Gitxsan Treaty Society Assessment for a Forensic Audit of Specific Issues and Allegations Aboriginal Affairs and Northern

n Development Canada

September 17, 2012 Confidential

Deloitte & Touche LLP 100 Queen Street Suite 800 Ottawa ON K1P 5T8 Tel: 613-236-2442 Fax: 613-563-2244 www.deloitte.ca

Confidential September 17, 2012 Sylvie Lecompte Director, Assessment and Investigation Services Aboriginal Affairs and Northern Development Canada 10 Wellington Street Gatineau, QC K1A 0H4 Subject: Gitxsan Treaty Society Assessment for a Forensic Audit of Specific Issues and Allegations Dear Ms. Lecompte: Attached is our report setting out the findings from our review. Our findings are based on procedures undertaken as described in Section 4 of this report and are subject to the restrictions and limitations in scope as set out therein. Should you have any questions or concerns, please do not hesitate to contact me at 613-751-5378.

Yours very truly,

Gary Timm, CAIFA, CFE Partner, Financial Advisory Deloitte & Touche LLP Enclosure

Table of contents

Introduction & background...................................................................................................................... 1 1.1 1.2 1.3 Introduction.................................................................................................................................... 1 Background ................................................................................................................................... 1 Retainer of Deloitte ....................................................................................................................... 1

Context of review .................................................................................................................................... 3 2.1 2.2 2.3 2.4 Gitxsan Treaty Society .................................................................................................................. 3 Administration of Gitxsan Treaty Society ...................................................................................... 3 Financial position of Gitxsan Treaty Society ................................................................................. 3 Accounting arrangement for GTS ................................................................................................. 4

Summary of findings ............................................................................................................................... 5 3.1 3.2 3.3 3.4 Payments made to Individuals ...................................................................................................... 5 Payments to Various Parties ......................................................................................................... 7 Alleged Conflict of Interest ............................................................................................................ 7 Conclusion..................................................................................................................................... 8

Scope and restrictions ............................................................................................................................ 9 4.1 4.2 Scope ............................................................................................................................................ 9 Restrictions.................................................................................................................................... 9

Payments made to individuals .............................................................................................................. 11 5.1 5.2 5.3 5.4 Payments made to Chief Negotiator, Elmer Derrick ................................................................... 11 Payments made to Negotiator, Beverley Clifton Percival ........................................................... 12 Payments made to Executive Director, Gordon Sebastian ......................................................... 12 Payments made to Wings Travel Services ................................................................................. 17

Payments to Various Parties ................................................................................................................ 18 6.1 6.2 6.3 Payment Summary Fiscal Years Ended March 31, 2009 to 2012 (to date) ............................... 18 Bull Houser &Tupper LLP ........................................................................................................... 19 Gitxsan Development Corporation .............................................................................................. 19
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6.4 6.5 6.6 6.7 6.8 6.9

Hazelton Recreation Centre ........................................................................................................ 20 V&B Bookkeeping ....................................................................................................................... 20 Tex C. Enemark .......................................................................................................................... 20 G.F.G. Enterprises Ltd. ............................................................................................................... 20 DDV Enterprises Ltd. .................................................................................................................. 21 Trilliant Ventures Inc. .................................................................................................................. 21

6.10 Roger Tasse ................................................................................................................................ 21 7 Alleged Conflict of Interest.................................................................................................................... 22 7.1 7.2 Vescor ......................................................................................................................................... 22 Elmer Derrick Control and Conflict of Interest Issues .............................................................. 22

Appendix A Employment Agreement for Executive Director, Gordon Sebastian ...................................... 1 Appendix B - Draft Executive Director Report dated December 29, 2011.................................................... 4

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ii

Introduction & background

1.1

Introduction

Deloitte & Touche LLP (Deloitte) was retained by the Assessment and Investigation Services Branch (AISB) of Aboriginal Affairs and Northern Development Canadas (AANDC), to undertake an assessment for a forensic audit of specific transactions in relation to concerns and allegations received by AISB regarding Gitxsan Treaty Society (GTS).

1.2

Background

GTS is an association of people committed to working toward negotiating a land claims settlement and undertaking various projects leading towards self-government. The Society also manages certain funds on behalf of the Gimlitxwit under the terms of the Short Term Forestry Agreement. On December 2, 2011, Elmer Derrick, Gitxsan Treaty Chief Negotiator, announced the signing of an agreement with Enbridge, backing the controversial Northern Gateway Project. Apparently, the previous day, more than sixty First Nation leaders declared their opposition to the proposed pipeline. As well, elected band leaders announced their opposition. On December 5, 2011, under the direction of a number of Gitxsan hereditary chiefs, a blockade of the GTS offices was established. The GTS, which also claims to follow the direction of a board representing the hereditary chiefs, filed for an injunction against the blockade. The Court ordered an end to the blockade on December 7, 2011. Since then, both sides have been to court repeatedly arguing over the legality of the blockade as well as the larger issue of who represents the Gitxsan. On May 10, 2012, AISB received allegations that were forwarded by the RCMP, concerning potential misuse of funds administered by the GTS, including those provided for negotiations. On May 14, 2012, GTS urged BC Supreme Court Justice McEwan to order the arrest of several Gitxsan hereditary chiefs supporting the blockade, while the RCMP pressed the need to peacefully manage the dispute and ensure public safety. With the RCMPs continuing reticence to intervene, Justice McEwan was reportedly considering ordering the Court Sheriffs to conduct the arrests. On May 16, 2012, an RCMP Superintendent contacted the AISB Director to discuss this matter. As a result, AANDC offered to undertake an assessment for a forensic audit in relation to certain allegations.

1.3

Retainer of Deloitte

Deloitte & Touche LLP (Deloitte) was engaged to review the funds provided by the federal government for negotiation purposes, in particular transactions carried out by Elmer Derrick, Bev Clifton Percival and Gordon Sebastian. Deloitte is to provide observations and preliminary findings to the Steering Committee composed of GTS, British Columbia (BC) Treaty Commission and AANDC CAEE/AISB. More specifically, the areas of analysis for this assessment were to include: Potential misappropriation of funds related to travel expenditures, hospitality claims, honoraria and wages of selected individuals; and
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Potential conflicts of interest. Our review and examination covered certain transactions for the time period April 1, 2011 to May 31, 2012 (the Review Period). This period was determined by AANDC. For purposes herein, all amounts are stated in CDN Dollars, unless otherwise stated.

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Context of review

2.1

Gitxsan Treaty Society

The office of the GTS is located in the interior of British Columbia (BC) in Hazelton. The Gitxsan people live in an area that covers 33,000 sq km and encompasses seven villages: Gitwangak, Gitsegukla, Glen Vowell, Gitnmaax, Kispiox, Hazelton and New Hazelton, and Gitxsan. GTS was incorporated on November 28, 1994 under the British Columbia Society Act for the following purposes: To support the Gitxsan people in their treaty and other negotiations; and To support the Gitxsan people in other initiatives.

2.2
2.2.1

Administration of Gitxsan Treaty Society

Board of Directors and Management
Jim Angus Alvin Hyzims John Olson Marjorie Quock Lynda Williams

The GTS Board of Directors during the review period included:

Management of GTS during the review period included the following individuals: Executive Director Chief Negotiator Negotiator Executive Assistant Gimlitxwit Coordinator Communication Director Archives Director Consultation Gordon Sebastian Elmer Derrick Beverley Clifton Percival Elizabeth (Betty) Sampson Barb Huson Art Wilson Bonnie Mowatt Cliff Sampare

2.3

Financial position of Gitxsan Treaty Society

Funding for GTS over the fiscal years ended March 31, 2005 to 2011, was mainly from a loan from Canada, a forestry agreement with British Columbia, and the BC Treaty Commission The deficit position has increased each year, generally represented by the loan from Canada under the First Nation Negotiation Support Agreement

Based on our review of the GTS financial statements, we note the following (as set out in Table 1 below):

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SUMMARY OF GTS FINANCIAL SITUTATION

TABLE 1

Fiscal Year Audit Opinion Beginning surplus (deficit) Funding sources AANDC loan funding Government - re: forestry agreement BC Treaty Commission contribution funding Administration Fees Debt forgiveness Other Total funding Expenditures Unexpended (over-expended) funding AANDC loan repayable Tangible capital assets purchased Ending surplus (deficit)

2004/05 Unqualified

2005/06 Unqualified

2006/07 Unavailable1

2007/08 Unqualified

2008/09 Unqualified

2009/10 Unqualified

2010/11 Unqualified

$ (8,043,655) $ (10,010,883) $ (12,443,063) $ (12,285,137) $ (13,068,070) $ (13,765,091) $ (15,755,886) 1,772,320 1,644,240 1,852,320 3,075,310 443,080 64,000 149,549 2,428,949 2,623,857 (194,908) 411,060 213,622 2,268,922 3,056,862 (787,940) 463,080 305,532 296,262 5,992,504 3,982,258 2,010,246 1,757,808 3,003,462 439,452 302,001 80,532 5,583,255 4,608,380 974,875 1,772,320 2,775,312 443,080 277,661 262,888 5,531,261 4,455,962 1,075,299 1,772,320 2,782,062 443,080 310,884 1,476,494 6,784,840 6,771,647 13,193 1,852,320 2,832,670 463,080 290,147 1,297,348 6,735,565 7,165,865 (430,300)

1,772,320 1,644,240 1,852,320 1,757,808 1,772,320 1,772,320 1,852,320 231,641 109,182 $ (10,010,883) $ (12,443,063) $ (12,285,137) $ (13,068,070) $ (13,765,091) $ (15,755,886) $ (18,147,688)

2.4

Accounting arrangement for GTS

Vandergaag & Bakker (V&B) are the external bookkeeping service for GTS since 2006. V&B perform all accounting for GTS, including monthly bank reconciliations, data entry, transaction accounting and monthly financial statements. V&B receives scanned copies of all expenditures and receipts through an electronic tunnel from GTS to V&B, from which V&B does the accounting. V&B sends the monthly financial statements to the GTS office for distribution to the GTS management and Directors. V&B also has a monthly telephone call with the Board to brief on the financial statements. In addition, V&B assists with the annual budget submitted by GTS to the BC Treaty Commission.

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Summary of findings

Based on the scope of our review, and subject to the limitations in scope and restrictions noted herein, the findings from our review are summarized as follows:

3.1

Payments made to Individuals

There were a number of allegations related to the Chief Negotiator, the Negotiator and the Executive Director , including issues related to wages, travel and hiring of various individuals. The following sections summarize our findings related to these individuals.

3.1.1

Wages and Honourarium

It has been alleged that the Chief Negotiator, the Negotiator and the Executive Director were double dipping on their wages and honourarium. Based on the documentation reviewed, it appears that the salaries for each of these individuals remained the same throughout the period January 2008 to May 31, 2012, and that each individual received a $1,000 Christmas bonus each year. In addition to the salary and bonus, Gordon Sebastian received $40,000 in each of the fiscal years ended 2009 and 2010, apparently for legal services rendered. Given that Gordon Sebastian was the full-time Executive Director of GTS, and his employment agreement with GTS, dated June 12, 2003, states A condition of your acceptance is that the current Legal Services Contract in place with the Gitxsan Treaty Society will effectively become null and void, it is unclear why Gordon Sebastian would be paid additional monies for services rendered related to legal services.

3.1.2

Travel

It has been alleged that there has been exorbitant travel expenses by the Chief Negotiator, the Negotiator and the Executive Director. Based on the documentation reviewed, we identified the following disbursements, many of which are apparently travel related expenses excluding airfare which is billed separately through Wings Travel for each of these individuals:
Summary of Disbursements to the Identified Individuals 2009 $23,933 $36,260 $44,287 $122,858 2010 $27,881 $49,565 $36,745 $142,598 2011 $18,225 $52,868 $28,849 $123,373 TABLE 2 2012 $19,859 $38,277 $31,679 $114,215

Elmer Derrick Beverley Clifton-Percival Gordon Sebastien Wings Travel

Most of the travel costs incurred were for travel to Vancouver, where these individuals stayed at the Fairmont Waterfront. Other costs related to meetings with various parties such as Enbridge, Suskwa, lunches, etc.
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We note that the GTS Travel Claim Form indicates that hotel costs were to be a maximum of $150 (high season) and $90 (low season). However, during the Review Period most of the room rate charges at the Fairmont Waterfront hotel were in excess of this amount. As such, these individuals were in contravention of the GTS guidelines.

3.1.3

Other Payments related to these individuals

a) Black Goose Holdings Chief Negotiator There was apparently $1.0 million dollars invested by GTS into this company through a holding company that Elmer Derrick is apparently the sole trustee. Apparently, the investment is worthless due to the downturn in the natural gas industry. b) Gordon Sebastian It was alleged that Gordon Sebastian hired a number of individuals without Board approval and paid them thousands of dollars The allegation relates to the engagement of the individuals noted in the following table.

Summary of payments to identified individuals 2009 Tex C. Enemark GFG Enterprises (Gordon Gibson) DDV Enterpises Ltd. (Dan Veniez) Trilliant Ventures Inc. (Rick Connors) Roger Tasse $0 $30,531 $0 $0 $0 2010 2011 $58,685 $111,320 $60,163 $99,200 $0 $0 $5,000 $20,848 $0 $0 2012 $75,257 $42,534 $80,000 $28,791 $24,878

TABLE 3 Description of Service Provided Lobbying, minining industry expertise Registered lobbyist for GTS Forestry issues, $10,000 monthly retainer Suskwa watershed and not GTS. Now CEO of GDC

As set out in the table above, there have been thousands of dollars spent on these individuals. It is not clear if the Board was aware of the costs but both Gordon Sebastian and Elmer Derrick were aware of these individuals and their involvement with GTS. c) Other - Gordon Sebastian Law Society of British Columbia We identified two invoices totaling $4,022.36 from the Law Society of British Columbia for the practice fee and insurance for Gordon Sebastian, which were paid from GTS funds in accordance with the Employment Agreement between Gordon Sebastian and GTS.

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3.2

Payments to Various Parties

The following table provides a summary of the cumulative payments to the thirty payees who received the most money from GTS during the period April 2008 to January 2012, based on electronic information obtained from the external bookkeepers for GTS.
Summary of Payments By Supplier by Fiscal Year Fiscal Year Ended March 31 2010 2011 ($451,030) ($1,127,325) ($597,766) ($1,250,000) TABLE 4

Supplier BULL, HOUSSER & TUPPER GITXSAN FOREST ENTERPISES GITXSAN DEVELOPMENT RBC DOMINION SECURITIES WINGS TRAVEL SERVICE LTD. HAZELTON RECREATION CENTRE V&B BOOKKEEPING & MANAGEMENT VESCOR TEX C. ENEMARK FOUR DIRECTIONS MANAGEMENT G.F.G. ENTERPRISES LTD GORDON SEBASTIAN SILVERTIP PROMOTIONS & SIGNS COPPERMOON NOXNOX BEV CLIFTON PERCIVAL BULKLEY VALLEY DEVELOPMENTS THE COAST INN OF THE NORTH SPEEDEE ART MATHEWS JAMES ANGUS WALTER WILSON COMPANY OF GITXSAN HOUSES FOUR DIMENSION COMPUTER CENTRE NORTHERN NATIVE BROADCASTING SLR CONSULTING (CANADA) LTD RECEIVER GENERAL HOTSHOT COMMUNICATIONS INC BLACK PRESS GROUP LTD. ELMER DERRICK Subtotal Payments to Other Suppliers Total Identified Payments

2009 ($265,643)

($750,000) ($122,858) ($55,540) ($136,250) ($10,216) ($30,532) ($84,287) ($62,808) ($17,344) ($43,820) ($36,260) ($60,000) ($52,163) ($15,231) ($38,474) ($38,561) ($62,718) ($24,470) ($28,146) ($5,880) ($3,987) ($105,806) ($10,510) ($23,933) ($2,085,435) ($1,398,886) ($3,484,322)

($142,598) ($350,000) ($74,252) ($150,000) ($58,685) ($168,000) ($60,163) ($76,746) ($61,857) ($130,603) ($35,820) ($49,565) ($120,000) ($52,614) ($48,813) ($35,757) ($37,825) ($43,116) ($31,596) ($43,453) ($34,766) ($113,947) ($46,673) ($38,098) ($27,881) ($3,081,624) ($2,274,354) ($5,355,978)

($123,373) ($110,224) ($111,320) ($41,009) ($99,200) ($28,850) ($71,092) ($70,548) ($48,745) ($52,869) ($55,943) ($66,737) ($31,223) ($34,451) ($20,640) ($31,596) ($27,827) ($39,748) ($59,597) ($29,197) ($18,226) ($3,549,737) ($1,854,291) ($5,404,028)

2012 ($1,262,861) ($250,600) ($1,103,818) ($145,379) ($114,216) ($73,292) ($75,257) ($17,000) ($42,534) ($31,679) ($19,147) ($47,820) ($38,277) ($426) ($11,967) ($34,268) ($22,097) ($31,596) ($9,704) ($35,600)

($27,797) ($19,859)

Total ($3,106,859) ($2,098,366) ($1,103,818) ($895,379) ($503,045) ($350,000) ($313,308) ($286,250) ($245,262) ($236,225) ($232,428) ($221,561) ($214,903) ($218,495) ($176,205) ($176,970) ($180,000) ($161,146) ($142,747) ($139,721) ($132,933) ($126,474) ($119,258) ($109,130) ($115,994) ($113,947) ($110,258) ($105,806) ($105,603) ($89,899)

($3,415,194) ($12,131,990) ($1,264,621) ($6,792,152)

($4,679,815) ($18,924,143)

Many of the suppliers identified in table above are discussed in Section 6 of this report. The disbursements to Bull Houser & Tupper represent payments for a number of ongoing legal matters involving GTS and others, examples of which are listed in Section 6.2 of this report.

3.3
3.3.1

Alleged Conflict of Interest

Vescor

It was alleged that Beverley Clifton Percival double dips with GTS wages and Vescor. Vescor was paid $286,250 during the two fiscal years ended March 31, 2009 and 2010. Vescor has apparently been doing work with GTS since 2001. According to Elmer Derrick, the entity is owned by Chief Don Ryan, who is the uncle of Beverley Clifton Percival. In addition, Elmer Derrick indicated that legal counsel was not happy with the work product. We have not identified documentation that would either support or refute the allegation.

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3.3.2

Elmer Derrick

In a draft report of the Executive Director (Gordon Sebastian), dated December 29, 2011, a number of allegations regarding the actions and potential conflict of interest situations involving Elmer Derrick were identified. Gordon Sebastian indicated that he has obtained explanations from Elmer Derrick such that he no longer has these concerns regarding Elmer Derrick. However, for the first allegation, the question remains as to how Elmer Derrick could provide an explanation that satisfies that he wasnt working without the negotiation team for a year

3.4

Conclusion

Based on the preliminary review, our assessment is that we would not recommend that a forensic audit be undertaken. However, we would recommend that an independent review and assessment be undertaken of the management practices, processes and policies of the GTS to ensure sound management and governance of the use of resources entrusted to them.

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Scope and restrictions

4.1

Scope

Our review and examination covered specific transaction areas for the period April 1, 2011 to May 31, 2012 (the Review Period) and was limited to the issues described in this report. This period was selected based on discussions with AANDC. Our procedures during the Review Period included a review of GTS accounting records, interviews and discussions with GTS employees, and a review of certain processes, policies and procedures of GTS. We attended at the GTS office from June 11 to 13, 2012 in order to review the documents available at the GTS. In preparing this report, we specifically reviewed and/or relied upon the following information. We also obtained electronic forensic images of sixteen (16) GTS computers and servers. 1. Electronic accounting records for the years ended March 31, 2009 to 2012, obtained from Vandergaag & Bakker; 2. Copies of selected supplier invoices; 3. Banking information bank statements and canceled cheques; and, 4. Miscellaneous documents related to expenditures. During the course of our work, we met and held discussions with the following GTS employees: 1. 2. 3. 4. 5. Gordon Sebastian, Executive Director Elmer Derrick, Chief Negotiator Beverley Clifton Percival, Negotiator Elizabeth Sampson, Office Administrator Roberta Mowatt, Reception and Administration

In addition, we attended at Vandergaag & Bakker, external bookkeepers for GTS, and interviewed the following staff members: 1. John Bakker, Partner 2. Jessica Bakker, staff member We obtained accounting data from Vandergaag & Bakker for the fiscal years ended March 31, 2008 to 2012.

4.2

Restrictions

This report is not intended for circulation or publication, nor is it to be reproduced for any other purpose than for the use of AISB, without our prior express written permission in each specific instance. We do not assume any responsibility for losses suffered by any party as a result of circulation, publication, or reproduction of this report contrary to the Provisions of this paragraph. We reserve the right, but will be under no obligation, to review this report, and if we consider it necessary, to revise our report in light of any information, which becomes known to us after the date of this report.

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Our work does not constitute an audit as defined by the Canadian Institute of Chartered Accountants. Consequently, this assessment for a forensic audit and the resulting report do not constitute an auditors opinion nor do they represent such an opinion in any way.

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Payments made to individuals

5.1

Payments made to Chief Negotiator, Elmer Derrick

1. Collects honorariums and wages 2. Travel a) Extensive travel b) Double dips on travel 3. $1.0 million invested in Black Goose is gone

There were a number of allegations related to Elmer Derrick, which included:

5.1.1

Wages and Honorarium

Based on a review of the payroll register for the period January 2008 to May 31, 2012, Elmer Derrick earned a salary of $115,000 per year. Each December he received a $1,000 Christmas bonus. Through discussion with Elmer Derrick, he confirmed the above amounts.

5.1.2

Travel

Based on a review of the GTS electronic files, we identified the following payments to Elmer Derrick in addition to the salary and bonus described in section 5.1.1: Fiscal year ended March 31
2009 2010 2011 2012 $23,933 $27,881 $18,225 $19,859

It appears that the majority of these amounts relate to travel, of which most travel was Terrace to Vancouver. Elmer Derrick confirmed this as he indicated most of his travel was in British Columbia. He indicated that he resides in Terrace. Typically, the hotel used in Vancouver was the Fairmont Waterfront hotel. We note that the GTS Travel Claim Form indicated that hotel costs were to be a maximum of $150 (high season) and $90 (low season). However, the room rates at Fairmont Waterfront hotel were in excess of this amount on most occasions. The expense claims for these costs were completed by Elmer Derrick and approved by Gordon Sebastian. The above noted travel amounts related to accommodation, meals and other travel costs, but did not include airfare as this was paid through Wings Travel Services Ltd., which is discussed in Section 5.4 below. Elmer Derrick indicated that he had not traveled during the fiscal year ended March 31, 2012, however, the electronic accounting records indicate a number of disbursements to Elmer Derrick related to travel during this fiscal year.

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5.1.3

Black Goose Holdings

In 2007, GTS apparently invested $1.0 million in Black Goose Holdings (BGH), a Calgary-based holding company. Elmer Derrick indicated that GTS has an investment in BGH through a holding company. This holding company may be Del ga goka Holdings Ltd. for which Elmer Derrick is apparently the sole trustee for GTS interest. Elmer Derrick indicated that the value of BGH is negligible due to the downturn in the Natural gas market.

5.2

Payments made to Negotiator, Beverley Clifton Percival

1. Double dips with honorariums and wages 2. Double dips with wages and Vescor (See Section 7.1) 3. Travel expenditures paid by GTS include clothing and expensive wine for meals

There were a number of allegations related Beverley Clifton Percival, which included:

5.2.1

Wages and Honorarium

Based on a review of the payroll register for the period January 2008 to May 31, 2012, Beverley Clifton Percival earned a salary of approximately $85,000 per year. Each December she received a $1,000 Christmas bonus.

5.2.2

Travel

Based on a review of the GTS electronic files, we identified the following payments to Bev Clifton Percival in addition to the salary and bonus described in section 5.2.1: Fiscal year ended March 31
2009 2010 2011 2012 $36,260 $49,565 $52,868 $38,277

It appears that the majority of these amounts relate to travel, of which most travel was to Vancouver, Victoria and Terrace. In addition, there were a number of charges for lunches, telephone, Enbridge meetings, and Suskwa meetings. Typically, the hotel used in Vancouver was the Fairmont Waterfront hotel. We note that the GTS Travel Claim Form indicated that hotel costs were to be a maximum of $150 (high season) and $90 (low season). However, the room rates at Fairmont Waterfront hotel were in excess of this amount on most occasions. The expense claims for these costs were completed by Beverley Clifton Percival and approved by Gordon Sebastian. The above noted travel amounts related to accommodation, meals and other travel costs, but did not include airfare as this was paid through Wings Travel Services Ltd., which is discussed in Section 5.4 below.

5.3

Payments made to Executive Director, Gordon Sebastian

1. Double dips with wages 2. Pays himself holiday pay when not entitled 3. Spends millions of dollars over his $5,000 authority limit 4. Hired a number of individuals without Board approval and pays them thousands of dollars a) Richard Bassit b) Dan Veniez

There were a number of allegations related Gordon Sebastian, which included:

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c) Tex Enemark d) Gordon Gibson

5.3.1

Wages and Honorarium

Based on a review of the payroll register for the period January 2008 to May 31, 2012, Gordon Sebastian earned a salary of approximately $105,000 per year. Each December he received a $1,000 Christmas bonus. 5.3.1.1 Additional Remuneration

In addition to the salary and bonus, Gordon Sebastian received $40,000 in each of the fiscal years ended 2009 and 2010. The $40,000 issued in April 2008 (fiscal year 2009) apparently was related to a reimbursement to Gordon Sebastian related to a law suit and a book review as set out in the Board motion below.

The second $40,000 was issued in July 2009 (fiscal year 2010) apparently related to services rendered by Gordon Sebastian regarding GFEI as set out in the Board motion and related cheque requisition below.

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Given that Gordon Sebastian was the full-time Executive Director of GTS, and his employment agreement with GTS, dated June 12, 2003, states A condition of your acceptance is that the current Legal Services Contract in place with the Gitxsan Treaty Society will effectively become null and void (See Appendix A attached), it is unclear why Gordon Sebastian would be paid additional monies for services rendered.

5.3.2

Other Payments to Gordon Sebastian

Based on a review of the GTS electronic files, we identified the following payments to Gordon Sebastian in addition to the salary, bonus and additional remuneration described in section 5.3.1: Fiscal year ended March 31
2009 2010 2011 2012 $44,287 $36,745 $28,849 $31,679

It appears that the majority of these amounts relate to travel, of which most travel was to Vancouver. In addition, there were a number of charges for lunches, telephone, Enbridge meetings, and Suskwa meetings. Typically, the hotel used in Vancouver was the Fairmont Waterfront hotel. We note that the GTS Travel Claim Form indicated that hotel costs were to be a maximum of $150 (high season) and $90 (low season). However, the room rates at Fairmont Waterfront hotel were in excess of this amount on most occasions. The expense claims for these costs were completed and approved by Gordon Sebastian. The above noted travel amounts related to accommodation, meals and other travel costs, but did not include airfare as this was paid through Wings Travel Services Ltd., which is discussed in Section 5.4 below.

5.3.3

Hiring of Individuals without Board approval

In terms of the allegations regarding the hiring of individuals without Board approval, the costs incurred related to each of these individuals are discussed in the related sections noted below: Tex Enemark Gordon Gibson Dan Veniez Rick Connor Roger Tasse Section 6.6 Section 6.7 Section 6.8 Section 6.9 Section 6.10

Based on the preliminary review, there have been thousands of dollars spent on these individuals. A number of these individuals were engaged to apparently assist GTS through their specific industry expertise or lobbying ability. We were advised by Gordon Sebastian that there was an unwritten policy/procedure that the Executive Director could approve expenditures up to $5,000, and that expenditures in excess of this amount were to be approved by the Board. It is not clear if the Board was aware of the costs but both Gordon Sebastian and Elmer Derrick were aware of these individuals and their involvement with GTS. We were advised that the Board would have had the opportunity to query these costs during their review of the monthly financial statements with the external accountants, should the Board happen to query a particular line item in the financial statements. The names of the individuals were not specifically detailed in these financial statements.

5.3.4

Other

We identified two invoices totaling $4,022.36 from the Law Society of British Columbia for the practice fee and insurance for Gordon Sebastian, which were paid from GTS funds. The Employment Agreement between Gordon Sebastian and GTS includes the sentence, In addition to this you will be entitled to an
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Employee Benefit package, including continued payment of professional fees. As such, payment of these invoices appears to be appropriate. Below are copies of the invoices paid to the Law Society of British Columbia on behalf of Gordon Sebastian.

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5.4

Payments made to Wings Travel Services

Based on a review of the GTS electronic files, we identified the following payments to Wings Travel Services: Fiscal year ended March 31
2009 2010 2011 2012 $122,858 $142,598 $123,373 $114,215

These disbursements include airfare and other costs for a number of individuals, including Elmer Derrick, Beverley Clifton Percival and Gordon Sebastian. We did not identify any documentation of pre-approval for travel for individuals, nor a yearly plan for travel by employees.

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Payments to Various Parties

6.1

Payment Summary Fiscal Years Ended March 31, 2009 to 2012 (to date)

The following table provides a summary of the cumulative payments to the thirty payees who received the most money from GTS during the period April 2008 to January 2012, based on electronic information obtained from the external bookkeepers for GTS.
Summary of Payments By Supplier by Fiscal Fiscal Year Ended March 31 2010 2011 ($451,030) ($1,127,325) ($597,766) ($1,250,000) TABLE 5

Supplier BULL, HOUSSER & TUPPER GITXSAN FOREST ENTERPISES GITXSAN DEVELOPMENT RBC DOMINION SECURITIES WINGS TRAVEL SERVICE LTD. HAZELTON RECREATION CENTRE V&B BOOKKEEPING & MANAGEMENT VESCOR TEX C. ENEMARK FOUR DIRECTIONS MANAGEMENT G.F.G. ENTERPRISES LTD GORDON SEBASTIAN SILVERTIP PROMOTIONS & SIGNS COPPERMOON NOXNOX BEV CLIFTON PERCIVAL BULKLEY VALLEY DEVELOPMENTS THE COAST INN OF THE NORTH SPEEDEE ART MATHEWS JAMES ANGUS WALTER WILSON COMPANY OF GITXSAN HOUSES FOUR DIMENSION COMPUTER CENTRE NORTHERN NATIVE BROADCASTING SLR CONSULTING (CANADA) LTD RECEIVER GENERAL HOTSHOT COMMUNICATIONS INC BLACK PRESS GROUP LTD. ELMER DERRICK Subtotal Payments to Other Suppliers Total Identified Payments

2009 ($265,643)

($750,000) ($122,858) ($55,540) ($136,250) ($10,216) ($30,532) ($84,287) ($62,808) ($17,344) ($43,820) ($36,260) ($60,000) ($52,163) ($15,231) ($38,474) ($38,561) ($62,718) ($24,470) ($28,146) ($5,880) ($3,987) ($105,806) ($10,510) ($23,933) ($2,085,435) ($1,398,886) ($3,484,322)

($142,598) ($350,000) ($74,252) ($150,000) ($58,685) ($168,000) ($60,163) ($76,746) ($61,857) ($130,603) ($35,820) ($49,565) ($120,000) ($52,614) ($48,813) ($35,757) ($37,825) ($43,116) ($31,596) ($43,453) ($34,766) ($113,947) ($46,673) ($38,098) ($27,881) ($3,081,624) ($2,274,354) ($5,355,978)

($123,373) ($110,224) ($111,320) ($41,009) ($99,200) ($28,850) ($71,092) ($70,548) ($48,745) ($52,869) ($55,943) ($66,737) ($31,223) ($34,451) ($20,640) ($31,596) ($27,827) ($39,748) ($59,597) ($29,197) ($18,226) ($3,549,737) ($1,854,291) ($5,404,028)

2012 ($1,262,861) ($250,600) ($1,103,818) ($145,379) ($114,216) ($73,292) ($75,257) ($17,000) ($42,534) ($31,679) ($19,147) ($47,820) ($38,277) ($426) ($11,967) ($34,268) ($22,097) ($31,596) ($9,704) ($35,600)

($27,797) ($19,859)

Total ($3,106,859) ($2,098,366) ($1,103,818) ($895,379) ($503,045) ($350,000) ($313,308) ($286,250) ($245,262) ($236,225) ($232,428) ($221,561) ($214,903) ($218,495) ($176,205) ($176,970) ($180,000) ($161,146) ($142,747) ($139,721) ($132,933) ($126,474) ($119,258) ($109,130) ($115,994) ($113,947) ($110,258) ($105,806) ($105,603) ($89,899)

($3,415,194) ($12,131,990) ($1,264,621) ($6,792,152)

($4,679,815) ($18,924,143)

The following sections discuss certain of the above noted expenditures.

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6.2

Bull Houser &Tupper LLP

Bull Houser & Tupper LLP (BHT) is the external counsel to GTS. They have worked on a number of projects on behalf of GTS. Based on a review of the GTS electronic files, we identified the following payments to BHT: Fiscal year ended March 31
2009 2010 2011 2012 $265,643 $451,030 $1,127,325 $1,262,861

The table below summarizes the nature of the work undertaken by BHT during the fiscal year ended March 31, 2012.
Nature of BHT work during fiscal year ended March 31, 2012 Description per BHT Invoice
Spookw (Gitxsan Government Commission) Litigation Gisega'as Enbridge Northern Gateway Project Blockade of GTS Office - Injunction Application Gitxsan Development Corporation BC Hydro Northwest Transmission Line Project Treaty Matters - Alternate Governance Long term Forestry Agreement Forestry Act Investigation Resources Development Initiatives General Corporate Matters Gitxsan Energy Inc. Purchase of New Hazelton Plaza Other unknown amounts Total Expenditures Identified

TABLE 6 Amount $649,367.20 108,351.64 65,544.65 62,526.72 46,857.77 28,271.01 27,143.20 14,625.87 9,556.70 7,709.33 5,722.10 4,659.31 2,519.17 $1,032,854.67 230,006.63 $1,262,861.30

Note [1] missing at least one inovice for one month.

6.3

Gitxsan Development Corporation

Gitxsan Development Corporation (GDC) became an entity on June 22, 2011 to be responsible for the economic and business interests of the Gitxsan people. Specifically, the GDC website states:
GDC guides and supports its subsidiaries' many new ventures and business initiatives throughout the Gitxsan traditional territory and beyond in cooperation with all Gitxsan members. It will pursue diverse business interests in a responsible manner with the goal of providing jobs to local people, stimulating the local economy and representing the Gitxsan Nation. GDC is governed by a board of directors appointed by the Chiefs through its Board of Trustees. Directors are selected based on their experience in business, natural resource development, management and the ways of the Gitxsan. The Lax Yip Society and Lipgyet Trust own and manage GDC on behalf of the Chiefs. The Lipgyet Trust holds the 100% voting rights through its appointed trustees. The Lipgyet Trust will hold and distribute dividends to individuals belonging to a house (wilp) in accordance with Gitxsan Ayookw and the Lax Yip Society will hold and distribute dividends to the greater Gitxsan for community based projects and initiatives
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During the fiscal year ended March 31, 2012, GTS disbursed $1.1 million to GDC towards its interim operating budget. Rick Connors was appointed CEO of GDC (See report section 6.9).

6.4

Hazelton Recreation Centre

The payment of $350,000 apparently relates to funding for a hockey rink. According to Elmer Derrick, this represented a contribution toward a new rink as the old rink was condemned. He indicated that approximately $60,000 had been spent on consultants and that the remainder, $290,000 was still available in a bank account.

6.5

V&B Bookkeeping

Vandergaag & Bakker (V&B) are the external bookkeeping service for GTS. See report section 2.4 for description of services provided. Based on a review of the GTS electronic files, we identified the following payments to V&B: Fiscal year ended March 31
2009 2010 2011 2012 $55,540 $74,251 $110,224 $73,292

6.6

Tex C. Enemark
Fiscal year ended March 31
2009 2010 2011 2012 $0 $58,685 $111,320 $75,257

Based on a review of the GTS electronic files, we identified the following payments to Tex Enemark:

Based on the invoices examined, the nature of the work appears to relate to involvement with negotiation, lobbying, research, etc. There was no contract on record and no documentation of authorization by the GTS Board for a contractual arrangement. According to Elmer Derrick, Tex Enemark was engaged to assist with talks with the mining industry as Enemark is the Executive Director of the British Columbia mining Association.

6.7

G.F.G. Enterprises Ltd.

G.F.G. Enterprises Ltd. is an entity apparently owned by Gordon Gibson. Based on a review of the GTS electronic files, we identified the following payments to G.F.G. Enterprises Ltd.: Fiscal year ended March 31
2009 2010 2011 2012 $30,531 $60,163 $99,200 $42,534

Based on the invoices examined, the nature of the work appears to relate to involvement with negotiation, lobbying, research, etc. There was no contract on record and no documentation of authorization by the GTS Board for a contractual arrangement. Per Elmer Derrick, Gordon Gibson is a registered lobbyist for GTS. He was engaged as he knows the senior players in Ottawa and Victoria.

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6.8

DDV Enterprises Ltd.

DDV Enterprises LTD. is an entity apparently owed by Dan Veniez. Based on a review of the GTS electronic files, we identified the following payments to DDV Enterprises LTD.: Fiscal year ended March 31
2009 2010 2011 2012 $0 $0 $0 $80,000

The billings are $10,000 per month on a monthly retainer basis. Per Elmer Derrick, Dan Veniez was brought in to deal with forestry issues. By way of background, Elmer Derrick indicated that Veniez used to own a forestry company (based in Montreal), Veniez apparently ran into financial issues and sold a forest licence to a Chinese entity, Sun Wave. Subsequently, the forest licence was apparently obtained from Sun Wave and Elmer Derrick was involved in the negotiation. Gordon Sebastian indicated that GTS had an arrangement with Cam Stevens, Manager of Gitxsan Forest Enterprises (GFEI), such that GFEI would be hiring Mr. Veniez as a consultant on the forest license (387,000 m3 annually). However, Stevens needed time to get his finances in order therefore apparently requested GTS to begin paying Dan Veniez $10,000 per month so that GFEI would not lose the opportunity with Mr. Veniez. Mr. Stevens apparently agreed that GFEI would repay GTS for all expenditures related to Mr. Veniez. Gordon Sebastian indicated Thus we (GTS) have reason to believe that all Mr. Veniezs costs will be reimbursed. The disbursements had not been reimbursed as at the time of our review, notwithstanding the $2.1 million of funding provided to GFEI identified in Table 5 above. If Gordon Sebastian is correct in his statement, then question arises as to why the amounts paid to Mr. Veniez by GTS could not have been paid from the funds provided by GTS to GFEI? There was no contract on record and no documentation of authorization by the GTS Board for a contractual arrangement.

6.9

Trilliant Ventures Inc.

Trilliant Ventures Inc. is apparently a company owned by Rick Connors. Based on a review of the GTS electronic files, we identified the following payments to Trilliant Ventures Inc.: Fiscal year ended March 31
2009 2010 2011 2012 $0 $5,000 $20,848 $28,791

According to Elmer Derrick, Rick Connors was engaged to work with the Suskwa Watershed and not the GTS. There was no contract on record and no documentation of authorization by the GTS Board for a contractual arrangement. Rick Connors has subsequently become the CEO of the Gitxsan Development Corporation.

6.10

Roger Tasse
Fiscal year ended March 31
2009 2010 2011 2012 $0 $0 $0 $24,978

Based on a review of the GTS electronic files, we identified the following payments to Roger Tasse:

According to Elmer Derrick, Roger Tasse was engaged to deal with one issue.
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Alleged Conflict of Interest

7.1

Vescor

Based on a review of the electronic accounting records for the period April 2008 to May 31, 2012, we identified that Vescor was paid the following: Fiscal year ended March 31
2009 Oil & gas business, etc Min/wild policy depos. Min/wild Phase 1 Sub-total 2010 Phase 2 Loop & Yajasxw Phase 3 Phase 4 Unknown Unknown Sub-total Total $ 26,250 80,000 30,000 $136,250 $30,000 30,000 30,000 30,000 30,000 $150,000 $286,250

Gordon Sebastian indicated that GTS has engaged Vescor since 2001. We were advised by Beverley Clifton Percival/Gordon Sebastian that Vescor created the technical expertise framework and related policies, in the areas of oil & gas, forestry, water & fish, minerals, and wildlife. Elmer Derrick indicated that this entity is owned by Chief Don Ryan, who apparently is the uncle of Beverley Clifton Percival. Beverley Clifton Percival confirmed the ownership and the relationship. Elmer Derrick further stated that the fees charged were exorbitant and that legal counsel were apparently not happy with the work product.

7.2

Elmer Derrick Control and Conflict of Interest Issues

Based on a draft Executive Directors Report (Gordon Sebastian), dated December 29, 2011 (See Appendix B attached), there were a number of issues identified regarding Elmer Derrick.
i. ii. iii. iv. v. Operating without negotiation team for over a year Took full control of the LTFA(Long Term Forestry Agreement) and appears to have accepted a MOF meager offer not abiding by legal advice of BHT He is into an arrangement with Valard Construction re Northwest Transmission line He is a signatory for Pretivm Mining Company who are seeking to consult with GTS He is attempting to make a deal with Gitxsan fibre to KFP sawmill and form a company between Gitxsan and a Chinese company

According to Gordon Sebastian, he has now obtained explanations from Elmer Derrick such that he no longer has these concerns regarding Elmer Derrick. However, in respect of issue (i), the question remains as to how Elmer Derrick could provide an explanation that satisfies that he wasnt working without the negotiation team for a year.

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Appendix A Employment Agreement for Executive Director, Gordon Sebastian

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Appendix B - Draft Executive Director Report dated December 29, 2011

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