BURSTA Northwest Territories-based First Nation has won a recent court battle with accounting firm KPMG and its Langley branch, part of a string of lawsuits linked to $11 million that was misappropriated from the Indigenous group’s businesses.
In a Jan. 14 ruling, NWT Supreme Court Justice N.E. Devlin ruled that the Lutsel K’é Dene First Nation (LKDFN) can continue its court actions against KPMG, and does not have to settle issues through arbitration in British Columbia.
The LKDFN has been suing the former head of its resource development businesses, Ron Barlas.
“While Lutsel K’é is small, its territorial lands are rich,” Devlin noted in his ruling.
The band created a number of corporations to generate revenue and return that to the band’s members.
Courts have found that Barlas misappropriated funds from the LKDFN’s companies, siphoning off millions through “joint venture agreements” with companies he controlled, among other means.
Devlin characterized Barlas as a “rogue” who “ruled over the LKDFN companies with an iron fist, threatening and intimidating community and board members alike if they had the temerity to ask questions aimed at accountability.”
One of Barlas’s first moves after taking over as head of the LKDFN companies in 2016 was to replace their local accountants.
Instead of choosing another firm in Northwest Territories or even Alberta, Barlas picked a KPMG accountant based out of Langley, British Columbia, with which he had a prior working relationship. Devlin said the move likely seemed innocent to the First Nation given KPMG’s status as a respected international accounting firm.
“However, a retrospective view of the overall circumstances compels a finding that Barlas made this change to better facilitate his illicit takings, and that it was an instrumentality of his oppression,” Devlin wrote.
Barlas had removed accountants with local knowledge.
When the LKDFN turned to Barlas’ associates, they sought to launch court actions against both KPMG and Barlas’ former lawyers.
KPMG, however, said their retainer agreement with Barlas had a clause saying that any actions had to be settled not through the courts, but through an arbitration process. The LKDFN wanted the process to take place in a court of law.
Devlin agreed with the First Nation.
The arbitration agreement, the judge said, was connected to the “oppression” of the First Nation by Barlas.
Devlin noted that he was not making a finding of wrongdoing against KPMG.
“They may well have been innocent and well-meaning in taking the retainers, and it is for the plaintiffs to prove otherwise,” he wrote.
The case will now go back to court, with the LKDFN able to litigate against the accounting firm.