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POSTED: Monday, Oct. 19, 2009

Bank sues Nooksack Tribe for defaulting on casino loan

Marshall Bank of Minnesota has filed a lawsuit against the Nooksack Indian Tribe and the tribally chartered Nooksack Business Corp., alleging that the tribe is behind on repayment of more than $26 million in loans used to build and equip the Northwood Casino.

As of March, according to a document the bank submitted in Whatcom County Superior Court, the corporation owed more than $1.2 million in interest and late fees on a $17.6 million construction loan and an $8.6 million casino equipment loan.

Among other things, the bank's lawsuit says the tribe used revenue from the Northwood casino, near Lynden, to subsidize operating costs at its other gambling outlet, the Nooksack River Casino in Deming. The bank says Northwood's revenues in excess of expenses should have been set aside to pay off the bank, under the stated terms of its loan agreements with the tribe and Nooksack Business Corp., a tribally chartered corporation that has been headed by Narciso Cunanan, the tribal chairman.

According to court documents filed by the bank, Cunanan signed key loan documents twice: once as tribal chairman, once as president of the corporation.

The bank made the loans to the corporation, not the tribe, but the documents also indicate that the tribe controls the corporation. Also included in the court filings are copies of resolutions of the tribal council, approving both the initial loan agreements dated 2007 and March 1, 2009, "forbearance agreements." In those, the bank agreed to modify loan repayment terms in an apparently unsuccessful effort to get loan payments flowing again after the tribe missed its monthly payments from November 2008 through February 2009.

The records submitted by the bank indicate that the tribal council approved the loan agreements and modifications without a dissenting vote. In some cases, documents indicate that the votes were taken via telephone conference call.

After the forbearance agreement, the bank's lawsuit said the tribal corporation missed a required payment of $132,000 in July, and instead used Northwood revenues "to pay expenses at the Nooksack River Casino, other entities directly or indirectly owned by the tribe, or to the tribe itself."

In response to a request for comment, Cunanan sent an e-mail message saying the tribe hopes to restructure its debt.

"As with many businesses, our commercial operations have been impacted by the current recession, but we remain committed to our current casino operations," the message said. "Due to declining revenues as a result of the recession, we are in negotiations with our lenders to restructure current debt.

"Our priority is to continue providing jobs and benefits to our Tribal members as well as the local community. We look forward to working through this period of economic downturn and continuing to provide a high quality entertainment experience and employment opportunities."

Lori Lynn Phillips, the Seattle attorney who filed the lawsuit on behalf of the bank, was not available for comment Monday. It was not immediately clear what legal tools the bank may have to force repayment of the loans, or what effect the lawsuit could have on operations at the casino or at the tribe itself.

While the bank does not have a deed of trust on the tribal real estate, it does appear to have a collateral interest in Northwood gambling equipment, according to documents filed with the court.

Among other things, the lawsuit asks the court to order the Nooksack Business Corp. to use all Nooksack casino revenues in excess of operating expenses to repay the loan. The bank also wants the corporation to be required to account for all money that was transferred to the Nooksack River Casino or other tribal operations, and return that money to the bank.

Maureen Marshall was part of a group of tribe members who mounted an unsuccessful effort to get elected to the tribal council in 2008. She said the lawsuit is strong evidence of grave financial problems that have been kept secret from her and other tribal members. Marshall said she and others have made repeated requests to the tribal council to get copies of meeting minutes and tribal financial statements, but those requests have been denied or ignored.

She said few, if any, tribe members were aware that the tribal council had approved millions of dollars in loans.

"We have no say," Marshall said. "We have never been contacted. We have never received financial statements regarding the tribe."

The Northwood Casino opened in November 2007 in a rural area at Northwood and Halverstick roads northeast of Lynden after surviving a legal challenge mounted by some surrounding property owners, and a liquor license challenge from Whatcom County.