Lutsel K’é Dene First Nation Advances Legal Battle Against KPMG

A recent court ruling in the Northwest Territories allows the Lutsel K’é Dene First Nation (LKDFN) to pursue legal action against KPMG and its Langley branch. This decision is part of an ongoing battle regarding the alleged misappropriation of $11 million from the Indigenous group’s businesses. On January 14, 2024, NWT Supreme Court Justice N.E. Devlin determined that the LKDFN is not required to resolve its disputes through arbitration in British Columbia, as KPMG had argued.

The LKDFN has initiated lawsuits against Ron Barlas, the former head of its resource development businesses. Justice Devlin highlighted the significance of the First Nation’s territorial lands, stating, “While Lutsel K’é is small, its territorial lands are rich.” The band had established various corporations aimed at generating revenue to benefit its members.

Court findings have indicated that Barlas unlawfully diverted funds from the LKDFN’s companies. He reportedly siphoned millions through “joint venture agreements” with firms he controlled. Devlin characterized Barlas as a “rogue” who maintained an oppressive control over the LKDFN companies, intimidating community members and board members who dared to question his accountability.

Barlas’s controversial decisions began shortly after he assumed leadership of the LKDFN companies in 2016. One notable action was his choice to replace the local accountants with a KPMG accountant from Langley, British Columbia, with whom he had a prior working relationship. Justice Devlin indicated that this decision likely appeared benign to the First Nation due to KPMG’s reputation as a respected international accounting firm.

The judge noted, “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.” By removing accountants with local knowledge, Barlas aimed to streamline his actions without scrutiny.

Upon discovering the alleged misconduct, the LKDFN engaged Barlas’ associates to initiate legal actions against both KPMG and Barlas’ former lawyers. KPMG contended that their retainer agreement with Barlas contained a clause mandating that any disputes be resolved through arbitration, not the courts. Conversely, the LKDFN sought to litigate in a court of law.

Justice Devlin sided with the LKDFN, stating that the arbitration agreement was tied to the “oppression” exerted by Barlas over the First Nation. Importantly, the judge clarified that he was not making any findings of wrongdoing against KPMG itself. “They may well have been innocent and well-meaning in taking the retainers, and it is for the plaintiffs to prove otherwise,” he wrote.

Following this ruling, the LKDFN is now poised to continue its litigation against KPMG. This case highlights ongoing challenges faced by Indigenous groups in securing accountability and justice in financial dealings, particularly when significant sums are at stake. As the legal proceedings progress, the LKDFN aims to reclaim the funds that are crucial for their economic development and community welfare.