St. Croix Chippewa leaders were warned about 'criminal' misuse of gambling money years before feds took action – Milwaukee Journal Sentinel

Nine years before federal officials charged that St. Croix Chippewa leaders misappropriated at least $1.5 million, a Madison lawyer warned tribal leaders that millions of tribal gaming dollars were being misused and that some leaders were pocketing tens of thousands of dollars.

In 2008 tribal “council members and members of their families charged personal expenses to credit cards, removed currency from the Nation’s assets through the use of credit cards, paid for spousal travel without authorized resolution, paid childcare expenses to themselves and their relatives and in some cases duplicated payments … with the result that the Nation expended $1.8 million of its assets over a 24-month period,” Charles Pellino, an attorney for the tribe, wrote in an 11-page letter on Oct. 14, 2010.  

The letter, obtained by the Milwaukee Journal Sentinel, was sent to a tribal official and warned that the “Internal Revenue Service will report to the Bureau of Indian Affairs what the Service believes to have been willful criminal acts performed by individual members of the Nation and violations of National Indian Gaming Commission rules and regulations as such relate to the use of gaming proceeds.”

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Pellino’s findings are eerily similar to the words of  Jonodev O. Chaudhuri, the chairman of the National Indian Gaming Commission, who issued a $5.5 million fine against the tribe last week because some of its leaders pocketed or misappropriated $1.5 million since 2014. The proposed fine, issued last week, can be appealed by the tribe.

RELATED: St. Croix Chippewa tribe is facing $5.5 million fine for pocketing and misappropriating $1.5 million

Some “tribal Council members, gaming Commissioners, consultants and other individuals … diverted at least $1.5 million away from tribal resources to line their own pockets,” Chaudhuri wrote in imposing the fine.

The fine is the follow-up to the Notice of Violation issued by Chaudhuri last month. In that notice he charged the Burnett County tribe with 527 violations of the federal Indian Gaming Regulatory Act, NIGC regulations and tribal ordinances. It was the largest notice of violation ever issued by the agency and accused some leaders of pocketing hundreds of thousands of dollars and using tribal funds to pay for trips to Hawaii or Las Vegas.

The tribe has reservation land in Barron, Burnett, Polk and Washburn counties and many of its approximately 1,000 members are impoverished. Members receive a per capita dividend of about $5,000 annually from its gaming operations, sources said. 

Pellino wrote the letter after the IRS discovered the misappropriations and planned to hit the tribe with a 28% penalty, Pellino wrote. 

“The service took the position that the Nation’s leaders were responsible for the waste of such assets and that, as a result, the Nation itself should suffer the consequences by paying a 28% tax plus interest and penalties,” Pellino wrote.

The penalty would have equaled about $700,000, Pellino wrote. It appears that the penalty was not assessed after it was pointed out to IRS officials that the tribe was the victim and fining it would make it a “double victim,” Pellino noted.

Pellino declined to comment. Contacted by phone last week, St. Croix Chairman Lewis Taylor told a reporter “I don’t know what you’re talking about” and hung up. 

Even though Pellino wrote that the IRS would not issue   the 28% penalty, Pellino noted that the agency was “absolutely correct in assuming that there had been a misuse of gaming proceeds in the millions of dollars in 2008.”

Specifically, Pellino wrote that Elmer “Jay” Emery, a tribal council member, used a tribal credit card to withdraw almost $90,000 even though records approving those withdrawals could not be located.

“Mr. Emery charged what the (IRS) considered to be exorbitant amounts for luxury limousine services and other services” including expenses for his girlfriend, Pellino wrote. 

Payments to tribal leaders

In the April Notice of Violation, Chaudhuri said Emery, who is still on the tribal council,  received 94 payments totaling $235,888 from 2014 to 2017. Taylor collected $154,173 during the same period, the agency said.

Pellino wrote in 2010 that he spoke with Emery and the council member “was unable to explain why he would have withdrawn currency using the Nation’s credit card.”

In addition, Pellino wrote, the IRS noted that Emery had unpaid loans for $273,190 and that one attempt had been made to collect the debt. 

Michael Decorah, a tribal council member from 2007 to 2009, spent about $30,000 using a tribal credit card for what appeared to be personal expenses, Pellino wrote. Purchases included Green Bay Packers tickets and stays at resorts, Pellino wrote. 

Decorah, who now works in the tribe’s governmental affairs office, declined to comment, saying he had not seen the Pellino letter and was unaware of the allegations. 

Emery did not return calls for comment.

Pellino said there was also misuse of state and federal dollars, including money earmarked for childcare.

“Certain persons, including council members, relatives of council members, children and grandchildren of council members seemed to have unfairly benefited financially from the Nation’s programs and from the use of federal and state funds,” Pellino wrote. 

Questionable childcare payments

The IRS auditor noted that from July 1, 2007, to June 30, 2009, there were “982 potential instances” where double payments were made to childcare providers, Pellino wrote. 

The IRS “auditor noted, and it is obvious from a review of the records, that childcare providers were paid for merely living in the same house as the child and providing no services other than those that a normal parent or guardian would have provided free of charge,” Pellino wrote.

The Pellino letter has been floating around the St. Croix communities for several years. The Inter-County leader, a newspaper in Polk and Burnett counties, referred to the letter in an editorial that did not name individuals cited in the letter. 

Anthony Ammann, a former tribal member, said a copy of the letter was found in 2015 while family members were going through the property of his deceased uncle, Kenny Mosay, a former tribal council member. The Journal Sentinel did not obtain the letter from Ammann.

Ammann and four family members are engaged in a fight with tribal leaders to be re-enrolled in the tribe. A tribal court has ruled they should be readmitted but tribal leaders have refused to re-enroll the group, known as the St. Croix Five, said Paula Fisher, a Michigan attorney representing them.

“The letter clearly illustrates that the St. Croix Tribe was on notice in 2010 that there were numerous tribal officials engaging in financial activities… not authorized … and could subject the tribe to a notice of violation by the NIGC, which is what ultimately happened 9 years later, Fisher said in an email statement. 

Contact Cary Spivak at (414) 223-5467 or cspivak@jrn.com. Follow him on Twitter at @cspivak or Facebook at https://www.facebook.com/cary.spivak

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