Two American litigation funders allege Alberta separatist leader Jeffrey Rath and his firm made “false, inaccurate, and misleading” representations to keep receiving millions of dollars to finance two First Nations lawsuits against Ottawa – even after his firm had been fired and replaced.
The allegations are contained in a lawsuit filed Thursday by Delaware-based Diriba Investments and Western Springs Investments, which are seeking $112.56 million from Rath and his professional corporation, RathPC.
None of the allegations have been proven in court.
The lawsuit was filed the same day a judge rejected Rath’s bid to release nearly $800,000 in frozen funds in a separate civil action involving another First Nation. Rath said he needed the money for legal fees and personal expenses – much of it related to his North American horse-racing “hobby.”
Rath continues to vocally advocate for Alberta independence on social media.
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Justice Lorena Harris refused the request, finding Rath had not provided a full accounting of his assets and financial position despite being ordered to do so.
“I have no confidence that the Rath Applicants’ disclosure is complete, transparent or reliable,” Harris wrote.
The lenders’ lawsuit escalates a dispute first reported by Global News last month. In late September, they signalled in court documents their intent to call in the debt, then estimated at nearly $109 million. On Thursday, they followed through by suing Rath and RathPC, alleging he had failed for more than two months to provide requested financial statements and an accounting of proceeds from the litigation they financed.
Rath has not yet filed a statement of defence. He declined to answer questions from Global News, saying: “Please stop bothering me.”
The lawsuit adds to a growing web of litigation involving Rath, his firm and several First Nations. Sturgeon Lake Cree Nation and Tallcree First Nation are separately suing Rath over millions of dollars allegedly withdrawn without consent from settlement trusts he administered.
Litigation funding is a large and controversial industry, primarily in the U.S. It allows outside investors to finance the cost of pursuing legal cases in exchange for a share of the compensation if the case is won.
Rath built a career suing the federal government on behalf of First Nations, securing treaty and claims settlements worth tens of millions of dollars. The American lenders’ lawsuit provides a rare window into how large-scale litigation funding operates, and, for the first time, how much Rath was underwritten for two of at least a dozen First Nations claims he has pursued.
The funders allege they signed a contract with Rath’s professional corporation, RathPC, in December 2018. They agreed to advance $25 million in five payments to finance individual lawsuits filed by the Thunderchild and Moosomin First Nations of Saskatchewan.
Rath initially received $10 million in 2018, followed by three more payments of $3.75 million between 2021 and 2023. The lenders did not advance a fifth payment of $3.75 million because Rath allegedly failed to obtain specialized life insurance.
The lawsuit alleges that Thunderchild fired Rath and his firm in September 2019, but that Rath did not disclose the termination to the investors until November 2024. They also allege Rath failed to disclose Law Society of Alberta proceedings in which he admitted misconduct arising from his representation of Thunderchild after it had fired him. He was ordered to pay $10,000 in costs.
The investors say they would not have continued advancing him money had they known Rath had been fired, accusing him of making representations “knowing them to be false, or recklessly, without regard for their truth or falsity,” to keep the money coming in.
Rath built a career helping First Nations sue Canada and Alberta, securing treaty and claims settlements worth tens of millions of dollars.
Global News
The contract entitled the lenders to annual returns of between 25 and 35 per cent, compounded annually, plus five per cent of net proceeds. The lawsuit does not provide a calculation showing how they arrived at the $112.56 million they now claim is owed.
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They claim broad contractual rights over proceeds from RathPC’s First Nations claims and other legal work covered by the financing agreement.
They are now suing RathPC, and Rath personally, for the entire amount because of what they allege are multiple breaches of their contract, including dissipating assets and failing to report money the lenders claim should have been paid to them.
After other law firms took over the Thunderchild and Moosomin cases and secured large settlements, Rath sued both First Nations for a total of nearly $60 million in contingency fees he claims he is owed.
Thunderchild and Moosomin deny Rath’s allegations.
The American lenders claim their contract allows them to “step in” and take over those claims, with any money recovered going to the lenders rather than Rath.
They also say the Tallcree litigation revealed that RathPC is pursuing another $90 million in unpaid fees from concluded settlements – claims they say had never been fully disclosed to them.
Tallcree escalates case against Rath
The Tallcree case started the domino fall of legal actions that has stricken Rath’s legal business, and he alleges, his personal finances.
In 2017, RathPC collected an $11.5-million contingency fee after Tallcree settled a $57.6-million claim with Ottawa. The firm then became trustee of the funds held for beneficiaries, including minors.
A judge later found Rath’s fee unreasonable and ordered $8.5 million returned to the trust. Tallcree alleges RathPC subsequently withdrew the same amount from the trust rather than distributing it to beneficiaries. Tallcree and Sturgeon Lake, whose trust Rath also administered, allege millions were improperly withdrawn from their trusts, including roughly $6 million and $12 million, respectively, in disputed administration and legal fees.
Rath denied misappropriating the money. He said he obtained legal advice before setting an annual administration fee of three per cent of the trusts’ declining balances.
Tallcree First Nation alleges Rath withdrew $8.5 million from the band’s trust fund and deposited into a new account at Bow Valley Credit Union, before buying $8 million in bullion.
Supplied.
In support, he filed statements of account itemizing fees charged to the Tallcree Trust, along with timesheets detailing work performed by lawyers at his firm. He maintains the litigation is part of a years-long effort by Tallcree’s leadership to gain control of its trust.
“No funds were misappropriated from the Trust by myself or any lawyer or staff at Rath & Company or RathPC,” he said in court records.
In July, the court froze Rath and his firm’s assets under an interim Mareva injunction and appointed an investigative receiver to trace the disputed funds. The American lenders have applied to have the receiver also act on their behalf.
The receiver has since alleged the $8.5-million refund was funded in part with $11.5 million transferred from the Sturgeon Lake Cree Nation Trust – another of Rath’s clients.
On Sept. 4, Tallcree escalated its case against Rath and RathPC again, seeking a $15-million judgment and broader powers for the receiver to recover disputed trust assets and enforce the court’s decision. The application is scheduled to be heard Oct. 29 and 30.
Rath says viability of law firm ‘at serious risk’
The court order allows the receiver to release some funds to Rath for approved legal and living expenses. He has been previously granted $135,000.
On Sept. 11, Rath sought nearly another $800,000 in frozen funds — including $350,000 for legal fees and almost $280,000 in horse-racing bills.
Tallcree opposed the release, arguing the $3 million held by Rath’s former lawyers could be traced to the disputed $8.5-million Tallcree refund. Banking records show both sums passed through the same RathPC account, where the reimbursement had earlier been used to buy $8 million in bullion and issue a $500,000 draft to Rath. Court records show that eight months later, the same account sent $3 million to his former lawyers.
In an affidavit supporting his application, Rath said the Mareva injunction and receivership placed the future of his law firm “at serious risk.” He said two lawyers have resigned and the orders jeopardized its efforts to recover $90 million in outstanding fees – the same fees the American lenders now say may fall under their agreement.
Rath called the Mareva order “entirely unjustified” and “not supported by any evidence,” while arguing the scope of the asset freeze and receivership was “hindering my ability to live.”
He has also filed four appeals challenging the trustee removal, the asset freeze, the receivership and the receiver’s access to the firm’s records.
“Releasing almost $800,000 would … use the property claimed by the [Tallcree] Trust to finance the Rath Applicants’ personal expenditures and defence,” Justice Harris wrote in rejecting the application. She said Rath’s evidence was “materially incomplete,” citing gaps involving his income, horses, corporate holdings, bank accounts and estate interests.
She stressed, however, that she was not finding Rath or his firm actually possessed undisclosed assets.
During an acrimonious Sept. 17 cross-examination, Tallcree lawyer Matthew Sammon challenged Rath and RathPC’s financial disclosures under the Mareva order.
Rath’s disclosure omitted three boats, a numbered company that had recently received $2.92 million from RathPC and at least four Royal Bank of Canada accounts, Sammon alleged. RathPC’s disclosure identified none of its bank or investment accounts.
The receiver has since identified at least 31 accounts held by Rath and RathPC across nine financial institutions, according to its second report filed Sept. 14. Rath denied deliberately concealing assets, saying omissions were mistakes.
As part of his application for the frozen funds, Rath submitted a stack of invoices that cover farriers, veterinarians, trainers, hauling, boarding and racing in Alberta and several American states, as well as phone and life insurance bills. He also sought $150,000 in unspecified future expenses.
Several of the invoices analysed by Global News were already long overdue when the Mareva order was imposed – at least three horse-related invoices were more than a year old.
Harris found the expenses were not “ordinary, necessary living expenses.”
Rath had also not listed the horses in his court-ordered disclosure of worldwide assets.
Under repeated questioning, Rath said that he did not know exactly how many horses he owned, eventually estimating “more than 10 and less than 30.” He said he omitted them because he considered them “liabilities,” not assets, and described horse racing as a hobby rather than a business.
According to Equibase, the official database for Thoroughbred racing in North America, horses listed under Rath’s owner profile have earned nearly $500,000 in Quarter Horse and Thoroughbred races since 2021. Those figures represent gross race earnings, before expenses such as payments to jockeys and trainers.
Rath once told courts that governments had failed First Nations, and is now being accused by some First Nations of failing them himself.
Global News
Rath also acknowledged that RathPC had paid horse-related expenses, describing them as “expenditures accruing to my personal account.” Banking records put to him included a $54,192 RathPC cheque to a prominent Alberta horse trainer, which Rath confirmed was a horse-racing expense, and a $117,401 payment to Keeneland Thoroughbred Sales that he said appeared to have been to buy a horse.
Rath rejected the suggestion he improperly diverted First Nations trust money to fund his horse racing. When asked how the horse expenses were accounted for in his law firm’s books, however, he said he did not know. “You would have to ask my accountant,” Rath testified.
An email included in Rath’s own court materials shows his accounting manager telling staff on Sept. 1: “We are no longer allowed to pay any of Jeff’s personal horse related expenses.”
As of Jan. 1, 2022, the Law Society of Alberta barred lawyers from using their general accounts “for any banking purpose not related to the law firm’s business or to conduct personal banking.”
The examination grew heated, with Rath threatening several times to end it, and his lawyer objecting more than 100 times to questions that he argued went beyond the scope of Rath’s application for living and legal expenses.
Asked to confirm information in records attached to his affidavit, Rath repeatedly said the documents “speak for themselves.”
When pressed, he replied: “You can call them whatever you want, sir. You can name them Fido, for all I’m concerned.”
