Chukchansi tribe's money manager rolled the dice – and lost $10 million

The Picayune Rancheria of Chukchansi Indians near Oakhurst lost $10 million in about one month when risky investments by a money manager lost value, a detailed letter to tribal members says.

The value of the investment portfolio managed by Blue Sky Capital Management tumbled from $19.6 million at the end of December to $9.3 million in early February.

The loss coincides with the stock market tumble that began at the end of January.

The Picayune Rancheria owns Chukchansi Gold Resort & Casino near Coarsegold and has paid naming rights for the downtown Fresno stadium, Chukchansi Park.

The loss is another financial blow to the tribe, which was forced to close the casino four years ago following factional infighting that resulted in actual fisticuffs at the casino. It reopened the next year.

Tribal Council Chairwoman Jennifer Ruiz said the council wrote the letter to be "transparent" with all tribal members about how the loss occurred.

"It's meant as an internal communication," she said. "It's not meant for the public."

The Bee obtained a copy from an anonymous tribal member.

A lawyer for Blue Sky, based in the Washington, D.C., area, said Friday the company planned to issue a statement on the Chukchansi matter but was checking into securities industry rules about such statements. Blue Sky Capital's website lists "American Indian Tribal Nations" as among the clients it serves.

Friday evening, Blue Sky issued a statement:

“Blue Sky Capital acts as an introducing broker and intermediary between its clients and several commodity trading advisors. Blue Sky Capital does not place trades. Trades are placed by the commodity trading advisors.

"As stated in their letter of February 21, 2018 the Tribal Council approved all of the investments that made up their portfolio mix of commodity trading advisors. The Council, by their own admission, was aware of the managed trading programs it was invested in and the risk involved with its investments. "

According to the letter dated Feb. 21, the tribal council learned earlier in the month that there was a problem when a money management company contracted by Blue Sky sent a blanket communication to clients, including Chukchansi.

"The communication explained that the market hit a historic low and that they were forced to vacate their positions and therefore incurred a significant loss," the letter states.

A few days later, Blue Sky broke the news to Chukchansi tribal leaders about how much money was lost – $10.3 million .

"Tribal Council's immediate reaction was one of disbelief and anger," the letter states.

The tribe had been led to believe its portfolio was well diversified, the letter said.

But further investigation by the tribe's new finance director revealed that Blue Sky is only licensed to trade and manage risky futures and options, and that Blue Sky had "100 percent of the tribe's investments in these types of investments."

"We feel their presentations misrepresented the diversity strategy they claimed they had," the letter states.

The letter also said the tribe's investment policy states that "investments should be at a level that is 'moderately aggressive …' " But Blue Sky did not follow the directives in the investment policy, the letter states.

The investment policy was signed by a former chair and treasurer in July 2016, the letter said. Previous Tribal Council Chairwoman Claudia Gonzales referred questions from The Bee to Ruiz.

The tribe has since pulled its remaining funds from Blue Sky and moved them to an account at Morgan Stanley.

Because tribal leaders refused to discuss the situation further, it was not yet clear how the loss would affect Chukchansi's operations. Tribal members get monthly income from the casino and resort. How that might be affected was also not clear.

This story was originally published March 2, 2018 at 2:04 PM with the headline "Chukchansi tribe's money manager rolled the dice – and lost $10 million."