Business and Industrial Development Fund balance $7M; B&F requests audit

By Kathy Helms
Diné Bureau

WINDOW ROCK — After 20 years of the Navajo Nation investing money from the Business and Industrial Development Fund to get businesses off the ground, the fund has dwindled from $30 million to a September 2007 balance of approximately $7 million cash assets.

The Business and Industrial Development Fund was established by the Nation in 1987 by appropriating an initial capital contribution of $30 million, Acting Auditor General Elizabeth Begay told the Budget & Finance Committee during a special meeting Wednesday.

“If we invested in a 10 percent return on our investment of that $30 million in 1988, we estimated that after 20 years, the fund should have at least, give or take, $90 million now,” she said.

Begay was asked to attend the B&F meeting so the committee could take action on a suggestion made by member Lorenzo Curley during a May 20 presentation in Shiprock regarding an audit of BCDS Manufacturing Inc.
“If you recall, Mr. Curley made a suggestion that the BIDF fund needs to be audited,” B&F Chairman LoRenzo Bates told the committee. Business and Industrial Development Fund funds were used to purchase stock in BCDS.

The BCDS audit found that Biochemical Decontamination Systems is now in debt approximately $4.7 million; that former CEO Hak Ghun intermingled personal and corporate funds; that the Navajo Nation was the only stockholder that contributed capital; and that due diligence investigation was not done.

In December 2003, the Navajo Nation, through the Division of Economic Development, invested $300,000 from the Business and Industrial Development Fund into BCDS Colorado and was issued 15,100 shares of BCDS no-par value common stock. On Sept. 1, 2004, the Nation was issued 10,400 more shares by investing an additional $11,290 from Business and Industrial Development Fund.
Through its $311,290 investment from Business and Industrial Development Fund, the Navajo Nation became majority stockholder with 25,500 shares, or 51 percent.

“We would like to inform this committee what happened to the funds. So if you want to request an audit, we recommend that we start with the very beginning on the $30 million and identify all of the loans and investments from that fund,” Begay said regarding Business and Industrial Development Fund.

The committee approved the audit request unanimously without question.

“We will look forward to the audit results,” Bates said.
The Business and Industrial Development Fund was created to be administered and managed in accordance with established Navajo Nation investment policies and procedures, Begay said afterward. “So if you talk about investment policies, then you expect that there should be a return on our investments.”

The purpose of the audit will be to identify “where they spent the money or where they lent out the money because according to this, it can be used for providing financing for business and industrial development, specifically, large tourism, commercial and industrial development projects or small business projects.”

Controller Mark Grant said there is a master policy that guides all overall investments and that a market return is expected. He said he does not believe there is a sub-policy for the Business and Industrial Development Fund.
The Economic Development Committee, which has oversight for the Division of Economic Development, was informed of the BCDS audit findings during a separate meeting Wednesday. Bates said EDC directed the Department of Justice to look into the possibility of hiring a special prosecutor to investigate the BCDS matter.

During the Shiprock meeting, B&F instructed DOJ and DED Director Allan Begay to come back in 30 days with a plan on what to do with the BCDS debt as well as legal options.

“With them (EDC) asking for a special prosecutor, that's fine. I don't know the time line of when they expect something back, but ours is 30 days from the May 20 meeting,” he said.