$5.5 million dollars would seem like a hefty fine to most, but it is just a slice of the $27,718,092 the St. Croix Chippewa Indians of Wisconsin were facing after the April 11 Notice of Violation (NOV) issued to the Tribe.
The violations included tribal members using gaming revenues for parties, bonuses, business expenses, college tuition and travel expenses. Seven tribal members received $562,246 in direct payments from the St. Croix Casino in Turtle Lake between 2015 and 2017. They include tribal council members Elmer “Jay” Emery, Carmen Bugg, Stuart Bearhart, Crystal Peterson, tribal member Duane Emery, tribal gaming commission chairman Jeff Taylor and tribal chairman Lewis Taylor.
According to a May 9 notice sent to the tribe by the National Indian Gaming Commission (NIGC), the fine is being proposed in connection with 527 counts of misuse of net gaming revenues and failure to audit contracts for gaming related goods and services exceeding $25,000 in a fiscal year.
“In several instances, the gaming operation issued substantial payments to consultants and businesses without a contract, record, or even a later recollection of the goods or services provided in exchange,” wrote commission chairman Jonodev O. Chaudhuri in its NOV.
Under the Indian Gaming Regulatory (IGRA) and NIGC regulations, the NIGC Chairman may issue a NOV to any person for violations of any provision of the IGRA, NIGC regulations, or any provision of a tribal gaming ordinance or resolution approved by the Chairman.
IGRA authorizes the Chairman to issue civil fines for violations and to issue a proposed civil fine within 30 days of the issuance of the notice. The Chairman has the authority to levy and collect appropriate civil fines, not to exceed $52,596 per violation, against a tribe, management contractor or individual operating Indian gaming for any violation.
In his notice to the tribe, Chadhuri said he had considered five factors in arriving at the proposal.
Economic benefit of noncompliance. “If I view the ‘respondent’ in this matter as being only the St. Croix Chippewa Indians of Wisconsin, there was no economic benefit to the respondent. In fact, the misuse of gaming revenue resulted in a considerable economic loss to the Tribe. Money that could and should have been used to fund governmental and tribal programs was diverted away from the Tribe to fill the pockets of a few individuals. As part of this element, the Chair is also required to consider ‘the likelihood of escaping detection.’ In this case, many of the misuses of net gaming revenue either flowed to or were directed by the very people charged with protecting those resources - Tribal Council and Gaming Commissioners. Given the fact that some of the individuals named in this NOV are the same individuals responsible for rooting out misappropriations of this nature, I find it very likely that if NIGC staff had not pursued this case with the amount of diligence it did, the misappropriations would have gone undetected. To date, the NIGC has documented over $1.5 million in tribal revenues that have flowed into private hands for personal benefit,” said Chadhuri.
Seriousness of the violation. Chadhuri said, “The seriousness of these violations and their effect on the St. Croix Indians of Wisconsin, as well as the reputation of tribal gaming across the nation, cannot be overstated. It is the declared policy of the IGRA to shield Indian gaming from organized crime and other corrupting influences to ensure the Indian tribe is the primary beneficiary of the gaming operation. Over $1.5 million dollars were diverted from Tribal programs. This is money that could and should have been used to fund the Tribal government and other programs that are now facing a ‘dire financial crisis.’ Most damaging is the complicity of those who were supposed to be regulating the gaming operation and protecting its assets. One of the reasons that Tribal Gaming has grown into a 32 billion dollar a year industry is that it has rightfully cultivated a reputation as a well-run, well-regulated industry. It instills trust in the gaming public. And, as I have repeatedly stated, it is the tribes that are in the best position to be the primary regulators. Here, though, the Chairman of the Tribal Gaming Commission and at least one of its employees accepted payments of net gaming revenues from casino accounts with full knowledge of IGRA’s restrictions. Not only is this a violation of the act, but it does immeasurable damage to the industry.”
History of violations. This is the only NOV issued against the Tribe in the past five years.
Negligence or willfulness. Chadhuri said, “The Chairman may adjust the amount of a civil fine based on the degree of fault of the respondent in causing or failing to correct the violation, either through act or omission. Here, multiple officials within the Tribe knew that these payments were occurring and did nothing to stop them. In fact, many of the people receiving or directing the payments were those in a position to stop the payments. Accordingly, respondent both caused, through acts of tribal officials, and failed, through omission by those same tribal officials, as well as others that were processing and making payments, to correct the violations.”
Good Faith. “A civil fine may be reduced based upon the degree of good faith shown by respondent in attempting to achieve rapid compliance after notice of a violation. The Tribe’s submission reflects the steps the Tribe has taken to strengthen regulation and prevent misuse of community gaming resources. It is however, a startling revelation of Tribal officials’ refusal to accept responsibility for the violations or correct the conditions that allowed them to occur. I had hoped to see an acceptance of responsibility within the Tribe’s leadership, a commitment to repay the Tribe and its members that put their faith into elected leaders, and meaningful policy and procedure changes to encourage reporting and prevent such losses from happening in the future.
“Instead, I have received evidence of a quorum of Tribal Council members compounding their avoidance of responsibility. They have installed a separate board that will give the quorum a veneer of deniability, yet over which the Tribal council has removal power and appellate authority under the Tribe’s Gaming Ordinance. They have pointedly failed to address the $1.5 million in funds missing from tribal coffers, much of which ended up in their own pockets. And, based on reports from a fellow council member, they continue to exclude their duly elected colleagues from the discussion of the NOV. In short, the Tribe has not demonstrated good faith,” said Chaudhuri.
In closing Chaudhuri said, “I do not relish the imposition of a fine on a Tribe purportedly facing a financial crisis, Yet, in the absence of action by Tribal leaders whose actions led to the NOV at issue here, I propose to assess a fine in the total amount of $5.5 million on the St. Croix Tribe. After balancing the factors, I believe a $5.5 million dollar fine is appropriate. There are few violations more serious than abusing the trust of the electorate for personal gain. The Tribe, through its submission and those of a fellow council member, has demonstrated extraordinary willfulness and bad faith in allowing the violations to continue.”
The notice does state the Tribe has a right to appeal within 30 days of the notice and has a right to assistance of counsel in such an appeal.