"It's got a lot of potential if we let it be," Executive Economic Development Director Allan S. Begay said just before a closed presentation to the Economic Development Committee. "It's really the only industrial development that's been done (on the reservation) in the last four or five years."
But, he said, the tribal government did not know about CEO Hak Ghun's 1984 conviction on mail fraud, wire fraud, commodity fraud and perjury when it approved using $2.2 million in Navajo Dam Escrow Account money as collateral for an economic development loan of the same amount.
"We did a very cursory check," Begay said.
He said he didn't know if the information would have changed the decision. The package was approved in September 2006 by a Navajo Dam Escrow Account Committee and the Budget and Finance Committee.
Ghun acknowledged Tuesday that he was a co-owner of Nelson, Ghun & Associates when the Wall Street company's owners were charged with using "high-pressure sales pitches and false claims to persuade unsuspecting victims to part with their funds,'" according to an Associated Press story at the time.
Ghun blamed the company's failure on an associate who went bankrupt.
"That was over 20 years ago ... it's one of the reasons I can't work in the (Securities and Exchange Commission)," he said. "(The federal government) has an insurance program now."
He said he paid his debt by serving about three and a half years in prison and paying a $25,000 fine.
"That's been through the courts," he said.
The Economic Development Committee, which oversees business loans, met Wednesday at Navajo Agricultural Products Industry. By a vote of 4-2, the committee closed the meeting to the public as Begay presented a report on the $4.5 million metal and fiberglass fabricator.
"(I want to) see if an executive session is necessary," Committee member Kenneth Maryboy said before the meeting closed. "Is that public money, or what kind of money are we talking about?"
"It's money, a general report, also some financial data that might be confidential," Begay responded.
The Navajo Dam Escrow Account was established some 20 years ago with money from a settlement between the Nation and the city of Farmington. The approximately $5 million account is used only to collateralize economic development loans and BCDS is the only current user.
If BCDS were to default on the loan, money from the escrow account would go to pay off the balance. Navajo Nation Controller Mark Grant said Tuesday he's received no complaints on loan payments from JP Morgan Bank, where Ghun took out the loan.
In May, the Shiprock Chapter passed a resolution calling on the Budget and Finance committee to audit both the escrow account and the company, saying the loan was supposed to pay for a 100,000-square-foot expansion that has never started.
Begay argued Wednesday that the $2.2 million loan wouldn't be enough to complete such an expansion.
"There no way you can do that," he said.
He said BCDS did submit the loan collateral package to pay for the expansion and no work has yet been done. Ghun said Tuesday the money was spent on inventory, including a $1.2 million reverse osmosis system. He added he put $3 million of his own money into the company.
The Economic Development Committee decided Wednesday to join Budget and Finance Committee executive session June 11 to decide if an audit is necessary. The Nation is a 51 percent shareholder in the company. BCDS employed about a dozen people in April.
Lindsay Whitehurst: email@example.com