Ruling In Lac du Flambeau Casino Bond Case Highlights Tribal Sovereignty Power Against Creditors

When the Lac du Flambeau Tribe fell behind on repaying $50 million in bonds that financed its casino in northern Wisconsin, bond issuer Wells Fargo asked a federal judge to appoint a receiver to run the casino and increase payments on the debt service. As reported on Turtletalk, the judge refused based on principles of Tribal sovereignty, leaving the bank and bondholders with few legal options other than negotiating with the Tribe.

In 2008, the Lac du Flambeau issued bonds to provide capital for the construction and operation of its casino. The bonds carried interest at 12% and required a monthly payment from the Tribe of approximately $800,000. With the economy plunging and over $46 million still to be repaid on the bonds, the Tribe stopped setting aside money to service the debt. Wells Fargo then filed suit in federal court to appoint a receiver to run the casino, in accordance with the terms of the bond agreement the Tribe executed with the bank.

The Tribe argued that the receivership clause in the bond agreement was so broad that it was actually a management agreement that would require approval by the National Indian Gaming Commission. The Commission had not been involved in negotiating the deal and did not provide any approval, therefore the Tribe argued that the agreement was void. The judge’s refusal to appoint a receiver essentially validated that position, leaving Wells Fargo with no direct ability to take control over the casino’s operations. “The entire agreement is a void issue,” said Tribal administrator William Beson.

The judge’s decision means the Tribe is not legally responsible to pay back the money, said Monica Riederer, the Tribe’s attorney. However, she said that does not mean the Tribe will completely renege on the debt. “They will do whatever they’re legally required to do,” Riederer said. Meanwhile, investors and Tribes across the country will no doubt closely monitor the impact this situation has on the ability of Tribal entities to obtain future bond financing. Having no ability to enforce collection of a bond debt is “a nightmare for investors,” said Megan Neuburger, an analyst who follows the Indian gaming industry for Fitch Ratings. “It’s sort of an investor’s worst-case fear.”


Grassroots Movement Pursuing Ban on Native American Mascots, Logos

Recently a local Madison newspaper ran an interesting story on a grass roots movement in Wisconsin to ban public schools from using Native American mascots, logos, or nicknames.

The article reported that, while the number of schools across the nation that have dropped or altered mascots and logos have increased over the years, not one state has passed a law banning usage of Native American mascots, logos, or nicknames to date.

Currently, lawmakers in Wisconsin are trying to pass a bill that would change this reality. The bill would create a process for people to complain about race-based logos, nicknames or mascots. Once a complaint was filed, the state Department of Public Instruction would hold a hearing and make a decision. If the Superintendent of Public Instruction ruled the complaint was valid, the school would have tweleve months to phase out the mascot or logo. And defiance would come at a high cost – a school could be fined between $100 and $1,000 a day for refusing to phase out the offensive mascot, logo, or nickname.

Because cultural competency is increasing, and knowledge of Native American history is expanding, some mascots and logos that once were viewed as entertaining are now considered racist and disrespectful. If even a small group of people find a mascot or logo to be offensive, it should be remove or phased out immediately. Cultural respect is far more important that maintaining imagery for the sake of entertainment; moreover, it is incredibly important to be culturally sensitive if we are to progress as a society that embraces diversity.

A legislative hearing on the bill is scheduled for March 17. The bill would have to pass both houses of the Legislature and be signed by the governor to become law. Native American educators and legislators have also started mobilizing and collaborating with the Wisconsin group in charge of the grassroots effort to support the movement, which they believe is important in making a positive change in the way Native Americans are portrayed in schools and in the community. It will be interesting to see if this bill is passed, and if it is, if it has a nationwide effect.