Skip to content

Judge slams ‘miscarriage of justice’ in Norman Wells fraud case

watson2

“Reprehensible.”

“Troubling.”

“A miscarriage of justice.”

Justice Karan Shaner didn’t hold back in admonishing the Town of Norman Wells for providing incomplete, “sloppy,” and “downright misleading” information in an ongoing lawsuit against ex-mayor Nathan Watson and former senior administrative officer Catherine Mallon.

Both Watson and Mallon, who are accused of defrauding the town out of $1.25 million, had their assets frozen in May following an application brought forth by the town.

The injunction, invoked only when a judge is convinced there is a risk of a defendant moving assets or absconding before a civil judgement is made, was granted by Justice Andrew Mahar. At the time of the application, legal counsel for the town indicated Watson and Mallon had likely absconded, citing an inability to locate them to serve notice of the legal action.

In granting the order, Mahar relied on materials submitted by the town: a statement of claim and a sworn affidavit from current Norman Wells SAO Cathy Clarke.

Clarke alleged the defendants committed fraud by concealing a November 2016 amendment to Mallon’s employment contract from town council, and by misappropriating funds for their personal gain through improper expense and overtime claims. Clarke and the town alleged some of the misappropriated dollars were relayed by Mallon to Watson to purchase semi-trucks for his business.

But as the court heard Wednesday, the town failed to provide key disclosure in an application that ultimately froze the assets of Watson and Mallon for months - a move their respective lawyers said had devastating consequences for the pair.

Clarke’s affidavit relied heavily on what she described as a “forensic” audit - a report, not provided to Mahar, drafted by an accounting firm - to back up the town’s allegations of fraud.

In July 2017, a MACA-appointed inspector probed the town’s bylaws, policies and financial and administrative records from Jan. 1, 2015 to July 31, 2017, following conflict of interest and breach of confidentiality complaints and allegations of improper council procedures, Mallon's lawyer, Matthew Woodley, said.

The review found no evidence of fraud on the part of Mallon during that period, the court heard.

Rather, inspector John Hazenberg praised her performance, according to his affidavit.

But Mahar never saw the report. It wasn’t included in the town’s disclosure.

Ex-Norman Wells mayor Nathan Watson dons a cap with the words 'Read the Transcript' stitched on it outside the Yellowknife Courthouse Wednesday. Brendan Burke/NNSL photo.

In her sworn affidavit, Clarke alleged Watson signed a new employment contract for Mallon behind closed doors, without town council’s knowledge. In October, when questioned about her alleged knowledge of the backroom deal under cross-examination by Mallon’s lawyer, Clarke said the claim was based on the fact she hadn’t seen any indication the contract had been approved by council.

“And because you haven't seen an indication that it was approved you've reached the conclusion that it was intentionally withheld; is that correct?” asked Woodley.

“Yes,” replied Clarke, a transcript of her cross-examination shows.

Questioned further by Woodley, Clarke went on to admit she had no knowledge of any illlegitimate payments to Watson, nor did she have any knowledge Watson’s trucking company benefiting from the alleged fraud.

Furthermore, the court heard there was nothing to support the relied-upon report being qualified as a“forensic” audit.

Shaner, left “extremely troubled” by Clarke’s discrepancies and omissions made by the town, noted the report was only a draft.

It was never finalized - a fact Clarke confirmed under cross-examination.

“Had the whole picture been in front of judge, I doubt very much the order would have been granted,” lamented Shaner.

Shaner, stressing the need to deter the kind of behaviour that led to a "miscarriage of justice,” in this case, ordered the Town of Norman Wells to cover solictor-client costs racked up by the defendants during the course of the freeze order, a step rarely seen.

Mallon, sitting in court, was visibly emotional throughout the hearing. She broke down in tears when the order - after seven months - was lifted.

As a result of the allegations and the subsequent freezing of Mallon’s assets, Woodley told the court his client has had her reputation tarred - rendered unemployable and restricted from accessing her own property.

Order had 'profound' impact on Watson 

Watson, clutching a ballcap with the words "Read the Transcript" emblazoned on it, wiped away tears in court.

"I was emotional in the courtroom because this has had a profound effect on not just my life, but my kids, my friends, my friend, everyone who cares about me and knows about me," Watson told NNSL Media outside the courthouse Wednesday.

Watson said the order, which halted activity with his trucking business, hurt him and his family fianicially. He's spent "tens and tens of thousands," in legal fees. Watson said he's often called a thief online.

"Clearly it’s tough to get behind the guy whose name has been splashed across the front page as the guy who stole 1.2 million from the town he was mayor of," said Watson.

Watson continues to "categorically" deny any wrongdoing in relation to the ongoing fraud case.