CASINO

Wells Fargo sues tribal casino operator over massive debt

TAGs: California, Chukchansi Gold Casino, Lawsuit, tribal gaming, Wells Fargo

According to financial institution Wells Fargo, one of its clients doesn’t want to pay its debts. The firm has submitted a lawsuit against the Picayune Rancheria of Chukchansi tribe in California for not adhering to the terms of a loan agreement reportedly worth $250 million. According to The Fresno Bee, the bank alleges that the tribe has concocted a scheme to avoid paying the 2012 loan.

Wells Fargo sues tribal casino operator over massive debtThe loan was taken out to refinance debt associated with the tribe as it was preparing to open the Chukchansi Gold Casino and Resort in Coarsegold. In 2014, the casino was closed by the federal government after a power struggle had been launched by a rival faction within the tribe. When it reopened, the Chukchansi Economic Development Authority (CEDA), also named in the lawsuit, was supposed to place the casino’s revenue into a deposit account to help cover the loan. The tribe was authorized to make withdrawals from those funds to maintain operations and to pay other loans, and any remainder would go toward the Wells Fargo loan.

However, the bank is now claiming that CEDA and the casino are shirking their responsibilities and have illegally stopped making the required payments. It accuses the entities of hoarding cash that was supposed to go toward the loan repayments, which it asserts is a clear violation of the previous agreement.

The lawsuit was filed in New York State Supreme Court and seeks to avoid any additional “irreparable harm” violations of the agreement could cause. It adds, “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.”

Wells Fargo also asserts in its suit that the tribe has recently created an affiliate lender that subsequently gave CEDA a $2 million loan. CEDA then used that money, in addition to another $12 million it had set aside, to pay back other loans pertaining to the casino’s reopening in 2015 and to renovations conducted of the venue over the years.

The bank wants monetary damages and an acknowledgement that the tribe and CEDA have violated the terms of the loan agreement.

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