Band’s federal funds garnisheed

WINNIPEG — A northern Manitoba aboriginal community is scrambling to keep the money it receives from Ottawa out of the hands of a disgruntled Winnipeg businessman.

Len Podheiser has garnisheed Garden Hill’s account at the First Nations Bank of Canada, hoping to collect $2.7 million the band owes him after a business deal went bad.

The bank account holds the money transferred from Ottawa to pay for a variety of programs — housing, welfare, education — and band payroll.

“If we had lost that money, it would have crippled the community,” said Arnold Flett, the Garden Hill band manager.

Flett said the band voluntarily placed itself under third-party management, surrendering day-to-day financial management of the community to a management consulting firm that now receives the federal funding the community needs to survive.

“The money goes directly to the third-party manager and not our bank account,” Flett said, adding that will keep Podheiser at bay for the time being. “We will pay the loan back. We just have to work out a plan.”

Podheiser agreed to lend Garden Hill $3.57 million in a series of deals in 2010 and 2011 to finance the band’s bulk fuel business, a laundromat and the construction of a new band office.

The loans were to be repaid through gasoline sales and revenue from the laundromat but the new businesses never generated the expected cash flow to make the monthly payments.

The smallest loan ($358,000) carried a compounded monthly interest rate of one per cent while two separate $1.625 million loans had annual interest of 10 per cent and 12 per cent.

As security, the band put up the federal funding it receives to run the community.

Flett said the band council was confident it could generate enough revenue through the sale of fuel, adding he couldn’t explain how the sales never materialized.