A federal judge in Miami has ruled that the Miccosuke tribes financial records are not protected by sovereign immunity from an IRS investigation into the use of credit cards by the tribes former chairman.
The IRS has been probing allegations that Billy Cypress, who was ousted as chairman in January, charged at least $3 million on the tribes American Express cards to travel to casinos around the country while making lavish purchases, according to the Miami Herald.
The tribe's credit card records are being held by Morgan Stanley, but the Miccosukes have been resisting the records request. The IRS suspects the records would show questionable expenses and lavish spending by other tribal officials that could be considered taxable income.
Judge Alan S. Gold denied the tribes request that the summons be quashed on the grounds of tribal sovereign immunity, overbreadth and irrelevance. Tribal sovereign immunity is a principle of federal common law, and the Supreme Court has consistently re-affirmed the general rule that an Indian tribe is subject to suit only where Congress has authorized suit or the tribe has waived its immunity. Kiowa Tribe v. Mfg. Tech., Inc., 523 U.S. 751, 754, 759 (1998). However, this rule is not absolute, and federal appeals courts including the Eleventh Circuit have consistently recognized that [t]ribal sovereign immunity does not bar suits by the United States and cannot be invoked to prevent the federal government from exercising its superior sovereign powers.
However, the judge also left room for the tribe to challenge the IRS summons at a limited adversary hearing as being issued in bad faith and constituting an improper fishing expedition against the tribe.
The IRS has been investigating the tribes gambling operations since 2005 in an effort to find misspent revenue. Meanwhile, in a separate case, Congress has not yet managed to agree on a way to pay a $3.4 billion legal settlement to Native Americans whose trust funds were mismanaged and poorly accounted for by the Interior Department for generations. The funds were included in the tax extenders bill that stalled in the Senate in June. Perhaps the government is trying to make up for the lost revenue, one way or another.