Civil suits filed against 135 in slush fund scandal
By Bill Donovan
Special to the Times
WINDOW ROCK, Aug. 4, 2011
(Times photo - Rae Yazzie)
These replace the criminal charges Alan Balaran filed earlier against 77 former and present members of the Council and then dismissed them.
This time he charged 81 members of the 21st Navajo Nation Council who served in office between 2007 and 2011, as well as former President Joe Shirley Jr., former Attorney General Louis Denetsosie, the current attorney general, Harrison Tsosie, and the controller, Mark Grant.
He also lists "John Does 1-50," unknown individuals and employees who had a part in the illegal distribution of discretionary funds.
The total number of individuals facing charges is 135.
Seven of the members of the 21st Navajo Council who were not named in this lawsuit had been named in the original criminal charges - Jerry Bodie of Sanostee, accused of misappropriating $17,600; Herman Daniels Sr. of Oljato, $4,025; Rex Lee Jim of Rock Point, $3,200; Tom LaPahe of Tachee/Blue Gap/Whippoorwill, $10,400; Laurence Platero of Tohijilee, $2500; Roscoe Smith of Crystal/Red Lake/Sawmill, $650 and Harold Wauneka of Fort Defiance, $650.
These seven reportedly had entered into a plea bargain with the special prosecutor or worked with him on a plea agreement.
Discretionary funds were money allocated to delegates and the president's office to provide assistance to citizens in need.
The suit goes after former and current members of the Navajo Nation government for actions that "covertly manipulated and converted Navajo, federal and state funds resulting in a disparity of wealth whereby the vast majority of the Nation lives precipitously on the edge of poverty while those in positions of authority have amassed considerable wealth."
In short, instead of promoting the well-being of their constituents, the civil suit claims they practiced the "art of self-dealing, ineptitude and secrecy."
Instead of treating their positions in a honest and trustful way, the suit claims delegates used "incompetence and dishonesty."
Balaran said in the suit he not only wants restitution but also the immediate removal of any of the Council delegates and tribal officials who are still in office. Eleven of the Council delegates still serve on the 24-member Council. Tsosie is still attorney general and Grant is still the controller.
Balaran said he also wants the court to appoint a "financial receiver" to take over the duties of the controller.
According to the suit, each member of the Navajo Nation Council received approximately $250,000 between 2005 and 2010, which they "unlawfully appropriated to themselves, their families, friends, other delegates and their friends, resulting in a total unlawful expenditure of tens of millions of dollars of the Navajo Nation."
The suit later claims that the delegates, with the assistance of former Speaker Lawrence Morgan and with the permission of Shirley, "appropriated approximately $35 million during fiscal years 2005 through 2010."
The lawsuit also indicates that the Council delegates may have also violated federal IRS laws when they adopted a policy a month after the fund was created that eliminated the requirement that the awards be reported to the IRS.
"In one sampling of awards, the (delegates) gave more than $2 million to 130 recipients with little regard to the beneficiary's indigency," the suit states. "These recipients were given checks in amounts ranging from $10,000 to $54,000."
Another sampling showed that family members of 14 delegates received awards ranging from $51,000 to $130,000.
The suit singles out Katherine Benally, who represented Dennehotso in the last council, saying that between 2005 and 2010, she "misdirected" $130,000 to herself, various family members and other people who were ineligible to receive the funds.
In giving out the funds, the suit says Benally manipulated the names and social security numbers of her beneficiaries to conceal payments to herself and her immediate family. By doing this, she was able to direct $34,685 from the discretionary fund to her five sisters, one uncle, one daughter and two cousins.
She also used the funds, according to the suit, to purchase a wide range of building supplies and pay off personal debts. Some of the checks went to United Builders ($12,500), Home Depot ($12,000), San Juan Mobile Home Supply ($917) and OnSat ($4,244).
Benally, during a press conference last Friday in which several of the named Council delegates sharply denounced the suit, said she was innocent of all of these charges (see separate story).
Morgan was also singled out with claims that his share of the discretionary funds during those years amounted to $1.6 million.
Although there were laws in place that limited awards to individuals of not more than $300 in any given year, the suit said Morgan ignored this and other restrictions by awarding money to himself and his family members "to pay for legal bills, shopping centers and to subsidize rodeo events."
"Acting in concert with other defendants - particularly Young Jeff Tom, Hoskee Kee, Johnny Naize, Woody Lee and Mark Maryboy - Morgan unlawfully manipulated his position to award discretionary funds to his wife, sister, daughter or grandson," the suit says, adding that the total amount provided to Morgan's family was about $50,000.
The suit also talks about a charitable contributions fund set up by Morgan - with about $2 million of tribal funds between 2004 and 2010. To administer the fund, he hired Laura Calvin.
She received a salary and was supposed not to benefit from the fund but the suit said that Morgan regularly awarded thousands of dollars from the discretionary find and the charitable fund to her and Amanda Teller, who is her daughter with Council delegate Leonard Teller.
Morgan was also accused in the suit of expending money from the charity for the political campaigns of those delegates he favored.
"In total, Morgan awarded approximately $10,000 to himself, as well as untold thousands of dollars to other ineligible employees, and $300,000 to unnamed individuals and organizations under the guise of being contributions," the suit states.
Grant, who has been controller for the tribe for more than nine years, failed, according to the suit, to carry out his responsibilities to make sure that tribal funds were properly distributed.
From 2005 to 2010, Grant failed to adhere to generally accepted accounting principals, thereby "engaging in a continuous violation of both Navajo and federal law." These problems have resulted in the tribe having to return more than $100 million in state and federal grant money.
The suit also claims that Grant allowed a major violation of federal and state law by commingling grant funds and using funds from one grant to support another grant.
In tribal matters, Balaran's suit claims that tribal council delegates received more than $2 million in salary and travel advances during those years and Grant made no effort to follow tribal laws to make sure that these funds were reimbursed by the delegates.
The suit points out that Grant is not a certified public accountant, nor has he hired a CPA to work for his department during the time he has been there.
If he had carried out his duties as required by tribal law, the suit said that the loss of $36 million in misspent discretionary funds would not have occurred.
As for Shirley, the suit claims that he "collaborated" with Morgan and members of the Navajo Nation Council during those years to approve "the passage of dozens of unlawful budget appropriations that resulted in the unlawful conversion of tens of millions of dollars in Navajo nation funds."
The suit claims that Shirley, in signing all of these resolutions, was aware that the monies were being spent to enrich the Council delegates and their families. Shirley, however, has stated that he had no knowledge that tribal laws were being violated by council delegates.
Shirley was brought into the suit because he approved budget resolutions which included funding for the discretionary fund. He didn't have the authority to veto a portion of the budget until voters gave him the line-item veto in a special election in 2009.
Both Denetsosie and Harrison were sued in connection with their approval of a contract with the Phoenix law firm of Gallagher and Kennedy to defend Shirley in the investigation that was being undertaken by Balaran into Shirley's involvement into the OnSat and BCDS controversies. The firm was given $150,000 for these services.
By doing this, the former and current attorney general tried to impede the special prosecutor's investigation. The two should have also known, according to the suit, that approval of the discretionary funds was "not in the best interests of the Navajo Nation" and that the way the council did it contravened Navajo laws.
The matter is now before the Window Rock District Court but so far no decisions have been made as to how the lawsuit will proceed.
Normally, in civil suits, the various defendants have 30 days after being served with the suit to respond to the charges. After that comes months - and sometimes years - of discovery, which will include the sharing of documents and depositions.