Fraud charges may hurt Navajo projects

FLAGSTAFF, Ariz. — Navajo Nation officials hit with a civil lawsuit alleging they used tribal money as personal slush funds and mismanaged outside funding are concerned that the complaint could impact their ability to access the capital market for a long list of unfinished projects.

The tribe secured its first credit rating ever earlier this year, an "A" that Standard & Poor's said reflects the strong finances on the country's largest American Indian reservation that include revenue-generating natural resources, taxes and a $1 billion trust fund.

But 85 people, including former and current lawmakers, the former tribal president, the controller and the attorney general recently were accused of defrauding the tribe in the use of discretionary funds. A special prosecutor contends they and 50 unnamed defendants benefited from $36 million or failed to regulate the funding that is meant for elderly tribal members, student scholarships or others facing significant hardship.

"Our economic development depends on our ability to attract investors, and this frivolous lawsuit threatens that," said LoRenzo Bates, chairman of the Tribal Council's Budget and Finance Committee and a defendant in the lawsuit.

The Navajo Nation has been preparing its list of projects that it intends to finance through both taxable and tax-exempt bonds when the lawsuit was filed. The new civil complaint replaced some criminal charges that prosecutor Alan Balaran had filed against Navajo lawmakers that were unresolved.

On the list are major economic development projects like casinos, shopping centers and school buildings, as well as power and water lines.

The tribe had long considered financing its needs with bonds but didn't have the right political mix in the tribal government to get it done, said tribal controller Mark Grant. Internal funds helped build the tribe's first casino, and a loan from KeyBank partially financed judicial and public safety facilities. But most projects have been left unaddressed.

The Navajo Nation received the credit rating in May, one of only two tribes that have a rating for general obligation bonds with Standard & Poor's, said company spokesman Olayinka Fadahunsi. Unlike other tribes the company deals with, the Navajo Nation doesn't rely on gaming to deliver services to tribal members. Thirty percent of its general fund — excluding federal money — comes from natural resources, 20 percent comes from taxes and another nearly 20 percent is generated from leases.