Chairman explains bankís
involvement in lawsuit
Posted 5/22/02

By JOEL STOTTRUP
Princeton Union-Eagle

If one wanted to figure out one of the reasons why B.P. "Pete" Allen Jr., who is chairman of the board at First National Bank of Milaca, has pushed for his bank to side with Mille Lacs County in a lawsuit against the Mille Lacs Band of Ojibwe, you could go back 22 years.

The Union-Eagle found that out when a reporter went into Allenís bank building that stands like a citadel in downtown Milaca with its tall, white columns. The walk to Allenís office takes you over a flagstone floor and back to an office that faces the lobby. A large sailfish dominates the wall behind the desk of the 73-year-old Milaca native, who has been a longtime force in Milacaís economy.

Allen began talking about how he hadnít become aware of the issue that is at the heart of the countyís recent filing of a lawsuit against the Indian band until four or five years ago.

He explained that when he was at a meeting of an association of Mille Lacs Lake property owners, he knew of the issue of the Indian band asserting that its reservation along Mille Lacs Lake is not the nearly 4,000 acres the county states it is, but is 61,000 acres.

The countyís lawsuit seeks to have a federal court determine once and for all if the bandís 61,000 acres was disestablished in the late 1800s.

If the reservation is 61,000 acres, which covers the townships of South Harbor, Isle Harbor and Kathio, and the cities of Isle, Wahkon and Onamia, as once was clearly the case in 1855, then it could be a problem for the non-Indians living within those boundaries, county commissioners have said.

So, within just a few weeks after the county filed its lawsuit, First National Bank of Milaca, owned by Allen and his four sons, filed to be an intervenor in the case on the side of the county.

A hearing is scheduled before a federal magistrate in Duluth on June 6 during which the request to intervene could be approved or denied.

The bankís motion to intervene states that the county "seeks to protect its sovereignty and regulatory authority while the bank seeks to protect its property and business interests."

The bank has a branch bank in Isle which has loans secured by real estate in the townships of Kathio, South Harbor and Isle. Allen, in his motion to intervene, notes that the bankís market area extends throughout "the former Mille Lacs reservation boundaries," including the three townships.

At the time of the filing, the Isle branch had 189 borrowers and about $11 million in real estate mortgage loans, according to Allen. He noted that most of those are in the townships of Kathio, Isle Harbor and South Harbor.

Allen, who served as president, CEO and/or director of the 105-year-old bank for 46 years, quickly got to a prime motivator during last Fridayís interview for why he wants his bank to be an intervenor in the lawsuit.

"All of us are products of experiences we have had before, for our thinking going forward," he began.

Then he told how in 1980 his bank sued the federal Controller of the Currency over the way the agency was assessing the cost of examining the bank.

At one time the assessment was based according to a bankís assets, or deposits, but then it was changed in the late 1970s, he explained. The change, according to Allen, resulted in his bank being assessed at a rate that was four times that of large banks in the Twin Cities.

First National Bank of Milaca, along with other banks protesting the new rate, took the federal agency to court, asserting it was unfair, but lost the case in federal district court.

Allen told how the plaintiffs then appealed to the federal appeals court in St. Louis and "faced a battery of federal attorneys." The plaintiffs lost again.

The decision from that appellate court said that for a long time the courts have given "great credence to agencies over their subjects," Allen said.

The case of the county suing to establish that the 61,000-acre Mille Lacs reservation was disbanded in the late 1860s has involved the Bureau of Indian Affairs and the Environmental Protection Agency, Allen noted. He explained that those federal agencies by their actions have recognized the 61,000-acre reservation as still existing.

What Allen said he learned from his experience with the banking lawsuit 22 years ago was that if someone is to go into court, they should go with "all the horses you can get."

Therefore, First National Bank of Milaca, with its retaining of Briggs and Morgan, a well-known Twin Cities law firm, could add to the legal firepower of the county, Allen explained. Although the law firm will likely have a few attorneys helping the bank if it gets the right to intervene, Allen mentioned just one Briggs and Morgan attorney last week, Scott Knudson.

Allen pointed to how Knudson helped Cass County a few years ago assert its right to collect property taxes on land owned by Indians not held in trust.

Allen is not acting alone in having the bank file the motion to intervene in the case, as the bankís board of directors unanimously approved the action to file for intervention.

Allen answered "no comment" when asked how much it would cost his bank to employ the Briggs and Morgan firm.

But many know that Mille Lacs County commissioners have committed to spending at least $1 million in general fund money for its legal work to settle its reservation boundary questions.

Much ado about nothing?

Allen acknowledged that there are people in the county skeptical of anyone needing to worry about a 61,000- acre Mille Lacs reservation being a detriment to non-Indians.

Some people say the concern is "much ado about nothing," that it would not be a "risk, be damaging or a problem," Allen said. Some people think that since the band has never much pushed the powers of licensing non-Indian-owned businesses on the reservation, it is a "non-issue," Allen said.

But the question is not about what the Indian band has asserted to date, but what authority it would have if the 61,000-acre reservation still exists, Allen contends. He added that the idea of the reservation being that size is "still subject to question."

The bank, in its motion, tells how the Mille Lacs Band of Ojibwe, in 1992, contacted Isle and Onamia businesses and stated its intention to require all businesses operating within the boundaries of the former Mille Lacs reservation to be licensed by the band. Further, the band said it has the power to regulate all commercial activities on lands subject to the bandís jurisdiction, the motion also notes.

The motion went on to claim that the Indian bandís assertion of regulatory authority over property the bank owns, or on which it holds a security interest, "will depress the market value of that property.

"As a result, the bank is concerned about taking a mortgage interest on property that is adjacent to land owned by the band due to the potential for conflicting land use regulations. The bandís efforts to regulate dealings with its members, through its licensing system, will also affect the bankís business and profitability."

The motion claimed that if the 1855 reservation of 61,000 acres is upheld, the bankís "livelihood will be adversely affected."

Allen says he has been trying to learn as much about the issues involving his bank. As an example of his effort, he pulled out five videotape cassettes on a seminar that was conducted called "Lending in Indian Country." Allen said he has viewed them over and over and was disappointed because they donít answer the question on how to "lend to non-Indians in Indian country" if the 61,000 acres becomes a reservation.

There are a lot of issues to be decided if it becomes all reservation, he said.

"I feel it would be a negative effect on the values of property up there," Allen said. "If you look on a map of the state of Minnesota, you would have a hard time finding a vibrant community on a reservation."

Allen added that the south end of the county should also be concerned about the reservation question, saying the outcome affects the growth of the whole county.