For five years, government regulators have been aware of misspending of gambling profits by Seminole tribal leaders in violation of federal law but have taken no enforcement action.
Indian leaders elsewhere in the country have been cited for using tribal funds on such things as Super Bowl expenses and accepting free jackets worth USD 1,330. Members of the Seminole Tribal Council have spent millions of the tribe’s gambling money on individual members, including themselves and their families, without penalty, the South Florida Sun-Sentinel found.
Federal law requires that gambling profits benefit the tribe as a whole, not individual members.
The federal agency responsible for enforcing the law, the National Indian Gaming Commission, first learned details of the Seminoles‘ spending violations from a December 2002 trial of three former tribal employees who were later acquitted of embezzlement.
Testimony „detailed egregious misuse of gaming revenues for such items as luxury cars, personal capital ventures and large payments to family- and friend-owned businesses“ by council members, according to a commission letter to the tribe.
The commission has been monitoring the Seminoles‘ spending since early 2004 and audited the tribe’s 2005 fiscal year. That review, completed in May, found the tribe still in violation of the federal law.
The audit commended the tribe for progress but questioned expenditures including USD 119,004 for improvements to council member Roger Smith’s house and USD 334,605 on a tribal American Express card for a box at Pro Player Stadium, now Dolphin Stadium.
The commission has authority to fine tribes, close their casinos and make referrals for criminal prosecution.
Commission Chairman Phil Hogen told the Sun-Sentinel in October his agency only recently began to monitor tribal spending of gambling revenue, in part because of confusion with the federal Bureau of Indian Affairs over who was responsible.
„This is a relatively new area of concern for [the commission],“ Hogen said. „In retrospect, it might be appropriate to say, ‚Well, gosh, we should have been doing that since Day One.‘ „
Congress created the commission, an independent agency with a chairman appointed by the president and two commissioners selected by the Interior secretary. At least two must be American Indians.
Hogen, a member of the Oglala Sioux Tribe in South Dakota and a former U.S. attorney, was appointed chairman in December 2002.
The commission oversees tribal casino operations and is also responsible for ensuring that tribes use gambling profits according to federal law, which restricts spending to five general areas, including funding government operations and providing for the tribe’s general welfare.
Gambling profits are not to be used for such expenses as personal houses, cars, boats and residential landscaping. Payments to individuals must be through dividends or established programs open to all tribal members.
The Bureau of Indian Affairs approves tribes‘ plans for distributing gambling proceeds. But as of 2003, neither the bureau nor the Gaming Commission monitored actual spending, according to an audit by Earl Devaney, inspector general for the Interior Department.
The commission’s 106 employees are responsible for overseeing about 400 American Indian casinos nationwide. Their budget comes from fees assessed on the tribes and this year is USD 18 million. By comparison, the Nevada Gaming Commission, responsible for 414 casinos, has a budget of USD 46 million and 462 employees.
„The National Indian Gaming Commission is woefully understaffed,“ said William Thompson, a University of Nevada-Las Vegas professor who studies the casino industry. „They don’t have the staff to do the job, nor do they really have the heart and soul and willingness to do it.“
Hogen said the commission’s budget and resources are „at an appropriate level.“
Since 1999, the commission has taken about 100 enforcement actions against tribes, the majority for illegal games or failing to file timely reports, according to its Web site. Only a handful involved misspending gambling revenue.
An IRS audit, too
In addition to the commission, the Internal Revenue Service has been auditing the Seminoles and in April 2006 requested tribal financial records for 2003 and 2004, including bank records, canceled checks, vendor lists and records of „all disbursements.“
Among the issues IRS auditors were looking into was the tax liability of tribal members who benefited from money spent on cars, vacations, houses and other perks, records show.
IRS spokesmen declined to comment.
The Gaming Commission’s auditors spent about three weeks at tribal headquarters in Hollywood in 2005 and returned for three days in December 2006. The commission identified 13 problem areas, including:
*A tribal loan program that was supposed to be limited to USD 35,000 per loan. No member was permitted to borrow more than a total of USD 100,000 without an exception for emergencies approved by a loan committee. The tribe made loans that violated its own rules, including one for USD 725,000 to be repaid at USD 1,000 a month. It „appears to be at best an insider loan, provided on highly preferential terms without any realistic intent to repay.“
*The tribe spent USD 68,163 to buy a mobile home for a tribal member in 2004 at the direction of council member David Cypress. „The failure to maintain documentation as to why the tribe purchased the house, who owns the house or where the house is located reflects an improper use of gaming revenues in violation“ of law.
*A „major concern“ was the tribe’s practice of sponsoring events such as a USD 15,000 memorial horseshoe tournament from its recreation program. „Checks are issued directly to the member“ without any proof the event took place.
*From October 2004 through September 2005, the tribe charged USD 334,605 on a corporate American Express card for its box at Pro Player Stadium. Food and beverage expenses for one month totaled USD 23,940. The credit-card charges „are made without documenting purchases and there is no indication that any review by any tribal official is performed.“
*A tribal housing program allowed for maintenance and repairs to homes of tribal members who applied for assistance. The USD 119,004 in upgrades to council member Smith’s house paid in December 2004 „do not appear to qualify for any of the housing program services.“
Smith declined to comment. Marcia Green, adviser to Tribal Chairman Mitchell Cypress, said earlier this month the tribe had made considerable progress since the Gaming Commission first raised concerns.
‚So many benchmarks‘
The commission „actually moved off from the investigatory audit to a review because … the tribe had done so many things, achieved so many benchmarks,“ she said. Commission auditors will be visiting in December, Green said, to review the tribe’s 2007 spending.
„The tribe anticipates that it will get another plus mark,“ she said.
The commission’s 2005 audit „was nothing but spot-checking,“ said former council member Andrew Bowers Jr., whose two-year term ended in June after he lost a re-election bid. „I have seen them be more aggressive with other tribes. They are just not that way with the Seminoles.“
Hogen said the commission is reluctant to take action against the Seminoles „if it’s going to disrupt progress.“
„We’ve enjoyed the cooperation for the most part of the Seminoles. We’ve made suggestions, and they’re adopting most of them,“ he said. Some members of the tribe, frustrated by the government’s inaction, have met with representatives of the Gaming Commission, the Bureau of Indian Affairs and the FBI.
Tribal members have nowhere to turn, Bowers said.
„I think the biggest question on everybody’s mind is, ‚Where do you take it?‘ “ he said. „It more or less stays on the reservation. That’s why these guys can get away with things.“
So far this year, the commission has taken action against five tribes and a casino operator. The commission fined one tribe for not doing employee background checks and properly licensing employees. Another tribe was fined for submitting an audit late. And one tribe agreed to seek reimbursement from its leaders, who accepted jackets valued at USD 1,330 and spent USD 14,621 on a Super Bowl package.
„In terms of those Super Bowl packages or jackets or whatever, in comparison to the total revenue that the tribe had, that had a significant impact,“ Hogen said.
The Seminoles are „moving in the right direction,“ he said.