opdr031309

Posted March 13. 2009 - Marble, NC

Opinion:

Don Rose: Tribe loses $60 million! It's no ones fault??

The broker who controls the funds the EBCI has invested in the stock market reported to the tribal Investment Committee that as of December, 31, 2008 the tribe has lost approximately $60 million from the endowments and per capita fund for under 18 year old tribal members. Given that January and February of 2009 are two of the worst months the market has experienced, it is reasonable to assume additional losses that could push the total loss to over $80 million. The broker encouraged the tribe to move the remaining money into hedge funds, a ridiculous idea that would have made it extremely difficult to access the funds should the tribe need the money and more than likely would have resulted in even greater losses. The Tribal Council rejected the broker recommendation and directed the investment committee to begin moving the money to certificates of deposit, bonds and similar less risky investments. However, that is like closing the barn door after the horse has run away.
Who is responsible for this fiasco? Apparently no one. Council denied responsibility by saying they thought the investment committee was handling things. The investment committee and the chief apparently blame the broker. The broker blames the current economic situation. We are just like everyone else in the market; victims of the severe down turn in stock values. I say that is pure bull crap! The signs that the market was going to suffer significant losses were obvious in January 2008. At that time I pulled my invested capital from the market and put it in CDs over the objection of my broker. I lost nothing in 2008 and, in fact, made $70,000. The tribe could have and should have done the same or something similar.
So, why did we lose so much of our money? Who is to blame? The blame rests on the shoulder of the investment committee, the Tribal Council and the Chief. The Chief bears the greatest part of the blame. He must have been reviewing the monthly reports of the growing losses but apparently took no action to curtail those losses. Quite likely he, and the investment committee were listening to broker recommendations without taking into consideration the fact that the broker does not represent the best interests of the tribe; brokers work for themselves or the company that employs them, and they all sing the same song: “stay the course, things will turn around and you will make it all back.” Most investors, including tribal leadership, really don’t understand the market. The tendency is to turn the money over to the broker and hope they know what they are doing.
So, what should tribal leadership have done. First, you don’t invest millions upon millions of dollars in anything without having a highly qualified person (who is not a broker) overseeing the investment on a daily basis. Secondly, you distribute the money such that the majority is in non-volatile, low risk investments such as treasury bills, AAA bonds, certificates of deposit, money market investments and cash. We apparently did not do that. We went for the big gains in the high risk segment of the market and paid the price for extremely poor decision making on the part of the chief and the failure of the Council to maintain awareness of what was happening.
It amazes me when I think back on the several council meetings I have attended during the past year and recall the battles over a few dollars when we were losing millions and no one even mentioned it. What is even more surprising to me is the total absence of an outcry by tribal members in response to the televised announcement that we have lost over $60 million. In any other community of our size the people would have been calling for the scalps of those who let it happen. Why are we so complacent? I guess it is because we have become so accustomed to things of this nature that we just accept it as inevitable. And, it will continue to be inevitable until the people say “enough is enough” and elect leaders who are more concerned with the welfare of tribal members than they are of themselves, people who will focus on preserving our money instead of getting their pensions early, people who will base their decisions on what is best for the tribe rather than on political considerations. And, we the people, need to accept our share of the blame. We need to quit running to the chief or Council every time we don’t get our way. We need to demand more openness in government; we should have demanded to know how our money was being invested and managed. We should have demanded monthly reports on the status of those investments. But, our government is neither open or accountable. I doubt that most tribal members even knew our money was heavily invested in the stock market. Until such time as a majority of the members of this tribe stand up and demand openness and accountability and elect leaders who possess the skills, experience and dedication to the best interests of the tribe, things will never change.