We Wai Kai (Cape Mudge) First Nation Chief Ralph Dick has been found in breach of his fiduciary duty after accepting a $12,000 share option from a business venture controlled by the band, an external investigation has found.
The investigation, by Ratcliff & Company LLP of North Vancouver, was requested by We Wai Kai Council after a review of computer files of former band accountant Maurice Magowan.
The report was delivered anonymously to the Mirror this week.
We Wai Kai Administrator Brian Kelly said council is planning to call a general membership meeting to share the findings of the report, but had not done so yet as many members — including some councillors — are commercial fishermen and are away for the final days of the season.
Kelly said the $12,000 has “been recovered” from the Chief, and “that’s not an issue.”
The Chief could be sanctioned by the band, under its Election Code, through a petition signed by at least 60 members. But it is an unprecedented process for the Nation.
“There’s a process in there,” Kelly said. “We’re finding out what that policy is, but it doesn’t say what happens if you make a mistake, what to do about it.”
Chief Dick could not be reached for comment at press time.
In his written investigation report, John R. Rich wrote that one of the transactions discovered in the computer records involved an option for a numbered company, whose directors were the Chief’s wife and son, to purchase partnership agreements in the band-controlled Middle Point Harbour Limited Partnership.
Another transaction was a payment of $12,000 to the same numbered company.
“These transactions appeared inconsistent with the usual business practices of MPHLP, and were not previously known to the We Wai Kai administration or council,” the report stated.
The $12,000 payment to the numbered company was then transferred to Chief Dick, who believed he was entitled to the $12,000 for services rendered to MPHLP.
The We Wai Kai hold 51 per cent of the partnerships in the Middle Point Harbour Limited Partnership, with Pacific Rim Harbour Developments (Tommy and Derek Pallan) owning the other 49 per cent. Chief Dick had been the We Wai Kai representative in the management of MPHLP when, in 2013, Magowan proposed there was an opportunity to acquire partnership units in MPHLP from Pacific Rim “that would lead to a profit.”
The Chief declined on the grounds it would be a conflict of interest, but suggested to Cowan that his son, Robbie Dick, might be interested in the opportunity.
Robbie and Lynne Dick, the Chief’s wife, then formed a numbered company that entered into an option agreement to acquire partnership units in Pacific Rim.
“At this point,” the report states, “the option has not been exercised and the numbered company has made no profits.”
But in February 2014, Chief Dick — acting as representative of the We Wai Kai — signed a resolution of partnership to pay $12,000 each to Pacific Rim and to the numbered company of which the directors were his wife and son.
Rich’s investigation included an interview with Kelly, who confirmed Magowan had been terminated in the summer of 2014, in part because of “his refusal to desist participating in the affairs of MPHLP.”
The report says a We Wai Kai band member initially raised the potential conflict of interest. Following Magowan’s departure, We Wai Kai staff reviewed the hard drive of his computer and found a number of documents they considered questionable.
Kelly confirmed neither the option agreement nor the resolution authorizing the $12,000 payment to the numbered company were brought before band council, and that band administration was unaware of either transaction before gaining access to the hard drive.
In May, 2015 Rich interviewed Dick, who said he was unaware of the option until April 8, 2015, when he was provided a copy of the agreement by his son.
He did acknowledge signing the resolution authorizing the $12,000 payment, and further acknowledged the payment was to come to him, an admission that was backed by a bank statement provided to the investigator.
“Chief Dick further expressed his belief that he was entitled to the money for services rendered, which he describes as lobbying,” Rich wrote.
The Chief told Rich the money was routed through his son’s company for tax purposes, on the advice of Magowan.
In Rich’s summary, he determined Chief Dick breached his fiduciary duty to the band by accepting the $12,000 payment personally, and is obligated to pay that amount to the band.
“If he does not do so, the Nation has a sound legal action to compel the payment,” Rich wrote.
Rich further found the Chief in breach of the We Wai Kai Council Conflict of Interest policy.
That policy does not include provisions for sanctions, but under the Nation’s Election Code the breach does provide grounds for a petition, signed by at least 60 members, to be brought to seek his disqualification from holding his office.
