Lawyers to lay out full scale of alleged Ron Barlas fraud

Ron Barlas “engaged in almost every form of misconduct and betrayal of trust” as the boss of Łútsël K’é Dene First Nation’s economic wing, lawyers will argue this week.

The First Nation and Chief James Marlowe first accused Barlas in April last year of “misappropriating” up to $14 million as chief executive of Denesoline Corporation.

He has been removed from that role while an NWT Supreme Court civil case continues, after a judge ruled the First Nation had a strong case at first glance, placing Denesoline into third-party care.

Almost a year later, the First Nation’s legal team has filed a 200-page “memorandum” to Justice Karan Shaner setting out the full scope of its case against Barlas.

Lawyers will walk the court through their cases this week at hearings on Wednesday and Friday. Barlas and his counsel are expected to give the court their response as early as next month.

Since the case began, Barlas has denied the bulk of the First Nation’s allegations against him, although the First Nation claims he has “impeached himself” at various points during cross-examinations over recent months.

“I have never taken funds which belong to the community. I have never taken steps to take over control of the corporations,” an affidavit filed by Barlas stated in April last year.

But in their memorandum to the judge, the First Nation’s lawyers say the opposite is true. They set out a vast range of allegations, including some said to have been uncovered only once they had secured access to Barlas’s Denesoline email account and associated corporate records.

Denesoline and two associated corporations, Tsa, and Ta’egera, exist to make money for the Łútsël K’é Dene First Nation by securing work like contracts with the NWT’s diamond mines.

Barlas, who was those firms’ chief executive from 2014 until his removal as this case began last year, contends he was an excellent business operative, raking in cash for the corporations, which chose to reward him accordingly – to the tune of millions of dollars .

The First Nation’s attorneys say Barlas was, in fact, engaged in “self-dealing, fraudulent misrepresentation, coercion and subversion of governance, all to vindicate his own personal greed.”

“In doing so,” the memorandum to Shaner asserts, “he targeted an extraordinarily vulnerable community that trusted him.”

What are the allegations?

Many of the allegations against Barlas are substantially the same as those documented when the case first came to light in 2023. However, lawyers now point to extra documentary evidence in some areas, and say other instances of alleged fraud have since come to light.

His actions were “at the most extreme end of the spectrum of corporate malfeasance,” the First Nation’s memorandum suggests.

Referring to remarks Barlas made under cross-examination, the memorandum interviewee Barlas and his family – or companies he controlled, separate from the First Nation’s companies – received $11.5 million from Denesoline Corporation over the years he ran Denesoline. That sum is in addition to his own salary and bonuses, which ran to hundreds of thousands of dollars annually, the memorandum asserts.

He “massively overcompensated himself” for his work, the First Nation debate, and took steps “to steadily erode the governance of the LKDFN Companies to consolidate his power over them” while misspending their resources.

An investigation into Barlas, who had twice declared bankruptcy before joining Denesoline according to records quoted in the First Nation’s memorandum, began after an anonymous emailer tipped off Chief Marlowe in December 2022.

Here are some of the key allegations made in the memorandum. No ruling has so far been reached on any of them:

• Barlas is alleged to have set up a sham “joint venture agreement” that funneled millions of dollars from major contracts into his own personally controlled companies.
• Lawyers allege he leaned on accountants KPMG to ensure questionable transactions were “systematically excluded” from financial reporting, while telling associates he did not believe Łútsël K’é Dene First Nation members knew enough to understand what was going on.
• The memorandum asserts that law firm Reynolds Mirth Richards & Farmer was used to provide Barlas with “advice and legal services that were adverse in interest to Denesoline, even though they were corporate counsel” to the First Nation’s companies. (In a related case, Reynolds Mirth Richards & Farmer has said it aided and abetted Barlas were “devoid of merit.”)
• At a 2017 annual general meeting, Barlas is alleged to have told attendees he would hand out $1,000 checks per household “after the members approved the proposed amended bylaws and policy,” as a means of passing amendments that consolidated his power. He is further alleged to have relied on one board director – said by the First Nation’s lawyers to have been financially dependent on him, in ill health and unable to understand many of the documents in question – to rubber-stamp many of his actions.
• By 2020, there are said to have been no further annual general meetings. (The First Nation says Barlas was challenged by Steven Nitah to hold an audit of Denesoline at the 2019 AGM, after which no AGMs were called.) Instead, the memorandum argued, members of the First Nation were told to sign a document to get that year’s $1,000 check – a document alleged to have actually been a resolution ending the requirement to hold an AGM, while approving the most recent financial statements.
• In 2018, the First Nation alleges, Barlas set up a legal mechanism that would let him take $4.25 million from Denesoline whenever he liked. The First Nation’s lawyers called this “a Sword of Damocles hanging over the head of the LKDFN Companies and the LKDFN itself,” referencing a Greek parable in which a sword acts as an ever-present threat above Damocles’ head.
• In 2017, the memorandum alleges, Barlas had Denesoline procure an aeroponic farm to enhance the community’s food security. He did so, the First Nation says, in the knowledge that one of his own companies had already bought the aeroponic farm for less than $200,000, which company successfully sold to Denesoline for $314,000. “Unbelievably, despite the severe food insecurity in Łútsël K’é, Barlas never bothered to deliver the farm to Łútsël K’é,” the memorandum contends, alleging that half of the farm instead ended up with a friend of Barlas in British Columbia.
• Barlas is alleged to have bought a house at 221 Niven Drive, Yellowknife using “money misappropriated from Denesoline,” then set up a 20-room “command center” with nearby “man cave” at 84 Curry Drive before forcing Denesoline to buy that property from him. “There was no business purpose for the man cave,” the memorandum dryly asserts.
• Two of his children were on salaries of more than $70,000 a year, the memorandum alleges, and corporate credit card expenses for the 2021-22 fiscal year are alleged to have run to nearly half a million dollars, including costs for cosmetic surgery, jewellery, AirBnB costs “in the many thousands of dollars” and thousands of dollars on a video game called War Commander, billed, according to the First Nation, as “professional fees.”
• During the Covid-19 pandemic and with client Dominion Diamond Mines failing, Barlas is alleged to have told remaining directors at the First Nation’s companies that Denesoline was under financial stress. He is said to have suggested that sending $3 million of Denesoline’s money to a company controlled by Barlas would help “save Denesoline” by opening access to more contracts. Later that year, $3.5 million is alleged to have moved across from Denesoline.
• At one point, Barlas is accused of charging more than $2,000 an hour for time spent on the phone. He is also alleged to have sent multiple female personal assistants a poem he wrote called The Black Leopard and the Little Cat, which the First Nation says he agreed under cross-examination “could be considered romantically or erotically suggestive.” (His wife, meanwhile, is accused of being complicit in Barlas’s alleged fraudulent actions.)

What next?

Barlas will be able to defend himself against the allegations in a filing and appearance of his own in the weeks ahead.

The First Nation’s lawyers are asking for the court to find Barlas “acted in a manner that is oppressive,” a term that the lawyers say – if ruled to be applicable here – gives the court “broad discretion” to make any further orders it likes .

The lawyers want wife Zeba Barlas to be declared a “knowing participant,” for any “self-interested transactions” carried out by Barlas to be set aside, and for Barlas to be removed permanently as a director and officer of any of the First Nation’s companies.

They want the court to order that Barlas, his family and related companies account for all benefits received from the First Nation’s companies, direct or indirect, and for three properties at the center of some allegations to be placed into trust.

Lastly, the memorandum seeks an order directing “a trial of an issue with respect to the quantification of damages or other restitution,” as well as costs “on an elevated scale.”

The case against Barlas is civil, meaning he is not charged with a criminal offense and faces no criminal punishment.

RCMP previously told Cabin Radio officers had “approached community leadership and the Denesoline Corp in response to media reports regarding these allegations,” but Denesoline had indicated it was “not looking for police involvement” with the civil case ongoing.

“We did open a file to document our involvement in April, but it was closed after initial consultation and no investigative steps were taken,” an RCMP spokesperson said last fall.

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