In less than 30 years, the Seminole Tribe has turned its tradition-based local businesses into a diversified international empire
By Peter Franceschina, Sally Kestin and John Maines
Sun_Sentinel Staff Reporters
Copyright © 2007, South Florida Sun-Sentinel
Sunday, November 25, 2007
The journey of the Seminole Tribe of Florida from chickee huts to the world stage began in a smoky bingo hall on State Road 7 in Hollywood.
The success has been staggering. In 1976, the tribe's budget — funded mainly by cigarette sales — was $4.5 million.
By 2005, the tribe's casinos and hotels empire generated that amount every 36 hours.
This year, the tribe expanded its reach globally with the $965 million purchase of the Hard Rock International hotel and café chain, becoming the first American Indian tribe to buy a major international company.
This month, the Seminoles achieved another milestone, signing a pact with the state that allows them to bring Las Vegas-style gambling to their casinos, a deal they pursued for more than a decade.
The Hard Rock acquisition makes the Seminoles proprietors of the Hard Rock brand, which operates in 47 countries and includes 122 cafes, five hotels, and four hotel-casinos. Another hotel-casino is under construction in Macau, a gambling haven off mainland China. The newest hotel-casino, in Biloxi, Miss., opened in July, two years after Hurricane Katrina struck on the eve of its opening.
Hard Rock International reported 2006 year-end results in March, with $502 million in gross revenues and $75 million in operating profit, a 19 percent increase over 2005. The increase was attributed in part to licensing fees paid by the Seminole Hard Rocks in Hollywood and Tampa.
"We can't rely on gaming," Tribal Chairman Mitchell Cypress said in an April interview with the South FloridaSun-Sentinel. "We want to have other business that might generate money so that one day if the gaming is taken away from us or whatever ... then at least our income won't be limited."
But gambling remains the draw, and as the Seminoles' operations grew over the years, people flocked to the tribe with business proposals. That has only increased since the Hard Rock purchase.
"Now, we've got a lot of friends," Cypress said.
OTHER VENTURES
The Hard Rock chain is the latest tribal business venture over the years. Many of them have lost money, some in the millions of dollars.
Outside of gambling, the tribe's business empire includes one of the largest beef cattle operations in the country. The tribe hopes to develop its own brand of Seminole beef for sale in supermarkets and the Hard Rock chain.
The tribe also has citrus groves and sugar cane fields, tax-free cigarette shops and sports promotion.
On the Big Cypress Reservation in Hendry County, the tribe runs a historical museum and tourist attractions. It owns a hotel and a 6,000-acre ranch and a cattle operation in Nicaragua.
Cigarette sales make money but the other ventures are marginally profitable or lose money, tribal audits show.
The tribe relies on experienced non-tribal businessmen — such as Jim Allen, chief executive of gaming, and Hamish Dodds, Hard Rock president and chief executive — to run its far-flung operations.
Allen, 47, thetribe's most influential business executive, now oversees the Hard Rock's cafe, hotel and casino operations, with Dodds reporting to him.
Hard Rock hired Dodds three years ago to revive a business losing its luster. "We've shown progress in turning this business around," he said. The Seminoles kept him on when they bought the corporation.
Dodds expects to add three to four hotels and eight to 12 cafes per year, and the emphasis on gambling projects will continue."There's a high degree of investor interest in working with us in projects," Dodds said. "There's a pipeline of other deals we're working on."
EXPANDING THE EMPIRE
The compact with the state of Florida, signed Nov. 14 by Gov. Charlie Crist and Cypress, is a 25-year deal that would allow the Seminoles to offer blackjack and baccarat and lucrative Las Vegas-style slot machines at their casinos.
Under the compact, the tribe would share with the state its annual gambling revenue, starting at a minimum $100 million the first year.
Before the games can be offered, the compact needs federal regulatory approval. It already is being challenged by House Speaker Marco Rubio, R-West Miami, who filed a lawsuit Nov. 19 in the Florida Supreme Court to prevent the compact from going into effect without approval from the state Legislature. The pact could also face challenges from the three non-Indian pari-mutuel operations in Broward County.
Still, in anticipation of Las Vegas-style gambling, the tribe is considering an ambitious plan for a mega makeover of its Coconut Creek Casino.
The Seminoles have filed preliminary plans to build a hotel with up to 24 stories and 1,500 rooms, which would be Broward's largest. The plans also include a 160,000-square-foot casino, a 2,500-seat concert venue and 150,000 square feet of shops, restaurants and offices.
The Tampa Hard Rock is in the midst of a $120 million expansion, to become the largest of the tribe's seven casinos in Florida. As of 2005, it was the tribe's biggest moneymaker.
Last December, when the Hard Rock chain purchase was announced, the tribe celebrated with a gathering at the Hard Rock Cafe in New York City's Times Square. Council member Max Osceola Jr. hailed the dawn of a new Seminole era.
"The sun will always shine on Seminoles' Hard Rock Cafes."
Staff Writer Ian Katz contributed to this report.
The Seminole Tribe is suddenly wealthy,
but little oversight means potential abuses Heady days:
The tribe has access to newfound money
By Peter Franceschina, Sally Kestin and John Maines
Sun_Sentinel Staff Reporters
Copyright © 2007, South Florida Sun-Sentinel
Sunday, November 25, 2007
In only three decades, the Seminole Tribe of Florida rose from abject poverty to running one of the most lucrative Indian gambling enterprises in the country, capped in March with the $965 million purchase of the Hard Rock International hotel and cafe chain.
Every Seminole shares in the wealth, but a handful of tribal leaders have especially benefited, steering millions of the tribe's money and business to themselves, their families and their friends, a South Florida Sun-Sentinel investigation found.
"From the outside, the tribe looks great. We just bought a $1 billion company," said Andrew Bowers Jr., a lawyer who served two years on the Tribal Council before losing his seat in a May election. "On the inside, I'm not sure we're functioning as a tribal government should, because as far as the spending, we don't take enough steps to control it. It's not being spent equally on everyone."
The Seminoles have long guarded their privacy and financial information and, as a sovereign nation, are under no obligation to open their records. The Sun-Sentinel obtained thousands of pages of tribal documents, including audits, budgets and council resolutions, and interviewed Seminole leaders and tribal members.
The investigation provides a rare window into the inner workings of a tribal government awash in new wealth.
Among the findings: — A majority on the Tribal Council, which controls the tribe's money, has maintained power in part by handing out cash and granting financial requests from tribal members. Since 2000, council members have spent more than $280 million as they chose from funds they control. The spending included luxury vehicles, televisions and stereo systems, and paid for cosmetic surgery for tribal members.
— Council member David Cypress alone has spent in excess of $160 million since 1999, more than the other council members combined. In 2006, he exceeded his original budget by $22 million. Cypress used some tribal money to buy and remodel his own boxing gym and spent millions on himself, his family and friends.
— A 2005 tribal audit found numerous checks requested by council members in round amounts under $10,000 and warned of an increased risk of fraud. The check-writing continued into 2007. In one eight-month period, more than $1 million in checks went to Cypress and his children.
— While many tribal members on the Big Cypress Reservation live in modest housing, Cypress and his brother, Tribal Chairman Mitchell Cypress, used tribal funds to help build lavish, gated compounds there for themselves and for David's ex-wife and adult children. In the past three years, the tribe's money also paid for improvements, including extensive landscaping, security cameras, and on Mitchell Cypress' lot, a basketball court.
Phil Hogen, chairman of the National Indian Gaming Commission and a member of the Oglala Sioux Tribe, said in an October interview that the recent spending practices uncovered by the Sun-Sentinel "cry out for some inquiry, and they will receive that."
"I am surprised to learn that council members are expending dollars of this magnitude," said Hogen, whose agency regulates tribal spending of gambling profits.
Longtime council member Max Osceola Jr., designated by the tribe to speak on behalf of the council, said there was no favoritism in tribal spending. Council members and their families have received assistance available to all Seminoles and have not enriched themselves, he said.
"I'm responsible for every Seminole member," Osceola said. "It's not who my blood family is, it's not who my clan is, it's the 3,320 Seminoles I'm responsible for."
David Cypress declined to be interviewed and did not respond to written questions from the Sun-Sentinel. The tribe provided Marcia Green, the chairman's adviser, and tribal spokesman Gary Bitner for an interview this month.
"There is a tremendous amount of detail that you've identified that we certainly personally were not aware, and I would say most people connected with the tribe were not aware of either," Bitner said.
'A SPENDING SPREE'
Prosperity is relatively new for the Seminoles. When the tribe achieved federal recognition in 1957, its annual budget was less than $15,000.
Subsisting on farming, crafts sales and alligator wrestling for tourists, the Seminoles' first real business success came in the mid-1970s, with smoke shops selling tax-free cigarettes. In 1979, the tribe became the first in the nation to offer gambling, opening a bingo hall on State Road 7 in Hollywood.
Over the ensuing three decades, the Seminoles added poker and slot machines and opened casinos on tribal land in Immokalee, Tampa, Brighton, Coconut Creek, Hollywood and Big Cypress.
Money poured in. By 2005, members of the Tribal Council, some with only a high school education, found themselves in charge of a $1 billion-a-year empire, flying on the tribe's fleet of helicopters and planes, including a Gulfstream IV jet bought for $31 million and once owned by Jordan's King Hussein.
"I myself had no running water until back in '70, '71 when I moved into a regular house," David Cypress testified in a 2002 court proceeding. "I come from an Indian reservation where there is nothing but swamps, Everglades. So when the money came in, we were on a spending spree."
How to spend the tribe's money, most of it from gambling, is up to the council.
The Seminoles are subject to some federal laws but also have their own government: a corporate board that controls the non-gambling enterprises such as smoke shops and cattle operations, and the more powerful Tribal Council that governs the tribe.
Each body has five representatives elected by tribal members, with the council responsible for setting tribal policies, approving business deals and determining the tribe's budget.
The council apportions a share of gambling profits to each tribal member in taxable monthly checks. That amounted to about $100 a year per Seminole after the first bingo hall opened in 1979. Today, tribal members receive about $120,000 annually — more than triple the average salary in Florida.
Each council member also controls an account, formerly called discretionary allocations and now known as reservation allocations, to spend on tribal members and events.
From the allocations, council members have taken care of individual members' requests, paying for vacations, home repairs, even criminal defense lawyers, records show. That spending has triggered audits by federal regulators, and complaints among Seminoles that it benefits certain members at the expense of the rest of the tribe.
Under the federal Indian Gaming Regulatory Act, tribes can spend gambling profits only on five broad categories, including funding government services and providing "for the general welfare of the tribe." Spending on individual members must be through programs, such as housing and recreation, with criteria typically tied to financial need. Payments outside of established programs to select individuals, or purchases of personal cars, boats and landscaping, are prohibited by law.
The council has spending flexibility with revenues from non-gambling enterprises, which are not regulated by the federal government.
BEST LEXUS CUSTOMER
A 2002 federal trial in Fort Lauderdale revealed the Seminole Tribal Council was spending tens of millions on individual members outside of programs at a time when the tribe's main source of income was its casinos.
Three tribal employees were accused of stealing $2.7 million from the tribe to fund an Internet gambling operation. Council members were witnesses in the trial, which ended in a rare decision by the judge to dismiss the charges before the case went to a jury.
Records and court testimony revealed that David Cypress, far and away the biggest spender, went through $57 million from his discretionary allocation in the three and a half years before the trial. To get assistance from him, all it took was a Hank Williams song or a cute baby, Cypress quipped in court.
"I always say, 'Grab the little baby, come to my door and pinch the baby and make it cry,' " he said. "I will give you a ton of dollars or something for Christmas."
He bought so many Lexuses, Cadillacs, BMWs and other luxury vehicles that he didn't remember who got them.
"You think you might be the world's greatest Lexus customer?" a defense attorney asked.
"I am pretty near it, if not," Cypress replied.
When Cypress spent his budget, he got more money.
The tribe's Constitution says that any expenditure of tribal funds requires a resolution "approved by a majority of the Tribal Council in legal session."
In a 2002 deposition, former tribal Treasurer Priscilla Sayen recalled a 2001 phone call from David Cypress, requesting an increase in his discretionary fund of about $1 million. Cypress had sought approval from the council at a meeting, but the request was tabled, Sayen testified.
She said she told Cypress she needed something "to back me up," and Cypress replied that he would "have the boys call."
By phone, then-council member Jack Smith approved the request, as did Osceola, who told her, "Well, OK, are we going to get our increase, too?" Sayen testified.
Sayen, now the tribe's secretary, testified that her office was supposed to approve payment requisitions but David Cypress took his to Sarah McDonald in the tribe's accounts payable department.
"I had no knowledge [David Cypress] was going out circumventing my office," Sayen testified in another deposition. "When I did have knowledge, I approached him that we were going to suspend his account, and we even held up the requisitions."
Asked what happened, she replied, "He overrode me, you know."
The tribe declined the Sun-Sentinel's requests for interviews with Sayen and McDonald. Green, the chairman's adviser, and tribal spokesman Bitner said they had no information about Sayen's testimony.
Records introduced in the case showed council members' families were among the biggest beneficiaries of the spending from 1999 through 2002.
From David Cypress' fund, 945 tribal members received assistance totaling $13.6 million. Of those, 30 people got more than half the money, including Cypress' three daughters, his ex-wife and brother Mitchell Cypress, records show.
David Cypress himself received the most, $1.2 million. Third on the list was McDonald, his contact in accounts payable, at $589,338.
Bitner and Green said they had no information on the assistance to McDonald.
"I don't think we can address that," Bitner said.
Tribal payments made on behalf of David Cypress' daughter, Doreen, totaled $1.1 million, including more than $400,000 for home furnishings, $31,559 for murals and $31,822 to a professional photographer, court records show.
Attempts to reach Doreen Cypress were unsuccessful.
Council member Osceola's family received almost $1 million in assistance, including $73,897 to a daughter who was younger than12, records show.
Osceola told the Sun-Sentinel the assistance included school tuition and medical expenses, "what every Seminole is entitled to."
"I didn't give anybody anything," he said. "They either worked for it or they're entitled to it."
In arguing to dismiss the 2002 court case, defense attorney Ken Lipman said, "It is their money."
"It is a crazy world," he said. "But it is their world."
The defense attorneys argued that the money given to the former employees came from then-Tribal Chairman James Billie's discretionary allocation, with his approval. U.S. District Judge William Dimitrouleas found no evidence of theft.
Osceola took the judge's ruling to mean "there was no misspending by anyone," he told the Sun-Sentinel.
The National Indian Gaming Commission, responsible for enforcing federal Indian gambling law, disagreed. The commission has described the spending revealed by council members' testimony as an "egregious misuse of gaming revenues."
REFORMS PLEDGED
The commission summoned Seminole leaders to Washington, D.C., and the commission chairman traveled to tribal headquarters in Hollywood in 2004. In response, the tribe pledged reforms, including spending gambling profits through established programs and immediately ending "all discretionary spending from allocations," according to a tribal document describing the changes. "Discretionary expenditures for prizes, trips, meetings, personal expenses and travel, birthday, marriage, birth and other gifts will be discontinued."
In March 2004, the council unanimously passed a resolution that said, "The Tribal Council has determined that the termination of discretionary spending by Tribal Council members is in the best interest of the general welfare of the tribe and its members."
Although the resolution "doesn't say it," it applied only to gambling money, Green said.
Documents obtained by the Sun-Sentinel show that in 2006, council members spent more from their allocations than the tribe collected in non-gambling revenues.
Jim Raker, the tribe's chief financial officer, acknowledged to the newspaper that council members continued spending gambling money through September 2006, but only on expenses allowed under the law, such as community events and parties.
The determination on what was an allowable use of gambling money was left to the individual council members' offices, Raker said.
"Back in 2002, each council member, they were given a pot of money," Raker said. "They didn't care whether it was gaming or non-gaming. They just spent it."
In 2005 and 2006, "we still had those accounts, unfortunately," he said. "If we could have turned back the clock, we probably would have done something differently."
Since the beginning of the tribe's 2007 fiscal year, the allocations have been funded solely by non-gambling revenues, Green and Raker said."We tried to take some of that guesswork out of the equation by only giving them non-gaming money," Raker said.
Green said there are no written guidelines for that spending.
"It could be all over the ball park," Raker said.
Asked in a July 2005 deposition in a civil lawsuit if he could spend tribal funds on a car, a boat, a house, vacations, Osceola replied: "If I want to."
What about speeding tickets? College tuition? "Yes," Osceola replied.
Bowers, the former council member, said that regardless of the source of the money, spending from the allocations unfairly benefits certain tribal members. "All along it's been my position no matter how you color the money, it should be equally spent," he said.
When Bowers took office in June 2005, tribal records show the allocation for each council member was $5 million.
"I argued against it," Bowers said. "I said, 'You can run a Third World country with this.'"
That year, David Cypress spent in excess of $29 million, tribal documents obtained by the Sun-Sentinel show.
The federal Gaming Commission continued meeting with the Seminoles and in July 2005 announced a "formal investigation," along with the Internal Revenue Service, of the tribe's gambling revenues. The review of the 2005 fiscal year, completed this May, commended the tribe for progress but found 13 problem areas, including spending more than $100,000 for work on a council member's house.
Until those are corrected, the Gaming Commission said the tribe would not be in compliance with federal law.
The review was "very complimentary," Green said. "The tribe has achieved most of the requirements of the [commission]."
The commission made no mention of the council members' reservation allocations.
"We have not done an audit of every dollar, every dime, that was spent," said Hogen, the commission chairman. "We've done some spot checking."
Bowers said he became increasingly concerned about the council's spending while he was in office. Each member started 2006 with a budget of $6.4 million to $7.5 million. By year's end, David Cypress had spent $28 million, tribal records show.
Bowers feared the tribe was still misspending gambling revenues. "How do you explain that to the [National Indian Gaming Commission]?" Bowers said. "I figured somebody had to say something, do something."
Bowers dug up the March 2004 resolution ending discretionary spending and another passed in December 2003 requiring council approval for any increase in a member's budgeted allocation.
"That was not being done," Bowers said. "It was just a matter of the council not adhering to their own resolutions."
In a March 2006 council meeting, Bowers said he asked the tribal secretary to read both resolutions "on the record, every word."
He said he warned the tribe it may be violating federal gambling law.
Osceola admitted mistakes, Bowers recalled, and David Cypress said, "I'm a culprit here."
Bowers said he held a meeting on the Brighton Reservation he represented to explain that the council had decided money would be available only for essential needs such as education, housing and health care.
"I learned a couple of months down the road that nobody [on the council] was really doing what they agreed to do," Bowers said. "They were still handing [money] out."
In the tribe's 2007 fiscal year, the budget for the five council members totaled $11 million. As of April, seven months into the year, David Cypress had spent $7 million — 511 percent over his budget, records show.
'THIS IS CURIOUS'
The tribe's outside accountants in a 2005 audit warned of a practice "where certain council representatives can request and approve checks to themselves under $10,000 without a second approval."
"We noted numerous expenditures below the $10,000 limit occurring in round dollar amounts," the auditors wrote, noting an increased risk of fraud.
The council did not adopt the auditors' recommendation to require two approvals for checks, Green said.
"I don't know why," she said. "The fact that it's noted in the audit doesn't mean it's recommended by the staff to the council."
The Sun-Sentinel obtained a registry of checks written out of the tribe's government fund for an eight-month period in the fiscal year ending in September. It shows the tribe issued 89 checks to David Cypress totaling $768,000, each one in a round number under $10,000.
Checks made out to David Cypress' children totaled $366,702, and an additional $65,000 went to his ex-wife. All but two of the checks were in round amounts under $10,000.
On Oct. 12, 2006, the tribe wrote three checks to David Cypress, each for $9,500, records show.
"This is curious," Hogen said. "It's patterns like this that suggest that somebody ought to take a look."
Of others receiving checks in round amounts under $10,000, McDonald in accounts payable got a total of $112,000. Green said she could not explain the payments.
Mitchell Cypress received 12 checks totaling $77,500. The other three council members got checks, generally for a few hundred dollars at a time and totaling $13,000 for all three.
Osceola said he did not know the purpose of the checks without reviewing them. He said he requests checks for "the needs of the Seminoles."
"Sometimes we'll have to give money if we put on a basketball tournament or maybe we had a death," Osceola said. "I had to pay some money for food or different things like that."
Hogen said he would instruct his staff to examine the Sun-Sentinel findings. He said he was unaware that council members had continued to spend large sums outside of established programs, despite commission recommendations against that practice. The commission has scheduled a visit to the tribe in December to review its 2007 spending, Green said.
The IRS began an audit last year and requested tribal financial documents. The IRS declined to comment, but Green said auditors are looking into the tax liability of tribal members who received cash and assistance from 2003 through 2005.
Within the tribe, Bowers and others have tried to limit council members' spending and more equitably distribute wealth.
"We spend, spend, spend like we got all this free money," Bowers said. "We just do what the heck we want to, whether it's fair or not."
Contact us:
Sally Kestin: skestin@sun-sentinel.com or 954-356-4510
Peter Franceschina: pfranceschina@sun-sentinel.com or 561-228-5503