Fort Belknap’s lending operations under scrutiny in federal courts outside Montana
Questions from the Fort Belknap tribal council and new board about Island Mountain Development Group’s finances and whether any of its former practices could risk Fort Belknap’s sovereignty are also being asked by attorneys around the country who have alleged in court filings the tribe is exploiting lower-income people with its high-interest lending companies.
Several of the attorneys have for years alleged the tribal lending companies operated by the Fort Belknap Indian Community are not wholly operated by the tribes and are not legally “arms of the tribes,” which, if found to be true, could potentially subject the companies and the tribes to state usury laws and federal financial regulations. Attorneys for the tribe and its companies have denied the allegations in court, and multiple lawsuits making those claims have previously been dismissed.
But these kinds of accusations involving so-called “rent-a-tribe” schemes have been made by lawyers against people and tribes across the country during the past decade, testing the bounds of tribal sovereign immunity that shields tribes from being sued in court, according to a scholar in Native American law.
Often, the tribal lending companies are set up on reservations that have few other forms of economic development available and provide much needed jobs and money to people living there.
But the high-interest loans are also often provided to people in other states who are seeking a couple hundred dollars to make it through the week or month. Some attorneys for those people have been trying to pierce sovereign immunity claims in ongoing lawsuits by alleging outside, non-tribal companies are operating and profiting off of other disadvantaged people.
Multiple lawsuits filed against lending companies probing alleged outside ties
So far, most of the federal lawsuits filed against Fort Belknap, IMDG and its subsidiaries in states including Illinois, New Jersey and Alabama have been dismissed by judges on the grounds of tribal sovereignty and sovereign immunity. Some of them were dismissed amid talks of mediation and settlement between the tribal companies’ lawyers, including the firm sued by Island Mountain last week, and the people who sued them.
Hundreds of pages of court documents reviewed by the Daily Montanan during the past several months, along with public meetings and documents, detail the scrutiny the tribe and its companies face over how the lending operations are financed and operated, bringing in money that has helped IMDG grow into one of the largest employers and sources of revenue for the reservation.
Allegations of non-tribal persons being highly involved in the lending schemes have been made in two ongoing court cases probing IMDG’s finances and operations.
The two ongoing lawsuits – one in Alabama and another in New Jersey – allege that two of the short-term lending companies operating under IMDG and GVA Holdings – GreatPlains Finance LLC/Cash Advance Now and Aaniiih Nakoda Finance LLC/Bright Lending – are being run in concert with financiers and help from non-tribal members who are utilizing tribal sovereignty to skirt state lending and collections laws.
Earlier this year, a group of tribal council members removed the old IMDG board and appointed themselves after making allegations of financial mismanagement. When the tribal council ousted the former board in January, the council’s attorney said sovereignty would be better protected if IMDG’s board was also composed of tribal council members.
The new board then initiated an investigation that led to the federal lawsuit filed by IMDG and the new board last week alleging that the company’s former attorney and law firm, Jennifer Weddle and Greenberg Traurig, were behind financial mismanagement of the company and efforts to transfer its assets to a tribe in South Dakota.
After the tribal council took over the IMDG board earlier this year, attorneys suing the lending companies pressed for financial records and deposed employees, while IMDG switched its teams of lawyers fighting each case – dropping Weddle and Greenberg Traurig entirely while alleging they were withholding financial agreements between the lending companies and financial backers.
Judges in both cases this summer granted requests from the plaintiffs’ attorneys to advance the cases on the basis that the attorneys claim the records and depositions show there has been malfeasance involving the company’s finances and tribal structure.
Lawsuits claim loans violate caps in interest rates, state usury laws
In the ongoing lawsuits and the ones that have been dismissed, most of the plaintiffs were people in states who took loans from various IMDG lending companies, many at interest rates well over 500% and some closer to 800%. Those people were having to pay back up to five times the amount they originally received during just six to 12 months, according to the agreements they signed.
Those loans, according to the court documents filed, violated various state caps on interest rates for short-term loans and state usury laws. Further, many of the suits claim violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) because the lending companies collected debt from the loan recipients that the plaintiffs say was illegal because of the interest rates.
Current IMDG CEO Evan Azure declined to comment on a list of questions about the lawsuits and their allegations that was sent to him in August.
“Fort Belknap Indian Community has been taken advantage of by interests outside our community who have worked to undermine our sovereign right as a people to govern ourselves,” IMDG said in a news release announcing the lawsuit last week. “These forces have made millions upon millions of dollars for themselves while too many of our people suffer.”
Sitting board members and tribal council members placed the blame for the alleged financial mismanagement at Weddle’s feet and said both the allegations and changeup of the board have caused deep divides in the community.
In a statement provided to the Daily Montanan last week, Weddle’s law firm said it was reviewing the allegations made by the Fort Belknap Indian Community, but had no further comment.
“We hope that armed with the truth and an undeniable factual record, members, families, and friends will be able to reconcile and move forward together as one community of people for Fort Belknap,” IMDG board member and tribal council member Geno LeValdo said.
Former IMDG executives did not respond to questions about their efforts to protect tribal sovereignty and economic development on the reservation.
Links to a Texas businessman
In the New Jersey lawsuit, the plaintiff’s attorneys have alleged Cash Advance Now is “a wolf in sheep’s clothing rather than a legitimate tribal entity” and that the company “represents another cog in the rampant ‘rent-a-tribe’ scheme used by non-tribal lenders to avoid compliance with state law.”
Plaintiffs in the Alabama case filed a complaint in the class-action lawsuit earlier this year that alleges non-tribal businesses and individuals “market, fund, operate and profit from the loans” handed out by IMDG’s lending companies.
“The actual operation and management of the lending business is conducted through others, including non-tribal individuals and entities included outside of any tribal land. The capital and other resources required to conduct the Bright Lending operation are provided, at least in part, by non-tribal members and entities located outside of any tribal land,” the lawsuit states.
The defendants in that case, along with the lending company, are BorrowWorks Decision Science, another company called BWDS LLC, and both companies’ CEO, Benjamin Gatzke. The three are named defendants in the Alabama lawsuit as well as in a case dismissed in Illinois last year in the midst of settlement discussions, court records show.
Gatzke and his attorney did not respond to written questions sent to them in August. However, in court responses, attorneys have disputed the allegations against Gatzke and his companies.
According to court filings and online records, a company of Gatzke’s was the initial owner of Bright Lending’s online domain registration and has been alleged by some attorneys in the multiple lawsuits to be involved in the company’s policies and practices. Trademark records also show BorrowWorks was the original owner of the Bright Lending logo. The Apple App Store shows BWDS LLC developed the Bright Lending mobile app.
BorrowWorks says in online profiles it provides “insightful, data-driven solutions that allow banks and lenders to make smarter decisions in order to provide better options for non-prime consumers” as well as “decision science, loan servicing and marketing for innovative lenders and banks.” Its website touts its abilities in instant credit decisions, data analytics, online engineering, lead generation and user experience.
Gatzke is the current chairman of the Texas Department of Information Resources.
Multiple people’s LinkedIn profiles also link BorrowWorks and IMDG. One person who worked as a telecommunications engineer and information technology manager at BorrowWorks from 2014 to February 2019 reported becoming a senior information technology engineer at IMDG in April 2019.
Another person who listed their position as a training liaison and senior customer service representative for call centers with BorrowWorks included in the description of their job that they “networked with the Fort Belknap Indian Community.”
The Alabama suit alleges that BorrowWorks, Gatzke and BWDS “market, fund, operate and profit from the loans” extended by Bright Lending to customers in Alabama and other states.
Nearly two full pages of that complaint are redacted per a court order in an area of the suit which describes the alleged connections between the various companies, but it goes on to say that plaintiffs’ attorneys believe BorrowWorks and possibly Gatzke “are directly involved in the drafting and approval of the Bright Lending loan documents.”
Gatzke’s attorney argued in a December filing that the only facts established against Gatzke and BorrowWorks at the time were that the company had registered the Bright Lending trademark and that a Gatzke-owned company owned Bright Lending’s online domain. The attorney called the plaintiffs’ claims “a conspiracy claim based on ill-defined, broad sweeping supposed ‘inferences.’”
“Plaintiff has speculated (incorrectly) that Aaniiih Nakoda may be controlled by outside parties rather than the Tribe, who operate the business primarily for their own benefit[,] but a defendant asserting sovereign immunity is not required to affirmatively plead and prove the financial details of all of its business arrangements,” Bright Lending attorneys, including one from Greenberg Traurig, wrote in a filling last December.
Among the questions tribal council president Jeff Stiffarm asked IMDG’s then-CEO Terry Brockie in a letter last July trying to get information on IMDG’s finances were how much IMDG or Bright Lending had paid to Gatzke and one of his companies during the prior five years and any management reports linked to them.
In April, in the midst of IMDG’s investigation into its finances, IMDG’s new CEO Evan Azure submitted an affidavit in the case saying that testimony submitted last year by tribal council member and former IMDG board member Tracy King was not accurate. King was impeached in August for his role in the alleged financial mismanagement.
Azure was appointed after former Brockie, the former CEO, resigned following the tribal council’s ouster of the former board.
Azure said Bright Lending had repaid a loan in 2018 it took out to help start Bright Lending and that while IMDG has non-tribal partners, the company pays its own costs and either retains the money, reinvests it, or distributes it to members of the Fort Belknap Indian Community.
“No non-Tribal entity has any ownership interest in [Bright Lending], its loans, or IMDG,” Azure wrote in the affidavit.
Gatzke, tribal and board leaders submit new sworn testimony in August
Azure, Gatzke, and FBIC Tribal Council President Jeff Stiffarm submitted new sworn declarations in the two cases in August supporting motions to dismiss the amended complaint.
Gatzke said that BorrowWorks and BWDS have not been involved in offering consumer loans nor collected debts. A motion from his attorneys to dismiss the case says the FBIC and BorrowWorks had a certain type of contract in place from 2017 until 2021, and another in place from 2021 to present. The types of contracts are redacted in the filing.
The document goes on to say that the FBIC had utilized BorrowWorks to provide Bright Lending limited, non-management services.
“BorrowWorks’ technology simply runs the analytics to apply the eligibility requirements of the tribe to determine if an applicant is eligible for a loan,” the document says. “The tribe maintains direct contracts with all crucial third-party vendors. It will, on occasion, leverage BorrowWorks’ relationships with certain data vendors to gain economies of scale. The tribe reimburses BorrowWorks monthly for the full costs of these contracts. They are purely a passthrough arrangement.”
Gatzke’s lawyers said in the filing that BorrowWorks also assists Bright Lending through IMDG “in certain marketing” that has to first be approved by Bright Lending. Their filing says that Bright Lending solely determines loan amounts, interest rates, and which people the company can lend to, “and BorrowWorks’ technology platform merely performs a ministerial function to determine if an application meets the requirements set by the tribe.”
“In a gaming context, BorrowWorks provides the equivalent of the technology supporting the slot machine while the tribe regulates and runs the casino,” Gatzke’s attorneys wrote.
In the August motion to dismiss the New Jersey case from Cash Advance Now (GreatPlains Finance), Azure, the current CEO, also detailed newly public information, saying that the company initially partnered with a company called Dater Management Company “to manage GPF while the tribe learned the business and grew its capacity.”
Another company, Cash Advance Servicing, serviced the company’s loan portfolio and hired and trained tribal employees, according to the filing.
It says the tribe during that time received a flat-fee payment for each loan taken and each payment made by customers. But the filing says that it ended its contracts with both companies and had IMDG start managing the company in 2017.
“From 2017 forward, no non-tribal entities have managed GPF or serviced its portfolio, and all of GPF’s profits have gone directly to IMDG, the tribe’s economic development arm,” the company’s attorneys wrote. “… No third party, including Dater or CA Servicing, has ever set the parameters for the loans offered by GPF.”
The attorneys argued that since the claims in the New Jersey suit happened after this change, all of the arguments that the company was operated by any non-tribal entity at the time are “irrelevant.” The attorneys said that sovereign immunity continues to apply “with full force.”
“Those contracts were terminated well before plaintiff’s complaint in this case, and IMDG has had full managerial control and oversight of GPF and rights to all GPF profits at all times possibly relevant to the arm of the tribe analysis in this case,” the company’s lawyers wrote. “… GPF is a manager-managed LLC, and since 2017 it has been managed exclusively by the tribe through IMDG.”
Allegations test arm-of-the-tribe claims
The allegations made in the ongoing lawsuits are testing the arm-of-the-tribe claims. If a judge finds that non-tribal people are heavily involved in the operations of the companies, it could have sweeping ramifications for those involved, for the reservation’s multi-million-dollar revenue streams, and for the tribal members who work for or under IMDG – nearly 400 people, according to court filings.
Monte Mills, director of the Native American Law Center at the University of Washington School of Law and a former professor at the University of Montana law school, said that if tribes are lending through online services, courts have generally found that they are not subject to states’ usury laws and are able to utilize the lending companies to bring in more revenue and employment for tribal members.
Fort Belknap’s lawyers in August again cited a U.S. Supreme Court decision that found sovereign immunity applies to off-reservation commercial activity. Another Supreme Court decision found the only exceptions to tribal immunity are if “Congress has authorized the suit or the tribe has waived immunity.”
According to IMDG’s charter, Fort Belknap has only authorized IMDG to be sued on any contract claim “to the extent and only to the extent specifically set forth in any such contract.”
But Mills said the landscape has gotten more complex as outside investors have at times “sought to take advantage” of tribal status to utilize tribes to make their own profits.
“I think that’s where you’ve seen a lot of, sort of, controversy and conflict around tribal lending operations,” he said.
He said, however, he doesn’t think it’s fair to paint all tribal lending operations with a broad brush as committing predatory lending behavior with outside money or help.
“It can be a really important source of economic activity for the tribe because it provides access to a customer base that isn’t just reservation central, and that means jobs and revenue that people just circulate on the reservation,” Mills said.
LeValdo, in an interview last week, declined to elaborate on the ongoing lawsuits in New Jersey and Alabama and called IMDG’s lending companies a “gold-standard and model lending program.” Stiffarm did not return several phone calls and messages left last week seeking an interview.
But the non-tribal parties’ involvement in some lending operations – alleged or real – have led attorneys across the country to set out in court to try and prove non-tribal people and companies are taking advantage of tribal sovereignty and lower-income people for their own profits.
“It really, frankly, challenges the somewhat bedrock principles of tribal jurisdiction, questions of sovereign immunity,” Mills said. “And it really puts the tribes’ authority at risk because, to be frank, people are getting screwed by these loans, and they wouldn’t be able to be made anywhere else in the state or even at the federal level there.”