Ex-AG: No merit to civil charges

By Marley Shebala
Navajo Times

WINDOW ROCK, Aug. 4, 2011

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When Louis Denetsosie was the Navajo Nation's attorney general, he made the decision to ask for a special prosecutor to investigate business dealings with OnSat and BCDS and the discretionary funds of the Council and speaker.

That was on Dec. 29, 2009.

In January 2011, the Window Rock District Court's Special Division approved a request by Denetsosie to widen the scope of Special Prosecutor Alan Balaran's investigation and possible prosecution.


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Denetsosie asked for the inclusion of the Tribal Ranch Program, the president's office's discretionary funds, and an accounting of federal and tribal funds by the controller's office regarding disbursement of deferred compensation payments to elected officials and political appointees "without deductions for salary, travel, tax or any other required deductions."

But on July 28, 2011, Denetsosie found himself and his former deputy attorney general, Harrison Tsosie, among 85 top officials named in a 49-page civil lawsuit alleging breach of fiduciary duty regarding more than $36 million in tribal, federal and state funds.

Denetsosie is currently working as general counsel for the Navajo Oil and Gas Company, a tribal enterprise.

Tsosie is the current attorney general.

Denetsosie and Tsosie are named for the alleged unlawful use of $36 million because they approved a contract with outside attorneys to represent President Joe Shirley Jr. against the special prosecutor.

"There is no merit whatsoever in the claim made against me by the special prosecutor," Denetsosie said in a two-page written statement issued Tuesday. "I will contest this claim vigorously, with the thankful recognition that people who know me and know the accomplishments of my lifetime of work for the Navajo Nation are giving me their full support.

"Rather than focus on the non-Navajos who have apparently absconded with Navajo money, the special prosecutor focuses on Navajo leadership, alleging that I and others breached our fiduciary duties to the Navajo Nation," he noted. "Nothing could be farther from the truth.

"Notably, the special prosecutor does NOT allege that I acted in any way for personal gain; rather, he misunderstands the role of the attorney general with respect to the Navajo Nation Council which has its own legal representation and with my decision to permit President Shirley to have independent legal representation where the Navajo Nation Department of Justice could not ethically provide such services," he stated.

He added, "Notably, the claim against me states that the OnSat matter involved a 'scheme to enrich OnSat officials [where] the Nation did not receive the Internet connection services for which they had bargained.'

"This is the initial matter that the special prosecutor was supposed to look into, but he has not brought one lawsuit to recompense the nation for this 'scheme,'" Denetsosie noted.

In December 2009, Denetosie and Tsosie approved the hiring of Gallagher & Kennedy of Phoenix to represent Shirley in the 21st Council's suspension of him while an investigation was conducted of OnSat and Biochemical Decontamination Systems Manufacturing Inc., which allegedly received preferential treatment from Shirley.

The Council suspended Shirley after they heard investigative reports on OnSat and BCDS in October 2009. The Council commissioned the reports at a cost of about $500,000 after Denetsosie declined to seek a special prosecutor, saying he saw little evidence of criminal wrongdoing despite highly critical audits.

The auditors found that the tribe had overpaid about $650,000 to OnSat for Internet services to chapters, agencies, and the president's office.

The tribe started Internet contracts with OnSat, a now defunct Utah-based company, in 2001. The contracts initially were for $2 million but quickly ballooned to more than $33 million, often circumventing procurement rules and other safeguards.

The audit of BCDS found that former CEO Hak Ghun had spent more than $3 million of the company's money on gambling, golfing, vehicles, relatives, friends, and other personal expenses.

The tribe became 51 percent owner of BCDS after investing $350,000 from the Business Industrial Development Fund. It later put up $2.2 million from the Navajo Dam Escrow Fund as collateral for a $2.2 million business expansion loan from JP Morgan Bank.

In August 2010, Controller Mark Grant, who was named in Balaran's July 28 civil lawsuit, confirmed that the tribe had to use $2.2 million from the $5 million dam escrow fund to repay the JP Morgan loan in December 2009.

Grant said the tribe could prevent such losses through due diligence - scrutinizing the history, qualifications and character of proposed business partners - and "not being in such a hurry to jump into bed with these guys."

The tribe's review of Ghun apparently missed information that was readily available through a Google search of his name, which yields information that he was among seven individuals convicted of an $11 million fraud scheme in 1984, for which he served three years in federal prison.

On Monday, Grant declined to comment on the July 28 civil lawsuit against him.

After tribal courts declared the Council's suspension of Shirley illegal and Shirley returned to office in December 2009, Denetsosie and Tsosie approved four-contract modification for Gallagher & Kennedy to continue representing Shirley.

The contract modifications occurred in April, July, and twice in September in 2010.

Gallagher & Kennedy submitted nine invoices in 2010 and one in March 2011. Tsosie, as attorney general, approved the payment of the March 2011 invoice. The total amount paid to the Phoenix law firm to represent Shirley was about $150,000.

In June 2011, the Navajo Times obtained 300-pages of court records that showed that Balaran subpoenaed about 16,000 records from Shirley involving his investigation of alleged corruption by Shirley and others, including his chief of staff Patrick Sandoval, in the tribe's business dealing with BCDS and OnSat from 2005 to 2009.

Sandoval is currently working as the director for the Navajo Occupational Safety and Health Administration.

But Shirley had Gallagher and Kennedy block Balaran's investigation of BCDS and OnSat by arguing that Shirley's records were protected by attorney-client privilege.

Balaran argued that Shirley should not be allowed to control the release of information to investigators, especially since Shirley had a hand in business dealings was with BCDS and OnSat.

Since Shirley is no longer in office, the Navajo Times asked Shelly if he had released the records that Balaran subpoenaed, which included the executive office's discretionary fund.

At press time on Wednesday, Shelly had not responded.

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