Santa Ysabel Resort and Casino—too broke to build its resort and too small to lure many gamblers to its casino on a reservation outside San Diego—is about to test whether or not Native American enterprises are eligible for protection under U.S. bankruptcy law, the Wall Street Journal reported today. The casino's biggest lender, another Indian tribe, has asked a San Diego bankruptcy judge to toss out the filing by the Iipay Nation of Santa Ysabel, arguing that tribes and some of the tribal businesses they own do not qualify for bankruptcy relief. The casino filed for chapter 11 protection last month, citing debts of more than $40 million. It had borrowed $26 million from JPMorgan Chase in 2005 to build a 37,000-square foot casino and a hotel. The tribe could not afford to pay for building materials and the hotel was never constructed, according to court papers. The casino opened in 2007 with poker tables and about 350 slot machines. The Yavapai-Apache Nation, a federally recognized tribe in Arizona, lent it $7 million and later bought JPMorgan's debt. However, the casino fell behind on loan payments, and the Yavapai-Apache Nation won a $9 million tribal court judgment in February.
