A Nova Scotia First Nation has called in the RCMP to investigate its partners in a cheese business that went sour.

Between 2017 and 2019, the federal government spent over $2 million on a failed Glooscap First Nation business venture to import, process and distribute 25 tonnes of feta cheese from Greece.

In a lawsuit seeking damages, the Annapolis Valley band says it was the victim of fraud perpetrated by its partner in the project, Ilia Gourmet Canada, led by Peter and Dimitri Tsakanikas.

Two other companies and three individuals are also named, including Claude O’Hara, former vice-president of corporate development at Glooscap Ventures, the band’s business development agency.

In the civil action filed last month, the band claims it paid for processing equipment that never materialized, and salaries and vehicles it later discovered were employed at other Tsakanikas businesses.

Glooscap Ventures acting CEO Elizabeth Morine said the band was alerted to problems by a year-end audit and other “routine financial oversight.”

“Glooscap Ventures identified irregularities in spending and accounting projects associated with former partner, Ilia Gourmet Canada Incorporated,” Morine said in a statement to CBC News.

“As soon as these irregularities were confirmed, Glooscap Ventures referred the matter to the RCMP, where it currently remains under investigation. While it is too early to confirm the exact impact, we understand that the total funds currently under review are in excess of $3.1 million.”

The business partnership operated as Glooscap Ilia Gourmet Foods GB Limited, where Dimitri Tsakaninkas was general manager.

The band alleged its former vice-president of corporate development, Claude O’Hara, was responsible for vetting Ilia Gourmet and was negligent in not warning the band when he discovered a prior allegation of fraud had been made against Peter Tsakanikas.

It claims O’Hara falsely told Chief Sidney Peters, band council and the board of directors of Glooscap Ventures that the background check was positive in all respects, when he knew otherwise “to support his own personal interests.”

In the statement of claim, the band says O’Hara — a former RCMP officer — is now a director of “a federally incorporated business venture affiliated with Dimitri and Peter Tsakanikas.” The business was not identified.

O’Hara has not filed a defence in the case.

His lawyer, Derek Brett, said he will vigorously defend the suit.

Defendants respond to allegations

Last Friday, all others named in the civil action filed their defence, disputing some facts claimed by Glooscap and denying any wrongdoing or harm caused by their actions.

They say Glooscap officials were aware of spending on the feta business, including the rental of a house and leasing of vehicles.

“At all material times payments were made for salaries of the employees that were being used on a full-time basis by Glooscap Ilia,” the defence states.

The failure to complete and secure approval from the Canadian Food Inspection Agency for a processing facility was blamed on actions by Glooscap, including the band taking possession of some equipment that did arrive in Canada and confusion over location.

Over $2.3 million was paid for processing equipment that never made it to Canada.

The defence says the machinery remains in Greece pending resolution of issues under dispute.

Feta expiration

The band claimed it paid $361,000 for a shipment of feta, but an expert it hired said it was worth half that amount.

The first tubs expired in August 2019 and the rest expires at the end of this month.

The defendants say CFIA could extend the life for another 12 months, but an offer to have its cheesemaker apply on their behalf was not accepted.

Both Ilia Gourmet and Glooscap agree that businessman Peter Tsakanikas approached the band in the fall of 2017 to make Glooscap the exclusive North American supplier for the family feta operation in Thessaloniki, Greece.

Glooscap given European free-trade dairy quota

In April 2018, the Trudeau government awarded the band a quota under the Canada European Trade Agreement to allow Glooscap to import 25½ tonnes of feta cheese from Greece.

The 300-member band is located in the riding of Kings Hants, which was represented by Scott Brison, who was Nova Scotia’s representative in the federal cabinet.

The Atlantic Canada Opportunities Agency loaned the band $1.1 million and Indigenous Services Canada contributed $1 million toward the project.

ACOA is still owed $907,000 on its loan.

Both agencies declined comment on the level of due diligence exercised in this project.

“Indigenous Services Canada (ISC) is aware of the situation between Glooscap Venture and Ilia Gourmet. ISC is not a party to the litigation between the parties. ISC will continue to work closely with Glooscap First Nation to determine next steps and assist them to meet their economic development goals,” Indigenous Services Canada spokesperson William Olscamp said in a statement to CBC News.

‘Disappointing and unfortunate’

Morine called the situation “disappointing and unfortunate.”

“We are grateful for the support we are receiving from the community, our stakeholders and funding partners,” she said. 

“Our core focus remains continuing our important programs, services and businesses that facilitate growth and capacity building in the community of Glooscap First Nation.”

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