Łutsel K'e Dene First Nation accuses Denesoline boss of taking millions

The Łutsel K'e Dene First Nation (LKDFN) and its chief are accusing the head of the community's own economic development arm of funnelling millions of dollars away from the corporation into his own businesses.

The claims aren't proven in court, but in a memorandum filed to the N.W.T. Supreme Court and first reported by Cabin Radio, the First Nation and Chief James Marlowe say Ron Barlas's conduct "falls at the most egregious end of the spectrum of corporate wrongdoing." 

The Łutsel K'e Dene say Barlas diverted up to $14 million of Denesoline Corporation revenues into his own businesses during the years he worked as CEO of the band-owned corporation. They call it a case of "blatant self-dealing." 

LKDFN also says Barlas manipulated how companies related to Denesoline 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 First Nation hired Barlas to head up the corporation in 2014, and it says it's still investigating Denesoline's finances.

Barlas is still officially the CEO and director of Denesoline. The First Nation is in court in Yellowknife on Friday to ask the court to halt the removal of assets from Denesoline companies. 

It's also asking for a freeze on the assets of the companies it believes Barlas funnelled money to.

When asked by CBC News for comment, Barlas forwarded a copy of his own affidavit — which he says has now been submitted to the court — saying many of the allegations against him are "false, unfounded or misleading."

He said Denesoline is the only Indigenous community-owned company in the N.W.T. to "have no debt, feed its entire remote arctic community year-round, redistribute its wealth into the community, [and] sponsor youth and education programs."

The amount of money the band is alleging is involved in the case is huge considering the size of the community. The First Nation has about 800 members, and around 300 people live in the community itself, which is on the on the east arm of Great Slave Lake, about 150 kilometres from Yellowknife. Lutsel K'e is one of the closest communities to the N.W.T.'s three active diamond mines and it has some form of impact benefit agreement with each one. 

LKDFN designated Denesoline as a business with rights to the benefits of those agreements, and as such, its main source of revenue comes from contracts to provide the mines with goods and services. Aviation, freight, explosives and mine site construction are a few of the things it can provide, according to its own website. 

The whistle blower

Most of the evidence in the case so far comes from Iqbal Bhatti, a former Denesoline employee who LKDFN describes in court documents as an "insider and whistle blower." 

Bhatti worked for the corporation between 2017 and 2022. In a sworn affidavit he says he decided to come forward because if he didn't — Denesoline would "continue to be operated to the detriment of its primary stakeholders: the LKDFN." Of all its revenues, Bhatti says Denesoline spends no more than between $400,000 and $500,000 on the community per year.

Bhatti said he was "well-acquainted" with Barlas when they both attended the same American college in 1983. He said he moved from England to Canada with his family in 2017, after Barlas called him "out of the blue" with a proposition that he develop a waste management project in Łutsel K'e, through Denesoline. 

"It was my impression, from the way that Barlas spoke about it, that Denesoline was his company and that he was inviting me to work with him," says Bhatti in his affidavit. He says his role "quickly shifted and expanded" and one of his responsibilities became forming new joint ventures. 

"Denesoline does not itself have the capabilities to perform much of the work or provide many of the goods required by the mines. As a result, it has entered into various joint venture agreements with partners who provide such goods and services." 

A joint venture agreement is at the heart of one of the First Nation's accusations: they allege Barlas created a joint venture agreement in 2016 that diverted 49 per cent of Denesoline's revenues to one of his own companies — Northern Consulting Group. 

The diverted funds from that contract alone, according to the Marlowe and LKDFN, amount to between $10 and $14 million. 

Barlas, in his affidavit, denies this. 

"I do not 'take 49-per cent off the top,' as alleged. My corporations only receive revenues in respect of contracts that were lawfully executed," it reads. "This is false."

Barlas asks for more time

In his affidavit, Barlas is critical of Bhatti, saying the former Denesoline employee has misrepresented his credentials as a professional engineer and that most of his projects were "complete failures." 

Barlas also attached an email to his affidavit, which appears to have been sent to him by Darryl Marlowe, the community's former chief. The email praises Barlas for the work he's done. 

"You have done more for the community of Lutsel K'e than anyone over the past 10 years. This included feeding us year round, sharing cash distributions, and so many other things no one else does." 

A sworn affidavit from Tom Lockhart, meanwhile, says: "I am not aware of any impropriety committed by Mr. Barlas and have no concerns with respect to the work that Mr. Barlas has done." 

Barlas is asking the court to adjourn the application made against him. 

"I was served with the application and supporting materials on [Monday] at approximately 5:30 p.m. MDT, leaving me little time to respond prior to the application being heard on [Friday.]"