Denesoline boss tried to move $500K out of the country before fraud hearing
A man who's been subject to fraud allegations tried to wire transfer $500,000 out of the country the day before the case against him went to court for the first time, an N.W.T. Supreme Court judge heard Friday.
Larry Innes, a lawyer for the Łutsel K'e Dene First Nation, told the court the attempted transfer was inappropriate. In an exchange that lasted less than five minutes, Justice Andrew Mahar agreed to indefinitely freeze the assets and companies belonging to Ron Barlas and his wife, Zeba Barlas.
Łutsel K'e Dene First Nation (LKDFN) hired Ron Barlas to lead its economic development arm, Denesoline Corporation, back in 2014. Now, they're accusing Barlas of funneling up to $14-million away from Denesoline and its related corporations into one of his own companies.
The First Nation, which has only about 800 members and about 300 people living in the community itself, also alleges Barlas manipulated how Denesoline and related companies were run to protect his leadership position and to prevent independent oversight, that he unilaterally appointed and removed directors, and that he failed to hold statutory annual meetings.
The allegations came to light early last week, and last Friday, LKDFN's lawyers successfully argued for Barlas's assets to be frozen and for Denesoline to be put into the temporary care of Riley Farber, an accounting firm in Calgary.
Matthew Sammon told a judge that Denesoline, for which Barlas is still director and CEO, was about to get a multi-million-dollar payment from a diamond mine. There was also concern Barlas was going to dissipate his assets.
Innes told CBC News on Friday that to be before the court a week later with evidence of an attempt to do just that — to dissipate assets — was "telling."
"We were very surprised," Innes said.
The court heard last Friday that a private investigator had tailed members of the Barlas family the day before. One of the things a former Calgary police officer observed, said Sammon, was that Zeba Barlas spent a "long period of time" at a Yellowknife bank.
Innes said LKDFN lawyers now suspect there's a link between that bank trip and the attempt to move money. Although that particular wire transfer didn't work, said Innes, there are other transactions LKDFN lawyers are looking into.
Barlas was not in court Friday. His lawyer, Michael Kirk, wasn't there either — and was instead represented by an agent.
CBC News has reached out to Ron Barlas for comment. As of 2 p.m. Friday, he had not responded.
Barlas previously said in an email that he denies any wrongdoing and will challenge allegations that he describes as "false, unfounded or misleading."
How does the freezing order work?
The order that freezes assets belonging to Ron and Zeba Barlas and the companies they own and control is called a Mareva injunction.
Kirk argued last week that the injunction and the order putting Denesoline into the care of a law firm were unfair because he hadn't had time to prepare for the hearing.
On Friday, however, Innes said after notifying Kirk of the attempted transfer, both sides agreed to the court extending the freezing order indefinitely. It means that LKDFN lawyers won't have to return every 10 days or less to explain to a judge why the freezing order should stay in place.
So how does a Mareva injunction work?
The injunction is a powerful legal instrument that orders a defendant not to move any assets they own or control to safeguard an applicant's legal claims. The order says that it "restrains" Ron and Zeba Barlas and their companies from "selling, removing, dissipating, alienating, transferring, assigning, [or] encumbering" their assets.
When it was first imposed last week, Innes said there were "many, many emails" notifying financial institutions the Barlases have dealt with. The injunction orders banks to "freeze and prevent any removal or transfer of monies or assets of the Barlas parties."
The order also requires financial institutions to disclose records with LKDFN's lawyers.
That's how lawyers for LKDFN found out about the attempted wire transfer.
Innes doesn't know why the transfer didn't work — it was attempted the day before the order came into effect. But if it had gone through, he said his team would have received evidence of the transfer and would have taken steps to put the money back.
Innes said he doesn't know yet if Barlas made any successful attempts to move money out of reach of the courts.
"There are transactions that we're still examining," he said.
Barlas and his wife are allowed to spend money on living and legal expenses, but they have to apply to do so. Innes said the next step is for his team of lawyers and Kirk, Barlas's lawyer, to agree outside the court on a dollar figure for those expenses.