Opinion

Harold Monteau: Bankruptcy and defaults in Indian gaming

Friday, May 28, 2010

"Tribes should be using the U.S. Bankruptcy Laws as a tool in the case where it is beneficial to the Tribal Government (Tribe), even if it results in a detriment to the lender and even if it means a messy “divorce” to extract the Tribe from the lender/tribe relationship. Also, the legal issues that have arose in a recent case involving the attempt by a lender/creditor to take over management of a tribal casino deserves a warning to Investment Banking Attorneys to tread with caution when thinking that the whole body of Investment Banking Law and Bankruptcy are going to apply to your case as they would normally apply to similar circumstances.

I don’t pretend to be an expert in the U.S. Bankruptcy Code and someone who practices in the U.S. Bankruptcy Court probably does not know as much about Federal Indian Law and Tribal Sovereignty as I do and there are probably legions who know more about Federal Indian Law than I do. However, any practitioner in either discipline had better tread with care when tribal assets are involved. When any kind of tribal assets, including tribally issued debt instruments or contracts for debt obligations, as well as “Management Contracts” for Indian Gaming, are involved, the full panoply of Federal Indian Law and Tribal Law comes into play. To not recognize that proposition can result in some serious detriment down the road.

I have been following the reports about an on-going U.S. Bankruptcy Court case of a large Nevada gaming company that holds several “Management Contracts” for Indian “properties”, to use the vernacular of the industry. The proceedings seem to be moving along smoothly under the rules of the U.S. Bankruptcy. However, no one seems to be paying any attention to the rules of Federal Indian Law. If they had, the first thing they would have done was ask the Bankruptcy Judge to appoint a “Special Master” regarding the Federal Indian Law issues. It is evident that no party has advised the Judge as to the Indian Law issues. No one has bothered to advise the court as to what happens when you judicially transfer rights in a Tribal Gaming Management Contract. Such transfers, including those in settlement under any “ Bankruptcy Reorganization Plan”, must be approved by the Tribes involved and the National Indian Gaming Commission (NIGC). This is true even if the entity that ends up with the “tribal properties” (Management Contracts) is just a different legal entity, but still owned by the same “people” who entered into the original Management Contract with the Tribe(s). It is still a transfer that requires the Tribe’s approval and NIGC review and approval. I also have not seen any indication of any involvement of attorneys of the tribal governments that have substantial rights that will be effected by the Bankruptcy Judge’s approval of any Reorganization Plan or approval of any proposed “auction” of assets pertaining to the tribal properties in the Nevada case."

Get the Story:
Harold Monteau: Bankruptcy and Debt Defaults in Indian Gaming (Pechanga.net 5/28)

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