Casino Bond needs to be restructured...Or we'll default within a year!

Back in November, I wrote a story about the casino bond that currently holds our tribe hostage. Within a year, it is forecasted that our casino will no longer be able to make the payment as it continues to increase beyond our monthly revenues. At that time, we will default and the investment group that owns our bond will be able to come in and remove our management and take it over. Sure, it will still be our casino, but we will have nothing to do with the running of it until the investment group recoups their $28 million. We won't see a dime until they are paid back.

In the November story, I talked about how we could have had a deal with the Shakopee Sioux Tribe to save our rear ends, but our tribal council block of four (Mic, Rusty, Norma and Little Guy) declined to sign on to the deal. I’m going to reprint that article in a few moments, but first, I’d like to talk about where we are at currently.

Our leaders are scrambling to find another investment group to buy out the current bondholders and give us a new restructured deal, but there’s one major problem with this; any reputable investor will want to see that whoever they are investing in, is in good financial shape, and unfortunately, our tribe doesn’t pass the test.

Not only is our financial status a mess, but our casino isn’t making enough to cover current payments, so what kind of a deal could a new investor expect?

The reason we are in this mess in the first place goes back to the signing of this bond deal in 2006 and the leadership of that time. Our council members back then included Mic, Rusty, Little Guy along with Brian Bisonette who was secretary-treasurer, and Louis Taylor, the chairman. It is a known-fact that our council didn’t even use a bond attorney when negotiating the terms. The terms included unreasonable interest rates and commissions that have us in all this trouble today, so much so, that our tribal council under Gordon Thayer two years ago, sought litigation in court for wrongdoings in the signing of that bond, in regards to the commissions and interest rates.

Eventually, our tribe won the right to have the case heard in our own tribal court, which means, this was a win-win case…in the amount of $11 million dollars. What happened next? Instead of allowing this to go to court, our current leadership took a settlement offer from the defendants in the amount of $2.3 million back in November, just days after I wrote the article about the bonds, which appears below.

Why would our chairman, Mic Isham, and his three supporters, Rusty, Norma and Little Guy, accept this ridiculous settlement when we had a slam dunk case? And let it be known that the other members of the tribal council were not happy about settling. It may be one of two reasons why they settled, or both. First, could it be that they didn’t want details of the lawsuit coming out in tribal court where it may have made it to the public’s knowledge. Or, secondly, could it be that the $2.3 million was a lifeline for a tribal council that had gone broke back in November and was going to be having a hard time telling the membership that Christmas bonuses for elders and employees were not going to be paid? I’m not sure why they settled, maybe you should ask them. But, I do know it was a bad deal and only a temporary fix for our financial problems. From what I hear now, we will be broke again in a few months. It was like putting a band aid on a gushing wound, and eventually they will have to come to terms with the inevitable, we’re bleeding money and the membership will know soon enough. They will do their best to hide it from us until after the election, hence, part of the reason why there won’t be another General Membership meeting until after the election.

Here is the article I wrote about the increasing bond payment and the missed opportunity when our chairman declined to do a deal with the Shakopee Sioux Tribe;

A deal was struck in September for the Shakopee Sioux Tribe to refinance the $27 million bond on the LCO Casino whereby the tribe would have received a much smaller payment and more favorable conditions.

Terms of the deal required that LCO Chairman Mic Isham sign the agreement on September 27 and forward to the Shakopee Sioux who would have had a full membership vote on it at their November 11 meeting. Isham refused to sign the deal after receiving information from LCO tribal attorneys that may have been false.

According to a tribal official who wished to remain anonymous, LCO tribal attorneys told the tribal council that under the agreement, LCO wouldn’t be able to build another casino that was within 90 miles of their Minnesota operation. They also said that if LCO were to ever build another casino, Shakopee would have final approval over our right to build it. The tribal official claims that this information was false and that these terms were never any part of the agreement.

Prior to Isham denying the Shakopee agreement, an investment banker from Atlanta, GA was brought in to make a presentation to LCO. The individual who set up the meeting between the Atlanta investor, after a background check, appears to have lost his license to operate in the state of Florida. His current office is in his home in Florida which is valued at less than $50,000. The tribal official questioned how the tribe could entrust a $27 million dollar deal into the hands of someone who can’t handle his own finances in the state of Florida.

The tribal official claimed that there isn’t any evidence that the Atlanta investor can even make a deal this large, and yet, our tribe denied the deal with the Shakopee tribe in favor of this other group.

In membership meetings held when Gordon Thayer was still chairman, it was disclosed that at our current rate of declining casino revenues and the increasing bond payment every month, we would be in default sometime in the year 2016.

The current bond payment is over $268,000 every month. Current revenues from the casino are less than that number. In addition to the bond payment, tribal operations must be maintained from casino operations. Another source informed me that there has been discussion among the tribal council to dip into the casino’s emergency reserve fund to maintain operations. This fund is held for unforeseen events that could occur at the casino which could result in the doors closing, such as HVAC systems, or plumbing.

The current bond requirements provide for an increasing bond payment to the investors and a large balloon payment in 2026, which the tribal official said would be impossible for the tribe to make. In 2023, the bond payments will surpass $3 million per year. The bond holders also have a stipulation in the agreement that was made in 2006 that denies the ability for an early payoff. Tribal personnel Scott Allen and Milo Arkema had negotiated with the bond holders to allow for a new deal with the Shakopee Sioux. The bond signed in 2006 was made by a tribal council that included Mic Isham, Rusty Barber and “Little Guy” Clause, all of whom denied the new agreement with Shakopee Sioux.

According to the anonymous tribal official, the Shakopee Sioux tribe would have made a $27 million bond refinance structure without any commissions, while the Atlanta investor would get a commission up to 1.5%, or around $400,000. He questioned why the tribe would forego a deal without any commission payment for such a large payment.

Anonymous sources claim the tribe is currently broke just as Christmas bonuses are arriving. In addition to tribal employee Christmas bonuses, the tribal government awards over $400,000 to tribal elders in the form of a $150 payment right around Thanksgiving time.

As Chairman, Gordon Thayer released information in regards to tribal finances at the time he took over. He stated that in 2011 the tribe had bank loans with Chippewa Valley Bank in excess of $10 million. When Isham took over as chairman, those loans had been paid down to $416,000. The annual loan payment to Chippewa Valley Bank was $1,028,000. By February of 2013, the tribe’s annual bank payment was reduced to $89,000. Also in February of 2013, there was nearly $6 million in tribal bank accounts.

Sources claim that all bank accounts have been exhausted since Isham took over as chairman in July of 2013. Isham refuses to answer my calls about these accusations. At the LCO General Membership Meeting in September he was repeatedly asked about these accusations and never gave a clear answer.