Would-be investors in a tiny Southern California bank say prejudice against Native Americans is keeping state officials from approving an ownership transfer.
Borrego Springs Bank claims the California State Banking Department is dragging its feet regarding transfer of ownership to a band of Kumeyaay Indians, costing the institution more than $50,000 a month.
The $32 million-asset bank, based in a town of 2,200 residents 90 miles northeast of San Diego, had hoped to receive approval on a purchase bid by the Viejas band earlier in the year. The bank got a nod from the Federal Deposit Insurance Corp. June 11, but state approval appears no closer than it did in November, when the process began.
The proposed deal has been complicated because the Viejas run a gaming casino in nearby Alpine and questions have been raised both about the gambling proceeds used to purchase a bank and the band's lack of bank management experience.
The Viejas are attempting a $2.4 million recapitalization that would give the band majority ownership of the bank.
John Winkelman, the Viejas' economic director, said he thinks the state attorney general's office has an anti-Indian bias, due in part to tribal gaming activities, and is forcing the state banking department to delay approval.
"We think there's clear evidence we're being singled out and treated differently," Mr. Winkelman said. "Attorney General Dan Lungren doesn't want the tribe to establish credibility. He's not afraid we're going to fail, he's afraid we're going to succeed. That's what this is all about."
Borrego Springs Bank president Frank V. Riolo said the delay is hurting his institution.
"We planned to expand with an ATM machine and also open a branch in the El Cajon area," Mr. Riolo said. "But this has taken so long that we've lost our lease in El Cajon and we estimate that we're losing more than $23,000 a month in net income without the ATM." He said delay is causing overall losses of more than $50,000 a month.
Mr. Riolo said he was especially upset with a June 13 letter from the state banking department that questioned the business experience and qualifications of three proposed directors, all members of the Viejas band. It also said the Viejas were in violation of the Indian Gaming Regulatory Act because their gaming activities were not conducted in conformance with a compact between the band and the state.
Mr. Riolo said gaming legality had been addressed in a letter the bank sent to the department in May 1995, and added that the FDIC had thought enough of the proposed directors to give approval.
Mr. Riolo said he also believes the attorney general may be responsible.
"We think the attorney general's office has got their hand in this," Mr. Riolo said. "Everything was going along smoothly, and then it came to a screeching halt."
A spokesman for the attorney general denied any interference.
"We don't have the authority to get involved," said Matthew K. Rose. "We do review mergers between major companies, but we don't have the time or energy for small deals. We don't step on the banking department's toes and we'd like to think they don't step on our toes."
But state Sen. Richard G. Palonco, a Democrat, said he thinks an anti- Indian bias is emanating from Republican Gov. Pete Wilson's office.
"I would point the finger at the administration or the attorney general or both on this issue," Sen. Palonco said. "There's been a full court press on against the Indians by this administration since the gaming issue began to heat up. And there is absolutely an anti-Indian bias.
Walt Mix, deputy banking commissioner, said his department does not comment on such transactions.
