Mashpee Tribe Debt Mounts

Illustration by Justin Metz

[Taken from: The Big Gamble]

Mashpee Tribe Debt Mounts Into The Millions As Casino Pursuit Drags On

By: Brian Kehrl
Published: 11/02/12

 

The Mashpee Wampanoag Tribe and its gaming corporation have been approved to borrow an additional $13 million from casino investors, bringing the tribe’s total potential debt to nearly $40 million in the past three years.

The tribe since October 2009 has exhausted its original, $25 million loan from Arkana Limited, a firm related to Malaysian resort casino developers Genting Group, according to documents obtained by the Enterprise and interviews with tribe members. This year the tribe has received approval to borrow $13 million from R.W. Investments Limited, another Genting-related firm.

The $13 million comes at a minimum of 15 percent interest, according to the documents detailing the loan.

The investors’ money has been used to fund both the tribal government’s day-to-day expenses and a variety of professional services used to pursue a $500 million resort casino in Taunton, according to budget documents.

What remains unclear is whether the tribe will be required to repay the debt should the casino fall through. Tribal council Chairman Cedric Cromwell has said publicly in the past that the tribe would not have to repay the debt, and a member of the tribal council said he has been told the same by tribal leaders.

“Well, that is the million-dollar question that you can’t get a clear answer to. Our leaders tell us that, if we don’t get a casino, obviously we can’t pay the loan back. But in the documents, it is not clear,” said Carlton H. Hendricks Jr., a member of the tribal council who voted against the additional debt and was asked about the measure by the Enterprise. “There is nothing in there that says this investment is based on us getting a casino. Where does it say that? Where does it say, if we don’t get a casino, it was a bad investment for them, and the debt is forgiven. You can’t find it in there because it doesn’t say that.”

Well, that is the million-dollar question that you can’t get a clear answer to. Our leaders tell us that, if we don’t get a casino, obviously we can’t pay the loan back. But in the documents, it is not clear.

Carlton Hendricks Jr.

Other tribe members said in interviews that they have not been allowed to see the loan documents and so do not know the terms.

The tribe and the Mashpee Wampanoag Gaming Authority, a corporation created by the tribe to develop and maintain a casino, both agreed to waive essentially all sovereign immunity from lawsuits in matters related to the loan, according to the documents.

A promissory note setting the terms for a $13,030,000 loan from R.W. Investments was recently obtained by the Enterprise, along with a copy of a tribal council resolution approving additional debt.

Included with the promissory note, the fourth since June of this year, are a series of financial and risk disclosures the tribe was required to make under the terms of the loan.

Documents Lead To More Questions

The documents do not provide a complete picture of the tribe’s relationship with its casino investors.

Missing are the terms of the tribe’s original loan from Arkana and a clear statement of the date at which the loans are due to be repaid, among many other details.

It is also not clear from the documents how the $13 million relates to the tribe’s original $25 million loan. However, a source close to the tribal council, who requested anonymity in order to speak freely about tribal matters, said the $13 million is on top of the original loan, which has already been spent, bringing the total principal debt to approximately $38 million.

According to a budget presented to tribe members at the beginning of 2012, the tribal council spent approximately $5 million per year in investor revenue in 2010 and 2011, and planned to spend $16 million in investor revenue this year.

The loan documents do, however, give the most informative glimpse yet into the debt Mr. Cromwell and other tribal leaders have been willing to take on as they expand the tribe’s government and seek permission to build a casino that could change the face of southeastern Massachusetts and the tribe itself.

R.W. Investments Limited appears to be related to Resorts World New York, the developer of a casino near New York City that is listed on the loan documents as the primary contact for the lender. The second contact listed is Genting Malaysia Berhad, in Kuala Lampur.

An executive listed on the loan document as the point of contact for Resorts World New York did not return a message left yesterday morning seeking comment.

A telephone number for R.W. Investments, which is incorporated on the Isle of Man, could not be located.

The promissory note was not filed with the US Securities and Exchange Commission.

Mr. Cromwell announced a financing deal with Arkana in October 2009, a move that immediately enhanced the credibility of the tribe’s pursuit of a casino. Genting and its affiliates are one of the largest resort casino developers in the world. The Genting-related firms replaced prior major investors Sol Kerzner, Len Wolman, and Herb Strather.

Through a spokesman, Mr. Cromwell declined this week to directly respond to a list of questions about the loan and its consequences for the tribe.

Through a spokesman, Mr. Cromwell declined this week to directly respond to a list of questions about the loan and its consequences for the tribe. Instead, he provided the following statement in writing:

“Our financial decisions are made by Tribal Council in accordance with our Constitution, and communicated to Tribal membership with the goal of respecting both Tribal citizens’ right to be informed and the confidential nature of such information. The fact that these documents have been stolen and distributed outside of our Tribe is not only disappointing, it is a threat to our Tribal sovereignty and self-governance. We are fortunate that we have a financial partner that has confidence in our Tribe and our inevitable right to conduct gaming as well as the ability to provide the funding necessary to achieve our economic development goals.”

‘Tons Of Lawyers’

Mr. Hendricks, who was elected to the tribal council in 2010 and has been a staunch opponent of the Cromwell administration, said he is concerned that the tribe has taken on millions of dollars in debt in three years, yet rank and file tribe members have seen few benefits.

“The services we are providing to tribe members are slim to none. When you step back and look at it, what do we have?” he said in a telephone interview this week. “We have tons of lawyers. We have tons of consultants...The debt that we are building up for these guys is absolutely ridiculous.”

We have tons of lawyers. We have tons of consultants...The debt that we are building up for these guys is absolutely ridiculous.

Carlton Hendricks Jr.
 

According to budget documents obtained by the Enterprise, the tribe spent $2.6 million on professional services and other casino pre-development costs in June and July alone.
Included among the professional services paid by the tribe are at least 11 law firms, two lobbying firms, and three gaming consulting companies. The law firms range from large corporations with offices around the world to individual attorneys in private practice.

Steven Bingham, a tribe member who has opposed the Cromwell administration, questioned whether the attorneys and other specialists have the tribe’s best interests in mind. Because their payments come from the casino investors, via the tribe, he said the lawyers may be more concerned with the welfare of the investors than the tribe itself.

Mr. Bingham, who also obtained a copy of the loan documents, pointed to the state-tribe gaming compact as evidence that the attorneys are not looking out for the tribe. The compact was recently rejected by the US Bureau of Indian Affairs for including several measures that clearly run contrary to federal protections for tribes.

The rejection of the compact likely delayed the tribe’s casino pursuit by at least several months.

Many tribe members are not aware of the debt the tribe has taken on, according to Paul Mills, a tribe member who attributed the lack of information to the council becoming more secretive in recent years. Mr. Mills said he has not been engaged in tribal politics as much as he has in the past, but he does not hear news of the tribal council circulating around the community like he used to.

Mr. Hendricks said the council operates in a manner meant to prevent documents getting out. At meetings when they are asked to approve financial decisions, council members are given documents at the start of the meeting and then asked to return them at the end. Often an attorney will sit in on the meetings via a conference call. “I don’t know how you got ahold of this because we are not allowed to take things home,” he said when reached with questions about the documents.

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According to the tribal council resolution approving additional debt this past summer, four council members voted in favor, two in opposition, and three did not vote.

The source close to the tribal council said the majority of the members of the council are employed or otherwise paid by the tribal government, so they have a personal stake in seeing that the revenue from investors continues to flow.

According to the promissory note, the 15 percent per year interest increases by 5 percent if the gaming authority takes on additional senior debt.

The loan document does not specify a date at which payments are due, but it gives the lender the right to call for repayment in full at any time.

The waiver of sovereign immunity allows the tribe and the gaming authority to be sued in state or federal court for matters relating to the loan. “The waivers of sovereign immunity and consents to jurisdiction contained in this Note, including without limitation this Section 12, are irrevocable and the Tribal Parties expressly agree that such other Parties will be irreparably injured upon any revocation or limitation hereof,” according to the documents.

The loan specifically excuses individual tribe members and officers from personal liability.

The tribal parties are required under the loan to provide monthly financial statements to the lender, and to give the lenders the right to access the tribe’s and the gaming authority’s financial statements.

http://www.capenews.net/communities/mashpee/news/2180