This story was updated Wednesday after the tribe issued a statement.
A legal fight between the Picayune Rancheria of Chukchansi Indians in Coarsegold and Wells Fargo Bank has erupted in New York state court.
In the case, first reported by legal website Law360, Wells Fargo on Wednesday sued the Chukchansi tribe over a “scheme” the bank alleges the tribe operated to avoid paying back a $250 million loan issued in 2012.
The suit also names Chukchansi Economic Development Authority and the Chukchansi Finance Company, LLC as defendants.
The Bee was unable to reach representatives from Chukchansi on Saturday. Representatives acknowledged The Bee’s report on Tuesday, and on Wednesday, the tribe issued a statement:
“It is regrettable that Wells Fargo chose to file this lawsuit. We believe we have honored all of our obligations under our agreements. We consider Wells Fargo’s lawsuit to be unnecessary and without merit. We intend to contest it vigorously.”
The loan was issued in order to refinance debt from the Chuckchansi Gold Casino and Resort. It was agreed on by the bank and the tribal organizations, and came with several requirements, according to the suit.
Once the casino reopened in 2015, Chukchansi Economic Development Authority (CEDA) was required to place the cash from the casino into a deposit account agreed to under the loan conditions.
The tribe was permitted to withdraw cash to fund the casino’s operations, make payments on other reopening loans and make certain tribal member distributions. Any cash left over was expected to go toward semi-annual payments to Wells Fargo, according to the lawsuit.
But the bank now claims the tribe has sidestepped the agreements to “unlawfully” cut off loan repayment.
The bank accuses the tribe and CEDA of stockpiling cash meant for loan payments, which the bank says violates the “cash control” agreements set among the parties.
Wells Fargo is seeking relief from New York State Supreme Court to avoid future “irreparable harm” from loan violations. It also stated it never intended to take the matter to court.
“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,” reads a portion of the lawsuit.
Bank points to tribe’s history
In the complaint, Wells Fargo points to the tribe’s history of failure to commit to loan agreement terms.
Attorneys for the bank contend the tribal organizations began violating the terms of the loan by stockpiling cash as far back as February 2013, when the court also had to step in to force the payments.
In 2014 federal authorities shut down the casino following an armed takeover. The National Indian Gaming Commission issued a notice ordering the tribe to cease and desist from all gaming activity.
By the time the casino reopened in 2015, the tribe had already missed loan payments. Wells Fargo attorneys also claim the casino’s reopening would not have been possible without the help of the bank’s loan to the casino.
In recent months, according to the complaint, the tribe created an affiliate lender and then made a $2 million loan to CEDA. Attorneys claim CEDA then used the $2 million plus another $12 million in stockpiled cash to repay other lenders who stepped in to help reopen the casino in 2015 and who helped the casino make improvements to facilities.
The complaint further accuses CEDA of informing public investors that it would stop making payments to the bank after Sept. 30, 2019, which the bank says violates the loan agreement.
Among other remedies, attorneys for Wells Fargo have asked the New York court to award monetary damages and declare that CEDA has violated the terms of the loan.