The Miccosukees have historically kept secret their gambling revenues and how they distribute profits to tribe members, including flouting a regulatory law that requires them to file a distribution plan with the U.S. Bureau of Indian Affairs.
The Miccosukees are the only tribe in the United States that doles out gambling profits to members but fails to follow the Indian Gaming Regulatory Act, according to the Bureau.
In 2005, the National Indian Gaming Commission issued a bulletin saying that tribes can make gambling distributions as long as they file a plan, report the income payments and withhold taxes.
The IRS’ legal fight with the Miccosukees began in 2005, when the tribe’s high-profile lawyers — one-time Miami U.S. attorneys Dexter Lehtinen and Guy Lewis — argued to agency officials that tribal members didn’t owe any income taxes.
In recent years, the tribe tried to block IRS summonses to turn over its financial records held by American Express, Citibank, Morgan Stanley and Wachovia Bank. But the Miccosukee’s argument that it was a sovereign nation and didn’t have to release them failed, as a federal judge and appeals court held that the U.S. government’s sovereign power trumps the tribe’s.
While the Miccosukees sparred with the IRS, the tribe underwent a dynamic leadership change with the ouster of Chairman Billy Cypress in late 2009. Under his replacement, Colley Billie, the tribe has sued Cypress for embezzling nearly $26 million and filed malpractice cases against Lehtinen and Lewis.
In particular, the tribe has attacked Lehtinen, who served as its general counsel from 1992 to 2010. Lehtinen’s law firm was paid $50 million, primarily for legal services on the tribe’s disputes with state and federal authorities over environmental issues in the Everglades.
But the tribe, in a lawsuit, blamed Lehtinen for giving the Miccosukees bad advice on their tax liabilities and for their current confrontation with the IRS over back taxes.
The suit cited a June 2006 letter by Lehtinen to the IRS, which said in part: “The Miccosukee Tribal members are not required to pay income tax, nor does the Tribe have any related withholding obligations.’’
Lehtinen, Lewis and the late Anthony J. O’Donnell Jr., reiterated that position in a separate, lengthy legal memo to the IRS.
Lehtinen, who is no longer muzzled by attorney-client privilege because his former client sued him, said the Miccosukees have distorted the truth. “The basis for their not paying taxes was their position — not mine,” Lehtinen told The Herald in late 2011 after he was sued.
On Tuesday, Lehtinen’s lawyer, Joseph Klock, said the “tribe’s strategy of blaming everyone else but themselves is coming up short. … Mr. Lehtinen never advised them they could avoid paying their taxes.”
To make their point, the duo produced an internal Miccosukee document dating back to 1989, before Lehtinen was hired, that revealed the tribe’s position that gaming distributions were “non-taxable.”
Lehtinen said he refused to advise the tribe that members did not owe taxes on those distributions, and instead recommended that the Miccosukees seek expert tax advice from a Miami law firm.
In 2003, the White & Case law firm issued this warning in a memo to the Miccosukees: “As noted previously, tribal members are subject to federal income tax on most sources of income, and are required to timely file an annual federal tax return.”
And in 2010, before he was fired, Lehtinen wrote the tribe’s general council: “Individual Indians…are subject to federal taxation on incomes they receive.”