A quick call to Chippewa Partners would have saved millions..........

And the beat goes on in Indian Country........

www.muskogeephoenix.com
Millions lost in tribal investments
By Donna Hales
Phoenix Staff Writer

TAHLEQUAH — The Cherokees are losing millions of dollars on businesses investments not connected with gaming enterprises, councilors were told Thursday.
Gaming profits have financed the failed or failing ventures, records show. Cherokee Connect, one of those businesses has lost $2 million, said Callie Catcher, CEO of Cherokee Nations Businesses and tribal treasurer.

Cherokee Nation Industries, Inc. officials confirmed $2.5 million used to purchase what is now 49 percent of Global Energy Group stock from a group of investors is as good as gone. Related expenses and investments with the same men pushed related losses to more than $6.3 million, said CNI’s new Chief Financial Officer Tom Reynolds.

“This is an investment I would never have come close to making,” Reynolds said in an Executive and Finance committee meeting of the Cherokee Nation Council on Thursday. “It’s ridiculous. I wouldn’t put a dime in that thing. I would have put it in the trash can. And then we loaned them $500,000 to buy some lighting company — and that’s now a $1 million (investment).”

Reynolds was praised for being so candid.

Taylor Keen, who was recently sworn in as a Councilor-at-large, said he was “concerned for (Reynolds’) professional health.

“I’m going to watch carefully what happens to him,” Keen said.

The federal Securities and Exchange Commission is investigating allegations of fraud in connection with the GEG purchase.

“I’m absolutely appalled at what I’ve seen from everything from lack of due diligence to looking at GEG and recognizing there is no payroll, a large amount of debt and a huge amount of good will.”

Keen said he was “appalled at how (the GEG purchase) happened.

CNI Chief Executive Officer Jim Majewski, who touted the stock purchase, earlier was placed on administrative leave with pay. An advisor to Cherokee Nation Businesses, Benjamin “Benny” Dixon, resigned rather than be put on administrative leave, CNI officials said Thursday.

Majewski, Dixon and Cherokee Chief Chad Smith are being sued in federal court by seven of the tribe’s 17 Councilors over the GEG sale.

Reynolds informed councilors that under CNI bylaws, CNI will have to hire attorneys to represent Dixon and Majewski in the federal suit.

Cherokee Nation Attorney General Dianne Hammonds, who also serves as the administration’s general counsel, asked the tribal court Friday to rule the seven Councilors who filed the federal suit were involved in a conspiracy to spend the Cherokee people’s money because they had no standing to file the suit.

That could mean the seven Councilors would have to pay their legal fees.
Baker made a motion Thursday to empower the council’s attorney to recoup the Cherokee people’s money using any legal means necessary.

“We need to try and recoup some of this money and if it means punishing the individuals who took us on this ride — then that’s what it means,” Baker said. “We’re the keepers of the purse — we’ve got the responsibility to the Cherokee people.”

Nine of the 15 councilors present voted against Bill Baker’s motion: Cara Cowan, Bill Johnson, Jackie Bob Martin, Phyllis Yargee, Meredith Frailey, Don Garvin, Audra Connor, Jack Baker and Taylor Keen.

Reynolds confirmed the $2.5 million initial investment in GEG came from line of credit guaranteed by the Bureau of Indian Affairs that was not intended to be used as venture capital.

Bill Baker asked Thursday what would happen to CNI, which employs more than 160 people, if that guaranty is recalled.

“I’m afraid we wouldn’t be solvent,” Reynolds said.

CNI purchased Global Energy before Reynolds, a former CFO for Hudson Foods, started working for CNI.

Councilors pressed Reynolds hard Thursday for his opinion of the GEG purchase.
“Just look at that company’s financials,” he said.

When asked if there was any hope of survival, Reynolds said: “To be honest with you, I think they’re close to bankrupt.”

It would take a huge amount of capital for installation and marketing and developing the product line, Reynolds said.

“It’s going to require a third party to come in and buy out our shares,” Reynolds said.

CNI will be taking from $3 million to $5 million in write-offs, Reynolds told Councilors.

GEG related losses include a $1 million investment in Cherokee Idling Solutions, Inc., which is owned by the same investors who own the majority of the stock in GEG, Reynolds confirmed.

“I don’t see us getting any money back there,” he said.

Another similar investment includes a lighting company that is losing money.

Reynolds assured Councilors CNI funneling money to GEG and related companies has ceased.

Reach Donna Hales at 684-2923 or dhales@muskogeephoenix.com.

Originally published July 28, 2006