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Lawsuit blames Cherokee for investment losses in children’s trust fund

The Eastern Band of Cherokee Indians has denied any wrongdoing in a lawsuit related to investment losses in a trust fund that safeguards casino earnings on behalf of Cherokee youth.

The tribe has, among other things, asked a judge to deny a class-action status in the lawsuit, which would allow any youth affected by the losses to be compensated by the tribe.

The tribe splits a portion of the profits from Harrah’s Cherokee Casino and Hotel among its 14,000 members. For children under 18, the annual payments are put in a trust fund managed by the tribe. They get their money when they complete high school or turn 21, whichever comes first.

The funds for 17-year olds are supposed to be transferred to a safe and stable account to protect them from market volatility in the final year before payout. However, a lawsuit against the tribe claims that the tribe failed to transfer the funds into the more stable account, a violation of Cherokee Code.

“They had to transfer it, and they didn’t,” said Attorney Russell McLean III of Waynesville, who is representing the plaintiffs.

McLean estimated that the decision resulted in a loss of $3 million affecting 138 youth.

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The tribe agreed that it lost money on the trust fund in the 2008 stock market crash but said it already compensated for the losses by putting extra money into the Minors Fund, according to a response filed by the tribe.

The lawsuit, however, claims that the affected youth were not reimbursed.

The tribe’s response also says that the investment committee that oversees the minors’ trust fund “acted in its reasonable discretion” when it opted not to transfers the money to the safer account to await pay out.

Roy Davis, an Asheville attorney who is helping represent the Eastern Band, declined to comment until he consulted with Cherokee Attorney General Annette Tarnawsky.

The lawsuit was filed in February by enrolled member Steve Teesateskie. Teesateskie’s complaint states that his account contained more than $90,000 at the end of 2007, but during the subsequent year, its balance dropped to about $78,000.

Teesateskie filed the lawsuit on behalf of himself and others who turned 17 around the same time. A judge must decide whether to permit it to be filed as a class action lawsuit, which would allow all affected minors to sue the tribe as one entity rather than having to file separate lawsuits.

The plaintiffs have asked for both punitive and real damages. Punitive damages are intended to punish the guilty parties, and real damages are how much actual money the person lost. If the tribe is found guilty, the court can award up three times the real damages, which, according to McLean’s calculations, could be as much as $9 million.

“I think it would be reasonable to resolve this without going to tribal court, but that is the tribe’s choice, not ours,” McLean said.

In its response, the tribe asked that the actual damages be considered separately from punitive damages. If a jury does not award actual damages, it would be difficult for the plaintiff to argue for punitive damages.


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