A judicial ruling last month has raised alarms about contracts awarded on Red Pheasant First Nation.
More particularly, the ruling is more trouble for Red Pheasant chief Stewart Baptiste, as the judge in the case used language such as "illegal" and "no less corrupt" to describe the agreements.
Queen's Bench judge Brian Scherman issued a ruling last month in a lawsuit by W. Downer Holdings Ltd. and DC Gravel Ltd. against Red Pheasant First Nation.
According to the facts of the case outlined in the ruling, payments and inducements towards Chief Baptiste were part of the agreement, although the chief ultimately did not receive payment from the arrangement.
The plaintiffs in the case were seeking enforcement of a settlement agreement reached in the legal dispute. In the end Judge Scherman ruled that settlement agreement was not enforceable, but it remains open for the plaintiffs to continue with their action to enforce the April 21, 2010 gravel crushing contract made with Red Pheasant.
The decision from Battleford Queen's Bench Court was released Nov. 13, and that written ruling has been obtained by the News-Optimist.
According to the facts outlined in that judgment, plaintiff W. Downer Holdings Ltd. had entered into a gravel pit development crushing and reclamation agreement with Red Pheasant on April 21, 2010, and then again with a second agreement June 22. The first agreement called for crushing and stockpiling of 50,000 tonnes of three-quarter-inch road crush granular material within government specifications at $6 per tonne, the second for an additional 25,000 tonnes of gravel at a unit price of $8 per tonne.
Each contract was executed by Chief Stewart Baptiste, according to the judgement. Judge Scherman further stated, "there was no evidence" that either the first or second contract was submitted to and approved by chief and council.
A significant part of the deal, one discussed a length in the ruling, was a sub-agreement entered into on June 22 between Chief Baptiste and DC Gravel Inc. Under that deal DC Gravel Inc. would pay to Chief Baptiste $1 for every tonne crushed and $1 for every tonne sold, on all sales processed through DC Gravel Inc.
Wade Downer, president and controller for the plaintiffs in the case, testified that the agreement was negotiated, drafted and executed by their general manager, Ward Affleck. Downer testified that while he wasn't present when it was executed, he was aware of the sub-agreement, had input into its preparation and approval and had acknowledged the sub-agreement was related to an agreement to crush an additional 25,000 tonnes.
"In response to a question about whether Chief Stewart Baptiste had any special requirements, he said - 'yes he wanted an amount of money for every tonne we crushed or sold.' On cross-examination he agreed the sub-agreement was intended to direct payments to Chief Baptiste and when it was suggested to him that it looks like an inducement to the chief his response was, 'I think you are right,'" stated Judge Scherman.
The judge went on to state Downer "testified that as far as he was concerned the sub-agreement should be viewed as a referral fee or a commission payable to Chief Baptiste, that it was not secret and he did not see anything illegal about it.
"He said his understanding was that the money would be paid to the chief and how the chief shared it with the councillors was none of his business. He said he thought that this was the way business was done with First Nations. When asked whether he would have entered into such an agreement if he had not been dealing with a First Nation, his response was to the effect he was not sure if it would be illegal, but he would not in such circumstances have done business that way."
The judge went on to point out that "no monies have ever been paid to Chief Stewart Baptiste pursuant to the sub-agreement." Wade Downer testified no invoices have been received from Chief Stewart Baptiste as contemplated by the sub-agreement."
The gravel company decided to commence legal action against Red Pheasant, claiming that after completing the crushing work on the 75,000 tonnes they didn't receive the full payment agreed to in the contract. Instead of receiving $285,000 owing on the two contracts, they had received $215,000 for the first contract from Red Pheasant and nothing for the second.
The Red Pheasant band argued the contracts weren't enforceable as they hadn't been passed at a band council meeting as required under section 2(3) of the Indian Act.
The plaintiffs' legal action ultimately went to mediation. Finally a settlement agreement with the plaintiffs was reached, which was signed and executed by six members of the Red Pheasant band council.
However, while the signatures were on the agreement, it also needed to be authorized at a Red Pheasant band council meeting as required by the Indian Act. That did not happen, according to the judge.
Judge Scherman ruled the settlement agreement was unenforceable because "at no Red Pheasant band council meeting was anyone authorized to negotiate and conclude the settlement agreement in question."
With the decision on the enforceability out of the way, the judge went on to decide "in the alternative and in any event, the illegality issue raised."
Judge Scherman stated he was satisfied "on the balance of probabilities" that there was a "breach of fiduciary duty on the part of Chief Stewart Baptiste" and that Wade Downer and DC Gravel Inc. were involved "in inducing that breach of fiduciary duty and/or the conspiracy in relation thereto."
"Chief Stewart Baptiste, as chief of Red Pheasant, owed a clear and compelling fiduciary duty to the band," stated Scherman. "This was or should have been known to DC Gravel Inc. and Wade Downer. By the sub-agreement they agreed to give to Chief Stewart Baptiste a reward, advantage or benefit as consideration for doing something relating to the affairs or business of Red Pheasant. The fact that no monies were paid to Chief Stewart Baptiste is of no consequence. The illegality, whether criminal, civil or both, is complete by their agreement. Wade Downer was, by his own admission, knowingly privy to the sub-agreement and thus a party to the illegality. While he protested that the agreement was not secret, nor illegal and that he understood that this was the way business was done with First Nations, these protestations are wrong in fact and, in my assessment, are not credible as regards what he actually knew. He himself acknowledged he would not have done business this way if dealing with a non-First Nations entity."
The judge went on to compare the $1 per tonne fee, which the deal would have paid Chief Baptiste, to the bribes and kickbacks currently under investigation and inquiry in Quebec.
"The importance in Canadian society of the principle that contracts are to be awarded on the basis of the merit of the deal itself, as opposed to being induced by or the consequence of the payment of bribes, kickbacks or other under-the-table benefits given, is demonstrated by the Charbonneau Commission Inquiry presently ongoing in the Province of Quebec. It is no less corrupt to agree to pay Chief Stewart Baptiste and for Chief Stewart Baptiste to seek to receive a fee of $1 per tonne of gravel crushed than it is for Quebec contractors to pay, as alleged, a fee of one percent to the city engineer and/or a 3.5 per cent fee to the mayor's political organization for contracts awarded to them."
The judge went on decide that, in his opinion, "where there is illegality related to an underlying agreement being litigated, that illegality flows through and taints a settlement agreement which seeks to enforce the underlying agreement.
"Accordingly," the judge states, "on public policy grounds, I conclude that this court should not assist the plaintiffs to enforce the settlement agreement by reason of the illegality associated with that agreement."
While the Queen's Bench ruling points a finger at Baptiste for alleged corruption in this situation, it has not yet resulted in further criminal charges against the chief.
The decision has, however, increased the political pressure on Baptiste from opponents on the reserve, who have stepped up protests against him in recent months.
Baptiste has faced criticism over his frequent court appearances on various criminal charges, which have included guilty pleas to driving while disqualified and breach of probation. A trial on an impaired driving charge is set for next year.
In the meantime Baptiste is due to return to North Battleford provincial court on a breach of probation charge Dec. 17.
