As the Chairman of the Hopi Tribe, I feel compelled to respond to various rumors and allegations regarding the Hopi Tribe Finance Department and an investigation I commissioned to analyze and review the status of the Finance Department. The investigation, conducted by Henry & Horne, LLP, a certified public accounting firm, identified several longstanding issues -- issues that predate my election as Chairman. As Chairman, it is my duty to ensure that the information being disseminated to the public is not misleading. Below is an accurate record of the Tribe’s current financial troubles.
I was elected into office in December of 2009 and my term began in earnest in January 2010, replacing then Chairman Ben Nuvamsa, who had resigned from office. Shortly after coming into office, I discovered serious financial problems within the Tribe and with our varied investments. I immediately authorized an investigation into these matters. This included retaining the services of Grant Thornton, LLP, a respected and reputable national and international forensic accounting firm. In their investigation, they discovered that during the 2007 through 2009 time frame, Treasurer Russell Mockta, with advice from the Tribe’s financial advisors and under the watch of Chairman Nuvamsa, opened more than 100 bank accounts.
It was also discovered that thousands of transactions and millions of dollars were moved around almost daily within these accounts, creating a complicated situation where monies were not properly accounted for in the Tribe’s financial records. Further, this is the primary reason the Tribe cannot get its yearly audits completed.
Even more troubling, Grant Thornton discovered that the purpose of the bank accounts were in direct violation of the Tribe’s written investment policies. The audit uncovered dozens of “New Account Forms” used to open bank accounts during that same time period. The forms were signed by Mr. Mockta, Tribal Secretary Ms. Mary Felter and the Tribe’s financial advisor and show that these are improperly authorized margin accounts, alternative investments such as CDO/CLO’s (high risk investments) and speculative “high degree of risk” activity.
All of the listed purposes violate the Tribe’s investment policies and occurred before I became Chairman.
In relation to the margin accounts, (a line of credit that the Tribe is ultimately responsible for), the Tribal Council authorized only $15 million for a loan to construct the Legacy Inn Hotel. Mr. Mockta, however, transferred $30 million – $15 million more than what the Tribal Council authorized. This unauthorized transaction occurred prior to my election as Chairman and continues to be a debt the Tribe owes.
Grant Thornton was not the only firm to find problems with the Tribe’s finances that occurred prior to my election. The Tribe’s auditors, Walker and Armstrong, LLP, also found substantial problems with the Tribe’s accounting for investments, reporting of bank accounts and compliance with the approved investment policies of the Tribe. As a further example, in the 2007 audit, the auditing firm could not determine whether the Tribe’s investments conformed to the Tribe’s policies:
The 2008 audit showed no improvement at all. The audit for the year ending 2008 stated:
Again, this is two years prior to my election as the Tribe’s Chairman.
We also discovered that in 2009, the then Treasurer, Mr. Mockta, engaged in investments with the firm of Morgan Keegan that included purchasing interest rate swaps to allegedly protect against fluctuations in interest rates. The “swap agreement” is a highly unusual activity for an Indian tribal government to engage in, and is a very risky investment strategy. The swap agreement is signed by Mr. Mockta, Mr. Scott Canty (the Tribe’s former General Counsel), and Ms. Felter.
The swap agreement is dated June 30, 2009, before my election as Chairman, and is currently costing the Tribe approximately $170,000 per month.
The above are not the only examples of the financial misdeeds that occurred before my term.
The report concludes that because of this “lack of organizational stability and strong leadership” (within the Finance Department over the past fifteen years),
All of the above activity was unfortunately made worse by the political turmoil and governmental meltdown that occurred within the Tribe during the 2007 – 2009 timeframe. Rather than fulfilling his term, Chairman Nuvamsa walked away from his position, ultimately leaving the Tribe with neither a Chairman nor a Vice Chairman, and the Tribe operated without a Treasurer for several months, causing the Finance Director to take on an overwhelming workload that put the Tribe’s finances at risk.
As has been well-documented by Henry & Horne, LLP, Grant Thornton, LLP and Walker and Armstrong, LLP, the Tribe’s financial troubles started many years ago, and well before I took office. The Tribal Council and I have been -- and will continue to -- take steps to further determine what and how this happened, both with the Tribe’s investments, as well as with the Finance Department’s operations. Due to the sheer volume and complexity of the financial investment transactions and the weakness of the Finance Department’s structure and processes, this has been a very difficult and time-consuming task. The Tribal Council, however, is committed to finding solutions and getting the Tribe’s books and records in order. I support and encourage the Tribal Council’s desire to conduct a complete and thorough investigation of all of the Tribe’s financial activities for at least the past five years, to implement policy changes to ensure financial misdeeds cannot happen again in the future, and if it is discovered that crimes have been committed, to prosecute the wrongdoers.
*Additional proof of the aforementioned documentation is available in more detail on the Hopi Tribe website, www.hopi-nsn.gov.