Investment into Kihew Kereru could be large loss
Questions have arisen about an investment made using funds from Onion Lake Cree Nation (OLCN).
According to numerous documents obtained by the Lloydminster Meridian Booster, the leadership of OLCN was involved in an investment using band funds with a company called Kihew Kereru GP Corporation, which some said went ahead with minimal input by band members and has resulted in a major loss for the band government.
The documents obtained also show members of the company, put together by OLCN for the investment, were aware of the dangers around the investment, but according to some band members, did not relay those concerns to the public or provide updates on the issue to inform members of OLCN about the issues the company faced.
OLCN leadership did not respond to questions about whether the money invested was gone for good, or will be recovered in the future.
Though a timeline on the exact details of the investment and how it proceeded is unclear, the documents obtained show a chain of events running from 2013 up to this year.
In one document, dated July 8, 2013 and sent from Roger Smith of Witten Law, the firm which handles legal affairs for OLCN band government, a technology group is named as part of the corporate structure of OLCN’s business entities.
The group, Kihew Kereru, names OLCN and numbered company 1712297 Alberta Ltd. as limited partners, with Kihew Kereru as the general partner.
The directors listed for the company on the document are Wallace Fox, who was chief at the time; Winston Walkingbear, a former director of operations of OLCN; Graemme Brown, a businessman in New Zealand, along with his wife, Debra Brown; and a second New Zealand businessman, Wes Bowen.
A letter sent from the company to the band council on May 27, 2013, illustrates an investment of $1 million, as well as a second amount of $100,000, made into the company using band funds in order to develop a DNP algorithm device, which would have dealt with “big data implosion/explosion capabilities.” The letter also mentioned a request for another $400,000, in order to complete development on the product.
It is not clear if this third amount was provided.
A local lawyer, Crystal Fafard, is named as the president and CEO of the company, and Walter Deagle, a businessman in Nova Scotia, is named as the chief operating officer.
A letter was sent on May 7, 2013, from Fafard to Walkingbear laying out her concerns about both the product and Graemme.
Fafard mentioned a court case which Brown is referred to in 2001, which was tried in the High Court of New Zealand. The case mentioned a company, Advanced Creative Technologies (ACTL), and a product, the ‘Matariki Codex’.
Though the letter does go into further detail around the conclusions of the case, Fafard said she is concerned about the similarity between the technology in the case, and the technology being invested in by Kihew Kereru.
“It appears the Browns feel they can simply change the name of the entity, which develops the technology, take money to live on, and move forward with commercialization,” Fafard wrote in the letter.
“As an owner in KKLP (KKLP New Zealand Limited), OLCN must now realize that its investment has been placed at risk or affected by previous promises made to other entities regarding this technology. I would recommend making Witten (Witten Law) aware of this new information and send them a copy of the New Zealand judgement. I would also recommend that OLCN request life insurance against both Graemme and his wife for a total of $1.5 million that KKLP will pay up for one year in advance to cover the OLCN investment should something happen to them. I would not recommend any further financial advances to KKLP until these are done.”
When reached by phone, Roger Smith said he had organized the company, but knew nothing of its business.
Farfard also advised for the directors in the company from OLCN to resign, given the possible implications of the development of the DNP Algorithm, as she was concerned the intellectual property may not actually be owned by Kihew Kereru.
Fafard ends the letter by announcing her resignation from the company.
It was not immediately clear why OLCN decided to make the investment into Kihew Kereru. A copy of the New Zealand High Court decision about the case, which led to Fafard’s concerns provided some insight into Graemme, the man who pitched the idea of the DNP Algorithm to council.
According to the decision, dated March 25, 2013, Graemme has a history of approaching companies with his tech idea, taking investment money from them to develop the product, and not delivering a functional piece of technology.
The decision included a factual background, which states ACTL had been formed in 1998, by two New Zealand businessmen, Michael John Lust and Scott Wilson, in order to fund and facilitate the research work of Graemme.
In 2001, Graemme struck an agreement with ACTL to transfer all rights and ownership of the technology, along with any intellectual property, hardware, and software relating to it and any spinoff technologies to the company. In return, Graemme and his wife were given a third of the shares in the company.
According to the court decision, the technology was never completed, and Graemme continued to seek funding. The court decision also indicates in early December of 2010, Graemme was in debt, and appealed to ACTL for assistance, and was given $200,000 in exchange for the codex technology, which he assured the company directors was full and complete.
After this exchange was completed, the directors tested the technology in late December 2010, and, according to the decision, found it did not meet the specifications, which had been claimed for it by Graemme.
Graemme was not a party to the court case and did not appear as a witness.
Charmaine Stick, a band member who has attended meetings where this deal has been discussed, said the leadership of OLCN have not been answering questions related to Kihew Kereru.
“When this started, this New Zealand deal, it was presented to the people at a band meeting, and we were told that it was supposed to be a technology thing,” said Stick.
“I started asking questions, because it didn’t seem right. I asked them what kind of technology it was, how it was going to benefit the people, and all they gave me was ‘It’s supposed to be a microchip.’”
Stick said repeated pitches were made to the band membership for more funds to be put into the company. She also said the issue was brought up at a recent band meeting this past October, and questions were once again rebuffed, with the leadership saying the money sent so far to the company is a lost cause.
“There was no real definite answer,” said Stick. “The only definite answer that we actually got out of all this was ‘we no longer deal with them, they are not a part of us anymore.’”
A former council member, Dolores Pahtayken, backed up Stick’s statements.
“It was never brought up to all the members of Onion Lake; it was brought in through our council meeting, for a possible partnership for our energy fund,” said Pahtayken.
Serving as a council member from 2010 to 2014, Pahtayken was present when the proposal was brought forward to invest in the technology company, using funds derived from revenue from Onion Lake Energy, and travelled to New Zealand with other band members to view the product into which the money had been put towards.
“I walked into a garage, it was kind of like a warehouse, with a really small room, and they were trying to show us different things we should be investing in,” said Pahtayken.
“At the end of the day, I went there, and I did not see anything worth investing in. I did not see anything good that our money was being used for.”
Pahtayken said many band members in OLCN are aware of the New Zealand deal, but do not speak of it openly. She also expressed a desire for more transparency on the issue from current leadership, as she also says they have refused to answer questions on the matter.
“We haven’t had an audit of those (energy) funds ourselves,” said Pahtayken.
“I trust our people, I do. It should have been out there. At one time, we used to have really good communication with our membership, and letting them know where we are with money, where we are with projects. It’s no longer like that.
“That’s what transparency is about, explaining what we’re doing, why we’re doing it, and how much money we have, and that’s not there anymore.”
A search of publicly-available corporate registry documents in both Alberta and New Zealand finds the listings for the company, with official New Zealand registration documents for KKLP New Zealand Limited last updated in 2014. In those documents, only Walkingbear and Bowen are named as directors.
Kihew Kereru, based out of Edmonton, is listed as having 1,000 shares in KKLP.
It is not clear how much money has been invested into Kihew Kireru by OLCN band government. Numerous attempts were made by the Meridian Booster to get in contact with those named as directors of the company, as well as the former CEO, and the former chief operating office, in addition to the current leadership of OLCN.
Most of those contacted did not wish to speak on the matter. Fox, though, did provide a brief response.
“It’s an investment,” he said in an email.
“Do you go around talking to other businesses regarding their investments? Or is it because this a First Nation? I haven’t seen articles that you’ve wrote on other entities regarding their investments in Lloydminster. This has been brought up for discussion at every general meeting that we’ve had in our community meetings.”
Fox did not respond to further questions concerning the statements of band members on his transparency on the issue.
Earlier this year, OLCN won a court case against the federal government, allowing it to keep its financial information closed to the public.
Story published on November 19, 2015.