S.D. tribe with Redskins ties accused of misusing funds

Jonathan Ellis | USA TODAY

SIOUX FALLS, S.D. — The leaders of a South Dakota Indian reservation that supplied the Washington Redskins football team with popcorn at FedEx Field last season have been accused of misappropriating millions of dollars in a report released Monday by an international non-profit.

Between 2007 and 2013, an estimated $25 million that was intended for essential services, economic development and the alleviation of poverty on the Lower Brule Sioux Tribe was unaccounted for. Millions of dollars meant for specific programs were instead diverted to the tribe's general fund and spent on "unexplained expenditures."

Taxpayers, meanwhile, are on the hook for an additional $22.5 million in the form of a loan guarantee that the Bureau of Indian Affairs extended to a tribal company. Money from the loan guarantee, which was sold to an insurance company, was used for a tribal-owned Wall Street brokerage firm that went bankrupt amid mismanagement and fraud, according to the report.

The report, issued by Human Rights Watch, an international organization that investigates abuse, follows a two-year investigation by the group that included interviews with dozens of tribal members, the review of federal audits and other federal, state and tribal documents. The report blames longtime Lower Brule Chairman Michael Jandreau and his political allies for diverting money and withholding basic government documents from the public to hide their activities.

Arvind Ganesan, the director of business and human rights for Human Rights Watch and the report's author, called the situation at Lower Brule a "tragic example" of that happens when governments operate without transparency.

"For tribal governments, it's an example of why it's critically important that they have transparency and oversight," said Ganesan.

Last year, the Washington Redskins made a deal with the tribe to sell the popcorn of a Lower Brule tribal company during games, part of owner Dan Snyder's efforts to reach out to Native Americans amid controversy over the team name. Team spokesman Tony Wyllie confirmed that the popcorn was sold at FedEx Field, although he did not disclose the terms of the partnership.

The release of the Human Rights Watch report coincides with a power struggle between Jandreau, who has been tribal chairman 36 years, and reformers. Three reformers were elected to the six-member council in September, but Jandreau and the old council members have asked the tribal court to remove the new members.

Kevin Wright, one of the new council members, said the Human Rights Watch report raises serious questions about the tribe's longtime leadership.

"It just reinforces why we need to get rid of the old council," said Wright. "Mismanagement of funds — federal tax dollars — is a serious accusation."

Jandreau did not return phone messages left for him last week. Tara Adamski, a lawyer in Pierre, S.D., who represents the tribal government as its general counsel, declined to comment.

"In speaking to my client, I'm not authorized to have any comment," Adamski said.

In an interview last month with the (Sioux Falls, S.D.) Argus Leader on an unrelated issue, Jandreau downplayed tribal corruption in general. He criticized the way in which the federal government gives money to tribes because of onerous restrictions on how the money can be used. He also said that the tribe is audited each year.

But those audits, which were part of the Human Rights Watch investigation, raised serious questions about tribal finances during the last several years. In 2008, for example, an audit found that the tribe improperly diverted $780,000 in federal money. It's unclear what happened to the money, which was meant to pay for drinking water on the reservation.

The investigation by Human Rights Watch into the tribe's finances also has spurred a criminal investigation by the Interior Department's Office of Inspector General, according to documents released in the report. The Bureau of Indian Affairs, which is part of the Interior Department, did not respond to requests for comment.

The bureau played a central role in the tribe's decision to purchase a New York-based brokerage firm, Westrock Advisors. The $22.5 million loan guarantee from the bureau was itself odd, Ganesan said, because it came from a program that typically only offers guarantees of $500,000.

At the time of purchase, Westrock was indebted, under investigation by regulators and had been fined and sanctioned for violating industry rules at least a dozen times. Despite this, the tribe formed shell companies to buy the brokerage firm in 2009. The tribe sold the loan guarantee to the Great American Insurance Group, an Ohio-based subsidiary of the American Financial Group, for $20 million.

The tribe used more than $12 million of the loan guarantee to pay off preferred shareholders of Westrock, which included members of the tribal council who were also board members of Westrock. There is evidence that tribal council members improperly benefited from the sale of the loan guarantee. Millions of dollars from the sale disappeared, and Westrock declared bankruptcy on Sept. 6, 2012, three years after the tribe bought it.

A spokeswoman for American Financial Group said there is an "outstanding issue" with the loan guarantee, which has not been honored by the Bureau of Indian Affairs.

Copies of the Human Rights Watch report began circulating on Lower Brule last week. Wright called the atmosphere at Lower Brule "tense," and he warned that there could be backlash against Jandreau and current and former council members who are the chairman's allies.

Gayle Ziegler, a former chief justice on the tribe and a member of the tribe council from 2008-2010, said she and others were kept in the dark about the Westrock deal.

"They made a couple trips to New York — the other council members — and I never knew anything about it," she said.

Ziegler, who had reviewed the report, said it was a damning indictment of Jandreau and his allies, and she predicted that criminal charges would follow.

"There's a lot of money missing," she said.

Ellis also reports for (Sioux Falls, S.D.) Argus Leader.