Wells Fargo Bank has sued California’s Picayune Rancheria of Chukchansi Indians in New York state court over the bank’s contention that the tribe has cooked up a “scheme” to avoid paying back a $250 million loan the bank made in 2012.
The lawsuit also names the Chukchansi Economic Development Authority (CEDA) and the Chukchansi Finance Company, LLC. The tribe is based near Coarsegold, in the state’s Central Valley.
The loan was made to refinance debt from the tribe’s Chukchansi Gold Casino and Resort. Terms included the requirement that once the tribe reopened in 2015 (after 18 months of being closed due to tribal infighting) that the development company would put cash into a deposit account.
The account was to be used by the tribe to fund casino operations, service other loans and pay monthly stipends to individual tribal members. Any cash left over was supposed to be used to service the loan to Wells Fargo.
The lawsuit claims CEDA and the tribe deliberately stockpiled cash to avoid putting it in the account, violating the terms of the loan. In the court documents the bank argues, “Every dollar CEDA diverts from the deposit accounts is a dollar of collateral lost to the trustee and holders forever and a dollar that will never be available to make payments on secured notes.”
The bank claims the tribe began stockpiling cash in February 2013, when the court first stepped in to enforce payment to the account. The following year the National Indian Gaming Commission forced Chukchansi Gold Casino to close after tribal infighting over who constituted the legal tribal council sparked violence and charges of assault and kidnapping.
Eighteen months later the casino reopened, but without revenue from the casino it had fallen behind on its payments. According to the bank, the casino reopening would not have been possible without the help of loan.
The lawsuit claims that recently the tribe created an affiliate lender and used that to loan $2 million to CEDA, which, combined with another $12 million it had been stashing away, it used to pay other lenders from that same period.
Besides the above allegations, the bank also claims that the tribe informed investors that it would cease making loan repayments after September 30, 2019, which would also violate the terms of the loan.
Although local papers such as the Fresno Bee have reached out to the tribe for comments it has so far declined to make a statement about the lawsuit.
