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For-profit long-term care company uses shell companies to build property empire

Ottawa (25 Feb. 2022) — At the same it was facing allegations of understaffing, diverting public funds and rationing food and sanitary items, the largest French for-profit long-term care company, ORPEA, was using shell companies to expand its European property portfolio, according to a report released this week.

The report, Caring for People or Profit? The Financial Engineering & Real Estate Investment of Groupe ORPEA, was based on investigative work by the Centre for International Corporate Tax Accountability and Research (CICTAR), which the National Union of Public and General Employees (NUPGE) helps support. According to the report, ORPEA is generating profits by buying and selling properties though shell companies in Luxembourg. 

Research has shown that using shell companies allows information about transactions to be kept hidden. But what is also clear is that the property speculation is affecting the quality of care seniors receive. The property portfolio was acquired using debt, and as debt and finance costs grew, the company cut corners on the quality of care. One example that was looked at was a German care home group the company owns where front-line staff were reduced by 10%.

The Canadian connection

Sadly, there is a Canadian connection. The largest shareholder in ORPEA is the investment arm of the Canada Pension Plan (CPP). This is part of a pattern. The focus of shareholders on generating returns means ethical issues with investments are frequently ignored.

During the COVID-19 pandemic, the death toll in long-term care facilities owned by Revera was particularly bad. Even though the company was owned by a federal government pension plan, it put profits ahead of the well-being of residents like any other for-profit corporation. In 2021, it was revealed that Revera was going so far as to use a web of subsidiaries in tax havens to reduce the corporate taxes its subsidiaries in the United Kingdom paid.

Long-term care companies in Canada might be doing the same thing, but it’s easier for them to hide it

Like ORPEA, a significant part of the attraction for-profit long-term care companies in Canada hold for investors is their real estate investments. Some for-profit long-term care companies in Canada are even organized as real estate investment trusts (REITs). Given that similarity, it would not be surprising if there are the same issues with for-profit long-term care companies in Canada as in France.

But what is different is that the secrecy around corporate registrations in Canada makes it almost impossible to investigate. Because the secrecy around corporate registration in Canada has been used by those involved in tax avoidance, money laundering and financing terrorism, there is a push for a public registry showing who really controls corporations registered in Canada (the beneficial owners).

As the CICTAR report on ORPEA shows, a beneficial registry may also shine a light on how for-profit companies operating services like long-term care are spending the public funds they receive.