that possible. I have underlined, given the

international dimensions of this, the importance of the federal

government paying more attention to what’s happening here.

J. Yap: The minister has had, I understand, the German report since early

April. I wonder when we would expect to see the report being

released.

Hon. D. Eby: My target for releasing the report was before the end of the

session. We have had some challenges around ensuring the protection of

privacy rights of individuals identified in the report and ensuring that

we don’t accidentally step on the toes of any law enforcement

investigations. As soon as that is done, the report will be

released.

[2:30 p.m.]

I don’t believe that it will be able to be released,

unfortunately, before the end of the session, which is too bad, but I’m

hoping to get it out as soon as we can. I’m hesitant to guess, just

because it’s taken a lot longer than I thought it would to get it out to

the public, but we do need to ensure that we don’t fun afoul of the law

in releasing it.

J. Yap: I appreciate that. Can the minister advise if the recommendations

— I believe there are 48 of them — in the report will affect the Lottery

Corporation’s three-year fiscal plan?

Hon. D. Eby: We currently have staff having a look at the recommendations, and

I don’t have any information yet to share with the member on any fiscal

implications.

J. Yap: I actually should have mentioned earlier that I appreciate the

minister offering to supply me with a copy of that PowerPoint

presentation or study by the doctor in Australia, and I look forward to

receiving it.

My last question on the Lottery Corporation is in regard to Dr.

German’s work. How much has been spent providing resources to Dr. German

to get his review done? How much more remains to be spent?

Hon. D. Eby: It’s $200,000.

J. Yap: With that, that concludes our discussion on the Lottery

Corporation. If I may suggest to the minister a short recess and allow

the staff for ICBC to join us.

The Chair: The committee will be in recess for five minutes.

The House recessed from 2:31 p.m. to 2:34 p.m.

[L. Reid in the chair.]

Hon. D. Eby: Joining us is in the chamber are Lindsay Matthews, interim VP,

corporate and stakeholder governance, and Phil Leong, corporate

controller, both ICBC; to my left, Nicolas Jimenez, acting CEO of ICBC;

to my right, Richard Fyfe, the deputy minister; and in the back corner

there, on the right, Doug Scott, who is the ADM of Crowns.

[2:35 p.m.]

S. Furstenau: Now that we have the right staff, I’ll come back to

ICBC.

Last week, I heard from several auto glass shops in Duncan, and I

went and visited Ken Matthews, who owns Speedy auto glass. They had

received a letter from ICBC at the beginning of May announcing that

there’d be several changes to what’s happening with ICBC, including the

changes to the moulding allowance program, increase in the NAGS part

discount and the reintroduction of the best-price policy. In particular,

the NAGS price discount, which is currently at 11 percent and is going

to 25 percent, is a great cause of concern for Ken and for the other

auto glass shops in town.

I have a couple of questions on this. First of all, Ken started

with raising the concern that there hadn’t been any consultation with

the auto glass businesses. I’m wondering if the minister can speak to

the lack of consultation and then provide an explanation for these

changes that have been brought forward.

Hon. D. Eby: In 2011, there was a Competition Bureau ruling that, intentionally

or otherwise, has limited ICBC’s ability…. I say limited, but it has

eliminated ICBC’s ability to negotiate rates. It is illegal, on the

current understanding, for ICBC to negotiate rates with material damage

suppliers. That’s the industry term for autobody repair, glass repair,

and so on. So ICBC is not allowed to negotiate rates.

That has obviously presented a significant challenge. There was a

pre-existing agreement with the glass repair industry. It had expired a

couple of years ago. The challenge is that now you’re in a position

where you can’t negotiate rates, yet something needs to be done around

increasing average costs for glass repair.

ICBC’s glass repair and replacement costs have increased

significantly from about $40.4 million in 2008 to $96.1 million in 2017.

There are two drivers of this. One is frequency. We’ve talked about

distracted driving and issues around increasing claims in British

Columbia. I’m sure the member has heard a lot of discussion around that.

The other, though, unfortunately, is the average cost per claim, which

has been going up as well. As technologies get better and as one would

expect that costs were coming down, they are not.

There was a challenge in that ICBC was paying for things like the

replacement of glass moulding, even when the moulding wasn’t replaced —

so paying for something that wasn’t actually replaced. There were issues

where ICBC was paying in excess of the cost charged by the original

equipment manufacturer for a windshield, and the windshield is available

from the original manufacturer for less than the replacement windshield

is available. One would expect that a replacement windshield is cheaper

than the original manufacturer’s replacement windshield.

These issues needed to be dealt with. I know the member is aware

of the financial challenge that we face at ICBC. Nobody is excited about

these kinds of things. They have real impacts. The member has named a

couple of auto glass repair firms in her community. There will be

additional reforms dealing with auto body repair that will similarly

raise concerns as we cut costs at ICBC.

[2:40 p.m.]

We have had a lot of concerns raised by the Trial Lawyers

Association around the reforms related to how we treat minor injuries —

that it no longer will go to B.C. Supreme Court. They’re going to go to

this tribunal. They’re going to have a limit on the pain and suffering

awards.

All of these savings are meant to go to two things. First of all,

to get ICBC back into the black. The second is to ensure that we can

provide affordable insurance to British Columbians, because the costs at

ICBC have gotten out of control.

That is the key policy change, in particular, and also why we’re

making the changes. I can say to the member that I am very regretful

that ICBC is not able to meet directly with material damage suppliers to

negotiate rates, because I think that would be a huge advantage for

everybody. The federal government’s Competition Bureau decision and the

implications of that limit their ability to that.

There’s also a group called the Automotive Retailers Association,

and they engage government on behalf of material damage suppliers. There

was a meeting of their glass replacement members with ICBC

yesterday.

Discussions can take place between ICBC and service providers, but

unfortunately, negotiation about rates cannot. That may be a distinction

without a difference, or it may be all of the difference in the world if

all you want to talk about is the rates and ICBC tells you that they’re

not allowed to do that under the law. I find it very frustrating, but

that is the state that we are operating in right now.

S. Furstenau: It’s interesting to note that the meeting with ARA happened

yesterday. Ken of Speedy Glass just recently got their ARA certification

for their business.

I appreciate the minister’s comments about not being able to

negotiate rates. In the discussions with ARA, is it possible to look at

other ways to mitigate these costs and to address these problems that

the minister has identified? Also, is there some consideration for the

impacts of these changes and how they’ll affect smaller businesses quite

a bit more than they might affect the larger businesses? Can there be

any plan to mitigate those impacts to the small businesses, such as the

ones that we’ve been hearing from?

Hon. D. Eby: On these policy changes, the policies are the policies. And that

is not all. There are additional reforms ICBC is looking at. We have

worked with PricewaterhouseCoopers Canada around an operational review

of ICBC that identified that its collision repair supplier program could

be refined to improve savings to ICBC and service to

customers.

ARA, the New Car Dealers Association and ICBC will be in

discussions on this. One of the considerations that ICBC will be looking

at is the rural versus the urban situation, which would include

considerations that maybe in a rural area it’s more likely to have a

smaller, independent shop. That’s on the table for that tiering

discussion.

[2:45 p.m.]

In terms of this specific auto glass policy, though, that is the

policy for ICBC going forward. Just so the member knows, I’ll go into a

little bit of detail about the policy changes specifically. There are

two main changes. One is around glass material sourcing and discount;

the other is around the moulding allowance policy.

For glass material sourcing and discount currently, ICBC pays for

replacement glass based on an industry-established after-market price

index minus an 11 percent discount. Suppliers can source replacement

glass from any number of sources, and they can purchase it at

significantly discounted rates — well in excess of 11 percent — which

assists them in running their business.

Currently ICBC pays more for glass replacement than other Canadian

insurers, including some B.C. private insurers. So not just an insurer

out in Saskatchewan, but B.C. private insurers are paying less for glass

than ICBC. In fact, more than half the time, the current policy at ICBC

allows glass suppliers to charge ICBC more for after-market glass, as I

said earlier, than the same glass from the original vehicle

manufacturer.

The new policy is going forward. ICBC will only pay the lesser of

either the after-market price or the price set by vehicle manufacturers.

It won’t pay the higher price; it will pay the lower of those two

prices. At the same time, they’ll adjust the current discount that

applies to the after-market price from 11 percent to 25 percent, which

aligns more closely with what the private insurers are paying, some whom

are using pricing structures that result in discounts of 30 percent,

actually. So ICBC is not even at that level.

ICBC is also aware of some large glass suppliers in B.C. that have

an agreement with a rental vehicle supplier to do windshield

replacement, materials and installation, for 250 bucks, regardless of

the vehicle make and model. When they looked at ten claims involving

that supplier, it showed that ICBC paid 126 percent more — that’s $331

per claim — than the supplier. So hopefully, this will address some of

that.

On a number of occasions…. I can tell the member that I receive

letters on a regular basis where people express concerns about the

difference between, when they tell somebody that the windshield is being

replaced through ICBC, what the cost is versus what the cost is if

they’re paying out of pocket, and the cost gaps are

significant.

The second big policy change is around the moulding allowance

policy. Currently if the national glass-pricing calculator that

suppliers use indicates that a new moulding may be required to complete

the replacement, ICBC will pay an allowance of $45.26 even if the

moulding isn’t replaced. Going forward, ICBC will no longer pay for the

moulding if it’s not actually replaced, which seems like a good,

commonsense type of policy — for ICBC to only pay for the moulding if

the moulding is actually replaced.

Those are the two big policy changes. The projected savings from

those are relatively modest in the scope of ICBC’s financial concerns.

It’s about $9 million annually. But we are looking at items, big and

small, to get costs under control at ICBC.

S. Furstenau: Just one more. I really appreciate the explanations here and that

the minister expresses some concerns about some of the practices that

have been happening in ICBC — price inflation and this kind of thing.

But sometimes what happens when we introduce policies to address some

poor practices is it can really impact businesses that aren’t engaging

in those kinds of poor practices, and they suffer because of maybe the

bad behaviour of others.

I’m hoping that there can be some recognition of that impact to,

particularly, the small family-run businesses and ways to ensure that

they remain viable and able to continue their operations, as they are so

important — in our small towns, in particular. I’m not sure if the

minister has anything that he can add or provide or any thoughts on

that, but I’d appreciate it.

Hon. D. Eby: That is something that could certainly be canvassed as part of the

tiering discussion taking place with the New Car Dealers and with the

ARA and ICBC.

M. Lee: I just wanted to acknowledge something that the Attorney said when

we started estimates this morning. I just wanted to say that it’s come

to my attention now, unfortunately, that there was a bit of a gap in

communication between our two offices. The lineup for today was clearly

spelled out but not for yesterday. So apologies for that.

[2:50 p.m.]

In terms of ICBC, I just want to start off at least this set of

questions by asking the Attorney to walk us through, from ICBC’s

perspective, the process under which the revenue requirements

application was filed on September 15, 2017, ultimately to get to a

decision by the BCUC on January 12, 2018.

First of all, could the Attorney please comment on how long it

typically takes for the BCUC to conduct its process review?

Hon. D. Eby: In a typical BCUC revenue hearing, it’s an eight- to nine-month

period that the Utilities Commission considers evidence from

intervenors, asks questions of ICBC and asks for reports and numbers —

quite a lengthy process. When you think about the fact that this is for

an annual rate, the fact that it takes almost the year to do it…. It’s a

thorough process.

The result of that is, actually, that the Utilities Commission

approves an interim rate because it takes them so long to get to

approval of the actual rate for the year because of the process that

they engage in. They approve an interim rate, and then it’s either

confirmed or changed following the end of the hearing.

So ’17-18 was an unusual year in that the fiscal crisis at ICBC

led our government to pursue some very significant policy reforms. The

first is in relation to minor injuries and the treatment of what are

called non-pecuniary damages or pain and suffering awards — essentially,

an award from the court for the fact that you were injured to recognize

your injury.

The second was a reform around minor injuries. So where those

disputes over insurance benefits — definition of minor injury, and so on

— would take place. Getting them out of the B.C. Supreme Court process,

which is quite a lengthy process and a far more costly process, into a

lower-overhead tribunal process still independent of ICBC and still

independent of government — the civil resolution tribunal. These two

pieces — major impacts on ICBC’s costs.

[2:55 p.m.]

In addition, when we inherited government, we found a very

different fiscal reality on the ground than had been projected in the

previous government’s budget documents, not the least of which was that

ICBC was supposed to be revenue positive this year. It’s still

astounding to me. A number of complicated calculations to arrive at

these remarkable budget projections. In any event, it took us some

significant time to really get to where we had a firm understanding of

where ICBC’s true finances were at.

As a result of all those moving parts, for the 2017-18 rate

hearing, we did a directed rate, which was not a full rate hearing. We

went to the BCUC and said: “Look….” We didn’t say this, but essentially,

the government said, “This thing is a huge mess. We’re doing these huge

policy reforms. If we just go with an undirected rate hearing and

present all of this, the rate increase for an average British Columbian

is going to be somewhere in the neighbourhood of $400, and British

Columbians can’t afford that. We’re going to do these reforms. We’re

going to get a handle on where ICBC’s finances are at. For 2018-19,

we’ll go to a full rate hearing, the eight to nine months. Everyone come

and kick the tires on ICBC’s projections, on their finances, where

they’re at. Ask your questions, interveners,” and so on.

The member asks about 2017-18. It’s an unusual year. It’s not a

good year to take an understanding of how long this process takes. Far

better to look at previous full rate hearings involving the B.C.

Utilities Commission, which are typically around eight to nine months

and which will be taking place for the 2018-19 fiscal year, an eight- to

nine-month hearing process.

M. Lee: I understand that the special direction IC2 that the Attorney

General signed by Order-in-Council 602, ’17 stated, in connection with

the 6.4 percent rate increase, that the panel make no determination

whether or not the change in basic insurance revenue needed to pay for

expected future costs of KY2017 is 20 percentage points, as stated by

ICBC.

The panel, in connection with its hearing, stated that, as a

result of this order-in council, it does not allow the commission

adequate time to fully explore all the components that contribute to the

rate change to fully cover costs, including ICBC’s actuarial rate level

indication analysis and including operating expenses and allocation

information and investment matters.

As the Attorney General has just summarized, the oversight from

the regulator for ICBC, its management team and the organization itself,

was truncated in this year. I’d like to ask, in connection with that,

the Attorney: what obligation does ICBC have to report to the BCUC any

changes to its financial position that might come to its attention

during the rate review process?

Hon. D. Eby: ICBC advises me that they do quarterly filings with the B.C.

Utilities Commission.

[3:00 p.m.]

To the member’s earlier introductory bit of his question, though,

about the full hearing that the Utilities Commission, in the member’s

opinion, did not get to engage in, and mine too, it was a directed rate

hearing. The rate that was directed was at the high end. Well, it was

the maximum under the previous government’s rate-smoothing framework.

Even had the thing gone to a full hearing, it was the maximum amount

that the Utilities Commission, under the existing law of B.C. at the

time, could have increased rates.

I agree with the member that there is great benefit to the public

to know that ICBC has had intervenors come and that there have been

people looking at the books and all these kinds of things. But the

ultimate point of the rate hearing is to set the rate, and government

directed a rate at the maximum rate that ICBC could set for that

process.

One of the challenges — and the member will surely see this — is

that for the regulator to need eight to nine months to go through this

whole process and get a sense of the books and where ICBC is at and all

those kinds of things…. The challenge, obviously, for our government on

coming in was acting quickly, recognizing the financial crisis at ICBC

without having a full knowledge of what the finances were at ICBC, what

the true state of affairs was at ICBC and what we needed to

do.

That’s why we did the directed rate hearing. I agree with the

member that it wasn’t ideal. That is why, though, we are going to a full

hearing for 2018-19 on this. It’s so that the public can get the

transparency, so they can see the projections, so that projections can

be tested around the legislative reforms that we put in place around

minor injuries, around the benefit increases and transitioning to a

care-based system for those minor injury files, so people can get the

support that they need.

It’s been a challenging transition, but I can see…. I’m not sure I

want to put that on the record. I feel like we’re headed in the right

direction is what I’m going to say. I’m looking forward to ICBC having

the opportunity to show up in front of the BCUC and be tested on all of

these things — rigorously, internally. Certainly, I am challenging them,

the government is challenging them, and they are providing us with a

huge amount of information so that we can ensure that we’re all on the

same page. I’ve been very grateful for their support and cooperation in

that. There’s been a lot of work over a very short period of

time.

The member is right to identify, yes, ’17-18. Would it have been

nice to have a full hearing? Yes. It takes a lot of staff resources to

do that, as well, and the staff were working hard on major, major

reforms, the biggest reforms to insurance law and policy in British

Columbia in a long, long time. We’re slowly getting there.

M. Lee: Prior to coming to this House, I was a lawyer with a law firm in

Vancouver that represented other Crown corporations, like B.C. Hydro, in

front of the BCUC. I didn’t do that work directly, but I do appreciate

the level of complexity and rigour that the Attorney is speaking to in

this House.

Of course, that length of process, the eight to nine months, with

the intervenors, the various submissions and the forecast assessments,

is an important role that that commission plays. With that oversight, it

gives British Columbians some confidence in what a Crown corporation is

reporting and what and how the rates are being set.

With that in mind, again I’d like to ask…. Specifically in the

context of this period from September 15 to January 12, 2018, there was

a mention that there was or there have been quarterly reports filed by

ICBC with BCUC. Specifically, which reports were filed, and

when?

[3:05 p.m.]

Hon. D. Eby: On the directed rate hearing, which was 2017-18 — which is, as I

say, when we were in, and still are, this very challenging transitional

period — there was a quarterly report. Now, the rate hearing was

September to November. There was a quarterly report just before, in

July. There was one just after. So it started in September. There was

one in October. Then there was another one just after, in January. They

happen quarterly. So the member has an idea now — July, October,

January, April every year.

Those quarterly reports, as they were filed with the Utilities

Commission, were getting progressively worse, in terms of ICBC’s

projections about where the finances were going, and it reflected some

of the challenge that we face with a Crown corporation.

Now, just for the member’s information, the way the B.C. Utilities

Commission sets rates is that they’re set for a point in time. So

they’re set for the application, which was done for September. As things

get progressively worse…. If things get much better or if they get much

worse over the year, you’re stuck with the same rate for the year.

They’re set for a point in time. You don’t get to cherry-pick a point

that’s worse or a point that’s better in the year and go from there. The

start of the hearing is the start of the hearing.

While the Utilities Commission is kept up to date about where

things are going, they’re setting the rate based on that point-in-time

information. Of course, in this circumstance, they weren’t setting the

rate. The rate was directed in ’17-18 so that we could free up staff to

do the important work on the reforms that we were rolling

out.

The full hearing for ’18-19, which will be the eight-to-nine-month

process, will have those quarterly reports happening. But it’ll still

have that same issue of the rate being set for the point in time, as

opposed to over some other point during the year or some average or

something like that.

M. Lee: Thank you to the Attorney for walking us through that. I think

it’s fair to say that judging from when the January quarterly report was

provided…. Perhaps I could just confirm whether that quarterly report

was provided before the January 12 decision.

Hon. D. Eby: It would have been after the decision.

M. Lee: As the Attorney General has indicated, it was certainly less than

ideal that there wasn’t a full revenue requirements application process.

Without that fullness, there wasn’t the kind of oversight that would

typically be the case over ICBC.

[3:10 p.m.]

Could I just ask one other question in respect to BCUC? In the

submission — and there may be some other points we come to later on in

this questioning — what was the purpose of ICBC proposing to discontinue

certain performance measures, like the average cost of bodily injury

claims, litigation costs, BI claims, paid loss amounts and the costs of

litigation in future applications?

The Chair: Hon. Members, the member for Courtenay-Comox seeks leave to

make an introduction.

Leave granted.

Introductions by Members

R. Leonard: I’m afraid I won’t be able to stay in the House long enough for three

of the classes from Mark R. Isfeld high school, who are arriving and are in

the precinct this day. They’re grade 10, 11 and 12 students. I asked them

particularly what they would like me to say about them, and they mentioned

that their girls rugby team came third in the province. That was something

they’re pretty proud of this week.

I also would like to acknowledge that one of the students, a grade 10

student, Jaylene Kwo, is a volunteer in my constituency office, where she’s

contributing to democracy. She’s very much appreciated by my staff and by

the public that comes in.

I would ask the House to welcome them as they come in, all three of

them, over the next couple of hours.

Debate Continued

Hon. D. Eby: There are a number of explanations for various measures. The

information itself, with these various measures, may still be present in

the filings to the Utilities Commission. The request is that the

Utilities Commission no longer require it to be bundled up into a

separate report to them, which takes staff time to do. It’s still in the

report. Or for some of the measures, there might be a better measure or,

in ICBC’s opinion, a better measure of the same thing. And there are

other measurements there that ICBC doesn’t use, produced solely for the

Utilities Commission and have no bearing on how ICBC sets rates or

addresses the subject matter in front of the commission.

What it’s an attempt to do is to improve efficiencies at ICBC.

What it is, in actuality, is a request to the Utilities Commission to

consider these things. If they still want them, they’ll still get them.

But if they don’t need them and if ICBC can convince them that there are

better ways or the information is available elsewhere, these can be some

more efficiencies for ICBC, which the member will know is something

we’re driving towards.

Now, the member shares my regret about the lack of a full rate

hearing in ’17-18. I’m going to have to say that the member was done a

favour, frankly, by not having the full hearing. It was not intentional.

I didn’t set out to do the previous government a favour by not having

the oversight of a full Utilities Commission hearing about how ICBC

ended up in the state that it did, how it could possibly be that ICBC

was projected to make money this year and how it could possibly be that

the projected loss was so small. I have some idea about how that took

place. None of it is particularly inspiring in terms of confidence

around the previous government’s decisions.

So the member should be careful what he wished for in terms of

’17-18 oversight by the commission. The reason why we directed that was

to free up as much staff time as possible to haul on the wheel of the

ship to get it turned around, because the situation is quite dire. It

was not for a lack of wishing that a third party could come in a very

public way and expose some of the decisions of the previous

administration and the state of ICBC’s revenues.

[3:15 p.m.]

The Chair: Hon. Members, the member for Abbotsford West seeks leave to

make an introduction.

Leave granted.

Introductions by Members

M. de Jong: We’re joined in the gallery by, I think, about 25 students from one of

the great schools in the Abbotsford school district, Bradner Elementary.

They are here with their teacher Ravinder Sandhu and some parents that are

accompanying them. They are also the hosts of one of the great May Day

celebrations, which is a time-honoured tradition in Abbotsford. I hope that

the House will make these students, grades 4 and 5 students from Bradner

Elementary, very welcome here.

Debate Continued

M. Lee: Well, I just had to comment on the last comment made by the

Attorney there. Obviously, it’s not a case of what I wish for. British

Columbians need to have that oversight through the BCUC. It is this

abbreviated form, the decision made by this government, that abbreviated

the review by the BCUC. That’s the reason why we just went through that

discussion. I think that’s a concern.

I want to move forward now into governance of ICBC. I’d be asking

the Attorney General to comment on a quote that the current chair of

ICBC stated at the end of January, on January 29. She stated, in respect

of a media interview, that ICBC is the insurance company that carries

out the policy directions or decisions of the government of B.C. ICBC is

the vehicle that delivers government policy so that it would be

government that would make the changes, and then ICBC would implement

them. I would ask the Attorney if the Attorney agrees with that

statement.

Hon. D. Eby: I would definitely need more context for that statement, and I

would encourage the member to address the chair of ICBC for

clarification of the context of those remarks and whatever she was

saying.

M. Lee: Let me ask the question differently, then. Does the Attorney

believe that ICBC should be politically directed or that it is an

instrument of government policy?

Hon. D. Eby: I know that one of the concerns over the years in relation to ICBC

has been “political interference” with the operations of the insurer. So

when we look at things like rate design…. Here’s something that is done

in every other jurisdiction in Canada in a very different way than it’s

done in British Columbia, which is how do you address this big-picture

problem of incenting good drivers to continue their behaviour and

incenting people who are higher-risk drivers to stop engaging in their

risky behaviour, causing at-fault accidents, multiple serious

infractions, and so on.

The way it’s done in other jurisdictions is very different than

here, in that good drivers subsidize bad drivers far less than they do

in B.C. Why is it that that’s the case? The reason for that is that the

governments of the day decided that it was too politically challenging,

too risky, to address this issue in the way that it needed to be

addressed.

Now, I understand that policy decision. But that is an example of

why people say there has been political interference in the operation of

the Crown insurance company. There are many examples that I could give

about this. But there is another layer, which is: does ICBC serve the

public interest in British Columbia? I get letters from people who say:

“Well, if ICBC is losing a lot of money, why don’t you just sell? Why

don’t you privatize it? That would do us a lot more favours here in

British Columbia.”

When people say that to me, I say, well, the issues that we face

in B.C. are definitely management failures — and, specifically, in my

opinion, government failures in the previous administration. I’m happy

to go into detail if the member wishes about why I believe

that.

When I look at Ontario, which has a fully privatized model of

delivery of insurance…. Here’s a province that gets none of the benefits

that we get from the public insurer in terms of administration of

drivers’ licences and a close tie between insurance and drivers’

licences to minimize the number of uninsured drivers.

[3:20 p.m.]

They don’t have a tie between insurance and government to be able

to do things — like realize for the insurance companies to fund road

safety improvements that reduce insurance costs and increase road

safety, that provide a net win for everyone in British Columbia. And

they have higher insurance rates than we do in British

Columbia.

Now, there are people from Ontario who say: “Hold on a second. I

moved to B.C., and now I’m paying way more in insurance than I did in

Ontario. That’s not true; Ontario has cheaper insurance.” They do for

good drivers, because they have this system that recognizes people who

are lower-risk drivers and incent them with better rates that we don’t

have in the same way here in B.C. But overall, Ontario has higher

insurance rates than we do. They don’t have those public benefits, and

they have a fully privatized system.

When I look at Saskatchewan, Manitoba, public insurers deliver

huge benefits to their communities — significant revenues and great

success in the work that they do in ensuring that people receive good

benefits if they’re in a crash, that they’re looked after, that they

have adequate benefits. Not only that, but they deliver revenue to the

treasury and deliver affordable car insurance.

Now, I acknowledge the difference between the Prairies and British

Columbia in terms of driving environments. There are a lot more

challenges here than they face in the Prairies. But the idea that a

private insurer is a better vehicle for providing savings or net benefit

to British Columbians is not borne out by the examples in Canada that we

look at.

I went down that rabbit hole, and I have completely lost whatever

the member’s original question was. So if that didn’t address the

question, I’d ask the member to ask me again, because I’m

quite….

Interjection.

Hon. D. Eby: Oh, the political interference, right.

There are two levels. The political interference question about

ICBC not taking necessary steps…. The member asked me about auto glass:

why are we paying to replace mouldings that aren’t actually replaced?

It’s because it’s politically difficult to have a small family auto

glass business come to your office and say: “Why did you stop paying for

this?” That’s politically difficult. “Why did you not rein in minor

injuries like every other province in Canada?” It’s because it’s

politically difficult to have the trial lawyers saying that you’re

taking rights away from people and organizing against government. So

there has been political interference in ICBC.

Also, ICBC delivers public benefits that do require political

decisions around allocating ICBC’s scarce resources and how and when and

why ICBC should be involved in public interest matters like road safety,

driver’s licence administration, collection of fees or fines for people

who aren’t paying their child support or aren’t paying their tickets or

whatever. Those are political decisions, so there’s political

involvement.

I wouldn’t call that interference. If there’s political

interference, then it interferes with the good operation of the insurer,

and not always in a positive way. It’s a complicated answer because it’s

a complicated subject for a Crown corporation like ICBC and its

history.

M. Lee: Well, I mentioned earlier that I had practiced law with a law firm

in Vancouver. There was a time where I was the acting corporate

secretary for B.C. Hydro and very much understanding the nature of

governance between a Crown corporation, a deputy minister, a minister

and the executive team and the board, of course. With that in mind, I

take it from the Attorney’s answer that he is mindful and sensitive to

political interference and political direction.

Can I ask the Attorney General if he could describe for us the

reporting structure on finances between the ICBC executive team, the

board and the minister?

Hon. D. Eby: On a monthly basis, actual claims results and forecasts on any new

emerging risks or developments are reviewed by the ICBC

executive.

[3:25 p.m.]

On a quarterly basis, claims forecasts are updated based on

experience and reviewed by the ICBC executive and ICBC’s independent

actuary, Eckler and associates. Also on a quarterly basis, actual

results for the quarter, as well as updated claims forecasts and the

outlook for other expenses, are reflected in ICBC’s quarterly results

and outlook for the current and future years and are presented to the

ICBC executive and government, in accordance with Crown agencies and

board resourcing office guidelines. They are reviewed and approved by

ICBC’s audit committee of the board and board of directors. Also on a

quarterly basis, an actuals and outlook report for the basic line of

business is filed with the B.C. Utilities Commission.

On an annual basis, ICBC’s annual audited consolidated financial

statements…. With respect to those, ICBC’s external actuary, Eckler,

provides an opinion on the fairness of the policy liabilities and/or

unpaid claims reserves. In addition, ICBC’s external auditor’s actuaries

— that’s PwC — review the policy liabilities, unpaid claims reserves, as

part of the annual audit before signing off on ICBC’s financial

statements.

Finally, also on an annual basis, there’s an annual basic revenue

requirement application with the B.C. Utilities Commission. As part of

the filing, ICBC’s external appointed actuary, Eckler, reviews and signs

off on ICBC’s actuarial assumptions and claims forecasts, supporting the

requested basic rate increase. The B.C. Utilities Commission engages an

independent actuary, Oliver Wyman, to review ICBC’s actuarial

assumptions and claims forecasts supporting the requested basic rate

increase.

Because 2017-18 was such a mess following the previous

administration, we took additional steps. Given the significant loss

forecasted in quarter 3, the following reviews were undertaken.

Government retained PwC to review ICBC’s assumptions and methodology.

The review found that ICBC’s assumptions and methodology were reasonable

and with some conservativism, which is reasonable, given the risk to

government’s fiscal plan.

Government is also engaging a peer review of PwC’s review — so

this is a review of the review, because PwC is the auditor of ICBC — to

ensure an independent review of that actuarial forecast.

As a result of a report from the Trial Lawyers Association, ICBC

also requested that ICBC’s external actuary review two of the Trial

Lawyers Association claims, which were concerns raised by that

organization but ultimately found not to be…. Well, frankly, they were

dismissed. I’m trying to find a nice way to say that, because I do

appreciate the TLABC raising concerns about that — about anything where

they find a concern around the financial numbers.

For the member’s information, I was provided that information by

ICBC as their understanding of their financial information

accountabilities and reporting processes. For my purposes here today, I

adopt them as my own.

M. Lee: Well, thank you for that

summary. It sounds, in ordinary course,

like regular monthly, quarterly and annual reviews. During this period

of time between July and January 2018, were there any additional points

in time where that typical review and reporting structure was not

followed, meaning there was some special reporting made available to the

Attorney General in his capacity as minister responsible for

ICBC?

Hon. D. Eby: Nothing beyond what I described to the member, in terms of the

exceptional review by PwC, then the review of the review by an external

auditor and then a review of the TLA’s concerns by an independent

actuary, as well.

M. Lee: In the course of this period of time in question, when there was

something that came to the attention of the executive and the board —

meaning a reclassification of types of claims and losses — was that not

reported to the Attorney General?

[3:30 p.m.]

Hon. D. Eby: In terms of ICBC’s work to understand the impact of the large

losses and the change in the Q2 to Q3 revision, that was reported as

according to the quarterly reports that I laid out for the member. In

addition, I was briefed in detail about that in January. Obviously, not

happy news, but I was briefed about that by ICBC.

M. Lee: There is a progression, which my colleague the member for

Richmond-Steveston will be getting to in a moment, of changes in the

financial position for ICBC over this period of time, statements made in

July, September, November, January. At these particular junctures, when

the Attorney General received this reporting, what process did the

Attorney General follow, in terms of whether it’s review or dealing with

this loss discovery as it has been portrayed? What actions did the

Attorney General take in terms of ensuring that those losses would not

further progress from the period in time where it was being commented on

in July, again, to September, to November and then January?

[R. Chouhan in the chair.]

Hon. D. Eby: I laid out the quarterly reporting

schedule and the fact that the

Q2 to Q3 change…. I received a briefing in January, and it was reported

Q3, according to the outline that I laid out for the member.

I don’t think the member has a full appreciation of the scenario

of what happened when we took over government. We were dealing with

projections that were based on, among other things, a fire sale of

ICBC’s assets, both real property and things as bizarre as selling

ICBC.com and booked savings for a report that government had not even

received yet. The government had commissioned it but not received it.

They booked the savings for that, not even knowing the content of the

report. It’s just examples of the challenge of trying to get to what

ICBC’s actual financial state was.

I do appreciate the member holding me to account for government

providing the public, the B.C. Utilities Commission and others, in terms

of my responsibility for ICBC…. I do appreciate that, because I really

recognize that, boy, we should have been looking really carefully at

those numbers when government presented them. I don’t say this to

challenge the member doing his job, because he should be doing these

things.

But I do point out that for the opposition now to say, “Why this

sudden escalation, and why the losses? You presented the losses in this

way,” and so on, when, on the way out the door, they had presented

numbers that were based on, let’s say, optimism…. That the report would

be something that they could implement, that there would be savings that

would result in a certain amount and that they’d be able to sell these

assets — ICBC’s domain name, and so on — and get a certain amount of

money for these various things was based on, at best, a hearty optimism

about what would happen going forward, including their ability to

implement these things on the

schedule that they projected.

It took some time to figure out the true financial state of where

ICBC was and a painstaking review by ICBC of the files to give us a

bottom-line number of where they’re at — in terms of many older files at

ICBC, large loss claim files — to provide the public with that accurate

report.

[3:35 p.m.]

Understandably, the opposition, me, the Trial Lawyers, people

outside of ICBC, were looking at the escalating loss and saying, “How

could it be that this is growing so quickly? How could it be so

different from the previous government’s projections?” Absolutely

important questions. That is why I didn’t just take ICBC at its word. I

engaged PwC to do a review of the actuarial projections to assure me

that I could have confidence in them. But although it’s a different arm

of PwC, because PwC’s other arm does ICBC’s audits, it’s not enough that

PwC does this review. I want somebody else to come in and review PwC’s

work so I can have absolute certainty in these numbers.

Certainly, the charge has been made by some personal injury

lawyers that the numbers have been inflated to create an artificial

crisis to force the minor injury changes. I’ve seen absolutely no

evidence that that is the case. What I’ve seen evidence of is that there

was a systematic effort before the election to optimistically — it’s the

best face I can put on it — project ICBC somehow making money this year,

which is astounding to me, facing a $1.3 billion deficit. But here we

are.

M. Lee: I will turn this over to my colleague, the member for

Richmond-Steveston, in a moment. But just to respond to this. Obviously,

I am a new member of this House, as the Attorney knows. But when you

look at this and you rely on what the government has been saying, the

focus that the Attorney General put in his release on January 28, 2018,

focused on the mounting losses. The Attorney is referring to other

things here. I appreciate what I’m hearing, but the focus was on the

loss.

We know that, of course, ICBC, as a Crown corporation, has the

oversight of a board, has a management team that’s been in place,

looking at and monitoring — with audit reviews by PwC — the regulatory

oversight by BCUC. So the questions that we are asking here today…. It’s

to really get a better understanding as to how these sudden changes

could occur from July to September to November to January.

With that, I’ll just ask and invite the member for

Richmond-Steveston to continue.

Hon. D. Eby: Maybe I’ll just answer the member’s question. How could this

happen? Let me give the member an example of how this could

happen.

If you retain an independent, third-party business firm to provide

you with an opinion — where are things going at ICBC? What should

government be concerned about? What should we be thinking about? — and

they provide you with that report, with recommendations, and then you

take pages out of that report before giving it to ICBC and releasing it

to the public, that is how oversight fails. The member wonders: how does

oversight fail? That is how oversight fails. That is not how oversight

fails. That is how oversight actually failed at ICBC under the previous

administration.

J. Yap: Can the minister tell us what changes have been made to the

executive team since he took over? Has the team largely remained on

board?

[3:40 p.m.]

Hon. D. Eby: There have been some changes in the executive team. I do want to

point out that it is my personal opinion that the losses and the

failings of management at ICBC lie squarely with the previous

administration, but I will point out that there have been changes in the

executive team.

The CEO, Mark Blucher, is no longer in that position. Nicolas

Jimenez is in that position as acting CEO. The VP of human resources,

Barbara Meens Thistle, is no longer in that position, and now Leslie

Mitton is in that position. The VP of corporate and stakeholder

governance, Steve Crombie, is no longer in that position, and the

current person in that position is Lindsay Matthews, who I introduced to

you earlier, as the interim.

J. Yap: Can the minister confirm for us the following? Nicolas Jimenez,

the interim CEO, was previously VP of insurance and joined ICBC in 2003.

Bill Carpenter has served as chief actuary since February 2015 and has

added the title CFO in June 2016.

Hon. D. Eby: The member is correct with those bios.

J. Yap: Can the minister confirm for us that the executive team has

largely stayed the same?

Hon. D. Eby: That’s a very subjective judgment. I’ve outlined for the member

the changes that have been made.

J. Yap: On January 30, in an interview with Mike Smyth on CKNW, when asked

if he had faith in the former CEO and the other members of the executive

team at ICBC, this was the minister’s answer: “In short, no. I was

completely blown away by the fact that things got so much worse so

quickly. I want somebody to explain to me how that happened.”

Is the minister willing to tell us what actions he took with the

executive team with regards to accountability, turnover or anything if

he did not have faith in them?

Hon. D. Eby: Absolutely. I took a number of steps. I asked the corporation to

retain an independent third-party business firm to do an operational

review of the organization and make recommendations for me. It was PwC.

I also asked for an independent actuarial review of ICBC’s work. Then,

given the fact that we were forced, because of various conflicts of

interest, to retain ICBC’s auditing firm to do that, I asked for another

actuary to review that work as well.

I have to say that that quote absolutely reflects where I was at,

at the time. I have to say, as well, how astounded I have been as I

peeled back the layers to discover how the financial projections for

ICBC that were in the government’s books were arrived at, how it was

that a third-party business report that was released to the public was

not complete in that the complete report wasn’t even released to ICBC

itself, how it was that key policy changes — like should we pay for a

moulding that’s not replaced? — went unaddressed for two

years.

I have come to the inescapable conclusion that the previous

government’s work resulted in the crisis that we face, and it was work

to do it, to prevent the public from knowing where things were going. I

find it disturbing, and I’m obviously not happy about that. But, you

know, onward and upward.

[3:45 p.m.]

We are making changes that should have been made a long time ago.

We’re going to get ICBC back on track. Obviously, there’s a major hit to

government’s fiscal plan. Obviously, it is a lot harder to do this in a

constrained time period than over the years that the previous government

had available to make these changes. But we will make those changes, and

we’ll get ICBC back on track. We’ll deliver affordable insurance to

British Columbians, and I have absolute confidence in the management

team that’s in place and the board that is in place to, first of all,

provide me with candid and appropriate information. I hope that British

Columbians have confidence in this government to act on those

recommendations where legislative or regulatory reform is

needed.

J. Yap: Does the minister have any faith in the board, as well, given that

they signed off on numbers that simply did not hold weight at the end of

the day?

Hon. D. Eby: I can advise the member…. I’ve already explained where I

personally assign responsibility for this, but in any event, the board

is completely changed except for one member.

J. Yap: On July 24, 2017, the minister stated: “ICBC, as described to me

by senior bureaucrats, is on the path to insolvency.” What indicated to

him this was the case? What did he do to correct this? And why did he

only project a $225 million loss in September, which was a marked

improvement over March 2017 and would suggest a reverse

trend?

Hon. D. Eby: The member is going to have to provide me with the source for the

numbers that he provided there, because they don’t jive with the numbers

that have been reported. I’m just curious. Maybe I misheard

him.

The member asks: “You’ve got this big problem. What changes have

you made? Enough with the media. Enough with the dumpster fire.” I get

it. That doesn’t help drive down insurance rates for British Columbians.

It doesn’t address the fiscal problems at ICBC.

I made the comment that ICBC was on the road to insolvency. That

has a legal definition. Basically, what I was saying was that ICBC’s

expenses were vastly in the billions of dollars, exceeding their revenue

intake. That is not a sustainable position for the Crown corporation to

be in. It has reserves. It has assets. You can sell off the assets. You

can liquidate the reserves over time.

But clearly, ICBC was in dire financial circumstances, and I have

a critical role to play to communicate that to British Columbians so

they understood why we were taking these very dramatic policy reforms

that will impact individuals and businesses in the province. Law firms

in British Columbia that do personal injury work, families that are

dependent on the revenues from those law firms, will be impacted by the

changes we’ve made. Autobody repair firms, glass repair firms — we’ve

already heard a member talk about it — will be impacted by the changes

that we’re making.

People need to understand why we’re doing this. We’re not excited

about doing it. This is essential and necessary for us to do.

The member heard me go through, in some detail, a very minor piece

— the glass repair changes. The big piece is certainly the treatment of

minor injuries, the limit on these non-pecuniary damages, the pain and

suffering awards — getting them out of B.C. Supreme Court, getting them

into this tribunal process, the civil resolution tribunal. It’s

independent of government, independent of ICBC, to resolve any disputes,

proportionate to the injuries. Major, major reforms.

And that’s not all. The PwC operational review of ICBC made a

number of recommendations around potential savings within the

corporation that they advise could result in savings of up to $57

million a year. We’re implementing those recommendations.

[3:50 p.m.]

We have additional work to do on the material damage side. These

are the autobody repair expenses and policies that ICBC…. ICBC is

engaging right now with the New Car Dealers, with the ARA, and insuring

that the reform of the tiering, as best as possible, has as minimal

impact as possible on their businesses but also delivers necessary

savings that we believe are there.

Finally, we need to have a serious conversation about the fact

that there are an increasing number of accidents in our province. The

member has heard the very significant changes that we put in place

around distracted driving penalties, treating it akin to driving while

under the influence of drugs or alcohol, in terms of the penalties for

your second time distracted driving.

I’m working with the Minister of Transportation and with the

Solicitor General on a number of initiatives — with the Solicitor

General, in terms of these red-light cameras, which have the ability to

measure speed as you’re going through the intersection as well. We’ve

got great big signs. We’re turning the things on 24 hours a day. Great

big signs: “If you speed through this intersection or if you run a red

light, you’re going to get a ticket.”

At each of these intersections…. There are 140 of them. If I’m way

off, I’ll let the member know, but there are about 80 accidents a year

at each of these intersections. That’s the number I remember. If we can

reduce the number of accidents by putting up a sign saying, “Don’t speed

through the red lights, don’t speed to make it through a red light, and

don’t go through a red light,” then we can improve road

safety.

The Minister of Transportation is identifying dangerous roads and

intersections under the control of the provincial government and trying

to find ways to address road safety through engineering and other

initiatives. In addition, we’re working with our partners in

municipalities. We talk about the revenue from infractions related to

people driving through these red-light cameras, speeding through these

red-light intersections, and the increased revenue. Could

municipalities, potentially, dedicate that to safety improvements on

their roads in their communities to reduce the number of

accidents?

Everything from road safety to cracking down on distracted driving

to cleaning up operational efficiencies at ICBC to addressing escalating

autobody repair costs to addressing escalating legal costs — this has

been a very ambitious and aggressive reform agenda the government has

been on. It is absolutely necessary, given the losses ICBC is posting.

We will not be turning to British Columbians for the $400-per-driver

increase that would be necessary if we just left things the way they

were.

M. Lee: I just wanted to clarify with my colleague from

Richmond-Steveston. The figure that the member for Richmond-Steveston

was referring to, of course, is from the service plan filed by ICBC in

September 2017. On page 15, it’s just the

summary financial outlook,

which would show, for the 2017-18 budget, a net loss of $225 million.

That is the figure that the member for Richmond-Steveston just

cited.

In the context of statements that…. At the end of July, the

Attorney General was indicating that ICBC was on the path to insolvency.

Well, in the context of that, looking at what was put out in that

service plan, that’s what I believe our member for Richmond-Steveston

was driving at.

Hon. D. Eby: I take it, I guess, that the member’s argument is that I was early

in my assessment. I’ll take his criticism; $1.3 billion is a lot of

money for a Crown corporation to lose.

J. Yap: Who got the numbers wrong here, then? Was it government or ICBC

that did not see that the losses would grow?

Hon. D. Eby: I tried to explain to the member the challenges that we faced

getting to the bottom of the numbers at ICBC. There are a number of

different factors at play. One was the previous government’s efforts to

put the best face possible on ICBC going into the election, which was a

serious one.

[3:55 p.m.]

The second piece was the fact that we had to ensure, from our

perspective, given what we discovered on opening the files here, that it

didn’t go deeper. ICBC did a full review between Q2 and Q3 to give us

the absolute bottom-line number of where they were at financially on the

large case loss files and to give us that information on older files so

we know exactly where we stand.

I hope that that provides some information for the member about

where we’re at. But I can tell the member that if he wants to point

responsibility somewhere, he might do well to look around the opposition

benches there to find some folks who could take some

accountability.

J. Yap: Can the minister tell us what the projected loss at ICBC was on

the date of September 5, 2017? And when did he first become aware of

this loss?

Hon. D. Eby: What I’ve endeavoured to do, what the government has endeavoured

to do, is provide the public with as accurate information about the

finances of ICBC as possible. The member read a quote, appropriately,

from the media in a certain time period when my confidence, quite

frankly, was shaken in the ability of ICBC to provide me with accurate

information. I brought in PwC, and I brought in an auditor of the

auditor, and there was an external actuary to provide me with

information.

I don’t have the final report yet. But I can tell the member that

I haven’t seen any indication that there was some sort of incompetence

on the part of ICBC or some sort of malice in what happened. What I can

tell the member is that I saw a lot of assumptions that went into the

government’s fiscal plan that (

a) made it hard to know the true

financial state of ICBC; and (

b) were based on what can only be

described, in my opinion, as irrationally optimistic views about the

sale of assets and the savings, from a report that hadn’t even been

received yet.

So it has been complicated to get to the bottom of ICBC’s

finances. I understand the member’s interest and, frankly, my own

interest in having somebody independent come through and start at the

date that the members opposite received that report, which they removed

the pages from before providing it to ICBC and to the public, and, from

that point on, do a real accounting of exactly who knew what when about

ICBC’s finances.

If the member is interested in that, we can have a conversation

about who a good person would be to appoint to do that review and

provide us with dates and provide the public with a full reporting about

that. That would be a very interesting exercise.

What I can tell the member in terms of estimates and the numbers

and ICBC’s financial state is, first of all — every piece of information

I’ve received to date — that the $1.3 billion projected loss is an

accurate projection based on actuarial best efforts. Secondly, the

reforms government has put in place will begin the long and difficult

process of turning ICBC around, but there’s a long road yet to

go.

J. Yap: Can the minister tell us…? At any point during his media

availability that day, September 5, did he use any different numbers

when speaking about the projected losses at ICBC?

Hon. D. Eby: It’s possible that I was using EY, Ernst and Young, projected loss

numbers from the report, as opposed to ICBC quarterly report numbers. I

have to admit that I don’t recall the interview. But in any event, I

appreciate the member drawing it to my attention.

J. Yap: I’ll help the minister. Can he confirm for us that during his

September 5 appearance on CBC’s All Points West , he stated the

following: “ICBC had its biggest loss in the organization’s history in

the last 12 months — period. They lost over half a billion dollars in

just 12 months. They are projected to lose, even with today’s rate

increases, over $300 million”?

[4:00 p.m.]

Hon. D. Eby: The member and I were referring to the 2016-17 losses in the Q2

report numbers.

J. Yap: Can the minister further confirm for us that on CKNW that same

day, September 5, he stated: “Next year’s loss at ICBC was projected to

be just $25 million. The actual loss is projected to be 14 times

that”?

Hon. D. Eby: Oh, to be that person again who thought that it would only be 14

times that. The actual loss is projected to be $1.3 billion.

J. Yap: Can the minister confirm that on CBC’s On The Coast on

that same day, September 5, he stated: “The projection that was in the

Budget 2017 documents was a loss of $25 million. The actual projected

loss for ICBC, even with today’s rate increase, is $360 million for next

year”?

Hon. D. Eby: Again, what a wonderful time that was to think that we only had to

make up a $400 million loss when, in reality, the loss is $1.3 billion,

a loss that has been confirmed not by one but by two separate actuarial

reviews and is in the process of being reviewed by a third

actuary.

J. Yap: Can the minister confirm for us that on CHNL, on September 5, he

stated: “The revised projection for next year’s losses in the base case

with existing rates is almost $500 million — a $450 million loss. That’s

a loss that is 18 times higher than projected”?

Hon. D. Eby: The member is pointing out an admitted challenge doing math in my

head. I prefer to use a calculator. If he’s pointing out that I may have

said 15 times or 18 times, I can tell the member that whichever

multiplier I used, I was woefully inadequate, unfortunately, in my

projections on the media that day.

J. Yap: I appreciate the minister referring to his math skills. But why so

many different numbers to different news outlets and programs on the

same day?

Hon. D. Eby: I was attempting, in the media, to convey to the public the very

serious financial state of ICBC. I appreciate the member pointing out

that in some interviews, I might have given slightly different numbers.

I will point out to the member that every one of those numbers was

incorrect, because the state of the insurer was much worse than I

believed at that time.

J. Yap: We’re trying to understand that. Recall, as I mentioned, these are

all media availabilities on the same day, September 5. The minister said

over $300 million on one outlet, 14 times higher than originally

projected, then stated $360 million on another, then switched the number

to $454 million on three other outlets on the fifth and sixth. I have

the transcripts, Minister. What were the real numbers, and why did you

use, on the same day, so many different numbers?

Hon. D. Eby: I’ve conveyed to the member the difficulty of knowing ICBC’s

finances. When he says, “What was the real number…?” What was

government’s understanding of ICBC’s losses on September 5? Excellent

question. Hard to know what that has to do with anything when you’re

talking about a corporation that, I can tell you, has had not one but

two reviews and is in the process of having a third, by an independent

actuary, to confirm a $1.3 billion loss.

I take the member’s very thoughtful reviewing of transcripts on

September 5, and I might point out that he has distracted himself a

little bit from the issue of concern to British Columbians, which is a

Crown corporation that is losing more than $1 billion this

year.

[4:05 p.m.]

J. Yap: Our intent is to find exactly what the motivation was during this

time when the minister made these public comments about ICBC and the

numbers kept changing. What was the final global number that the

minister signed off for the quarterly report?

Hon. D. Eby: Just for the member’s clarification, I don’t sign off on these

quarterly reports.

The member asked for the Q2 quarterly report loss, which was $364

million. I point out to the member that the previous report was $225

million, which was the September quarterly report. Then the Q3 quarterly

report was the $1.3 billion loss. What the member is seeing in those

numbers is, as ICBC is drilling down to give government the bottom-line

number of where they’re at financially, the work progressing on

that.

The member wants to know my motivation. Why was I in the media

talking about the losses at ICBC? I’ll point out that, even at my worst

in those numbers, I was well closer to ICBC’s true financial state than

the previous government was.

The reason for doing that was to let British Columbians know some

things that they did not know before the election, which were that the

Crown corporation that they own, that is the public’s, was in deep

financial trouble; that there had been a concerted effort to prevent

them from knowing that; that key assets of the corporation had been

listed in the financial reports, essentially, as sold, even though they

hadn’t been put up for sale, everything from the URL at ICBC to land

owned by ICBC; and that savings had been booked from a report not even

received by the previous government.

The member can see why I might have had to go out to the media to

say: “Hey, British Columbians. There’s some real trouble here that you

might not know about.” I can also understand why the member would be

unhappy with the fact that I had done that because it was his government

and he was there when the previous government tried and, ultimately,

clearly failed to prevent British Columbians from knowing the true

financial state of the insurer. So if the member wants to know my

motivations, I’m glad to put them on the record for him.

J. Yap: I’m certain that the minister was doing his job in doing the media

availabilities that day. We’re just canvassing the fact that the numbers

kept changing on that same day.

With that in mind, the final figure was $364 million. Did the

minister do anything to ensure proper oversight to stop further losses

after that date?

Hon. D. Eby: I’ve outlined for the member a number of policy initiatives and

oversight initiatives undertaken by the government to address the

financial crisis at ICBC.

J. Yap: Let’s fast-forward to November of 2017, when the minister stood in

this House, on November 7, and told the House: “ICBC is projected to

lose $364 million this fiscal year, ’17-18.” Can the minister confirm

that?

Hon. D. Eby: That is the Q2 ICBC number.

J. Yap: Can the minister tell us when he was made aware of the revision to

the loss?

Hon. D. Eby: It was in January of 2018.

[4:10 p.m.]

J. Yap: Can the minister confirm for us that on November 7, he did an

interview with CHNL where he stated, in reference to ICBC, the

following: “They’re on track to lose another half a billion dollars this

year.”

Hon. D. Eby: I can’t recall the interview, so I’ll take the member’s transcript

or whatever he’s using to cite that. I have no reason to doubt that

that’s incorrect.

The quarterly reports, as I went through with his colleague, from

ICBC are October and January at that time of year, if that assists the

member at all.

J. Yap: Through you, Chair, I don’t want to be unparliamentary, but

British Columbians want to know. Was the loss $364 million, or was it

half a billion? Which was it?

Hon. D. Eby: I have patiently attempted to explain to the member the evolving

scenario that we were dealing with on taking over government when ICBC

was projected to be turning a profit — as I stand here in the

Legislature, which still boggles my mind — to the state that we actually

find ourselves in on this day in the Legislature, which is ICBC facing a

$1.3 billion loss. The Q2 report from ICBC was a $364 million projected

loss.

This was during a time that ICBC was doing an extensive review to

provide government with their bottom-line financial of where they were

at. I provided the Legislature and British Columbians with the best

information I could about the significance of the loss faced by ICBC and

its financial difficulties. There’s an evolving situation in the Q2

report, reflected as a $364 million loss, and in the Q3 report,

reflected as the number that’s in front of the Legislature and in the

budget, which is the $1.3 billion loss.

J. Yap: I’m confused. And I do appreciate the minister’s patience. I do

appreciate it.

We have five numbers here that describe the projected losses at

ICBC. First it was over $300 million in September, followed by $360

million, followed by $454 million — all on the same day. Then in

November, in estimates, it was $364 million. But in the media on the

same day, it was half a billion dollars. Five different numbers, and no

clarity on what the actual numbers were. Can ICBC, through the minister,

clarify which of the five numbers is accurate?

Hon. D. Eby: I provided the member with the Q2 number, which was not an

accurate number. It was ICBC’s number provided to government on the best

information available to them at the time. It was during a process that

they were doing an exhaustive financial review. The Q3 number, which is

from when that review was complete, was $1.3 billion — which is, in

fact, the accurate number and which is, in fact, the number that’s in

the budget and which is the number in the budget that’s in front of the

Legislature and in front of us in this estimates process here

today.

It’s $1.3 billion. So I was off — depending on the interview,

according to the member opposite, and I’ll take his word for it — on a

factor of anywhere from four to just over 2½. Again, I’m trying to do

multiplication in my head. Maybe not a great idea. In any event, I was

attempting to convey to British Columbians the seriousness and the

escalating nature of the situation.

The Q2 number that ICBC provided was not accurate, but it wasn’t

not accurate out of malice. It was not accurate out of the best

information that they had available. They were doing an exhaustive

financial review at the request of the board, and they provided the

bottom-line financial number to government — which is the number that

the member should use and rely on, and I encourage him to do so — which

is the $1.3 billion loss.

[4:15 p.m.]

J. Yap: Can the minister tell us what oversight functions were put in

place to stop any further losses at that time? We’re talking the

November time frame, when we had a situation where in the House, the

minister said the loss was $364 million and then in a media interview

said it’s half a billion.

Hon. D. Eby: The member asks…. The specific question was about….

I just want to take a second. I’m trying to read my own

handwriting about which high school just joined us, because the member

for Courtenay-Comox took the time to recognize these high school

students and the success of their girls’ rugby team. I’ve written a

note, and I cannot read my own handwriting about which high school it

is.

Anyway, I wanted to recognize that we’re joined by a number of

high school students from the member for Courtenay-Comox’s riding and

welcome them here to the Legislature.

The member has asked a number of times about what mechanisms were

put in place. From the very earliest days, when it became immediately

apparent that ICBC was in deep financial difficulty, the discussion was

about which policy reforms…. What are we going to do?

There were a number of options on the table — everything from

full, no-fault insurance, which was advocated in the report that had

been left for us by the previous government, to do nothing and increase

rates by $400 for each driver across B.C.

Obviously, we were not going to do nothing. What we settled on was

an attempt to preserve the best elements of the tort system that we have

in British Columbia for the most serious injuries. For other injuries,

more minor injuries — although they can be quite serious for people who

find themselves facing them — we would have an expedited process, a

tribunal process independent of ICBC and government, to resolve disputes

instead of the full B.C. Supreme Court system.

We would have a limit on the maximum pain and suffering award.

This is an award by the court that recognizes someone’s pain and

suffering, but it’s not their out-of-pocket expenses. We would use the

savings from that to get ICBC back on its feet and be able to increase

benefits.

Now, I do want to note that that is not all we are doing. The

member wonders about what steps were taken. I believe, at that point, we

had already retained PwC. They were already in the process — if not, we

were in the preparatory stages of retaining PwC — to do an operational

review of ICBC to provide us with recommendations about efficiencies

inside the corporation.

ICBC was also well aware of my concern about correspondence that I

received from many members of the public expressing concern about the

difference in costs that they were asked to pay by auto body repair

firms or by auto glass repair firms, depending on whether the work was

being done on behalf of ICBC or whether it was being done and paid for

out of the person’s own pocket. The gap between those two numbers made

them very unhappy, because they believed that ICBC was being taken

advantage of.

ICBC was aware of my concerns on the material damage side, as

well, and the need to review policies and address any policy issues that

that might be causing — and we’ve discussed some of those here today —

and also to crack down on fraud.

I saw incredibly troubling video out of Ontario of some of the

activities taking place in that province. Thankfully, in B.C., there are

some safeguards to prevent some of those excesses. But in others, we may

be vulnerable.

I wanted to be sure that ICBC had the cohort necessary to address

fraud and, also, that ICBC had the cohort of staff necessary to be

responsive to members of the public when they call, when they have an

accident — to access the benefits they need, to have the support that

they need so they don’t have to hire a lawyer, which is something that

increased costs for ICBC as well.

The member is asking what steps were taken. We continue on a

course of identifying every possible saving at ICBC, because we know

that for every dollar we save at ICBC, there are two possible outcomes.

One is there are reduced problems for government’s fiscal plan. It

provides, potentially, ICBC to be in a revenue-positive space, which

could result in reduced car insurance premiums for British Columbians.

It could, in a virtuous cycle, allow for increased investments in road

and traffic safety in the province to even reduce accidents

further.

We are aggressively pursuing all savings, not just to get ICBC

back into the black but also to, hopefully, reduce costs and make life

more affordable for British Columbians.

[4:20 p.m.]

J. Yap: Let’s go to January of 2018. Minister, can you tell us, through

the Chair, what files you and the board and the executive team looked

back on that led to an additional $1 billion in liabilities?

Hon. D. Eby: There were two sets of files, or two factors, that ICBC looked at.

One was the large-loss files that they reviewed, hundreds of files, to

provide more accurate projections about potential costs at ICBC, to give

government a bottom line about where we were at. The second factor that

ICBC looked at was the closure rate. In the previous year, there had

been a record high number of file closures. When ICBC looked at files in

the October-November period, they identified that suddenly files were

not closing.

The implications of files not closing is that they last for a lot

longer when someone is making an accident claim. The longer the files

last in the system, that is closely associated with escalating costs for

ICBC. So when you see that the files aren’t closing, that is a red flag

that costs are about to go up when those files ultimately do close. Not

only are you getting new claims in the door, but the old claims aren’t

closing, and you know actuarially that the longer they linger around,

the higher the costs tend to go over time.

It was those pieces — the physical file review of large-loss

files, to provide more actuarial certainty, and also this issue of files

not closing — which caused a great deal of concern that the losses

associated with those files would be much higher than

expected.

M. Lee: As we continue on into January and what was reported, can I just

ask, as we’re looking at financial reporting and the reviews…? The $225

million forecast loss and the $364 million forecast loss — those two

periods. Is there an actuarial review at that juncture before those

numbers were released?

Hon. D. Eby: I can tell the member that quarterly reports’ claims forecasts are

updated, based on experience at ICBC, and they’re reviewed by the ICBC

executive and ICBC’s independent actuary, Eckler and

associates.

M. Lee: Earlier the Attorney General mentioned that his confidence was

shaken in terms of the kind of financial reporting that he was receiving

from the team at ICBC. With that concern in mind, what

changed?

[4:25 p.m.]

Hon. D. Eby: An independent third-party firm was retained to come in and review

the actuarial assumptions at ICBC and the jump in the projected loss.

That review, because it was done by the firm that is also ICBC’s

auditor, although it’s done by separate arms of that firm…. That review

process will be reviewed by a separate, additional actuarial review that

we’re engaging in.

There will be the ICBC internal review, the Eckler and associate

review, the PwC review and then the review of the PwC review. There will

be four levels of actuarial review just to illustrate to the member the

depth of my concern and also my desire to provide some certainty to

British Columbians around these numbers.

M. Lee: With that in mind, in terms of how the Attorney has just laid that

out again, has it been determined at this juncture that there is an

issue in respect of ho