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Łutsel K'e Dene First Nation lawsuit focusing on conflicts of interest

Łutsel K'e Dene First Nation is alleging that a law firm hired to help its businesses instead helped a former CEO defraud those businesses of millions of dollars. (Natalie Pressman/CBC - image credit)
Łutsel K'e Dene First Nation is alleging that a law firm hired to help its businesses instead helped a former CEO defraud those businesses of millions of dollars. (Natalie Pressman/CBC - image credit)

A lawsuit alleging that millions of dollars were taken from companies owned by the Łutsel K'e Dene First Nation (LKDFN) in the N.W.T. has devolved into a battle between two groups of lawyers.

In one corner are the lawyers representing the First Nation in the lawsuit alleging former CEO Ron Barlas used his position to bilk its companies out of millions of dollars. In a recent filing, they asked the courts to expand the lawsuit to include the lawyers who represented the companies during Barlas's reign, alleging they were working more for Barlas than the LKDFN companies.

In the other corner are the companies' former lawyers, all partners for the same Edmonton law firm, Reynolds Mirth Richards and Farmer LLP. The firm represented the Łutsel K'e companies until May 2023.

In one of his last acts as CEO, Barlas had the companies pay the firm a $500,000 retainer. The firm was initially reluctant to return the money, but did when pressed by the LKDFN lawyers. At around the same time it stopped representing the companies.

In recent court filings, the Reynolds Mirth lawyers accused the LKDFN lawyers of a conflict of interest in the lawsuit for representing both the First Nation and its businesses. They say that LKDFN represents all of the members of the First Nation but, under their constitution, the companies are operated on behalf of only the members living in Łutsel K'e. The lawyers say that only about five per cent of LKDFN members live in Łutsel K'e.

"The companies should represent their own interests, as they don't inherently align with those of the proposed claimant, LKDFN," said the lawyers in written arguments to the judge.

The Reynolds Mirth lawyers say LKDFN's move to include them and their firm in the case includes, "salacious, egregious and specious claims that are devoid of merit and are designed to discredit and embarrass the proposed defendants."

The arguments about whether or not the lawyers and their firm should be added to the lawsuit were made in Northwest Territories Supreme Court in Yellowknife this week. Justice Karan Shaner has reserved her decision.

Conflicts of interest

The allegations of conflict of interest the Reynolds Mirth lawyers make are comparatively subtle next to the conflicts of interest that existed in the LKDFN companies while Barlas was CEO, according to transcripts filed in the case.

Under questioning by lawyers for LKDFN, Tom Lockhart, a former director of LKDFN companies, admitted that, in addition to overseeing Barlas and the operation of the companies, he was also an employee of one of the companies. Barlas was his boss, set his wages and gave him pay advances when he requested them.

Lockhart admitted that Barlas had the LKDFN businesses give his family $1,500 in financial assistance to travel to Edmonton when Lockhart went there for medical treatment. Barlas also gave him tickets to Edmonton Oilers hockey games, said Lockhart, according to transcripts in the case.

Lockhart also admitted he had dinner with Barlas and his wife at their house the day before Lockhart filed an affidavit in the case saying that he was not aware of any wrongdoing in the operation of the businesses during his time as director.

Lockhart said he did not discuss the affidavit or the case with Barlas during that dinner. He said he went to Barlas's office the next day and Barlas presented him with the prepared affidavit. Lockhart said he signed it after reviewing it for 10 to 15 minutes.

When he was questioned by LKDFN lawyers last October, Barlas said he often got requests for pay advances from employees and approved most of them. He said pay advances and helping out employees with family matters was just how business was done in the community.

Under questioning by LKDFN lawyers, Barlas admitted that he continued to pay Lockhart $60,000 a year as the Łutsel K'e community liaison for the companies after Lockhart moved to Yellowknife in 2019.

Barlas also admitted that he advanced meeting fees, or honoraria, to another director, Darryl Marlowe, and continued to pay him fees even after he ceased to be a director. Barlas also said the LKDFN companies paid $30,000 to $35,000 for a lawyer to represent Marlowe in a criminal matter unrelated to the companies.