Peguis First Nation writes down $145M in debt amid lawsuit

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This article was published 24/03/2023 (1241 days ago), so information in it may no longer be current.

Just days before voting starts at Peguis First Nation for its next chief and council, an auditor’s report shows its current leadership has unilaterally written down the almost $170 million in loans principal and interest it owes a lender to only $25 million.

The outstanding debt — obtained by the First Nation to build on-reserve housing and buy land in Winnipeg — was the subject of a lawsuit launched last year in Manitoba Court of King’s Bench by PricewaterhouseCoopers Inc., the court-appointed receiver and manager of Bridging Finance Inc.

Bridging Finance collapsed in 2021, amid an Ontario Securities Commission investigation.

First Nation members begin casting votes in advance voting in Peguis (March 28), Winnipeg (March 30) and Selkirk (March 31), with election day April 6 in Peguis.

Chief Glenn Hudson, who is seeking re-election, said Friday he couldn’t say much about the writedown and auditor’s report (prepared by Baker Tilly Canada), but promised there would be a response Monday.

“We’re awaiting a response from Pricewaterhouse,” Hudson said. “(PWC) is still having discussions with us. We are both working at things right now.

“It hasn’t been litigated. And we have not been served, to date, by the courts.”

The writedown became public in Peguis last week, after the auditor’s report was posted on the band’s website.

In January, Hudson told the Free Press leadership was in meetings with the receiver and it had already agreed to write off the accumulated interest on the loans — at that time, a total of $56 million.

“This is something very complicated and complex, but we are working hard for the best interests of Peguis First Nation,” Hudson said at the time. “We’re looking at working with a new lender. We have three interested parties.”

The lawsuit was filed to protect the receiver’s interests, but did not say anything about the band writing down the debt principal itself, Hudson said.

The chief also said former Supreme Court justice Marshall Rothstein had been chosen by both the receiver and Peguis to help mediate a settlement.

PWC did not respond to a call for comment Friday.

Members of 269 Silent No More, a grassroots initiative concerned about decision making and finances on the reserve 170 kilometres north of Winnipeg, could not be reached for comment.

According to the auditor’s report, Peguis leadership had received legal advice about whether the loans needed to be paid back, under provisions of the Indian Act.

Under the Indian Act, creditors can’t take legal action to seize property on-reserve unless that protection is waived by the First Nation itself. Many financial institutions and individuals don’t offer such loans unless they get this waiver.

The auditor’s report said after receiving the legal advice “challenging the validity of the authentication of the contracts, which it was deemed invalid,” Peguis chief and council passed a motion to knock the debt down to $25 million without accruing any more interest or additional costs.

A Globe and Mail article published Friday said the band believes the write-down is legal because, while it waived the requirement for BMO for the original loans, when it went over to Bridging, that financial company didn’t ask Peguis for the same waiver, instead believing the earlier permission went with the loans.

In January, Hudson told the Free Press there was no danger of Peguis going bankrupt or losing any of its land or property.

Baker Tilly made several statements in the report expressing concerns about Peguis’s finances.

The auditor said it was unable to confirm anything with PWC, so it doesn’t know if amounts for the demand debt, net debt and interest expense are correct.

Baker Tilly said it also wasn’t able to get all the paperwork for Chief Peguis Investment Corp., Peguis Development Corp., and Chief Peguis Investment Trust. It also couldn’t obtain accounts payable for the construction project done by affiliates and contractors.

One note in the report says: “Management has assessed that the First Nation’s debt-servicing requirements, and level of third-party debt, indicate the existence of a material uncertainty that may cast doubt about the First Nation’s ability to continue as a going concern.”

kevin.rollason@freepress.mb.ca