MICS. TICS. SICS. The second day of testimony about how control of Osage Casinos executive expenses eluded regulators and overseers was heavy on acronyms but light on insight into how a former casino chief executive was allowed to squander money on fine dining, drink, golf and private jets without properly documenting those expenses.
Feb. 8 saw two witnesses appear before the Osage Nation Congress’ Commerce, Gaming and Land Committee, which is investigating the circumstances surrounding former CEO Byron Bighorse’s expenses, which cost the casinos nearly $400,000 over three years ending in December 2021.
Bighorse is the son-in-law of Principal Chief Geoffrey Standing Bear.
Both the casinos’ Director of Regulatory Compliance, Patrick O’Brien, and the director of the Osage Nation Gaming Commission, Elizabeth Hembree, spent a good while explaining to Congress the various internal control standards – Minimum Internal Control Standards (MICS), the stricter Tribal Internal Control Standards (TICS), and the detailed System of Internal Control Standards (SICS) – that tribal casinos must follow.
And both agreed that because neither had access to credit card receipts or club invoices that are now at the center of the three-day Congressional inquisition, they were unaware of the alleged abuses that were occurring.
O’Brien testified that he just got access to credit card records about two months ago, essentially when the long-simmering inquiry into expenses blew into the public eye.
“In December, I received access to the purchasing system for the first time with access to the information,” O’Brien said. “I spent the past 15 years focused on gaming operations.”
“Why in December 2022?” asked Jodie Revard, chair of the commerce committee that is leading the congressional investigation.
“Because this happened on more than one occasion to Osage Casinos – and something needed to be done,” O’Brien replied.
“Can you be more specific?” Revard pressed.
“Ummm, expenses,” said O’Brien, who repeatedly said he was a bit nervous about testifying. “We’ve only started to review the credit card policy. Reviews of travel and club policies we haven’t started but we have no club memberships now.”
Congresswoman Paula Stabler asked O’Brien if he had begun reviewing receipts yet, to which O’Brien responded he had and that he had already found reports with missing receipts that he had reported to the Gaming Enterprise Board and copied to the casinos’ new CEO, Kimberly Pearson.
When asked what will happen If his reports were ignored, O’Brien said he could not answer.
2014: Another credit card fiasco
The Bighorse expenses mark the second notable time that Osage Casinos have been stung by what some see as profligate credit card and club spending by its top executives. In 2014, the casino’s top brass was investigated and some fined for various infractions that Hembree described as using credit cards to fund a business they were trying to form to make themselves more money. (An article at the time describes the business as OC Foods, which put out spice and other culinary mixes, and something called Eat & Play.)
Osage LLC was also hit with a similar fiasco involving clubs, wining, dining, golfing and lousy investments of tribal money that led to the cleaning out of the top brass in that organization, also in 2014.
At the time, lawyers and other advisors told the Osage Nation Congress and its business entities that they needed to develop internal controls and enforce them to prevent a repeat.
Congressman Joe Tillman asked Hembree about the casino debacle in 2014 after she noted that there had been violations of the control standards.
“Is this worse?” Tillman asked.
Hembree: “I don’t remember the exact dollar figure for that violation. It was rather egregious as well.”
In response to questions by Tillman, who frequently paints Chief Geoffrey Standing Bear as something of a tyrant, both Hembree and O’Brien flatly denied ever having been asked or told to ignore violations or threatened by any elected officials in the course of their work, but Hembree did confess that she believed the Gaming Commission had been “hampered” receiving documents in the current matter.
That appeared to be a reference to the Gaming Enterprise Board, which has balked at producing records that are believed to concern Bighorse’s employment contract and a separation agreement that netted him $600,000 after taxes.
History repeating itself
Congresswoman Paula Stabler expressed frustration that history was repeating itself again and that no decisive action had been taken to prevent that.
“Last time, that was the answer, too,” she said. “‘We’re going to write better policies,’ but we can see that no one followed it.”
What guarantee, she asked Hembree, will there be that this time a fix will be made?
Hembree said that she wants the Gaming Commission to expand its staff to be able to audit all receipts and make sure that a reprise of the fiasco doesn’t occur.
“As with the rest of you, I am terribly disappointed that we are going through this and I want to say that the Gaming Commission will do everything in their power to get things turned around in a very short time,” she said.
“We will definitely be looking at auditing every receipt until we can determine that they are following policy with proper receipts, proper documentation and all of the appropriate SICS are in order.”
She also said the Gaming Commission could demand restitution for improper expense reports, and that the National Indian Gaming Commission was well aware of the expense brouhaha – and likely would be willing to issue a notice of violation if the Osage Gaming Commission requested it.
Random checks, or audit every receipt?
O’Brien said that the casinos have proposed doing random checks on casino credit card expenses, but Hembree advocated for a more proactive response: To stop using casino credit cards for employee birthday lunches and the like and to revert to a more conservative and traditional approach to expenses.
“It starts with a requisition,” she said. “Everything is done ad hoc now; the system creates a requisition after the credit card is used … Payments don’t go through procurement.”
Revard also asked Hembree if she had ever traveled by private jet, an issue that arises during almost every conversation about expenses since Gaming Enterprise Board members used a private jet to fly to Missouri and Bighorse and others to Las Vegas.
“Have you ever flown on a private jet?” she asked Hembree.
“Yes. When I was six years old. That was the last time,” said Hembree, who is about 63 now.
Day 3
The third day of the committee’s investigative hearings will take place Feb. 9 starting at 9 a.m. in Congressional chambers in Pawhuska. The hearings are streamed live at https://osagenation.mixlr.com.
Thursday’s witnesses are slated to be current Gaming Enterprise Board Chairman Geoff Hager, board member Julie Malone, and former Chair Mark Revard, the latter of whom is appearing by invitation, not under subpoena. Mark Simms, who resigned from the Gaming Enterprise Board on Jan. 20, then rescinded his resignation four days later only to have Attorney General Clint Patterson opine that he couldn’t rescind because only the chief can appoint to the board. On Feb. 8, Simms resigned again, but the Gaming Commission already considers him off the board and his gaming license to be inactive, Hembree told the Commerce Committee.
CORRECTION: Two quotes in the original version of this article were misattributed. The errors have been corrected. The Osage News regrets the error.
