MGEU sues former staff member over alleged home insurance rebate scam, police investigating

Police are investigating and Manitoba’s largest public-sector union is suing one of its retired staffers who allegedly set up a secret side-hustle and, for decades, received close to a half-million dollars in rebates on home insurance sold to union members.

In 2021, when the Manitoba Government and General Employees’ Union found out about the rebate payment agreement, defendant Raymond Erb returned nearly half the money, according to the lawsuit.

On Monday, the union filed a statement of claim in Court of King’s Bench for the rest of it, plus damages, claiming Erb’s “highhanded, outrageous and unlawful” actions showed a “wanton disregard for MGEU’s rights and ought to offend the community’s sense of fair play so as to justify an award of aggravated, punitive and exemplary damages.”

The lawsuit named Erb, his wife Arlene Erb, John and Jane Doe and persons unknown “who either knowingly or unknowingly, directly or indirectly, received or benefited from” the Erbs’ alleged conduct.

The defendants have 20 days after they’re served the statement of claim to file a statement of defence.

Concealed his actions

The statement of claim said Raymond Erb started working for MGEU in 1973 as a staff representative who specialized in pension and benefit matters and was entrusted to represent the board on several committees related to member pensions and benefits. He provided support to the Superannuation and Insurance Liaison Committee that represents employee and pensioner members of the Civil Service Superannuation Fund administered by a board, of which MGEU is a member.

In 1995, Erb purportedly, on behalf of MGEU, entered into an agreement with HB Group Insurance Management, a subsidiary of the Co-operators, that provided insurance products to MGEU members at the time, the lawsuit says. The deal would see MGEU get a two per cent rebate on all policies held by MGEU members, dating back to 1994.

The Co-operators began making rebate payments without the MGEU being aware of the agreement, the statement of claim says. It alleges Erb intentionally kept and concealed from the union his actions, the rebate agreement and the rebate payments.

It says Erb set up an account at Buffalo Credit Union under the name MGEU Pension and Insurance Committee even though the union’s policy didn’t allow MGEU committees to have or operate their own accounts. Erb directed Co-operators to mail all information regarding rebate payments to his attention and he deposited rebate payments into the credit union account, the lawsuit says. Erb was the sole person who knew about the account and made himself a signing authority for it, it says.

No record of agreement

Without MGEU authorization, Erb withdrew rebate payments for his own use and transferred them from the Buffalo Credit Union account to his wife, Arlene Erb, the statement of claim says. In 2008, Buffalo merged with Assiniboine Credit Union.

After Erb’s retirement from MGEU in 2008, he continued to serve on several boards and committees related to MGEU members’ pensions and benefits, including the SILC, and opened an account at Assiniboine Credit Union called Superannuation and Insurance Liaison Committee that used Erb’s and his wife’s home address as the address of record and arranged for all Co-operators rebate payments to be sent there, the lawsuit says.

Erb deposited the payments into the credit union account and made himself the sole signing authority for it.

It said he withdrew money from that account for his own use, transferred funds to his wife’s ACU account, and transferred funds to another ACU account in his name and made payments on his personal credit card using money from that account.

The union didn’t become aware of the rebate payment deal until March 2021, when the Co-operators contacted MGEU requesting a GST number be provided for the rebate payments being paid on home insurance sales to MGEU members, the lawsuit said.

The union conducted an internal investigation and found no record of MGEU entering into any kind of rebate agreement with the Co-operators, and that no MGEU members or SILC executives had any knowledge if it or any record of rebate payments being received.

The internal probe showed the rebate cheques went to Erb’s home and that he had deposited them into the ACU account and used them to make personal credit card payments and transferred funds to his wife, the lawsuit said.

No pension funds involved: MGEU

In May 2021, Erb made two deposits into the ACU account for $150,678 and $52,191 and wrote a letter on SILC letterhead to the Co-operators — without the committee’s knowledge — advising the company that SILC had changed its constitution and would no longer be involved in the home insurance rebate plan, the court filing shows.

In June 2021, the MGEU learned that SILC had made no such changes and hadn’t directed that the letter be sent.

In December 2021, Erb resigned from the SILC board and other union-related organizations, the lawsuit said.

Erb has refused to return to MGEU the retained $239,000 in rebate payments that were allegedly obtained through misappropriation, fraud, deceit, breach of trust and unjust enrichment, it said.

The MGEU is entitled to trace and recover funds from the credit union accounts, the statement of claim said. It says the union is entitled to an injunction restraining the defendants from disposing any of their assets or moving them to another jurisdiction.

MGEU director of internal operations Jean-Guy Bourgeois said Monday that the union acted as soon as it became aware of the rebate payment deal and notified police.

“We confirm that the Winnipeg Police Service’s financial crime unit is investigating this matter,” spokesman Const. Claude Chancy said in an email Monday.

The union said it wants to reassure its members that none of their dues’ money was involved in the home insurance rebate scheme.

“No pension or benefit plan funds were involved in these payments,” Bourgeois said.

“The funds in question relate to promotional commission rebate payments that were generated from sales of a group home insurance plan that was available to members on a voluntary basis and has been since the 1990s.”

carol.sanders@freepress.mb.ca