An impoverished First Nation is going to court to recoup millions of dollars it obtained through loans secured with the help of a Toronto architect who now stands accused of diverting the money to her own companies and alleged co-conspirators.
Kashechewan, a fly-in community on the western shore of James Bay that is constantly being evacuated due to flooding, says Ellis Galea Kirkland – who took her own life this Jan. 1 – and a number of her associates obtained, or tried to obtain, loans of as much as $11,083,709.72 to rebuild decayed infrastructure and to build a new community centre.
Even though most of the money was placed under Ms. Kirkland’s control in 2014, and millions were disbursed, a statement of claim filed by the First Nation in the Ontario Superior Court says “none of the defendants provided any goods or services, or any material value, to Kashechewan.”
Leo Friday, the current chief, said the community "was deeply impacted by the events surrounding Ellis Kirkland’s involvement, both financially and in terms of a loss of trust. Our council felt that we had a duty to our community members to seek answers and, if the court finds wrongdoing, make those responsible for what happened accountable.”
Ms. Kirkland was a Harvard-educated philanthropist – she helped build a suicide barrier on Toronto’s Bloor Viaduct – and architect who was once president of the Ontario Association of Architects as well as vice-president of the NATO Association of Canada, a non-governmental organization that promotes understanding of the North Atlantic Treaty Organization.
In March, 2016, at the age of 61, she was charged with attempted murder and aggravated assault after stabbing the doorman of her posh Toronto condo with a kitchen knife. She was the subject of a spectacular arrest when police rappelled down to the 27th floor balcony of the hotel room where she was holed up after the assault.
In June, 2017, a judge ruled that she was suffering from a mental illness at the time of the stabbing and was not criminally responsible.
Ms. Kirkland is the first among 25 defendants named in the lawsuit launched by Kashechewan. Nine of the other defendants are companies she controlled.
Derek Stephen, the former chief of Kashechewan, is accused of playing a part in the alleged conspiracy.
As are brothers Joe and Franco Crupi and their Crupi Consulting Group. Joe Crupi is the government-approved co-manager of the First Nation who pleaded guilty to fraud in late 2017 after misappropriating $1.2-million from a breakfast fund for Kashechewan children. He was released on bail in July after serving six months of a three-year sentence.
But the brothers now face a separate lawsuit, launched by the federal government, that accuses them of misappropriating or mishandling an additional $1.4-million of Kashechewan’s health funding.
Other named defendants include two Toronto lawyers, a financial-services company that helped negotiate the loans, Ms. Kirkland’s engineering associates and multiple numbered firms.
All are accused, according to the statement of claim, of “diverting funds (including trust funds) to obtain a secret profit for their own benefits and to Kashechewan’s detriment.”
The RCMP will not confirm if they are investigating the allegations outlined in the civil case, which is scheduled to return to court on Oct. 15.
In May of this year, Justice Peter Cavanagh of the Ontario Superior Court granted a motion to freeze the assets of all the defendants. In his ruling, Justice Cavanagh said the harm to Kashechewan, a “First Nations community in need,” would be “considerable if it was unable to recover any money that may have been wrongfully misappropriated.”
The Globe and Mail reached out to lawyers for all the defendants named in this story and to Ms. Kirkland’s brother, Mark Galea, who is named in court documents as her litigation guardian. None responded to requests for comment or questions about the lawsuit. But most have filed statements of defence denying the allegations that, combined with the First Nation’s statement of claim, create a narrative of what went wrong in Kashechewan.
The problems go back decades and are largely tied to the community’s location, where the Albany River flows into James Bay. Kashechewan is prone to damaging floods that have left it with dilapidated infrastructure that is insufficient for its population of about 1,700.
In 2011, Kashechewan retained Ms. Kirkland, who was said to be a specialist in infrastructure planning and design, to find funding to build a community centre. The community aimed to take out a loan using gambling revenue promised by the Ontario government as collateral. By May of that year, according to the statement of claim, Ms. Kirkland said a major Canadian bank was interested.
In August, 2012, Mr. Stephen was elected chief of Kashechewan. And in September, the Bank of Montreal (BMO) offered to finance the community centre.
A few months later, according to the statement of claim, Ms. Kirkland took full control of the project and negotiated an arrangement by which she could disburse payments with her own sign-off and that of just one of her associates. The First Nation says she “took virtually untrammeled control of the accounts of Kashechewan,” including the BMO account in which the gaming revenues were being deposited.
Then, in 2013, another flood caused even more damage, and Ms. Kirkland set about increasing the size of the proposed loan so housing could be rebuilt.
By 2014, she was asking for four separate loans totalling $8.23-million.
Throughout this period, Mr. Crupi was acting as band co-manager. According to the statement of defence filed by Crupi Consulting, Mr. Crupi denies any wrongdoing and says he wrote to the Bank of Montreal stating that the loans did not conflict with the community plan and that he supported them. The First Nation says he also signed off on the approval processes that allowed Ms. Kirkland to disburse the funds with little oversight.
On April 22 or 23 of 2014, says the statement of claim, Ms. Kirkland gained access to the loan money and “began dispersing millions of dollars to herself and the defendants and others.”
She also began negotiating more loans. By May 28, 2015, the First Nation says it received a commitment letter from the bank authorizing “loan facilities totaling $11,083,709.72.”
Crupi Consulting was replaced by a new co-manager, Northern Logistics, in the spring of 2014. And in August, a new council was elected, with Mr. Friday replacing Mr. Stephen as chief.
The new co-manager and the new council immediately began asking questions about what happened to the BMO money.
According to the statement of claim, Ms. Kirkland provided a breakdown showing that $9,752,303.36 had been dispersed to her own companies, to the financial-services firm that negotiated the loan and to lawyers for the First Nation. But she was able only to “furnish bare, suspiciously similar invoices” and was “wholly unable to explain the enormous outflow of funds.”
The First Nation presented evidence in court to show that payments directed by Ms. Kirkland and amounting to $294,242.54 were paid to the Visa card of Mr. Stephen in increments of about $10,000 a month.
Mr. Stephen, who was recently suspended from his new job as executive director of the Nishnawbe-Aski Legal Services Corp., said in a Facebook post that he has nothing to hide. “I know people are curious where I’m getting the money with the businesses that I have started and I have all the paper work from lenders on that,” he wrote.
But Justice Cavanagh said in his ruling on the motion to freeze the defendants' funds that Mr. Stephen had failed to provide requested documentation to the court and gave “non-responsive answers” when being questioned.