BY JENNIFER DIXON

When Michigan approved Indian-run casinos in 1993, the tribes agreed to turn over a portion of their profits to neighboring communities to offset the traffic, crime and other expenses gambling can bring.

So why did one tribe use $700,000 of this money to pay its members' taxes? Why did a second tribe use $101,000 for a documentary on its history? And why did a third send $28,000 to another town ... in Wisconsin?

The Free Press found numerous instances in which tribes failed to turn over control of this money to neighboring communities, instead spending the funds -- hundreds of thousands of dollars -- on themselves or pet causes.

"It seems ridiculous," said Steven Pickens, treasurer in Isabella County, home to the state's largest tribal casino, Soaring Eagle Casino & Resort, run by the Saginaw Chippewa Indian Tribe of Michigan. "They pick and choose what they want to do and they fund it."

Several tribes declined to comment on their operations.

One official who did talk said his tribe gave to causes that needed the money and benefited the community at large.

Cory Wilson, spokesman for the Sault Ste. Marie Tribe of Chippewa Indians, said his tribe gave all its community money to local governments, which then used it for worthy causes. In 2005 alone, the tribe distributed $1.7 million.

"We're very happy to distribute this money; it benefits everyone involved," Wilson said. "We want to make sure it benefits the majority."

Where some of the money went

In their original deal with the state in 1993, the tribes agreed to help communities offset the economic impact of gambling by paying them 2% of slot machine and video poker profits. Instead, the Free Press found, the Keweenaw Bay Indian Community paid its members' property taxes with its money. The tribe spent just under $700,000 from 2001 to 2003 on such taxes.

David Hicks, a state gambling auditor, also questioned another $567,550 in Keweenaw community payments over that period. In the 2005 audit, Hicks found the tribe had ordered neighboring communities to give the money to private entities or nonprofits of the tribe's choosing. The recipients included a snowmobile club, a girls hockey association and a ski hall of fame.

The tribe responded in a letter that "the State of Michigan does not have the legal authority to conduct an audit of the Community for any purposes."

The Free Press repeatedly sought comment from tribal lawyer John Baker. He told the paper to send its questions by e-mail, then never responded.

The Grand Traverse Band of Ottawa and Chippewa Indians sent $101,000 in community money to CMU Public Broadcasting in Mt. Pleasant to finance a documentary on the tribe's history, and earmarked an additional $299,000 for Native American education programs at northern Michigan schools last year.

The Lac Vieux Desert Band of Lake Superior Chippewa Indians in the Upper Peninsula gave $28,653 to Phelps -- a town across the border in Wisconsin -- to pay property taxes on land the tribe owns there. A lawyer for Lac Vieux declined comment.

Why it matters

Nine tribes operate a total of 17 casinos in Michigan. Community payments by the tribes are crucial to the economies of some remote areas. Since 1993, the tribes have turned over $149.9 million in community funds.

Soaring Eagle alone enjoyed estimated slot profits of $387 million last year -- which translates into roughly $7.7 million for its neighbors.

But some community officials chafe at how tribes control the flow of money, though they're loath to openly criticize their benefactors.

In Leelanau County, Commissioner Melinda Lautner said the county's roads, police and courts have all been adversely affected by the Grand Traverse tribe's Leelanau Sands Casino, near Suttons Bay.

"Sometimes it's drinking, sometimes it's drugs," she said. "Sometimes it's speeding, it's accidents. It's all connected. It all filters down."

Yet of the $1.9 million the Grand Traverse tribe doled out in 2005, only a sliver -- $168,500 -- went to Leelanau County agencies. Most of the rest went to programs and organizations in other counties, including Grand Traverse, where the tribe has another casino. It gave money to groups such as a food pantry in Charlevoix and a historical society on Beaver Island.

Grand Traverse tribal attorney John Petoskey said through an aide the tribe did not want him to comment.

In fairness to the tribes, their contracts with the state requiring these payments are vague in several respects.

The 1993 deal, for instance, requires that the tribes give money to communities "in the immediate vicinity" of casinos, with no language on which communities get what. The deal also does not say how communities are to spend this money.

That has led to disagreements, even over seemingly innocuous donations to charities.

For instance, the Hannahville Indian Community gave $4,042 to the Menominee County Historical Society; $11,094 to a Veterans of Foreign Wars post, and $2,933 to the West Bagley Homemakers Club.

The Lac Vieux tribe gave $45,000 to the Watersmeet Fourth of July Committee and spent $530,639 on what state auditors labeled "undetermined" expenses.

In a 2003 letter to the Lac Vieux tribe, Eric Bush, who oversees tribal gambling for Michigan's Gaming Control Board, scolded the tribe, writing that community payments are "NOT to provide a source of monies for charitable donations by the tribes."

Bush wrote that communities must "make their own determination" on how to spend casino cash.

Michael Gadola, an attorney for Gov. John Engler who helped negotiate the 1993 deal with seven of the tribes, said he believes "the language is clear ... and does impose some fairly significant restrictions on the tribes' discretion."

Asked about tribal payments to pet charities, Gadola, now counsel to the Michigan Supreme Court, said, "I don't think those types of things were contemplated."

A year after Bush wrote his letter, Patrick Devlin, a gaming board compliance officer, urged Bush to sue the tribes or seek an attorney general opinion on whether the tribes can legally earmark community money for private groups.

In May 2005, state gaming officials met with the tribes to discuss the payments, and said late last year they were close to a deal.

But in January, the Grand Traverse tribe announced it was giving community money to several charities, civic groups and the Northport Indian Mission Church.

John Wernet, Gov. Jennifer Granholm's liaison to the state's tribes, said gaming officials bear some responsibility for the way this money has been spent, because the board never questioned tribal spending for a decade.

If "those practices are never challenged, they are quite understandably going to assume we have no objection," he said. "Certainly, in our view, there needed to be ... more aggressive assertion of our rights."

Contact JENNIFER DIXON at 313-223-4410 or jbdixon@freepress.com. Free Press data analyst Victoria Turk contributed to this report.

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