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Michigan tribe files multimillion fraud claim against Mexican casino magnates

WATERSMEET, Mich. – The chairman of the Lac Vieux Desert Band of Lake Superior Chippewa Indians has some advice to tribes who are thinking about economic development projects outside the United States. If it looks too good to be true, it probably is, Chairman Jim Williams warned.

The Lac Vieux Desert Band (LVD) has filed a lawsuit against Arturo Rojas Cardona and Juan Jose Rojas Cardona and their company, alleging that the brothers have defrauded the tribe of its $6.5 million investment in a casino in Guadeloupe, Mexico.

The lawsuit was filed originally in Arizona Superior Court in April 2008, and moved to the U.S. District Court in Arizona in July 2008. The action lists multiple claims, including “breach of contract, conversion, breach of fiduciary duty, fraud, breach of the implied covenant of good faith and fair dealing, constructive trust, and piercing the corporate veil against” the brothers and the host of companies in Mexico, the U.S. and Panama that comprise their gaming empire of 16 casinos and sports books in Mexico.

“My goal in this litigation is to try to stop this nightmare from happening to other tribes and investors, because I know it has happened to others and it will continue if someone does not try to rein in these guys,” Williams said.

“The first advice I’d give another tribe is unless you have full control over the operation on a daily basis and are capable of actually putting the revenue generated from the casino into a bank and taking it, I’d say stay away from it.”

The lawsuit says the Rojas brothers solicited investors in the U.S., particularly Indian tribes operating casinos, “because of their reputation for having access to capital and familiarity with the gaming industry.”

LVD conducted due diligence, investigating the brothers’ bona fides and the legality of gaming in Mexico and ultimately determined that the solicitation was a credible opportunity.

“All we wanted to do was make sure we were in compliance in paying the Mexican taxes and making sure we were in compliance on the American side as well, and that they would comply with giving us documents and other things like getting paid. When our attorneys put the agreement together with the Rojas brothers, whoever thought they would renege on those agreements?” Williams said.

According to the lawsuit, the Rojas brothers “induced” LVD to invest $6.5 million to the Guadeloupe Casino by promising a 26 percent equity interest and 26 percent of the casino’s net revenues. The offer was attractive as an economic development project and also because the parties agreed that American law would govern the investment and the state of Arizona would be the forum for disputes.

But since the tribe’s transfer of investment funds in 2006, the defendants haven’t paid the tribe its share of the casino profits and have used the tribe’s investment “for their own purposes,” including the purchase of slot machines for other casinos, according to the lawsuit.

The lawsuit documents a series of agreements between the tribe and the Rojas brothers including a “depository agreement” by which the brothers agreed to deposit on a daily basis 26 percent of the net revenues of the Guadaloupe Casinos or set up a trust fund for these revenues. Williams said that hasn’t happened. But the tribe is able to track the casino’s revenues through daily electronic reports.

“It’s ironic that we get reports every day on how the casino is doing and yet we get no money. At this point, with the revenues being generated, they owe us more than $1 million.”

He said appeals to Mexican authorities for help have been fruitless. “We talked to a number of government officials in Mexico and we’re not very comfortable with that. It almost seems that they’re bought out somehow. They’re very resistant and not as open-minded as we thought they’d be.”

The lawsuit also documents numerous other attempts by the tribe over a year-and-a-half to collect its money, and promises made by the Rojas brothers to pay up that were later broken.

“We went through that cat and mouse game with them and finally realized they were stringing us along and that nothing was going to happen, that they weren’t going to comply with our agreement and they weren’t going to pay us, and we needed to go forward and try to get our money back,” Williams said.

The lawsuit documents a series of attempts by the tribe to locate the Rojas brothers, whose whereabouts were unknown during much of the time. According to the lawsuit, others were also seeking the brothers.

“Defendant Juan (Rojas) Cardonna was known to live in Monterrey, Mexico. However after two shooting incidents, one of which targeted him personally and killed the driver of his vehicle, he is believed to have moved. In one e-mail to the manager of (the LVD holding company), he reported that he left Monterrey after the first shooting to live somewhere else,” the lawsuit says.

Neither of the Rojas brothers or their attorney could be reached for comment.

Little Fawn Boland, a member of Piro-Manso-Tiwa Tribe and an attorney with the firm Rosette & Associates, said the defendants have filed a motion to dismiss the case and a motion to stay the case, which the tribe has answered.

“The court has not ruled on anything since we had a favorable ruling (Nov. 6, 2008) to amend our complaint. Things may have slowed down over the holidays. The court has indicated it might rule on a remand that would bring the case back into state court where it originated,” Boland said.

That would be favorable for the tribe, since a jury decision in state court requires only two-thirds, whereas federal court jury decisions must be unanimous, Boland said.

Meanwhile, the 540-member tribe is feeling the general economic crunch, which has been exacerbated by the loss of its $6.5 million investment.

There is some hope that the Rojas brothers are in the midst of selling their company, Williams said.

“Maybe if new ownership comes in we can sit at the table and get our partnership back on track, get paid what we’re owed. But at this point my whole goal is to get our money back and get away from the nightmare.”

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