Lock Latu is poised to join Canterbury next season with Flanagan claiming the teenager's agent, Michael Chebl, handled talks with the club "terribly".
Latu has yet to play NRL but has been named in the Dragons' extended squad that will face the Sydney Roosters in Friday's Anzac Day clash.
"I wanted to keep him and I'm not happy about the negotiation side of it," Flanagan said.
"It's been handled poorly, terribly.
"Sometimes you lose them because you're not willing to pay a certain fee, or you don't want the player, but we wanted to keep him, and we're not happy.
"The way that it was handled by his management, was handled poorly, really poorly.
"We've brought that young bloke up the last three or four years and we wanted to keep him and never got an opportunity to."
The Dragons said they made a strong offer for Latu, but no counter proposal was put forward by the player's camp despite assurances the club would be given a right of reply.
But the youngster's decision to walk away and join the Bulldogs has left a bitter taste in Flanagan's mouth.
The Dragons coach pointed to other examples of player movement through the early part of the season where clubs have been left feeling blindsided.
"I've got some good relationships with agents, and they're all got their pros and cons," Flanagan said.
"As I said, the handling of this one was poor.
"I've read Ricky (Stuart) is not happy to with what's going on with (Manly's pursuit of) Jamal Fogarty, we've got the Lachlan Galvin situation.
"It's too big a problem for me to solve, but I'm not happy about it."
