Betting against the house

WINDOW ROCK, Dec. 6, 2007

A group that includes a former tribal president, state senator and council delegate has filed notice of intent to sue the tribe to stop it from borrowing up to $100 million to build casinos on the reservation.

The group, which calls itself Ha'a'da'a Sidi, held a press conference Tuesday in Window Rock to explain the reasons behind the suit, which will seek to enjoin the tribe from tapping a $100 million line of credit from JP Morgan Chase Bank.

They contend the loan deal is flawed for several reasons. The critics claim it does not adequately protect the tribe in case of default or mismanagement of loan monies.

It fails to restrict the tribal assets that the bank could go after in case of default, and would allow the tribal president too much latitude to spend the money for non-gaming purposes, they said.

In addition, they accuse President Joe Shirley Jr. of not consulting the chapters or Navajo voters before signing the deal.

Many in Ha'a'da'a Sidi voiced their complaints at a press conference in Kayenta in October, but the Navajo Nation Council approved the line of credit agreement a few days later.

The group includes some high-profile members such as former chairman Peter MacDonald, Milton Bluehouse Sr., and former New Mexico state senator Leonard Tsosie.

Also in the group are people who have clashed with Shirley over the proposed Desert Rock Energy Project and the Bennett Freeze agreement.

Many critics

People in the Shirley administration characterize the critics as "people who have been opposed to anything the Shirley administration has done for the Navajo people." But concern about the $100 million line of credit extends beyond the group now threatening legal action.

The Shiprock Chapter passed resolutions opposing the council's decision to approve the line of credit and is urging the council to reverse its approval.

MacDonald, though not a named plaintiff in the lawsuit, said in a statement that he is also concerned about the line of credit.

"I am sure the majority of the Diné do not want their land, natural resources and other assets to be pawned," he said, adding that his understanding of the arrangement indicates that this is not much different than a payday loan.

"Thousands of Navajo veterans have fought in many wars to protect and keep our assets, resources and tribal sovereignty, not to have it pawned to outside financial predators," he said. "I hope the proposed lawsuit helps clarify many of our concerns." Bluehouse, a named plaintiff in the lawsuit, stressed that opposition to the line of credit does not mean that the group is opposed to casinos on the reservation.

"We are just opposed to the way they are going about it," he said.

Bluehouse and several others said their primary worry is a provision in the agreement that would allow the bank to go after "any and all assets" of the tribal government if the casinos don't make money and the construction loan goes into default.

This would include the Permanent Trust Fund, said Tsosie, now a council delegate for Pueblo Pintado, Whitehorse Lake and Torreon.

The tribal council could have insisted on a clause to exempt the assets of the trust fund - worth more than $900 million - but opted not to do so, he said.

Tsosie, a lawyer, is not one of the 10 named plaintiffs in the pending lawsuit but he has been the most vocal member of the tribal council to question the proposal.

It was his opposition when the loan deal first came before the council that convinced a majority of delegates to table action until the details could be explained.

A question of trust

"The recent situation with OnSat and several divisions including the Office of the Controller reveals Navajo President Joe Shirley's administration cannot be trusted to deal ethically and abide by Navajo laws with non-Navajo business interests," Tsosie said, alluding to contract problems identified in a recent tribal audit of OnSat, a contractor with close ties to Shirley.

Bluehouse said many questions remain unanswered today and that's one reason why he is disturbed about the whole proposal.

The group contends the line of credit is so important to this and future generations of Navajos that the council should have called for a voter referendum on it.

Former Tuba City delegate Billy Reese Kee, a named plaintiff, said he would like to see the tribal council take a lead role and recall its earlier resolution in favor of the loan deal.

Alfred Bennett III of Shiprock, another named plaintiff, said he felt this was another situation where the tribal council was pressured by an outside organization - JPMorgan Chase - to approve a deal that is beneficial to the bank and not the tribe.

The agreement is "for the best interest of the outside agency and not the tribe." The decision also was made with little or no input from the chapters or the grassroots Navajo and is just another example of why "we need to reform our government," Bennett said.

Vern Lee of Fruitland, N.M., who ran against Shirley in 2006, is another plaintiff in the suit.

Lee said the Navajo Nation must pursue gaming development "in a manner that upholds and respects the credibility and integrity of the Navajo people's government" and does not create "massive financial burden that will be paid back by future generations of Navajo people and their children." In its presentation to the Navajo Nation Council, the Shirley administration argued that the loan deal has many advantages for the tribe. For instance, the tribe would only pay interest on the amount that is borrowed. Repayment will come from profits made by the casino.

The tribe carefully researched the best location to open its first casino, and followed its consultants' recommendations, supporters said.

The deal also requires tribal financial officials to keep close tabs on spending and revenues so if the casino doesn't make money, the tribe can pull the plug without encumbering the entire $100 million.

Bob Winter, who came out of retirement to be the tribe's gaming czar, told council members that this is one of the best agreements he has seen in his 30-year career. Winter said he has negotiated more than a billion dollars' worth of deals between tribal governments and banks.

Strategy outlined

Attorney Jim Zion of Albuquerque, former general counsel to the tribe's judicial branch, is the lead plaintiff's attorney. He said the group will seek declaratory relief only - an injunction - and will name specific tribal officials rather than the Navajo Nation itself.

This is the same approach that groups used successfully several years ago to oppose a tribal council resolution that gave raises to the delegates of the council. Instead of naming the council, the suit named the individual council delegates who would profit from the decision and those who were charged with implementing it.

The proposed suit in this case also names unidentified people within the tribal government who have the responsibility to implement the tribal council resolution. Among the officials likely to be defendants are Mark Grant, the tribe's controller, who is responsible to overseeing the financial aspects of the line of credit.

The group hopes by doing this they will be able to avoid having the case thrown out because of the tribe's sovereign immunity.

Zion cited a recent Navajo Nation Supreme Court case dealing with the Forgotten People of the Bennett Freeze area as also upholding the group's right to bring this case before the Navajo tribal courts.

Ray Etcitty, legal counsel to the Navajo Nation Council, doesn't think the group will be able to overcome sovereign immunity arguments and said the courts take issue with people who file lawsuits just because they don't like how a governmental body voted on a particular issue.

If these kinds of suits were allowed, he said, the courts would be clogged with lawsuits from people upset at any kind of financial decision made by the tribal council. It would keep banks from loaning money to the tribe or tribal enterprises for fear that someone would file a lawsuit.

The law requires the tribe to be given 30 days notice before a lawsuit is filed. Once it is filed in tribal district court, the tribe would then have 60 days to respond.

That's a delay of 90 days before the courts would have an opportunity to act. With plans to build the first casino now on the fast track, Zion was asked if the loan may already be out by the time a judge could act.

Zion said that if he were an official for JP Morgan Chase, he would be very careful about releasing any money to the tribe as long as the threat of litigation is in the air. Otherwise, the bank - not the tribe - could end up liable for any funds expended while the case is in court.

Etcitty, however, doubts the threatened lawsuit will slow down the tribe's plans to open its first casino by July. The tribe is now in the process of hiring an architect and casino manager, according to Winter.

Etcitty predicted that JPMorgan Chase would seek a legal opinion which will say the lawsuit has no merit, and then go forward with the loan.

"This suit is being brought by a bunch of people I've heard described as former tribal officials and wannabes," he said. "These people are just upset because they are not involved in gaming." The other named plaintiffs are James Henderson Jr., Ivan Gamble, Eddie Arthur, Arnold Yellowhorse, Norris Nez, Elouise Brown, and Ambrose Teasyatwho.