Seminole leaders say the tribe will rein in extravagant spending and make sure gaming devices are legal.
By JEFF TESTERMAN
Published February 25, 2004
The U.S. government has warned the Seminole Tribe of Florida that it will shut down its casinos unless the tribe stops using illegal gaming devices and ceases a free-wheeling spending program that pumped millions into luxury cars and gifts for council members' cronies.
National Indian Gaming Commission chairman Philip N. Hogen issued the dire warning earlier this month in a private meeting with the Seminole Tribe's elected council members in Washington, D.C. Hogen is scheduled to resume talks about compliance with the Seminole governing body this morning at tribal headquarters in Hollywood, Fla.
The council, facing the loss of its economic lifeblood - casinos bring in more than $300-million a year - appears eager to do what Hogen requires.
"Whatever we have to do, we will do," tribal council member Max Osceola said Tuesday. "We want to be in compliance. We don't want to do anything to harm the economic development of the Seminole Tribe."
Profits from the Seminole's casinos in Tampa, Hollywood, Immokalee, Coconut Creek and Brighton finance most of a tribal budget that exceeds $300-million a year and allows the payment of a $42,000-a-year dividend to every man, woman and child in the 3,000-member tribe.
But those profits could disappear unless tribal officials do two things: First, they must update some electronic slot machines so that patrons are playing against other patrons, not the house, as federal rules require. Second, and this hurdle is more critical, the tribe must overhaul a discretionary spending plan that allocated $5-million to $10-million annually to each council member to spend as he wished.
Spending excesses from those multimillion-dollar handouts made headlines in 2002 during a federal conspiracy, embezzlement and money laundering trial in Fort Lauderdale involving three former employees of the Seminole Tribe.
Council member David Cypress testified at the federal trial that he blew through his $5-million allocations, asked for more and ended up spending $57-million in less than four years.
Cypress said he shelled out so much for Cadillacs and Lexuses for friends that he lost track of who got all the luxury cars. He said he poured $350,000 into a pal's boxing gym and paid $5.8-million to another friend's business to landscape 32 homes on the Big Cypress reservation - an average of $181,250 a home.
That kind of carte blanche spending violates federal rules on the use of gambling revenues, according to the Indian Gaming Regulatory Act enacted in 1988.
That act says net revenues from tribal gaming must be used to finance tribal government operations, to provide for the "general welfare" of the tribe and its members, to promote economic development, to make donations to charity or to help fund other governmental agencies.
Hogen, a Sioux Indian and lawyer who served as the U.S. attorney in South Dakota for 10 years, has the authority to order temporary closure of gambling facilities and to levy and collect civil fines for failure to meet National Indian Gaming Commission rules.
Reached Tuesday on his way to catch his flight to Florida, Hogen said he intends "to inform them of what our requirements are," and that he believed shutting down the tribe's casinos now appears unlikely.
"Closure is kind of a last resort enforcement tool," Hogen said. "Our object will be to get compliance through discussion with tribal leadership."
The tribe has already organized a task force to determine how best to reallocate the money previously handed council members for discretionary spending, said Joel Hirschhorn, a Coral Gables lawyer who represents Seminole Tribal Chairman Mitchell Cypress.
Hirschhorn attended a meeting with National Indian Gaming Commission Acting General Counsel Penny J. Coleman and her staff in early February, as Cypress and other Seminole council members were huddling with Hogen.
"What I felt then was that it was a no b---s---, eyeball-to-eyeball discussion that said, "We've got a problem, and we need to deal with it,"' Hirschhorn recalled.
Hirschhorn said he thinks controversy over discretionary spending developed only after the Seminoles saw their successes in casino gambling "outstrip their ability to deal with it." The sit-down with Hogen helped galvanize a tribal effort to consider financial reform.
Already on the drawing board are options that include increasing the current $3,500-a-month dividend, curtailing arbitrary expenditures in areas such as travel and earmarking more for tribal education programs, Hirschhorn said.
The illegal gaming devices may be able to be fixed through the use of a software patch or by replacing older machines, tribal officials said.
Without a compact with the state of Florida, the Seminoles are permitted to offer only so-called Class II gambling: scratch-off games, high-stakes bingo and low-stakes poker. For years, the tribe has also offered video-gaming devices resembling "one-armed bandits" found in Las Vegas and Atlantic City casinos.
The U.S. Attorney's Office in Tampa asked a judge to declare the devices illegal and order them unplugged, but the suit has been dormant since the tribe has wrangled back and forth with the state over the right to offer a wider variety of Las Vegas-type games.
The tribe holds that devices wired together in banks, allowing patrons to play against one another, and which offer a printed receipt in lieu of cash, are perfectly legal.
Now, with Hogen's directives, and the continued threat of activation of the federal lawsuit, the tribe has a new incentive to junk machines not in compliance or fix them with new computer chips.
"The hammer hasn't been dropped," said Osceola. "But it's still over our heads."