The Palace Hotel debacle isn't the first time the Guidiville Rancheria or its tribal advisors have been at the center of controversies with government agencies.
Tribal consultant Michael Derry, a Ukiah resident and a promoter of Guidiville's plan to buy the landmark Palace Hotel, demolish it, and build a new hotel-retail complex downtown, has been at the center of activities to expand the tribe's financial base for at least two decades.
In 2004, Derry was a principal adviser when Guidiville and investment partners made headlines when they proposed building a billion-dollar casino at Point Molate overlooking San Francisco Bay. The casino plan collapsed amid intense public scrutiny, but years later, the tribe, its casino backers, and the city of Richmond are still engaged in a costly legal struggle to determine an outcome.
As part of a 2022 settlement, Guidiville, and its partner Upstream Point Molate LLC, obtained four developable parcels at Point Molate for a token of $400. They were given five years to sell the potentially valuable parcels and split the proceeds with the city of Richmond.
In late November 2023, however, a state Court of Appeal ruled that the environmental impact report for any proposed development at the former Naval storage depot was flawed, a big boost for shoreline public park development proponents. Guidiville and Upstream are now negotiating with Richmond and the East Bay Park District to sell the lots for park development.
Derry and Guidiville, in 2017, also figured in a high-profile East Coast racketeering case that federal prosecutors said stretched the limits of tribal sovereignty claims and centered on payday lending practices.
Derry would later testify in the trial that he and tribal representatives were duped by Philadelphia financier Charles Hallinan, known as the 'godfather of payday lending,' who was convicted of racketeering by a federal jury and sentenced to 14 years in prison for conspiring to collect on hundreds of millions of dollars in illegal high-interest loans issued to thousands of people. Hallinan, 77, appealed his conviction to the U.S. Supreme Court, which declined in 2020 to review it.
A year earlier, in 2019, a U.S. federal court appellate ruling outlined Guidiville's role in the high-profile East Coast case. It described Guidiville's contracts with Hallinan and associates as a "sham." Federal prosecutors labeled it a "rent-a-tribe" scheme involving Guidiville and other tribes who claimed sovereignty from state usury laws.
According to a statement of facts issued by the U.S. Court of Appeals for the Third District in Philadelphia, the Guidiville contracts with Hallinan and later an associate of his called for Guidiville to receive $20,000 monthly payments from 2010 to 2012 for allowing the use of the tribal name to circumvent state laws.
The court statement details how a $200 computer was sent to Guidiville's Ukiah office to "create the illusion" that someone on tribal land was approving the loans. In fact, according to the court decision, no hardware or software had been placed on the computer that would have enabled its interface with the lender's computers.
"Guidiville did nothing other than to permit its name to appear on the loan documents," according to the court. In return, Guidiville was "paid approximately $20,000 each month."
Derry testified during financier Hallinan's federal racketeering trial that he had been told by a Hallinan lawyer that "payday lending was a low-risk way to raise money" and that he could be introduced to a person with the most experience of anyone in the industry, "the godfather of online lending." That person was Hallinan, according to the court document.
The court document discloses that in January 2011, the late Guidiville tribal chairwoman Marlene Sanchez and Hallinan signed a letter of intent to create a payday lending partnership with Hallinan.
A problem quickly developed when Guidiville placed a 36 percent interest cap on all loans. Hallinan's attorney told Guidiville the rate cap was a "deal killer which would require us to immediately move on to another tribe."
According to the court document, the tribe agreed to amend its ordinance to eliminate the rate cap.
However, the successful federal racketeering prosecution did not end Guidiville's ties to payday lending.
Last October, federal class-action civil lawsuits were filed in Indiana and Virginia against Derry and the tribe's LoanSmith.com online loan operation based in Ukiah. The suits alleged that Derry and other non-natives were the principal beneficiaries, not the tribe, which enjoyed sovereignty immunity. Court records show, however, that the lawsuits were dismissed three months later because of jurisdictional issues.
Derry and his attorney, Patrick Daugherty, did not respond to repeated requests for comment.
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