Sunday, April 12, 2009

The Tribes In The Media: Mashantucket Tribal Chairman's Defense

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This installment of The Tribes In The Media is a New London Day newspaper article providing details on a bank loan provided to the chairman of the Mashantucket Pequot Tribe.

Tribal Chairman claims bank Bribed Him
By David Collins
The Day
April 12, 2009

Was Mashantucket Pequot Tribal Council Chairman Michael Thomas offered a bribe, in the form of an unsecured $1 million line of credit, by Sovereign Bank, as it courted the tribe's lucrative casino banking business five years ago?

This is what Thomas asserts in paperwork his lawyers have filed in a Superior Court lawsuit in which Sovereign is trying to reclaim the proceeds of the loan, which over time, with addendums, grew into a $5.2 million line of credit.

The bank says Thomas is in default on the loan for not making payments and now owes more than $6.5 million, including penalties and interest, an amount that is growing at the rate of $1,769 a day.

The bank, according to Thomas, made the loan “with the intent to influence or reward an agent of an Indian tribal government” in violation of federal statutes. Thomas doesn't use the word bribe, but the statute he cites does.

And since the loan was made “against public policy” and with the intent to “violate the law,” the loan documents are void, the argument goes, and therefore Thomas cannot be compelled to pay the money back.

Calls to the tribal chairman's office last week requesting comment about the lawsuit and the claims he has made in his defense were not returned.

Austin J. McGuigan, a former chief state's attorney whose Hartford law firm, Rome & McGuigan, is representing Sovereign, takes a dim view of this creative defense crafted by Thomas' lawyers.

”Any allegation of wrongdoing in this matter is groundless,” the gruff former prosecutor said when asked about the bribery claim.

Still, you have to wonder what the bankers at Sovereign were thinking when they offered to give Thomas an unsecured loan for $1 million. I'm sure that, in hindsight, a lot of people at the bank are asking that question.

Not only does the lawsuit suggest that Thomas may have turned out to be a bad credit risk, but it has shaken out a strange cast of characters with whom the tribal chairman has been doing business, some of them marquee criminal names in Connecticut.

The bank loan to Thomas, as it grew in size over time, was eventually secured by a mortgage of a 12-acre commercial property at Route 12 and Gungywamp Road in Groton, property Thomas' associates had planned to develop into a 118-unit apartment project.

According to Sovereign, the investors with an interest in that property include some of the principal characters in the collapse of Colonial Realty in the 1990s, Connecticut's own Madoff-style Ponzi scheme in which local investors lost hundreds of millions of dollars.

Among those with an interest in the Groton property that was put up to secure Thomas' loan, the bank said in court papers, are Jonathan Googel, a Colonial founder who pleaded guilty in federal court to wire fraud, bank fraud and tax fraud; Kevin Sisti, the son of another Colonial founder, who pleaded guilty to a conspiracy charge for taking loan proceeds for his father, and William P. Candelori, a former state lawmaker and Colonial executive, who pleaded guilty to federal tax evasion.

These and others have all been named in new complaints filed in Sovereign's suit against Thomas, which is drawing defendants and their lawyers like cloud banks to a gathering storm.

“It's a laundry list of convicted felons,” one person familiar with the case said of the growing list of defendants.

That includes Thomas himself, who was convicted as a young man on drug-dealing charges in Rhode Island.

Helping Thomas with advice about the Sovereign loan and other personal business matters, according to people familiar with the Sovereign case, is none other than Daniel Gordon, one of eastern Connecticut's most notorious white-collar criminals.

In a case that prosecutors called astonishing for its sophistication and brazenness, Gordon, a Norwich native, was accused of embezzling $43 million from Merrill Lynch when he was a top energy trader for the firm.

Gordon, who used some of the money to buy the Norwich-based Daticon electronic data company, pleaded guilty in 2003 to three felony counts related to the embezzlement.

He was released early from prison last spring.

As if Sovereign wasn't having a tough enough time collecting its money, it turns out the Groton property that was mortgaged to secure Thomas' loan may have already had a mortgage on it. The bank has filed a separate lawsuit against that entity to try to secure its interest in the property.

The bank is also embroiled in another of Thomas' defenses, this one claiming that the person the bank took to be his representative was actually fraudulently drawing down money from the Sovereign line of credit without Thomas' knowledge.

This Thomas associate, Billy Hadley, a Norwich real estate agent, has also been named as a defendant.

Paul Geraghty, his lawyer, claims, however, that Thomas had “given Mr. Hadley authority to handle business transactions on his behalf” and the claims that he fraudulently drew down money from the line of credit are not true.

One bright spot for Sovereign, in their legal wrangle to get their money back, is that a Mashantucket Pequot Tribal Court judge has granted the bank an attachment on Thomas' property on the reservation. This could help them collect if they eventually get a judgment from the court in their favor.

As for Thomas' claim that the bank gave him a bribe when they lent him the money, it seems to suggest that, by the same turn of events, that he accepted one.

I wonder what gaming regulators in Pennsylvania will think of all of this, bribes and criminal associations, when Thomas' gaming license, part of the tribe's pursuit of a share in a Philadelphia casino, comes up for its annual review for renewal.

THIS IS THE OPINION OF DAVID COLLINS, NEW LONDON DAY NEWSPAPER