BELLINGHAM - The Nooksack Indian Tribe has reached an out-of-court settlement with a group of unnamed banks in a federal lawsuit stemming from millions of dollars in unpaid loans that were used to develop the tribe's two casinos.
Terms of the settlement have not been disclosed in court records. Tribal Chairman Bob Kelly and attorneys for the tribe and the banks have not responded to requests for comment.
During legal maneuvering in state and federal courts before the settlement was reached in early October, the tribe's attorneys contended that legal agreements covering about $39 million in loans were unenforceable because the tribe has sovereign immunity that protects it against lawsuits, even though the tribal council agreed to waive sovereign immunity as a condition of getting the loans before they were made in 2006 and 2007.
The tribe's attorneys also contended that even though the casino loan agreements were approved by the tribal council, those agreements surrendered too much casino management authority to the lenders. The attorneys said that made the loan agreements equivalent to a "management contract," which many tribes have used when they hire non-Indian firms to help operate their casinos.
Federal law says all such tribal casino management contracts must gain approval from the National Indian Gaming Commission. Because the Nooksack loan agreements never got that federal review, they are not valid and not enforceable, the tribe's attorneys argued in court documents.
According to court documents, Minnesota-based Marshall Bank and a predecessor, FirstBank, loaned millions to tribal business corporations, beginning in late 2006 with a $15.3 million loan to refurbish the tribe's original Nooksack River Casino in Deming, while paying off older loans.
In 2007, the bank provided another $26 million for the construction and furnishing of the tribe's second casino, on Northwood Road.
Marshall Bank then sold portions of the loan to other banks but continued to serve as loan servicer.
In August 2009, Marshall Bank filed a lawsuit in Whatcom County Superior Court alleging the tribe had stopped making payment on the Northwood loan.
In January 2010, the Federal Deposit Insurance Corp. shut down Marshall Bank and took over some of its operations, leaving the FDIC in the role of servicer on the tribal loans.
In March 2010, the tribe announced its attorneys had hammered out a settlement, and the Superior Court lawsuit was dismissed. But court documents indicate the tribe soon was unable to meet repayment terms in that settlement.
The unnamed banks that had helped finance the loans stepped in and, with FDIC approval, appointed Outsource Services Management to handle the unpaid debt on their behalf. The identity of those banks is nowhere revealed in court documents.
Outsource Services then went to Whatcom County Superior Court attempting to seize tribal bank accounts and casino revenues. Tribal attorneys went to U.S. District Court in Seattle attempting to block those moves, but the litigation was suspended when the two sides convened settlement talks.
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