July 2008 news releases

Provincial news releases

PricewaterhouseCoopers' investigation results released — July 17
Video: PricewaterhouseCoopers' investigation results released — July 17
Backgrounder: Investigation timeline — July 17
Backgrounder: Key findings & ICBC's actions — July 17
Backgrounder: What makes a vehicle a write-off? — July 17
Municipalities receive ICBC grants totalling over $4.2 million — July 9

PricewaterhouseCoopers' investigation results released — July 17

ICBC commits to implementing recommendations

ICBC today released the findings of the PricewaterhouseCoopers (PwC) independent investigation into the sale of vehicles repaired at ICBC’s Burnaby-based research and training facility.

PwC was retained by ICBC to conduct an independent, external investigation while the corporation was conducting its own internal investigation into concerns that some vehicles repaired at the facility were sold with a repair history that was incorrectly documented and not disclosed to buyers.

“PricewaterhouseCoopers has thoroughly investigated the issues at our research and training facility,” said ICBC interim president and CEO Geri Prior. “We are committed to implementing all the recommendations in their report.”

The PwC report substantiated ICBC’s initial findings that there was a general lack of controls and conflicting policies and procedures regarding the appropriate vehicle designation and around employee purchase of vehicles repaired at the facility. PwC’s investigation found instances where personal vehicles were repaired at the R&T facility. In addition, the report found that appropriate actions were not taken by the management responsible when concerns were raised about the facility prior to January, 2008.

“ICBC takes these findings very seriously,” said Prior. “ICBC has been proactive and up front about this investigation from the beginning and we are committed to making things right for our customers.”

PwC has made a number of recommendations to ensure that ICBC’s policies and procedures are comprehensive and consistent, and updated on a regular basis. Other recommendations include restricting the number of staff with the authority to update salvage designations and developing and implementing standards for conducting internal reviews including escalation requirements and documentation standards.

Since announcing its own investigation into the research and training facility February 13, ICBC has taken the following actions (see backgrounder for more detailed list):

• The research and training facility no longer repairs vehicles for sale.
• Employees and members of their immediate family are not permitted to purchase any ICBC salvage, either directly or indirectly through a friend, acquaintance, family member or other proxy.
• The repair of personal vehicles at the facility is not permitted under any circumstance.
• Updating policies and procedures to make sure all vehicles are designated properly.

“Our employees are hard working, dedicated professionals who strive to do their best for our customers every day and we are committed to working with them as we implement these changes,” added Prior.

“I am pleased that senior executive acted quickly and decisively, first to fully investigate this issue and then to make changes to prevent this from happening again,” said Richard Turner, ICBC board chair.

Once ICBC completed its initial investigation, it reviewed other areas in the company that were involved in vehicle designation and/or the sale of vehicles.

This further review found that, over 10 years, 91 vehicles were sold through ICBC's Salvage operations without the proper disclosure of repair history or registration status. Unlike vehicles from the research and training facility, there were no employee purchases. These vehicles were repaired by external collision repair shops and sold through ICBC's standard salvage sales process to licensed salvage buyers.

"ICBC regrets the inconvenience that this has caused our customers and we apologize," said Prior.

ICBC will be contacting customers who purchased these vehicles to have their vehicles inspected, properly designated and, when appropriate, provide compensation. Not all of these vehicles are currently registered.

PwC's report and background information outlining the chronology of ICBC's and PwC's investigations is available at www.icbc.com.

Media contact:
Doug Henderson
604-982-1332

Backgrounder: Investigation timeline — July 17

January 2008

• Employees present concerns to ICBC Special Investigations Unit (SIU) officer

January 24

• SIU officer reports concerns to ICBC’s Employee Relations Department
• ICBC’s vice president of Human Resources & Corporate Law is alerted – this is the first notice to an Executive Committee member

January 25

• ICBC’s CEO is advised and the preliminary investigation begins

January 29

• Harris and Company is retained for legal advice

February 12

• PricewaterhouseCoopers (PwC) commences work on investigation

February 13

• ICBC issues a news release announcing investigation
• Research and training facility is temporarily closed
• PwC provided access to the research and training facility and records
• Interviews begin with employees, including management

February 18

• The research and training facility is re-opened with the policy directive that no vehicles are to be bought or sold

February 13 – March 19

• ICBC contacts affected vehicle owners
• Formal interviews with current and former employees
• Research into all vehicles processed through the research and training facility
• Investigation into policies and procedures

February 26

• Scope of PwC’s investigation finalized

February 28 - March 3

• Presentations to Board Audit Committee and Board of Directors

March 11

• Regional Crown Counsel is advised of the nature of the investigation and the process ICBC is following

March 19

• News release issued on ICBC actions to date
• Personnel decisions implemented

April 4

• ICBC makes a formal request for an RCMP assessment

April 15

• ICBC and PwC update terms of reference for PwC’s investigation

April 16

• The Minister responsible for ICBC, the Minister of Public Safety and Solicitor General, tables a letter in the legislature on the status of the investigation

April 17

• RCMP launch a formal investigation

May 14

• The Auditor General tables a letter in the legislature stating his office will defer their review of the research and training facility until PwC have concluded their review

July 17

• ICBC releases PwC investigation findings and recommendations

Backgrounder: Key findings & ICBC's actions — July 17

Backgrounder: What makes a vehicle a write-off? — July 17

What makes a vehicle a write-off or, in insurance terms, a total loss?

After a crash, ICBC must decide if it makes sense to repair the vehicles. This is done in one of two ways:

• An Obvious Total Loss is identified by obvious extensive damage.
• In a Constructive Total Loss, ICBC estimates the total cost to repair the vehicle, including parts, labour, alternate transportation to the customer and taxes. We then subtract from this total any money we could recover if the vehicle was sold as salvage. If this new total is higher than the current market value of the vehicle or, in insurance terms, the actual cash value of the vehicle, the vehicle is a total loss.

Example:

• The cost of repairing your vehicle is $8,000.
• The actual cash value of your vehicle is $10,000.
• The estimated salvage value is $3,000.

ICBC would consider your vehicle a total loss because it would cost $8,000 to fix your vehicle, compared to the $7,000 it would cost ICBC if we paid you $10,000 and recovered $3,000 by selling your damaged vehicle as salvage.

After a vehicle is identified as a total loss, ICBC’s Salvage Department gives it one of four designations:

• Dismantle Purposes Only
• Salvage
• Total Theft
• Vehicle Repaired

These internal designations are used to trigger the appropriate status in the Vehicle Registration System – the information the public sees.

What’s the difference between the designations?

• A vehicle designated as dismantle purposes only can only be used for parts. It cannot be licensed and insured under any circumstances.
• A vehicle designated as salvage can be repaired. It can be licensed and insured after being structurally and mechanically inspected by a Designated Inspection Facility. Once this is complete it is considered a rebuilt vehicle.
• A vehicle designated as total theft is a recovered stolen vehicle with little or no damage. It can be repaired, licensed and insured after being mechanically inspected by a Designated Inspection Facility.
• A vehicle designated as vehicle repaired was originally estimated as repairable and sent to an external collision repair shop. In some circumstances, over the course of the repairs, the costs increased making the vehicle a total loss. While in other circumstances, ICBC decided to buy the vehicle from the customer for customer service reasons.

What went wrong at the Research and Training facility?

The damage history of 94 vehicles repaired at the research and training facility was not properly documented and disclosed. This means the true repair state of the vehicle was not reflected in the vehicle registration system – the information the public sees.

This was done one of two ways:

• ICBC salvage department designation switched from Salvage to Vehicle Repaired
• Payment code changed from ‘total loss’ to ‘cash settlement’

The practice of some employees and managers purchasing vehicles was condoned by a specific line of authority within ICBC. While this practice did not explicitly violate ICBC's policies and procedures, it resulted in inappropriate actions and the appearance of a conflict of interest. This management group also condoned the improper use of the facility.

When previous concerns were raised, appropriate action was not taken by the management responsible.

How could this happen?

There was a lack of clear and specific policies and procedures to govern the designation, repair and sale of vehicles at the facility.

• The reselling of vehicles repaired at the research and training centre was a process that developed over time, and there were no specific policies for selling the repaired vehicles.

There was a general lack of controls, and conflicting policies and procedures regarding the employee purchase of vehicles repaired at the facility.

• ICBC’s Claims Procedures Manual was clear that employees should not purchase ICBC salvage. However, in ICBC's previous Code of Ethics, it stated employees could buy salvage as long as it was through public auction, which was the case in the employee purchase of vehicles from the research and training facility.

The practice of selling repaired vehicles to employees and related parties was condoned by a specific line of authority within ICBC. 

Some individuals within a specific line of authority did not demonstrate proper judgment. No one within that line of authority is still with the company.

What is ICBC doing to make sure this never happens again?

ICBC has already taken steps to make sure nothing like this happens again, and we are committed to implementing all of the recommendations in the PwC report.

Action taken to date:

• The research and training facility no longer repairs vehicles for sale.
• ICBC employees and members of their immediate family are not permitted to purchase any ICBC salvage, either directly or indirectly.
• All improperly documented designated vehicles have been either purchased from customers, or inspected and re-designated.
• Comprehensive review of relevant policies and procedures – changes where required.
• Those responsible are no longer with the company.

Municipalities receive ICBC grants totalling over $4.2 million — July 9

Thirty-one British Columbia cities, districts, and municipalities will receive ICBC grants in place of real property and business taxes, totalling over $4.2 million this year.

As a provincial Crown corporation, ICBC is not required to pay business and property taxes. Instead, communities receive annual grants that are equal to the taxes that would be levied if ICBC were a private business.

Grants are paid to communities with ICBC claim centres, administrative offices, and storage and salvage yards. The municipal grants vary according to size and location of the premises, and differences in local mill rates.

The following is a list of 2008 ICBC grants in place of taxes to be paid:

Media contact:
Doug Henderson
604-982-1332