N.W.T. First Nation accuses head of economic development arm of diverting millions
YELLOWKNIFE — A Northwest Territories Supreme Court justice has ordered that Lutsel K'e Dene First Nation companies be put in the care of a receiver-manager as the First Nation accuses the head of its business arm of misappropriating millions of dollars through self-dealing.
The First Nation and Chief James Marlowe filed suit against Ron Barlas, his wife, Zeba Barlas, and several companies last week, accusing Barlas of oppression, breach of fiduciary duty, unjust enrichment and fraud. In court documents, they allege that Barlas, through "duplicity, threats and legal manoeuvring," had "illegally seized control" of the First Nation's companies and diverted an estimated $10 to $14 million from them to companies controlled by him and his wife over several years.
Barlas, who has been chief executive officer of Denesoline Corporation Ltd. since 2014, has denied any wrongdoing and said in a statement he plans to challenge the claims. None of the allegations have been proven in court.
The Lutsel K'e Dene First Nation has approximately 800 members and about 350 people are estimated to live in the remote community on the East Arm of Great Slave Lake.
Denesoline Corporation is the economic development arm of the First Nation and is responsible for business negotiations and management of various joint ventures. Its primary source of revenue comes from contracts with the three diamond mines in the territory, with which the First Nation has agreements.
Marlowe and the First Nation allege that since being hired as chief executive officer of Denesoline, Barlas has taken control of Ta'egera Company Ltd., a real estate holding corporation, and Tsa Corporation, a non-profit that owns Denesoline and Ta'egera, through invalid means. They allege these companies are no longer being operated for the benefit of First Nation members, they lack proper governance and oversight, and Tsa has not held an annual general meeting since 2019.
They further allege three companies — Northern Consulting Group Inc., Equipment North Inc., and Dene Aurora Environmental Technologies Inc. — are "alter-egos" of Barlas and his wife. They allege that these companies perform no independent work and have been used to divert and hold funds and assets that rightfully belong to the First Nation. In particular, the suit claims a joint venture between Denesoline and Northern Consulting Group was created to divert 49 per cent of revenues generated by Denesoline from other joint venture contracts, which they allege Barlas concealed from Tsa members.
Other allegations the First Nation has made against Barlas include that Ta'egera purchased his family's home in Yellowknife, Equipment North bought an aeroponic farm that Barlas sold to Denesoline for $140,000 in profit but sent it to a former colleague in B.C. rather than Lutsel K'e, and that Denesoline paid $40,000 for renovations to a property owned by Equipment North in Yellowknife as well as $15,000 in monthly rent to the company.
Barlas has denied any wrongdoing and said the affidavits filed in support of the First Nation's suit contain "numerous false, unfounded or misleading allegations." He stated in his own affidavit that no funds have been diverted to companies owned and controlled by him or his family, full disclosure has been provided to Tsa members and he purchased his home with his own money.
"I have never taken funds which belong to the community, I have never taken steps to take over control of the corporations," he wrote.
Barlas said in an affidavit that Denesoline is the only Indigenous community-owned company to have no debts, has been awarded a Canadian Business Excellence Award annually from 2019 to 2023 and provides significant benefits to the community. In it, he also included an email attributed to former Lutsel K'e Dene First Nation chief Darryl Marlowe stating Barlas had "done more for the community of Lutsel K'e than anyone over the past 10 years" and that all of his agreements were signed lawfully.
The First Nation and its current chief applied to the court last week for an interim order appointing Riley Farber Inc., a business advisory firm with offices in Calgary, as receiver-manager of Denesoline, Tsa and Ta'egera while litigation proceeds. They also requested an interim Mareva injunction, which allows the court to freeze the assets of a defendant, to prevent the respondents from potentially dissipating funds or destroying evidence. They expressed concern that a large payment was pending to Denesoline, arguing there was "serious risk" those funds could be diverted.
An affidavit from Angela Bigg, president and chief executive officer of Diavik Diamond Mines Inc., indicates that a total of $13.5 million was due to Denesoline-related entities by the end of April and further invoices totalling $6 million are expected in the coming weeks.
Deputy Justice William Grist granted both orders on Friday, which he said were "extraordinary," noting there was "some urgency" given the significant funding due.
The temporary orders are subject to review. The Maerva injunction order states it will cease to have effect if Barlas provides the court $9 million in financial security.
This report by The Canadian Press was first published May 1, 2023.
This story was produced with the financial assistance of the Meta and Canadian Press News Fellowship.
Emily Blake, The Canadian Press