While poverty persists for St. Croix Chippewa, tribe officials misuse federal funds, audit shows

Dozens of families have at times languished on waiting lists for housing assistance, and in 2014 and 2015 federal audits show tribal housing officials loaned themselves housing money without proper oversight.

By DAVE DALEY | Sept. 15, 2016

Hertel — On a tiny reservation tucked away on an isolated stretch of scrub land and pine trees in northwestern Wisconsin, the poorest members of the St. Croix Chippewa tribe live in ramshackle trailers, get meals at tribal nutrition centers and depend on monthly government checks and a meager $400 a month in casino payments to get by.

For years, the federal government has provided millions of dollars in grants from the Department of Housing and Urban Development and other Washington, D.C., offices in the hope the aid would benefit impoverished tribe members. Over the years, however, dozens of families have at times languished on waiting lists for housing assistance, and in 2014 and 2015 federal audits show tribal housing officials loaned themselves housing money without proper oversight.

Time and again, housing help has been waylaid by a pattern of mismanagement and waste with little accountability even while the tribe takes in millions of dollars from its casino operations, a Wisconsin Policy Research Institute investigation has found as part of its “Federal Grant$tanding” project.

It’s a similar case nationwide. HUD awards $660 million to 587 tribes each year to help low-income members find affordable housing. Allegations of misuse are common across the nation (see related story, “Tribes in Wisconsin and across the U.S. misusing millions in federal housing funds”). And they point to a fundamental and systemic problem: As sovereign nations, the tribes are not subject to the same open government laws that other federal grant recipients are subject to. That means taxpayers and even tribal members are often kept in the dark as to how the dollars are used and how decisions are made. 

As a result, the St. Croix Tribal Council — and the Housing Authority it oversees — is able to meet behind closed doors, keep its deliberations secret and refuse to open financial records to tribal members or watchdogs who might want to know how the council decides to spend millions in tax dollars each year.

A 2015 audit of the $2.3 million in federal housing grants to the St. Croix Chippewa that year found that more than $776,000 in back rent owed the tribe would probably never be collected and that the Housing Authority’s top officials were, without proper oversight, loaning themselves monies from a fund designed to help the tribe’s poorest members. The audit also criticized the tribe for not following proper procedures in how $308,000 in block grant funds were awarded to contractors doing housing work for the tribe.

Congressman Glenn Grothman (R-Wis.), a member of the House Committee on Oversight and Government Reform, is troubled by the findings of the 2015 audit, released earlier this year.

“It’s disturbing that a blatant misuse of federal funds is occurring with little to no oversight,” Grothman says. “And this is not a one-time issue” — the mismanagement “reaches back years.”

“Taxpayers deserve to know that their money is being used in the manner for which it is designated,” Grothman adds. “It’s a step in the right direction that audits into the housing funds of the St. Croix Chippewa tribe have occurred. However, to be the most effective they can be, the audits should be streamlined — issues brought up in the 2015 audit should be resolved by the 2016 audit and so on.”

The St. Croix Chippewa is the smallest of Wisconsin’s 11 tribes, with about 1,000 members, 735 of whom live on reservation lands around Big Sand Lake north of Hertel or nearby. Gaming at the tribe’s casinos in Turtle Lake, Hertel and Danbury has been a financial boon, bringing in millions each year. One estimate in 2000 from a federal special prosecutor’s report put the tribe’s casino profits at $30 million-plus annually from the Turtle Lake casino alone. That casino employs more than 1,000 people.

With tribal enterprises that include the tribal center at Hertel, a construction company, a grocery store in Siren and a tribal tobacco shop, the tribe employs 2,500 people in all. The tribe calls itself the largest employer in Burnett County and the second-largest in Barron County.

Unlike with some tribes, however, little of the casino revenue seems to make its way to St. Croix members the ones living in shabby trailers and fishing-shack houses who settle for a paltry $400 monthly check as their share of the gaming profits.

Federal grant money, in the meantime, comes in many forms. The U.S. government awarded the St. Croix Chippewa $10.98 million in 2014 to distribute food, provide alcohol- and drug-prevention help, make family planning services available and fund fish and wildlife programs, among others, according to the Federal Audit Clearinghouse. Of that, over $2 million came in the form of housing grants to help buy or rehab homes or pay rent and utility bills.

Substandard housing

Substandard housing among the St. Croix Chippewa has been a sore spot for years. The tribe’s Housing Authority manages 234 housing units that it either built or bought using HUD money. It oversees another 67 units purchased by the tribe, according to the 2015 audit. The rates for the low-rent units are based on the tenant’s income, pegged to the federal poverty rate. In 2015, under HUD poverty guidelines, a family of three with an annual income below $47,376 qualified for rent-subsidized housing.

Despite receiving millions each year — $2.3 million in 2015 — in federal housing funds, tribal members have complained of long waiting lists to get into the subsidized housing. And past annual audits of those millions reveal fraud so flagrant that two former tribal housing directors went to prison in the 1990s.

Sparked by questions from WPRI, federal investigators are examining the 2015 audit, which found:

• Tribal recipients of housing funds are required to pay a minimal rent to the Housing Authority. The audit, however, found that in many cases even that minimal amount is not being paid. The Housing Authority recorded $924,548 in rent money owed by tenants, but most of that — $776,292 — was categorized as “doubtful collection,” meaning tribal housing officials do not expect to see repayment, without any apparent consequence to future tribal HUD funding.

• The Housing Authority awarded $308,000 in block grants to contractors without following rules on how it selects and evaluates vendors. This was a repeat finding from the 2014 audit, which found $444,929 in such funds were awarded improperly that year.

• The Housing Authority provided housing assistance totaling nearly $24,000 to tribal members whose income may have been too high to qualify for subsidized housing.

• 80 percent of the Housing Authority’s tenant case files that were audited did not contain the required income recertification information needed for a tenant to qualify for rent-subsidized housing.

• Top Housing Authority officials lent themselves one-third of the money from an $85,000 loan program aimed at helping the neediest in the tribe buy houses, and did so without proper oversight.

Mystery money

The independent auditor said the loan program is “referred to internally as the HCRI loan program,” an apparent reference to the Housing Cost Reduction Initiative, a program funded by taxpayers and awarded by the State of Wisconsin Division of Housing. It is designed to help low-income residents make down payments to purchase homes and pay closing costs.

A spokesman for the division, however, said the last HCRI grant the state made to the St. Croix Chippewa was in 1992 for $46,000. How HCRI funds from 23 years earlier — if indeed they were HCRI funds — ended up in the tribe’s 2015 financial records is unclear. What is clear, however, is that the auditor found problems with how the Housing Authority was administering those funds.  

“The loans (from the so-called HCRI fund) are administered and accounted for by finance and management level personnel that also participate as individuals in the program, without any additional oversight,” the 2015 audit report states. “The largest loan balances outstanding are to these finance and management level personnel individuals and total $27,885 or approximately 32 percent of the total balance.

“Sound business practice and strong internal control dictate that to effectively ensure that the persons who benefit from the loan program should not have complete discretion over the approval of loan requests, or the recording of balances and repayments,” the audit states.

The year before, the 2014 audit pointed out that this practice was already an issue and recommended that the Housing Authority adopt a conflict of interest policy that should be read and signed each year by employees to remind them “that their duty to the organization comes before any direct or indirect individual benefit.”

Any follow-up to that recommendation was not addressed in the 2015 audit. Rules for the State of Wisconsin’s HCRI loan program specifically prohibit anyone who has responsibilities for the program or participates in decision-making for the program from benefitting from the HCRI program.

Recurring problems

St. Croix Chippewa officials have gotten into trouble before. In the mid-1990s, an audit discovered the tribe misspent thousands of dollars on restaurant tabs, gifts and bonuses, invested nearly $660,000 of HUD funds in an unauthorized apartment project and placed almost a half-million dollars in an account that did not generate interest. Lewis Taylor, one of the tribe’s most powerful political leaders over the past 20 years, was tribal chairman at the time. He remains chairman today.

Investigators also found that the Housing Authority director at the time, Janelle Golden, was writing checks from the HUD account for personal use. She was fired, sentenced to 21 months in prison and ordered to make $46,000 in restitution. The housing director before her, Catherine Sandstrom, also went to prison, sentenced to two years after pleading guilty to embezzlement and misconduct.

Golden claimed she wrote some of the checks at the direction of Taylor, who she said threatened to fire her if she refused, according to federal court records. But no charges were filed against Taylor, and the judge discounted Golden’s claim, court records show.

Taylor could not be reached for comment on the latest audit of the tribe’s federal housing grants. Calls to the tribal attorney were not returned.

Duane Emery, Housing Authority director and a top tribal official, was unavailable for comment despite phone calls and a visit to the Housing Authority’s offices on the St. Croix Chippewa reservation.

No HUD follow-up

The 2014 audit also recommended that tribal leaders keep minutes of their meetings to record how they decided to award funds and to whom. That also was not followed up in the 2015 audit, and no apparent action was taken by HUD.

It is even unclear how many people the Housing Authority employs. The tribe’s website lists a director and six employees, but the 2015 audit said the Housing Authority had as many as 15 employees that year.

The five-member Tribal Council operates in secrecy with almost absolute power, critics complain. (See related story, “St. Croix Chippewa members have decried council secrecy for years.”) The council decides who votes in tribal elections, who gets a job at a tribal business and even who is enrolled in the tribe and thus eligible for casino profits.

Tribal members who complain end up on a “no hire” list or risk getting kicked off the tribal rolls, critics have told the Inter-County Leader, the local newspaper providing the most comprehensive coverage of the tribe over the past decade. And there are instances of critics suddenly finding themselves with one of the good-paying jobs that the Tribal Council can hand out.

Just recently, the council moved to remove five people from the tribal membership list, saying there were errors in their application documents, even though their families had been members for generations. Those being banished say they are the victims of vendettas that go back years, according to stories in the Inter-County Leader. In mid-August, a tribal judge ordered the council to reinstate the five members. In her written ruling, the judge said that the disenrollment action by the council was “unconscionable and violates the basic tenets of justice and fairness.”

Grothman is calling for more transparency by the St. Croix Chippewa. “Tribes are sovereign nations, which makes it difficult for the federal government to intervene in their legislative processes,” he says. “However, it seems that HUD is making zero effort to follow up with tribal leaders to make sure that they are appropriately spending the millions in taxpayer dollars they receive from the federal government.”

U.S. Sen. Tammy Baldwin (D-Wis.) did not respond to calls for comment, and U.S. Sen. Ron Johnson (R-Wis.) declined to comment for this story.

Dave Daley is the reporter for the Wisconsin Policy Research Institute’s Project for 21st Century Federalism (wpri.org), of which “Federal Grant$tanding” is a part. A journalist for 30 years, Daley covered the statehouse in Madison for The Milwaukee Journal and the Milwaukee Journal Sentinel.

Read related stories in this series:
Tribes in Wisconsin and across the U.S. misusing millions in federal housing funds
St. Croix Chippewa members have decried council secrecy for years