Former Norman Wells manager was paid $527,905 in overtime, lawsuit alleges

The Town of Norman Wells,N.W.T., is allegingits former mayor secretly sweetened the town manager's employment contract in 2016 helping the duo defraud the town of about $1.26 million.

According to a statement of claim filed May 3,former town manager Catherine Mallon began her job in November 2015, and a year later, her employmentagreement was revised.

The town filed the statement after reviewing a forensic audit of its finances. None of the allegations in the lawsuit have been tested in court. In addition to being named in the lawsuit, former mayor Nathan Watson is the subject of an arrest warrant a judge issued on Friday after Watson failed to show up in court to be sentenced for cocaine possession.

Watson says he missed his court date because it was held in Yellowknife instead of Norman Wells, and had difficulty arranging flights and accommodations. In court on Friday, a legal aid lawyer said Watson had contacted him that morning and said he had been in an accident the previous week and couldn't make it to court because of medical appointments and travel.

The town says it initially agreed to pay Mallon $182,000 annually, including salary, a northern allowance and a housing allowance,and give her six weeks vacation plus another two weeks off to account for any overtime.

The town alleges that in November of 2016,Watson signed a new two-year agreement giving Mallon an increase in her pay by $24,000, allowing her to collect overtime for anything in excess of 7.5 hours work each day, and giving her a full payout of the contract if she was terminated before it ended.

The town says the council at the time did not authorize orknow about the new agreement.

The lawsuit alleges that, as a result of the second agreement, Mallon was paid $527,905 for 3,887 hours of overtime, an extra $97,338 in salary, $67,090 in lieu time paid out, and $64,820 for unused vacation time.

It also alleges Mallon was paid $329,121 for expenses without providing receipts and without the knowledge of town council, and that she charged an additional $89,162 in personal expenses to the town credit card.

It further alleges Watson and Mallon conspired to sell the town a painting for $6,000 and that when council found out about it and directed the sale to be cancelled, they did not do so.

"The town was particularly vulnerable to the discretion and authority Mallon had over the town's assets and finances in light of her position," states the town in the lawsuit, "such that the misuse ... constitutes a breach of fiduciary duty causing injury, loss and damage to the town."

In total, the town says Mallon and Watson defrauded the town of $1.26 million. In addition to claiming that amount, it is calling for $250,000 from the two for punitive damages, plus the costs of the lawsuit.

Watson refutes allegations

In a two-page statement, Watson says he is innocent of the allegations and stresses he did his utmost to follow the law.

"I simply did not do what I've been accused of and believe that the facts once known in their entirety will reveal it," he states.

Watson does not directly address allegations he altered Mallon'semployment agreement or allegationsthat he and Mallon defrauded the town.

He also says his administration was "scrutinized" by the Department of Municipal and Community Affairs as well as third-party financial professionals and "at no time did anybody indicate [he]had done anything wrong."

Watson and town councillors lost their jobs in 2017 when the N.W.T. government dissolved town counciland appointed an administratorto handle the town's business. It hadreceivedcomplaints about alleged conflicts of interest, breaches of confidentiality and failure to follow legislation and council procedures.

The audit was ordered after a former administratornoticed Mallon's2016 T4 showed her salary was much higher than it should have been, according to the current mayor. Mallon no longer works for the town.

Mallon and Watson have 30 days to file a statement of defence.

In an emailed statement to CBC, Mallon says she has retained legal counsel, who have advised she provide no comment.

"I wish it was not so," she stated.

Read the statement of claim here: