Creditors trying to gain repayment on tribal bonds

The Lac du Flambeau Tribe in Wisconsin issued about $50 million in tribal gaming revenue bonds in January 2008. Apparently, payment on the bonds has ceased or is in danger of ceasing. Wells Fargo Bank filed a lawsuit in December against the Tribe’s corporate entity, the Lake of the Torches Economic Development Corporation. The Bank sought a temporary restraining order to preven the Tribe from distributing reserve funds and the appointment of a temporary received to oversee the tribe’s corporate entity which operates the Tribe’s casino.

Judge Randa of the U.S. District Court for the Western District of Wisconsin dismissed the case in January. Randa ruled that the trust indenture was void because it was in actuality “a [gaming] management contract” which under federal law has to be approved by the National Indian Gaming Commission, which it was not. “Without prior approval, the entire contract is void,” Randa said.

The Tribe had waived its sovereign immunity to be sued in the bond documents but the judge’s voiding of the contracts also apparently voids the Tribe’s waiver of sovereign immunity.

Read more.

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