Peguis First Nation hires new lawyers to fight $172M lawsuit over loans

Peguis First Nation has hired a new law firm to contend with a $172-million lawsuit its chief says has effectively hampered his community's finances.

The northern Interlake First Nation had previously argued in a statement of defenceit doesn't have to pay loans it described as illegal, unconscionableand part of"a Ponzi scheme."

Peguis Chief StanBird said he's brought in "a new set of eyes" to defend against theclaim brought against Peguisby PricewaterhouseCoopers Inc., a court-ordered receiver for insolvent lender Bridging Finance Inc.

That $172 million sought fromPeguisexceeds what the First Nation,which has 11,670 members living on and off reserve, spends every year on its annual budget.

"It's almost like we can't do very much until that's resolved, and we do have our legal team looking at that right now,"Bird said in an interview.

"We brought on a new firm toaddress that because we need to move out from under this position that we're in."

In December 2022, four months before Bird was elected chief, PricewaterhouseCoopersfiled the $172-million claim in Manitoba's Court of King's Bench, namingPeguis, its chief and council and five Peguis-associated corporations as defendants.

Peguis took out three loansin 2017 fromBridging Finance, according to an amended version of the claim.

Bridgingwas placed into court-ordered receivership in 2021 afterthe Ontario Securities Commission alleged managers with the company funnelled investors' money to themselves.

PricewaterhouseCoopersis now trying to recover $99.5 million in principal plus $72.6 million in interest from Peguis for loans that matured at the end of 2020, according to the amendedclaim.

Theloans hadan interest rate equal to BMO Bank of Montreal's prime lending rate plus 11 per cent, according to the amended claim.

One loan, taken out initially tobuild 50 homes on reserve and maintain existing housing, ended up being $41.7 million, according to the amended claim.

A second loan of $6.9 million was intended to build gas bars in Winnipeg and Selkirk, while athird loan, which totalled $50.9 million,replaced previous Bank of Montreal loans, according to the amended claim.

PricewaterhouseCooperssaid in its amended claim it will accept $172 million in damages for breach of contract as an alternative to Peguis paying back the principal and interest.

As of July 2023, Peguis had not paidany of the money back, according to a Bridging Finance receivershipupdate posted on thePricewaterhouseCooperswebsite.

Loans were illegal, Peguis argued

In a statement of defence filed on Sept. 1, 2023, five of the defendantsPeguis, its chief and council, the Peguis Development Corporation and two Peguis-associated numbered companies deniedmost of the allegations.

Those defendants argued the loans from Bridging Finance were illegal because the managers used company funds and investor money "to personally enrich themselves, thereby committing fraud and other wrongdoings."

The managers of Bridging Financeconstituted "a criminal organization" and ought to have known Peguis"was not in any position" to repay the loans, the statement of defence stated.

"The scheme was in its entirety a Ponzi scheme for which no valid recourse is available to the receiver," the statement of defence continued.

The Peguis defendants also called the loans "unconscionable" due to "the inexperience and financial naivetof these defendants" compared to Bridging officials, according to the statement of defence.

They accused the latter of causing Peguis to default on earlier loans with BMO Bank of Montreal when Peguis took out some of its loans from Bridging, according to the statement of defence.

In a separate statement of defence, two other defendants Chief PeguisInvestment Corporation and Peguis First Nation Real Estate Development denied most of the allegations, stating they were not the borrowers.

The latter two defendants also said in their statement that they rely on the defences put forward by the other defendants.

In a cross-claimagainst the five other defendants, Chief PeguisInvestment Corporation and Peguis First Nation Real Estate Development seek to be paid if they are found liable to payPricewaterhouseCoopers.

Writedownof Peguis debt questioned

Prior to Bird's election as chief in 2023, Peguis First Nation posted financial statements for 2022 that indicated the debt owed to Bridging Finance had been written down to $25 million.

Bird said he questionsthe veracity of that claim, which PricewaterhouseCoopers has not confirmed.

Accounting firm Baker Tilly, which audited the Peguis financial statements, included a cautionary note about the writedown.

"We were unable to obtain third-party confirmation from the receivers of Bridging Finance Inc., a major creditor of the First Nation, which is in receivership. Thus, we were not provided with sufficient and appropriate evidence to support the existence and completeness of demand loan owning by the First Nation," Baker Tilly wrote in the statement.

Mingzhi Liu, an accounting professor at the University of Manitoba, saida defendant under liquidation can seek solutions to write down debt.

"This case is different. Peguis First Nation unilaterally wrote down the debt without providing sufficient evidence," Liu said."That's why Baker Tilly issued a qualified opinion."

Peguis First Nation hires new lawyers to fight $172M lawsuit over loans

8 months ago

Duration 2:19

Peguis First Nation has hired a new law firm to contend with a $172-million lawsuit the chief says has effectively hampered his community's finances. The northern Interlake First Nation had previously argued it doesn't have to pay loans it described as illegal and part of a Ponzi scheme.