Law firm steps away from Denesoline boss's legal battle

A law firm representing three embattled Lutsel K'e Dene First Nation companies — which were up until recently run by Ron Barlas — is stepping away from the suspended Denesoline Corporation CEO's legal battle with the First Nation. 

Marco Poretti, a lawyer with Reynolds Mirth Richards & Farmer, told N.W.T. Supreme Court Justice Andrew Mahar on Friday his firm was no longer representing the Łutsel K'e Dene First Nation (LKDFN) companies in the matter.

The firm also agreed to return most of the $500,000 it had received from Denesoline Corporation as a retainer for its services to Riley Farber Inc., an accounting firm that has been appointed by the court to run the LKDFN companies. 

Although the cash return came before the court as a consent order — meaning both sides agreed to it — a series of letters between the two firms in a legal assistant's recently filed affidavit shows it was previously a sticking point.

"On or about April 26, 2023, the sum of $500,000 was remitted by Denesoline Corporation Ltd. to your firm, presumably as a retainer for legal services for that company," reads a letter from the firm Lawson Lundell, which is representing Riley Farber, to Reynolds Mirth Richards & Farmer.

"We hereby demand that these funds be remitted to our office immediately." 

In response, Reynolds Mirth Richards & Farmer said: "We disagree that we are required to return these funds to the receiver [Riley Farber Inc.]. As a result, we will be bringing an application to the court to address this issue."

Retainer paid days before fraud allegation heard

The $500,000 retainer was paid while Denesoline Corporation was still under Barlas's control, one day before he would allegedly try to wire transfer $500,000 out of the country, and two days before LKDFN's fraud allegations against him would be heard by a judge for the first time.

On the day those allegations were first heard, Justice William Grist froze the assets of Barlas and his wife (an order that has since become indefinite) and appointed a receiver (Riley Farber Inc.) to take over LKDFN's three companies: its economic development arm Denesoline Corporation, a real estate holding corporation called Ta'egera Company Ltd., and the non-profit that owns both of them called Tsa Corporation.  

LKDFN hired Barlas to lead Denesoline back in 2014. 

Now, they're accusing him of funneling up to $14-million away from it and into his own companies. 

The First Nation, which has about 800 members and about 300 people living in the community itself, also alleges Barlas manipulated how Denesoline and the two other corporations were run to protect his leadership and to prevent oversight. They allege he unilaterally appointed and removed directors and failed to hold statutory meetings. 

Barlas has previously told CBC News many of the allegations against him are "false, unfounded or misleading" and he plans to fight them in court. 

Do Ron and Zeba Barlas have access to any money?

Another order approved by the court Friday laid out what kind of money Ron Barlas and his wife, Zeba Barlas, will have access to for living expenses and legal fees while their assets remain frozen.

Justice Mahar allowed a bank to transfer $150,000 from one of Barlas's companies to the law firm of his lawyer, Michael Kirk. The order also gives the couple access to $15,000 of their money per month for a few months. 

There was another motion before the court that Reynolds Mirth Richards & Farmer ended up withdrawing: it wanted the court to say it was allowed to challenge the receivership order put in place two weeks ago. 

Matthew Sammon, part of a team of lawyers representing LKDFN in the case, indicated the First Nation wanted Reynolds Mirth Richards & Farmer to cover its legal expenses related to that withdrawn motion, arguing it didn't have the authority to bring the motion forward in the first place. 

Reynolds Mirth Richards & Farmer is hanging on to nearly $46,000 of the $500,000 it received from Denesoline Corporation in late April which, according to the order, the firm had already "applied … to existing accounts" — although that could be contested in the future. 

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