Cherokee teens sue in class action for money lost in stock market crash
A class action complaint aims to hold the Eastern Band of Cherokee Indians responsible for money lost when the stock market crashed in 2008 and eroded the personal accounts of Cherokee youth held in trust by the tribe.
All 14,000 members of the tribe share in profits from Harrah’s Cherokee Casino and Hotel. For those under the age of 18, the tribe holds the money in trust, not only adding the annual casino payments to it but also investing it to help it grow until they reach adulthood and can cash out.
The suit claims 138 youth each lost about $22,000 when their cut of casino earnings were invested in risky, unapproved ventures.
To safeguard against losses in the stock market, the funds of 17-year olds are supposed to be transferred to a safe and stable “pre-payout” account to protect it from market volatility. The holding account guards against erosion of the principle in the year just before payout.
The suit claims the investment committee for the Eastern Band of Cherokee Indians Minors Trust Fund failed to transfer funds into the safe holding account in 2008, and the 17 year olds that year “suffered significant monetary losses as a direct and proximate result of the decision to not transfer funds to the pre-payout sub-account.”
In other words, the stock market tanked and money was lost because it wasn’t in safekeeping. The youth that year received approximately $65,186 instead of the $88,000 that they should have accrued by turning 18. Minors can cash out when they turn 18 if high school diploma or GED. Otherwise, they have to wait until they are 21.
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The suit names each of the five members of the investment committee and Principal Chief Michell Hicks, both individually and in their official capacities.
“They played the stock market and they lost,” said Attorney Russell McLean of Waynesville, who represents the plaintiffs. “They gambled and invested it in funds that were not protected.”
The investment committee and Hicks had not as of last week filed a response to the civil suit.
The suit claims the tribe should reimburse the youth for their losses. The tribe, in fact, previously pledged to do just that in the face of angry backlash over losses in the Minors Trust Fund.
In an tribal-wide update on the Minors Fund status in April 2009, Chief Hicks. stated the tribe “stands good for the principal balance of our children’s investments by tribal law,” according to the suit. The proclamation said that the Eastern Band would make up the difference “if a minor leaves the fund and their balance is below the principal amount contributed.” Despite the promise, the tribe did not follow through on its commitment and did not reimburse the children involved, the suit alleges.
McLean said that he expects to file a second, larger class action suit on behalf of Eastern Band children ages birth through 17.
“We’ll see if an entire group of children on the reservation should be protected by the courts,” he said.
McLean said the next step in the current class action suit is to identify and notify each of the children involved. They’ll need to each decide whether they want to proceed as part of a class action suit or if they prefer to file their own individual lawsuits. He said the notification would take about two months to complete.
