vey PR aT ee a gus
Z FAR YOS S30 Piss AYR A SH

IRS (AGENCY RECORD Hem I: Hearing a1 180) for each of those years does not give
credence io his assertions that he was a tribal employee and JPW was a shell to provide for a
persion. The repeated Provision of claimed falsc information to another federal gevermment
agency also supports the NIGC finding that Mr, Weisman was not a credible witness.

17. The Commission could reasonably choose to give more weight to Mr. Smith’s
conlemporancons statements 0 Stuckwiseh and Olson. than to deposition testimony given more
than a yeur later. At the request of JPW, it is not unlikel y that Smith provided his testimony to
help JPW and Mr. Weisman avoid 3 multimillion dollar fine. The NIGC could rationally
conclude that the attempted explanations, cited by plaintiff in the opposition brief, (JPW Opp., at
16), skirt around the unprepared candid observations made to the two investigators that plainly
reflected ongoing management by JPW.

18, The Commission could reasonably chose to give more credibility to the pre-Htigution
representations lo the JRS that JPW was engaging in management activities and Mr. Weisman
was nol an employee of the Seminole Tribe, rather than Mr. Weisman’s characterization afer the
Proposed fine assessment was made grven the financial interest at stake in the outcome of the
fine. This is particularly true of the admission by JPW that it was ceasing Management activities,
a tepresentation made after securing the advice of counsel,

CONCLUSIONS OF LAW

The Court may grant.summary judgement. ifthe pleadings, depositions,answers }o.3: 0-3. ee he lst ow
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as 10 any material fact and that the Moving party is entitled to a judgment as a
matter of Jaw.” Fed,R.Clv.P, 56(c). The siringent burden of establishing the absence of a

genuine issue of material fact lies with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317,

7

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-

of a $3.4 million civil penalty for JPW’s violation.”

AFFIRMED.

23PW also argues in his brief that the Commission selectively enforced the IGRA against JPW.
The district court order, however, does not mention this issue nor did JPW develop this legal
argument in its motion for summary judgment. We, therefore, decline to address this issue.

n

APR-16-2281 16:33 3670187 96%


MON oie! FAX 202 305 0506 DOJ ENRD Gen Lit 8th Flr +9» NIGC goo2

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

: CASE NO, 98-7401-CIV-DIMITROULEAS
JPW CONSULTANTS. INC.. A

Plaintit,
vs.
NATIONAL [INDIAN GAMING
COMMISSION, et al.
Defendants. _ 7 so : woe ee
‘ ORDER GRANTING NATIONAL INDIAN GAMING
M DG) i

AND DENYING JPW CONSULTANT'S MOTION FOR
SUMMARY JUDGEMENT

THIS CAUSE having been heard upon both parties’ Motions for Summary Judgement, -
and the Court having heard arguments of counse! on November 23. 1999. having reviewed
proposed Orders, finds thal National Indian Gaming Commissions’ Motion is Granted and JPW
Consultant’s Motion is Denied,

FINDINGS OF FACT

Because this action is one for review under the APA, there can be no facts that are
apprupriate tu be ied de novo before the Court. Under ihe arbitrary and capricious standard,
“all the agency must do is articulate a rational connection between the facts and its conclusion.”

Georgia Public Service Commission,, 204 E24 538, 543.(11".Cir. 1983). The question belore.the... ..

Court is whether evidence in the agency record is rationally connected to the decision ofthe

National Indian Gaming Commission in this case. Where the substantial evidence lest is
appropriate, the Court looks to the record for relevant evidence which supports the agency’s

conclusion and which “is something less than the weight of the evidence, and the possibility of

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6, While the standard of review of the Commission’s decision regarding the stolanon of
the regulation by JPW's management activities is “arbitrary and capricious”, of alternatively
“ substamial evidence,” the standard of review ij Jelermining the appropriateness uf the
Commission's sanction of $3.4 million 1s the abuse of discretion standard, Shippers Commitee,
QOT-5 v. ICC, 968 F.2d 75 (D.C. Cir. 1992), “Unless the Commission abused its discretion in
fashioning its remedy. its action must be affirmed.” Shipners Commitee, OT-5. 968 F.2d at 79.
Agency sanctions are generally treated as a discretionary act related to the fashioning of policies.
Ningars Mohawk Corp. \, FPC, 379 F.2d 153. 159 (D.C. Cir. 1967), The fact that IGRA
provides the Chairman with the authority to levy a per violation fine of $} or $25,000, is a clear
indication thar Congress has given the Commission broad discretion in the application of agency
Sanctions:

7. The agency record in this casc contains substantial evidence to suppon the decision of
the National Indian Gaming Commission that a civil fine in the amount of $3.4 million is a
lawful and appropriate penalty for JPW's violation of the Jaw and that decision is not arbitrary,
capricious or an abuse of discsction. It is clear that NIGC must have reduced the fine from
$25,000 to $10,000 per day, It appears that the hearing officcr’s recommendation had some
effect on NIGC’s decision. The agency has an important mssion m protecting the mteenty of
Indian gaming. Review and approval of management contacts is a device designed by Congress
to limit corrupting influence, protect the public, and to assure that tribes remain the prime
beneficiaries of the Indian Gaming Regulatory Act. The proposed fine assessment considered all
the factors that are relevant. The Commission reasonably reduced the Chairman's fine, but
continued to make it substantial, in light of the serious threat to the integrity of Indian gaming

presented by the management of 2 gaming facility without a compact and the Jarge sums received

t sendemedisaniiiniemmmtaieaitenindal-antliaed

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wets


the discussion in the American Law Reporters concerning whether a person is an employee or an
independent contractor for tax withholding purposes. The tax cases look to common law to
decide whether a person performing a service for another was doing so as an employee or as an
independent contractor. The following are factors which indicate whether the relationship
between the parties was one of employer-employee or of contractor-contractee: right to control;
length of employment; opportunity for profit or loss; services in course of recipient’s business;
right to discharge workers; substantial investment or cost by person performing services; skill or
training required; method of payment; right to employ assistants or substitutes; supplier of tools, _.
equipment, or place to work; designation or description of relationship by parties; distinct trade or
business; right to change or specify job, job site, or hours of work; offering of services to public;
belief or intention of parties; employee-type benefits; and custom in trade, No one factor is
determinative. Rather, the circumstances must be examined as a whole.

Several factors indicate that Mr. Weisman’s relationship to the Tribe was that of a
contractor-contractee. They include opportunity for profit or loss; substantial investment or cost
by person performing services; skill or training required; method of payment; distinct trade or
business, employee-type benefits; and belief of the parties. We believe that the existence of
several factors support the Chairman’s assertion that Mr. Weisman was not an employee of the
Tribe but rather a contractor related to JPW.

“{AJn independent contractor is generally one who has either the opportunity to make a
profit or the risk of taking a loss and/or, conversely, that an employee generally does not have that
opportunity or risk.” 51 A.L.R. Fed. 59 at §5 (citations omitted). Chief Billie testified that Mr.
Weisman was paid of HSG’s net revenues. Billie Deposition at 17. The monthly
financial statements indicate that JPW was paid roughly | of the net revenues. Items
20-24 of the Administrative Record. This indicates that Mr. Weisman had an opportunity to
make a profit if HSG performs well. Thus, this factor seems to indicate that Mr. Weisman
functioned as a contractor.

“{A]dministrative decisions explicitly support the view that if a person performing a
service undertakes a substantial cost or has a substantial investment, it is indicative of an
independent contractor-contractee relationship.” 51 A.L.R. Fed. 59 at §8 (citations omitted).
JPW’s 1996 Income Tax Retum ;

Item 19 of the Administrative Record. Mr. Weisman testified that the Tribe paid
JPW for his services as a general manager since 1982 instead of a salary. Weisman Deposition at
38. Mr. Weisman also testified that JPW was established primarily to provide a pension for him
and had no other purpose. Id. at 89-90. The record indicates that JPW had no other major
source of income other than Mr. Weisman’s compensation from HSG. See id. at 98. Because
HSG represented JPW’s major source of income, it is logical to conclude that HSG would be the
major expense item for JPW and that the Ll was related to Mr. Weisman’s
activities at HSG. Given the amount of money involved, we would characterize the ‘ L


Parker v. Bowen, 788 F.2d 1512, 1520 (11th Cir. 1986). Here, the Commission, as
well as the district court, questioned Weisman’s credibility as a witness. The
Commission noted that Weisman consistently argued that JPW was not managing
the gaming facility (but instead was established simply to provide Weisman a
pension plan). But JPW’s tax returns stated that its business was “management
services” and that its product was “consulting.” The Commission also notes that
JPW incurred a substantial “consulting expense” in 1996, which indicated to the
Commission that JPW had some activity or purpose beyond providing Weisman a
pension. And in an attempt to explain the apparent conflict between these tax returns
and his testimony, Weisman admitted he filed “false information” to the IRS and
stated that he would “have to file amended returns for all those years and correct it.”
For these reasons, we cannot say that the Commission’s decision to doubt
Weisman’s testimony was unreasonable.

JPW also attacks the $3.4 million civil penalty assessed by the Commission.
JPW first challenges the fine by claiming that Weisman had not exerted a corrupt
influence on the Tribe and that, therefore, the goals of the IGRA were not served by
penalizing JPW. But JPW’s operation of the facility, without the Commission’s
approval, threatened the Commission’s ability to achieve its goals of shielding the

Tribe from organized crime, of ensuring that the Tribe is the chief beneficiary of the

9

APR-16-2081 16:33 3078187 97% P.18


MUN 1U;D0 FAA ZUZ 3UD YoOUD DUS ENKD GEN LIT 8TD FLIP 44+ NIGC
PRE igviz wAa vod Sou s2ou manna eee

3231986). The Court should nor grant summary judgement unless it is clear that a mal is
unnecessary, Anderson v: Liberty Lobby, luc., 477 U.S. 242, 255 (1986), and any doubts in this
regard should be resolved against the moving party, Adickes v, SH. Kress & Co,, 398 U.S. 144,

157 (1970).

‘The movant "bears the initial responsibility of informing the district court of the basis for
its motion, and identifying those portions of [the record] which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Com,. $77 U.S. a1 323, To discharge this
burden. the mov unt niust point out tu the Court that there is an absence of evidence to support the
honmoving party's case. Id, at 325.

After the movant has met its burden under Rule 56fc), the burden of production shifts and
the nonmoving party “must do more than simply show that there is some metaphysical doubt as
10 ihe material facts," Motaushite Electronic Indusuisl Co, v, Zenith Ratio Corp, 475 U.S, 574,
586 ( 1986), According to the plain language of Fed.R.Civ.P. 56(e), the non-moving party “may
not rest upon the mere allegations or denials of the adverse party’s Pleadings,” but instead must
come forward with “specific facts showing that there is a genuine issue for tnal.” Fed. R.Civ.P. ,
56(c): Matsushita, 475 U.S, at 587.

Essentially, so long as the non-moving party has had an ample Opportunity 10 conduct
discovery, it must come fonvard with affirmative evidence to support its claim, Andersog, 477
U.S, a1 237. “A mere-‘scintilla’ of evidence supporting the opposing party's position will not
suffice; there must be a sufficient showing that the jury could reasonably find for that party.”
Walker v, Darby, 911 F.2d 1573, 1577 (11th Cir, 1990), Ifthe evidence advanced by the non-
moving pany “Is merely colorable, or is not significantly probative, then summary judgement

may be granted.” Anderson, 477 U.S. 242, 249-50.

Pre «NEY means 3 pe ed Bee FE

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goog



[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS.

FOR THE ELEVENTH CIRCUIT CFE
U.S. COURT QF APPEALS
EVENTH Oli IT

No. 00-10017 APR 12 2001

THOMAS K, KAHN
D.C. Docket No. 98-07401-CV-WPD CLERK

JPW CONSULTANTS, INC.,
Plaintiff-Appellant,

versus

NATIONAL INDIAN GAMING COMMISSION,
established within the United States Department
of the Interior,
UNITED STATES,
Defendants-Appellees.

Appeal from the United States District Court
for the Southem District of Florida

(April 12, 2001)

Before EDMONDSON, BLACK and McKAY*, Circuit Judges.

_ * Honorable Monroe G. McKay, U.S. Circuit Judge for the Tenth Circuit,
sitting by designation.

APR-16-2081 16:38 3970107 g°% P.@2


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12/03/99 FRY 16:19 FAX 854 Soy fiov HAm a. POV BA ay

~ Service Commussion, 704 F.2d 538, 343 (11 Cir, 1993).

4. The agency aniculated a rational connection between the facts in the record and in its

sanctusion that a violation occurred. The record reflects that JPW admitted to management

: activities a HSG tha it agreed to cease on June 6, 5997. This admission alone is a substantial
basis for finding support for a finding of a violation. The admission js consistent with pre
litigation representations to the IRS. It is also consistent with Mr, Smith's representation that
JPW took over management activitics on July 2, 1996. This certainly rationale for the
Commission to conclude thal puyments made directly to JPW for management activities is an
indicia, not of an employee-employer relationship to corroborate the admission of violation by
JPW. The Commission could rationally view the disinterested Horkey sudit report as substantial
corroboration of the ongoing violations during this period. The failure of the Tribe to deduct
payroll taxes or provide cmployce benefits. repeated representations to the IRS characterizing the
activities of JPW, all substantiate the rational connection between the facts in the record and the
conclusion of IGRA violations.

§. Under the arbitrary or capricious standard. or even under the substantial evidence test,
the Commission’s determination that violations occurred is sustained. Substantial evidence
exists to support a conclusion that violations occurred during the relevant period. The evidence
presented by plaintiffs in the record could reasonably be viewed as amounting to disavowals
presented by plaintiff. When the entire agency record is considered and. appropriate deference --- :*-
viven to the agency, the decision of the National Indian Gaming Commission, that from July 2,
1996 to June 6, 1997, JPW managed HSG under a contract which was not approved by the
Chairman of the National Indian Gaming Commission, in violation of 25 U.S.C. § 2711, cannot

be viewed as arbitrary, capricious or Jacking substantial evidence,

10

ere eee CT a ee ype He 8

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var.urua 40.49 Fran verviur

WwuLe

~ gaming operation, and of ensuring that gaming is conducted fairly and honestly by
both the operator and players. See 25 U.S.C. §2702(2).

Second, JPW challenges the fine on the grounds that the Commission set it
arbitrarily; he focuses on how the Commission reduced the fine from $8.5 to $3.4
million. The Vice Chairman of the Commission considered the pertinent factors and
proposed a fine of $25,000 per day. See 25 C.F.R. §575.4 (setting forth economic
benefit of noncompliance, seriousness of violation, history of violations, negligence
or willfulness and good faith as factors to consider). The Vice Chairman noted that
(1) JPW had received an economic benefit in over $9 million paid under the
unapproved contract; (2) JPW willfully violated the IGRA in that it knew that the
Commission must first approve the management contract if the contract is to be
proper; and (3) JPW’s operation of an Indian gaming facility under an unapproved
contract was a serious violation in that it circumvented one of the Commission’s
main means of protecting Indian gaming from improper influences. The whole
Commission then considered the proposed assessment but concluded that the
violation was not serious enough to assess the maximum penalty and reduced the

fine to $10,000 per day. JPW has shown no error in the Commission’s assessment

10

APR-16-2801 16:33 3070187 96%


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w continued to manage HSG, until June 6, 1997, when JPW advised the NIGC thal they agreed to
cease the management activities, Agency record. Item 15, Exh. 3.
12. Horksy and Associates, P.A..a Cenified Public Accounting Firm from Ft,
Lauderdale prepared an independent audit report in order 10 obtain reasonable assurance that the
financial statements are free of materiul misstatements. In audiling the expenses they noted that
~Management fees” were paid in 1996 in the amount of $423.426,354, And in 1997, in the
amount of $9.290.347, Avency record, item 12. Ex 2 ut3. The Horkey report reflected that
“[Uhrough May 1997, the Tribe had arranged for the day to day operations of HSG by the
engagement of a management company, which was responsible for the regular operations of
HSG.” Hat 5. In May 1997, Tribal Council assumed Mranagement of the HSG. The Horkey
Report identifies the management company for the relevant Period at note G. "In May 1996, the
Tribe purchased the remaining rights of SMA tv the Management contract (see Note F) and
simullaneously approved a new management contract with Jew Consultants, Inc., a company
w owned by the same general manager previously employed by the Tribe, This new contract
required JPW to perform the same managemeni functions as SMA..." Id at 9.
13, Since 1982, JPW Consultants, Inc. received all payments directly from the tribe for
Management services. Between July 2, 1996, when Mr. Smith related to NIGC investigators thar
JPW began managing the facility, until June 6, 1997 when JPW admits that it then ceased

management activities, there is no record evidence.of a written employment contract; ihe:» -

ik Lda

provision of any pension, health insurance, sick leave, vacation Jeave, or any other employment
benefits provided by the Seminole Tribe to Mr. Weisman. There is no indication that payroll
taxes were ever deducted by the Tribe for the compensation to Mr. Weisman. or that Mr.

Weisman ever protested the failure to deduct Payroll taxes,

5

s stndeneteniintiommtnadiedeaite te}

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w

The Chairman cites a number of Federal court cases in support of its argument, including
Cabazon Band ission Indians v, National Indian Gamii ., 827 F. Supp. 26 (D.D.C.
1993), affd, 14 F.3d 633 (D.C. Cir.), cert. denied, 114 S. Ct. 2709 (1994); Sycuan Band of
Mission Indians v. Roache, 54 F.3d 535 (9th Cir. 1994); United SV. 294 Vari mblin,
Devices, 718 F. Supp. 1236 (W.D. Penn. 1989); United States'v_ 137 Dra’ ker-
Machines, 606 F. Supp. 747 (N.D. Ohio 1984); United States v, Sixteen Electronic Gambling
Devices, 603 F. Supp. 32 (D. Hawaii 1984); and United States v. Various ling Devices, 368
F. Supp. 661 (N.D. Miss. 1973).

The Chairman distills from these cases several general characteristics of a game which
have been relevant to determining whether or not the game constitutes a “gambling device” within
the meaning of 15 U.S.C. § 1171. These characteristics include the length of time it takes to play
a particular game, whether the player can extend play, the absence of skill elements, the existence
of a retention ration, the potential for inordinate numbers of free games, and a multiple coin
feature.

Based on the information which the Chairman presented concerning the machines offered
at the Hollywood facility, the regulatory definition of Class III gaming, the cited case law, and the
lack of opposition to the Chairman’s arguments, we conclude that the Chairman has carried his
burden in this case of proving that the machines offered at the Hollywood facility constituted
Class III gaming within the meaning of the IGRA.

We do not find a definition of the term “offer” in the IGRA or its implementing
regulations. Based on its usual meaning combined with the context of gaming, we believe that the
term “offer” was most likely used to mean that JPW had made these games available for play in
the Hollywood facility. In the context of the IGRA, we conclude that JPW would be responsible
for “offering” the games only if it had authority to determine what games would be placed in the
facility.

The Chairman relies on a statement attributed to Smith by to Stuckwisch and Olson to the
effect that Weisman had decided not to purchase certain machines for the facility. Assuming that
Smith’s alleged statement was correct, nothing which the Chairman presented showed that
Weisman had the unilateral authority to purchase machines. The fact that a person has the
authority to decide not to do something is not proof of his having authority to decide to do that
thing. Without additional proof of Weisman’s authority, it is an assumption to say that he could
purchase gaming machines on his own authority because he could decide not to purchase them.
An equally possible scenario is that Weisman had authority to make initial decisions as to whether
or not to purchase particular machines, but that any decision to purchase had to be approved by
the Tribe.

Additionally, the JPW Contract allowed either JPW or the Tribe to purchase gaming

equipment. Management Contract at 10. While the Chairman did provide evidence that Mr.
Weisman may have some authority over the installation and operation of these Class III games at

10


make findings on some of the common law factors. But no requirement exists that
evidence of every listed factor must be present before a court may examine the
totality of the employment relationship. The common law is clear that no one factor
is determinative; instead, the circumstances must be examined as a whole. See

Patterson & Wilder Constr. Co., Inc. v. United States, 226 F.3d 1269,1276 (1 1th

Cir. 2000) (common law test of agency requires examination of entire relationship);

Birchem v. Knights of Columbus, 116 F.3d 310, 312 (8th Cir. 1997)(“‘In applying

the common law of agency test, the Supreme Court looks at the large number of

factors that define the parties’ total contractual relationship.”); ARA Leisure Servs.
Inc. v. NLRB, 782 F.2d 456, 460 (4th Cir. 1986)(“we must examine the relationship
in its entirety, considering all the circumstances that suggest either employee or
independent contractor status.”).

Next, the Commission concluded that Weisman’s acts could be imputed to
JPW. This conclusion was based on the following evidence: (1) the Tribe paid JPW
for Weisman’s work; (2) in an audit report conducted by independent auditors, the
auditors inferred from the circumstances that JPW assumed management
responsibilities under an unapproved management contract; (3) the Tribe’s monthly
financial statements indicated a management fee paid to JPW, which was listed
separately from salaries paid to employees; (4) JPW was being paid roughly ten

7

APR-16-2781 16:32 3870187 37% P.pB


so, the Commission noted that JPW’s conduct was a substantial violation but was
“not so egregious as to merit the maximum fine.”

JPW filed a complaint in the district court for review of the Commission’s
decision. The Commission filed a counterclaim against JPW for the $3.4 million
fine. The district court granted summary judgment for the Commission. The court
concluded that the evidence supported the Commission’s decision that JPW had
violated 25 U.S.C. § 2711 and that the fine assessed by the Commission was within
its discretion. JPW now appeals the district court’s order. JPW challenges both the

Commission’s 13 November 1998 decision and the accompanying civil fine.’
DISCUSSION

JPW first attacks the Commission’s decision that JPW was managing the
gaming facility without approval from the Chairman in violation of the IGRA.

Courts review the Commission’s decision and its findings under the “arbitrary

Nin a footnote to the facts portion of its brief, JPW states “Montie Deer’s appointment as
Chairman of the NIGC is highly questionable in that it does not appear that he was appointed by
the President with the advice and consent of the Senate.” JPW points to no record facts to
support this contention nor does he develop a legal argument beyond this speculative statement.
Furthermore, the district court’s order did not mention this issue nor did JPW raise this issue in its
motion for summary judgment. We, therefore, decline to address this issue today.

4

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Mr. Weisman received the normal employee benefits from the Tribe.

Another factor is the belief of the parties involved. “[I]f the person for whom the services
are rendered and the person tendering the services intend or believe that an employer-employee
relationship exists between them, that indicates an employer-employee relationship and/or,
conversely, that the absence of such an intention or belief is indicative of a relationship of
independent contractor-contractee.” Id. at §17. Mr. Weisman argues that he was an employee of
the Tribe. Respondent Post-Hearing Reply Brief at 9. It is not clear that Chief Billie believed the
same thing. He intended that their relationship to be contractual when Mr. Weisman continued as
the general manager after the SMA contract was terminated as evidenced by the JPW Contract.

It is unclear that he believed that Mr. Weisman was functioning as a tribal employee pending the
Teview and approval of the JPW Contract. He was aware, however, that the NIGC may have
some problems with Mr. Weisman receiving! while a contract was pending before it.
Billie Deposition at 19. This suggests that he may have believed that the relationship was
contractual. We find that Mr. Weisman’s argument that he was a tribal employee is inconsistent
with his June 6, 1997 letter to Acting Chair Ada Deer and the Tribe’s documents. We are unable
to discern with absolute certainty the parties’ belief given this inconsistency and the ambiguity of
the Tribe’s beliefs as distilled from Chief Billie’s testimony but in viewing the record as a whole,
we are inclined to find that the parties believed that they had a contractual relationship.

The analysis of the factors discussed above support the argument that Mr. Weisman was a
contractor rather than an employee of the Tribe. The record does not contain enough information
to make an adequate analysis of the following factors: right to control; length of time of
employment; right to discharge; right to employ assistants or substitutes, supplier of tools,
equipment, or place to work; right to change or specify job, job site, or hours of work; offering of
services to public; and custom of trade.

We next look to the factor that seems to indicate that Mr. Weisman is an employee of the
Tribe. “[I]f the services performed are in the course of the recipient’s business, rather than in an
ancillary capacity, it is indicative of an employer-employee relationship.” 51 ALR. Fed, 59 at §6
(citations omitted). The service that Mr. Weisman performed was to manage a gaming facility
which is in the course of the Tribe’s business. This fact would seem to indicate that Mr. Weisman
is an employee. We find that this factor is not compelling against the weight of the other factors
that support the conclusion that Mr. Weisman was a contractor of the Tribe.

In evaluating these factors based on the facts available to us, we conclude that the
Chairman has met his burden of proof in establishing that Mr. Weisman was a contractor and not
a tribal employee. JPW did not offer sufficient evidence to refute this conclusion. They did not
offer evidence that Mr. Weisman was treated in the same manner as other tribal employees. Mr.
Weisman did not produce any W-2 forms indicating that he was paid a salary or that he received
any benefits associated with being an employee. It is also interesting to note that no employment
contract was introduced into evidence. The only written document detailing Mr. Weisman’s
relationship to the Tribe is the JPW Contract. Having concluded that Mr. Weisman was not an


as a substantial cost that is indicative of a contractor-contractee relationship.

“{I]f the person performing the services requires a particular skill that would be indicative
that the person is an independent contractor and/or, conversely, that if the person performing the
services needs little or no skill for the job that would be indicative that the person is an
employee.” 51 A.L.R. Fed 59 at §9 (citations omitted). A gaming operation is complex business
especially one the size of HSG with its numerous games, departments and transactions. To
manage such a facility successfully, a person would have to acquired a deal of skill and
knowledge. A person with little or no skill would not be hired to manage a business with an
annual net income of over The Tribe was willing to pay a substantial amount to keep
Mr. Weisman after the SMA contract was terminated, presumably because of his expertise. See
Billie Deposition at 9. Mr. Weisman testified that he has had over twenty years of experience in
the gaming industry. See Weisman Deposition at 9-21. We conclude that managing a gaming
facility requires a particular skill and that the Tribe believed that Mr. Weisman possessed the
requisite skill.

“[A]n employee is generally paid a salary or on an hourly basis, although he may be paid
on a piece-work basis and/or, conversely, that an independent contractor is generally paid an
agreed amount or according to an agreed formula for a given job.” 51 A.LL.R. Fed 59 at §10
(citations omitted). Chief Billie testified that the Tribe paid Mr. Weisman ‘ of net or
gross revenues. Billie Deposition at 17. The monthly financial statements of HSG from July to
November 1996 indicates that JPW was paid roughly « of the net revenues. Items 20-
24 of Administrative Record. Mr. Weisman testified that he was paid a percentage of HSG’s
tevenues from July 1996. Weisman Deposition at 55. These facts establish that Mr. Weisman’s
pay for his services as the general manager of HSG was in the form of a percentage of HSG’s net
revenues and was not a salary.

“[If] the person engaged to perform the services is in a recognized trade or calling, that
would be indicative that the person is an independent contractor and/or, conversely, that the
absence of a distinct occupation or a recognized trade or calling would be indicative that the
person performing the services is an employee.” 51 A.L.R. Fed. 59 at §14 (citations omitted).
We would characterize general manager of gaming operation as a recognized trade or calling.
Every gaming operation needs a general manager who has the knowledge and skill to oversee its
operations.

“[T]he presence of those benefits normally associated with an employer-employee
relationship-paid vacation, sick leave, insurance, pension benefits, and the like-is indicative of an
employer-employee relationship and/or, conversely, that the absence of these benefits is indicative
of an independent contractor-contractee relationship.” Id. at §18 (citations omitted). Mr.
Weisman established JPW because the Tribe did not provide a pension plan. JPW, not the Tribe
made payments to Mr. Weisman’s pension. Weisman Deposition at 101-104. It is also important
to note that Mr. Weisman’s payroll taxes were not deducted from the Tribe’s payments to JPW
but from JPW’s payments to Mr. Weisman, Id. at 102-103. Nothing in the record indicates that


NKY GER LIT SUM Fir 399 NIbL

Maken E

14. The Tribe was in fact treating the Management contract with JPW as thouyh it were
alréady operative. Seminole Chairman Billie. in explaining why JPW was receiving its
(contractually required) multi-miltion dollar tcn percent payments, described the situation in his
deposition by noting that once the Tribal Council approves something, the Tribe is going to
proceed with it (AGENCY RECORD item 13: Billie depo. at. 5, L. 18-20).

15. No request Tor a mandatory background check was submitted lo NIGC for Mr.
Weisman as an employce, until well alter the investigation focused on the violation in issuc in
the NIGC enforcement action. The testimony of Ms. Sumner established that Mir. Weisman was
being treated as an asset of the management contractor rather than a tribal employce. Her
testimony shows thar it was not until April of 1997 (when the level of NIGC scrutiny was well
known). that the submission of employee background materials on Mr. Weisman required under
75 CER, Part 356 was made. Agency Record, Item 12, Hearing Transcript, July 15, 1998, at
99-103. As early as 1993, however, background material had been submitted for Mr. Weisman
(as a person having an interest in a management contract) in conection with SMA’s effort to get
approval lor its contract pursuant to 25 C.F.R, Part 537. In other words, by 1993, Weisman had
complied with the background requirements for persons tinancially interested in management
contracts bul did not comply with the requirements jor casino employees until 1997.

16. For every year in which JPW Consultants, Inc, filed a tax retum, the representation to
the Intemat Revenue Service was thal the corporation was providing consulting and managing
services (Schedule B, Line 3), and that James P. Weisman was not an employee of the Tribe.
This representation is consistent with the absence. of IRS W-2 forms, evidence indicating that
payments to JPW were subject to payroll taxes, or any other documents suggesting Mr, Weisman

was an employee of the Tribe. The fact that Mr. Weisman says he was not telling the truth to the

6

ooed tomar EMO? a7) Demumats 2 pe Bt Pan 38 ETI re

12/03/99 FRI 17:10 [TX/RX NO 6792)


JPW in a June 6, 1997 letter to Acting Chair Ada Deer implicitly admitted that it was

~~ = managing HSG by agreeing to cease such activities. Respondent argued that Mr. Weisman sent
that letter to protect the Tribe from a threat of closure on the advice of counsel and should not be
taken as an admission of guilt. Given that Mr. Weisman had received advice from counsel, it is
difficult to accept that he was not aware of the implication in the letter. The letter could have
stated that Mr. Weisman ceased to be the general manager while admitting no liability. Rather the
letter states that “JPW Consultants, Inc. hereby agrees to cease, and has ceased, all management
activities at Seminole Indian Bingo of Hollywood.” Weisman Deposition Exhibit 3 (emphasis
added). Based on this letter along with the other evidence presented in the record, we conclude
that Mr. Weisman was managing HSG on behalf of JPW.

Based on the discussion above, we find that the Chairman has met his burden of proving
that JPW was managing under the JPW Contract without approval from the Chairman in violation
of IGRA and the NIGC regulations.

lass IL ing.at

Paragraph 3(b) of the NOV alleges that JPW “has offered video pull tab machines,
Superpick lotto machines, and Touch 6 machines for play at the Hollywood gaming operation. In
addition, [JPW] has operated poker games in the Hollywood facility which are not consistent with
state limitation.” The Chairman contends that each of these games constitutes Class III gaming
under IGRA and its implementing regulations.

In support of his allegation that Class II games were being offered at the Hollywood
facility, the Chairman presented the testimony of Mr. Harper. Mr. Harper testified that he
observed and played pull-tab machines, Superpick Lotto machines, and Touch 6 Lotto machines
at the HSG sometime in January 1997. JPW did not offer any evidence to refute the Chairman’s
assertions.

The Chairman concentrated his proof and argumentation on the machines available at the
HSG. Without citing the regulation, the Chairman contends that “[t]he current regulatory .
definition of electronic or electromechanical facsimile of any game of chance is ‘any gambling
device as defined in 15 U.S.C. Sec. 117(a)(2) or (3).” See 25 C.F.R. §502.8. The Chairman
relies on 15 U.S.C. §1 171{a)(2), which provides that a gambling device is

any other machine or mechanical device (including but not limited
to, roulette wheels and similar devices) designed and manufactured
primarily for use in connection with gambling, and (A) which when
operated may deliver, as the result of the application of chance, any
money. or property, or (B) by the operation of which a person may
become entitled to receive, as the result of the application of an
element of chance, any money or property.


Les vorey
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FRI 18:14 Fax 954 356 7180 mIARL

by the JPW when it was operating illegally. A substantial fine for a scrious violation to secure
some deterrent cftect is not an abuse of discrction in these circumstances. The NIGC reasonably
found that winie record evidence exists of violations pre-dating July 2, 1996, clearly by July 2,
1996 according to the testimony of the NIGC investigators and Mr. Olson's declaration, Mr,
Smith, who represented himself as the Program Director, stated that JPW took over management
activities on that day, It was also not an abuse of discretion for the Commission to sei the end
date of the violations as June 6, 1997, given JPW's letter to the Commission conceding that JPW
Consultants. Inc, “hereby agrees to coase” the management activities.

‘CONCLUSION

Acconlingly, after due consideration. itis

ORDERED AND ADJUDGED as follows:

1, Defendants’ Motion for Summary Judgement 1s hereby GRANTED, Judgment is”
¢ntered for the counter-claimant on the counterclaim in the amount of $3.4 million, in the name
of the United States together with interest. Plaintiff shall pay the costs of this action.

2. Piaintiil’s Motion for Summary Judgement is hereby DENIED.

3. The Clerk shalt deny all pending motions as moot.

4, The Clerk shall close this case.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County. Florida,

ee ‘ tr . a f -
this 0. uay of November, 1999. 7 , : ¢
; a)

P. T
United States District Judge

ere ems BREVARD 3 pgs 13 Was BY 53 Fa

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NATIONAL INDIAN GAMING COMMISSION

)
)
)
IN THE MATTER OF )
) Docket No. NIGC 97-4
JPW CONSULTANTS, INC. ) NIGC 98-8 _
)
)
) November 13, 1998
)

ecision of the National Indian Gamin mmission

Appeal to the National Indian Gaming Commission (“Commission”)! from a notice of
violation and an assessment of a proposed civil fine issued by the Chairman of the Commission
(Chairman”) in regard to the management of Hollywood Seminole Gaming (“HSG”)’, a gaming,
operation owned by the Seminole Tribe of Florida (“Tribe”).

APPEARANCES: Christine Lambert, Esq., Darla M. Silva, Esq., and Richard Schiff, Esq.,
National Indian Gaming Commission, Washington, D.C., for the Chairman; Henry Latimer, Esq.
‘@ and Angelia M. Baldwin, Esq., Fort Lauderdale, Florida, for Respondent JPW Consultants, Inc.

ORDER
After careful and complete review of the administrative record, the brief filed by the
Chairman and JPW Consultants, Inc. (“JPW”), the depositions, the hearing transcripts, the

exhibits and the Presiding Official’s Recommended Decision, the Commission finds that:

1. The Chairman bears the burden of proof in administrative appeals of administrative
enforcement actions. The proper standard of review is a preponderance of the evidence.

2. JPW did manage HSG without a management contract approved by the Chairman. The
period of violation was from July 2, 1996, to June 6, 1997, for a total of 340 days.

Commission” refers to the body that is hearing this appeal and is currently comprised of
Chairman Montie R. Deer and Vice-Chairman Philip N. Hogen. “NIGC” refers to the agency
which includes the Commission and its staff.

Hollywood Seminole Gaming was formerly known as Hollywood Seminole Bingo or
Seminole Indian Bingo of Hollywood.. It is also referred to as the Hollywood facility in the
ey ‘cord. “HSG” will be used to encompass all of these names.

1


12

NM she Gee

Montie R. Deer
Chairman

Pilep /1. Heyer hy Lep0

Philip N. Hogen
Vice-Chairman



.

HSG, he failed to provide sufficient evidence that it was JPW who made the final decision to
acquire and install the machines in question. In examining the record, we do not find sufficient
evidence to hold that it was more likely to be true than untrue the fact that JPW “offered” Class
III gaming without an approved Tribal-State compact. We find that the Chairman did not meet
his burden of proof and therefore, reverse his decision on this issue.

ivil Fine Assessm

Managing an Indian gaming operation prior to receiving approval of the management
contract is a substantial violation where the assessment of a civil fine is appropriate. Congress
intended that management contracts be subjected to an extensive review and approval process
prior to becoming effective. See 25 U.S.C. §2712. They expressed their concern for the need
and importance of this process to protect not only the tribes but also the public at large by
establishing detailed requirements and not creating any exceptions to them. NIGC is compelled to
follow accordingly and the regulations reflect the seriousness of the process and the requirements,
The Commission views a violation of this provision a major breach of the requirements established

by Congress.

The Chairman assessed the maximum fine of $25,000 per day. While we agree that the
violation deserves a considerable fine, we find that the violation is not so egregious as to merit the
maximum fine. Therefore, we lower the civil fine assessment to $10,000 per day.

In determining the period of violation we look to the date in the NOV that the Chairman
alleges that JPW began to manage which was July 2, 1996, and the date of the letter from JEW
indicating that it ceased its management activities which was June 6, 1997. The:1996/1997 audit
report for HSG indicated that JPW assumed management of HSG sometime in May 1996 and
Continued to manage until the Tribe assumed management in May 1997. Smith Deposition
Exhibit 2 at 9. Chairman Billie confirmed this fact in his deposition: Billie Deposition at 6. The
monthly financial statements for HSG from May 1996 to November 1996 showed management
fees being paid to JPW during those months. The record does not contain monthly financial
statements for months after November 1996. The record suggests that the violation may have
oceurred before July 2, 1996, but we do not believe it necessary to change the period of violation.
Mr. Weisman’s letter of June 6, 1997, indicated that JPW would cease its management activities
of that date. We find that the Chairman met his burden in establishing that JPW was managing
during this period. Based on this evidence, we find that the period of violation to be 340 days.
Therefore, we affirm the assessment of the civil fine but lower the fine from $8.5 million to $3.4
million.

CONCLUSION
For reasons stated above, we affirm the Chairman’s decision relative to the management

of HSG, we reverse the Chairman’s decision relative to the Class II games; and we affirm the
assessment of the civil fine but lower the fine to $3.4 million,

11


acts be imputed to JPW? Because Weisman does not dispute that he managed the
gaming facility, we focus our review on the Commission’s last two inquiries.

The Commission looked to common law principles to determine whether
Weisman managed the gaming facility as a tribal employee or as a contractor. See
Nationwide Mutual Ins. Co. v. Darden, 112 S.Ct. 1344, 1348 (1992)(adopting
common law test to determine whether person is employee under ERISA),
Restatement (Second) of Agency §220(2) (1958)(listing non-exhaustive criteria for
identifying master-servant relationship); 51A.L.R. Fed. 59 §§3-19 (same). Several
things indicated that Weisman’s relationship to the Tribe was that of a contractor-
contractee: (1) JPW had the opportunity to make a profit if the gaming facility
performed well; (2) JPW’s tax return included deductions for “consulting
expenses,” and JPW had no other major source of income other than Weisman’s
compensation; (3) Weisman possessed a particularized skill required of managing a
gaming facility; (4) Weisman’s pay for his services was not a salary, but in the form
of a percentage of the gaming facility’s net revenue; (5) the general manager of a
gaming facility is a recognized trade or calling; (6) Weisman’s payroll taxes were
not deducted from the Tribe’s payments to JPW; and (7) JPW -- instead of the Tribe
-- made payments to Weisman’s pension plan.

The Commission noted that the record did not contain sufficient evidence to

6

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- moves

and capricious” standard. See 5 U.S.C. §706(2)(A). When reviewing a decision
under the “arbitrary and capricious” standard, “we must defer to the wisdom of the
agency provided [its] decision is reasoned and rational.” McHenry v. Bond, 668
F.2d 1185, 1190 (11th Cir. 1982).

The district court concluded that the 6 June 1997 letter sent from JPW to
Acting Chair Ada Deer was substantial enough to uphold the Commission’s
decision. Weisman argues with the Commission’s interpretation of this letter. He
claims that he signed the letter, upon advice of counsel, only to avoid closure of the
gaming facility and that counsel had not contemplated the implications of the letter.
The Commission rejected this explanation because 1) Weisman had counsel which
made it more likely than not that the letter’s implications were understood and 2)
Weisman could have easily disassociated himself from the facility without admitting
JPW managed the facility. We cannot say that the Commission’s reasons for
rejecting Weisman’s explanations for the 6 June letter were unreasonable or
irrational.

Also, the Commission did not rely solely on the 6 June letter to conclude that
JPW had been managing the gaming facility. The Commission also conducted a
three-part inquiry to resolve the issue further: (1) did Weisman manage the gaming
facility; (2) did he do so as a contractor or as a tribal employee; and (3) should his

5

APR-16-2001 16:31 3878187 96% P.Q6


employee, we now look to determine whether Mr. Weisman acted on behalf of JPW. To make
that determination we must examine Mr. Weisman’s relationship to JPW and the Tribe’s
interactions with JPW.

Mr. Weisman testified that the Tribe paid JPW for his services as the general manager.
Weisman Deposition at 39. Having concluded that Mr. Weisman was a contractor to the Tribe,
this fact alone would establish that the Tribe paid JPW for management contracting services. The
Respondent argued that this arrangement existed before the JPW Contract was signed and
therefore, is not indicative of a contractual relationship. While that may be the case, that fact
could be interpreted to indicate that Mr. Weisman ceased to be a tribal employee when the Tribe
began to pay JPW for Mr. Weisman’s services.

There are other facts that support the conclusion that JPW was performing under an
unapproved management contract during the period alleged in the NOV. Notwithstanding the
findings of the Presiding official, we find that Mr. Smith’s statements on February 12, 1997, to
Messrs. Olson and Stuckwisch regarding JPW’s management of HSG is consistent with the
documentary evidence provided by the Tribe. See Item 2 of the Administrative Record (Olson
Declaration). The audit report inferred that JPW assumed management responsibilities under a
management contract from May 1996 to May 1997. Smith Deposition Exhibit 2 at 9.
Respondent argued that the audit is hearsay and unreliable. We disagree. Hearsay evidence is
admissible in administrative proceedings and we find audit reports to be a reliable source of
information. Audit reports are prepared annually after an audit as required by IGRA and the
NIGC’s regulations. They are conducted by independent auditors who are disinterested parties
whose responsibility is to report fairly and honestly the financial state of the gaming operation.
We find no reason to believe that the auditor in this case has lied or misrepresented that JPW was
the Tribe’s management contractor for HSG. Also, the characterization of JPW as a management
contractor is corroborated by the Tribe’s monthly financial statements from May 1996 to
November 1996 which indicates a management fee paid to JPW. See Items 20-25 and 27 of the
Administrative Record. This item was listed separate from salaries paid to employees. The
monthly financial statements also indicate that from July 1996 to November 1996, JPW received
roughly ¢ of the net revenues which is what it would have received under the JPW
Contract. See Item 18 of the Administrative Record at 4 and Items 20-24 of the Administrative
Record.

Respondent argued that JPW was established simply as a mechanism to provide Mr.
Weisman with a pension and not asa management contractor. If that was the case, then why did
JPW contract with the Tribe to provide management services. JPW’s tax returns

~ See Items 19, 32, 51, 71-
72 of the Administrative Record. JPW incurred substantial i.
indicating that it had some activity or purpose beyond providing Mr. Weisman a pension. It is
Teasonable to conclude that this expense was incurred in connection with the management of HSG

because that was Mr. Weisman primary business.


AUN 1U;90 FAA ZUZ JUD YoOUD DUS ENKY GER LIT 8TM FIP 395 NIGE
FKL 40:10 FAA Oe Soo face Bre BAY OS

1, ‘The principles at deference to agency decisrons of Chsxron “are applied to most
agency actions, including administrative adjudications...” Kohler Co, v. Moen, Inc,, 12 F.3d:
632, 634, fh. 3.(7" Cir, $993}; TransUnion C om, v. FTC, 8} F.3d 228 (DC Cir. 1996). As noted
by the Ninth Circuit in Momison-Knudsen Co., Ing, v. CHG Intemational, 811 F.2d 1209 (9" Cir,
1987). the substantial evidence test applies only to hearings required by statute, otherwise the
arbitrary and capricious standard applies.

2, While 25 ULS.C. § 2713 (ax2) requiring a hearing. it does not specify a bearing “on
the record” or otherwise explicitly require the court to apply the substantial evidence test;

The Supreme Court in State Farm referred to the substantial
evidence standard only after citing legislative history from the
Motor Vehicle Safety Act that explicitly stated Congress" intent
that that standard of review by used. id, The Court has repeatedly
held that unless an agency's organic statute contains a specific
provision to the contrary. the substantial evidence standard is uscd
only to review formal “on the record” agency actions, not lhose
resulting from the informal rulemaking procedures of § 553 of the
APA which are incorporated...
facturt sing Associat Cisneros, 33 F.3d 1565, 1573 (11" Cir,
1995).

3. The arbitrary and capricious standard applics to review of whether or nota violation
occurred. “Along the standard of review continuum, the arbitrary and capricious standard gives
an appellate court the least latitude in finding grounds for reversal.” North Buckhead Civic

Ass'n y, Skinner, 903 F..2d.1533;1538-.39(13"'Gi 990).: Under the arbitrary. and capricious 7.

standard, “all the agency must do is articulate a rational connection between the facts and its

conclusion,” Georgia Public Service Commission, 704 F.2d at 543, See Bowman
Transportation, Inc. 419 U.S. at 285, 95 8.Ct. A141, Once a commission has drawn its

conclusion, an appellate court must give deference to the expertise of the agency. Georgia Public

9

Aneet otg -CT Ome pe 29-1 oe 9 YO Sts

12/03/99 FRI 17:10 [TX/RX NO 6792)

6

'o


PER CURIAM:

This case is a challenge to an order of the National Indian Gaming
Commission (“Commission”), which concluded that Plaintiff JPW Consultants, Inc.
(“JPW”) -- in violation of the Indian Gaming Regulatory Act (“IGRA”) -- managed
an Indian gaming facility without a management contract approved by the Chairman
of the Commission. See generally 25 U.S.C. §2711(a(1); 25 C.F.R. §533.1. We
affirm the district court’s decision upholding the Commission.

JPW does not dispute that its owner, James P. Weisman (“Weisman”),
managed the gaming facility or that the Chairman of the Commission never
approved the contract. But JPW contends that Weisman was merely an employee
of the Seminole Tribe of Florida (“Tribe”), who owned the gaming facility.

Weisman was first hired to work at the facility by Seminole Management
Associates (“SMA”), who managed the facility from 1979 until 1996. When first
hired, Weisman was paid directly by the Tribe. In 1982, however, Weisman formed
JPW Consultants, in which Weisman was the only principal. The Tribe began
paying JPW for Weisman’s services, and Weisman drew a salary from JPW. In
May 1996, the Tribe adopted a resolution approving a new management agreement
between JPW and the Tribe. The agreement provided that JPW would manage the

gaming facility in exchange for ten percent of the gaming revenues from the facility.

2

APR-16-2081 16:30 3878187 97% P.3


Chairman “accept{ed] the burden of proving the allegations set forth in the Notice of Violation” at
‘ _ issue in Shingle Springs September 2, 1998, Response at 5. After a similar analysis, the
Chairman stated his opinion that “the correct standard of review is by a preponderance of the
evidence.” Id. at 7.

Based on the analysis of the law presented both by JPW and the Chairman in Shingle
Springs, we hold that, as a matter of fundamental due process, both the Chairman and the
regulated public have a need and right to know which party bears the burden of proof and what _
standard of review will be applied in all administrative hearings to review the issuance of a notice
of violation or of a proposed civil fine assessment. We also hold that for this and all present and
future administrative appeals of enforcement actions undertaken pursuant to 25 C.F.R. Part 573
the Chairman bears the burden of proof and the standard of review is a preponderance of the
evidence.> Preponderance of the evidence is the degree of relevant evidence that a reasonable
person, considering the record as a whole, would accept as sufficient to find that a contested fact
is more likely to be true than untrue.

Management of HSG

The Chairman alleges that “JPW has operated gaming at the Hollywood gaming operation
without obtaining approvals necessary to fulfill the provisions of the Indian Gaming Regulatory
Act (“IGRA”) and the requirements set forth in Section 533.1 of the NIGC regulations.” NOV at
2. In support of this allegation the Chairman points to the activities of Mr. Weisman and argues
& that it is through Mr. Weisman that JPW managed HSG. In order to sustain this allegation, the
Chairman must prove that Mr. Weisman managed HSG, that he did so as a contractor and not a
tribal employee and that his action should be imputed to JPW.

JPW does not dispute that Weisman exercised management authority at the Hollywood
facility. Weisman testified that he was the general manager of the facility under the SMA contract
from 1979 through 1996. Chief Billie corroborated this Statement. Billie Deposition (Dep.) at 5.
Weisman further testified that he continued to serve as the general manager after the termination
of the SMA contract, although during that time he reported directly to the Tribe. Chief Billie also
corroborated this statement, testifying that Weisman stayed on as general manager after the
termination of the SMA contract (Id, at 8, 11), “worked for us to run the operation” (Id. at 6),
and continued “[b]asically, same routine, running the operation for us, hiring and firing, except
now he reported directly to us.” Id, at 28. Chief Billie’s further testimony clarified that by “us,”
he meant the Tribal Council. Id. at 29. Thus, we find that Mr. Weisman did manage HSG.

The next question before us is whether Mr. Weisman managed HSG as a tribal employee
as he contends or as a contractor as the Chairman asserts, In determining this issue, we look to

*However, the standard of review, by regulation, will be clear and convincing evidence
when the Chairman issues a notice of violation alleging that a gaming operation has defrauded a
w tribe or a customer. 25 CFR. § 573.6(a)(6).


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drawing Ovo inconsistent conclusions from the evidence does not prevent an administrative
agency’s finding from being supported by substantial evidence.” Consolo v, Federal Matitime
Commission, 287 U.S. 607. 919-62 (1066" McHenry v Bond. 868 F.2d V1RS, 1190 ¢1)" Cie

1982," is something morc than a seintilla of evidence, but something fess than the weight of

the evidence.”) Sf there is substantial evidence in the record, it is beyond this court’s function to
“substitute its own conclusions for those which the Commission had fairly drawn from such
findings.” Bowman Transportation, Ine, v, Arkansas-Best Freight System, Inc, 419 U.S. 281.
285 (1974) (citing Citizens to Preserve Overion Park, Ine v. Volpe. 401 11.8. 402. 416 (1971)),
Under either ~substontiat evidence” or “arbitrary and capricious” standard, a reviewing court
should substantially defer to the judgment of the Commission.

Under this framework, this Court has concluded that there is a substantial evidentiary
basis presented in the agency record for the following facts:

1. The Seminole Tribe of Florida, a federally recognized tribe, has been operating a
gaming facility in Hollywood, Florida, now called Hollywood Seminole Gaming (HSG), since
1979. Start-up capital and management for the gaming nperation were provided by Seminole
Management Associates (SMA) under a management contract approved by the loca) BIA office.

2. SMA was u limited parinetship in which Butch Moriarity, a/k/a Lugene Weisman,
brother of James P. (Skip) Weisman, as trustee for Weisman Enterprises, served as a general
partner. One of the partners in Weisman: Enterprises.was: Pininti ft 3RW Consultantyy Trici-(JPW).
James P. Weisman was brought in by SMA from the beginning to manage the gaming facility.

3. Although initially on the payroll of the Tribe, in 1982, James P. Weisman formed JPW
to receive payment from the Tribe for the management services performed by James P.

Weisman. According to Mr. Weisman, the purpose for this arrangement was to provide Mr.

2

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: oY 202 3 “J xt 1 FIP 39% NIGU
HON 20:55 AR 202 305 veo 2 BND Sep Lat sen Fur +»

Record. hem 34. The Vice Chainnan’s ‘assessment reflects a consideration of cach factor
contained in C.F.R. $ $75.4 (a - d) and articulates the method of calculating the proposed civil
fine assessment.

9, JPW timely appealed both the Chairman's Notice of Violation and the fine Assessed
by the Vice Chairman (catified by a subsequently appointed Chairman) to the NIGC as provided
in 25 U.S.C, $2713 and 25 C.F.R. Pan 577. Pursuant to its appeal regulations, the Commission
designated a presiding official to conduct 4 hearing and provide a recommended decision. The
hearing occurred in two phases: (a) depositions taken in Florida on June 9 and 10, 1998, and (by
testimony in the presence of the Presiding Official in Arhngton, Virginia, on July 15 and 16,
1998.

10. The Presiding Official’s recommended decision was submitted lo the Commission on
October 16, 1998, She recommended that the notice of violation and proposed sivil fine be
withdrawn, Her recommendation is but a single factor that this Court considers in reviewing the
reasonableness of the NIGC’s decision. In its action the NIGC disapproved the recommendation
in pan. The Commission determined that JPW was managing HSG without an approved
contract, but that it was not offering the class Ill games. The Commission also reduced the fine
from the proposed 38.5 million tv $3.4 million.

11. Corroborating the information in paragraph 5, Kenneth Smith, Program Director for
the HSG. told the NiGC:investigaters. on Februnny 1.25] 997..that JPW, began-managing th
Hollywood Gaming operation on July 2, 1996. Dectarauion of Carl Olson, May 30, 1997. Item
64, Administrative Record, Tab 2; see also Agency Record, Hearing Transcript, Item 12 at page
20 (Stuckwisch Testimony) and at 71 (Olson Testimony). Mr. Smith also told the investigators

that in July 1996, he was given the additional title of Program Manager. Jd, James P, Weisman

4

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consolidated on May 15, 1998

Mr. Weisman was deposed in Florida on June 9, 1998. Mr. Smith and Chairman Billie of
the Tribe were deposed in Florida on June 10, 1998. A hearing before the Presiding Official was
held in Arlington, Virginia, on July 15-16, 1998, to take testimony of Mr. Harper, Mr. Olson, Mr.
Stuckwisch and Ms. Linda Sue Sumner, Chief of the NIGC Tribal Background Investigation
Section. Mr. Weisman also testified at the hearing.

Both the Chairman and JPW filed post-hearing briefs. The Presiding Official issued her
Recommended Decision on October 16, 1998. The Chairman filed his opposition to the
Recommended Decision on October 23, 1998. JPW filed a response to the Chairman’s objection
on November 9, 1998. Pursuant to NIGC regulations, the Commission finds that there are no
provisions providing for the Respondent’s response. In addition, this reply was filed more than 10
days from the date of the Recommended Decision.

DISCUSSION

The Commission has determined that there are four issues before it. They are: (1) who
bears the burden of proof and what is the correct standard of review; (2) whether JPW managed
HSG in the absence of an approved management contract; (3) whether JPW “offered” class II
gaming at HSG; and (4) what is the appropriate civil fine assessment, if any.

Burden of Proof and Standard of Review

Neither the Indian Gaming Regulatory Act nor its implementing regulations specify which
party bears the burden of proof or what standard of review applies in an administrative hearing to
review the issuance of a notice of violation or the assessment of a proposed civil fine. Because of
the lack of clarity on these issues, the parties in several NIGC cases were given an opportunity to
discuss them. :

In response, JPW cited 5 U.S.C. §556(d) and several Federal court cases in arguing that
the Chairman bore the burden of proof because he was the proponent of the action; the proper
standard of review was a preponderance of the evidence: and, under a preponderance of the
evidence standard of review, the person with the burden of proof must show that the facts are
“more probable than not in light of the totality of the circumstances.” JPW’s Initial Post-Hearing
Brief at 12.

The NIGC’s Deputy General Counsel, on behalf of the Chairman, responded to the same
questions in a filing on September 2, 1998, In the Matter of Shingle Spri
Indians, Docket No. NIGC 97-1. That response contains an extensive analysis of the allocation of
burdens of proof and standards of review in administrative enforcement actions. Citing 5 U.S.C.
§556(d) as “instructive as to general principles of administrative law and procedure,” several
Federal court cases, and the regulations of other agencies having enforcement authority, the


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12/03/99 FRI 18:14 FAX 954

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- Edward J, Passarelli. Esq.
Senior Counsel, Department of Justice

Environmental and Natural Resvurces Division

General Litigation Section
P.O, Box 663
Washington, DU 20044-0603

Henry Latimer, Esq.

Angela Baldwin, Fsq.

Eckert, Seamans, Cherin & Mellot, LLC
450 E. Las Olas Boulevard, Suite 800
Fort Lauderdale. Florida 33301

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12/03/99 FRI 27:10 [TX/RX NO 6792}

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3. The Chairman did not meet his burden of proof in establishing that JPW offered class III
gaming without an approved Tribal-State compact at HSG

4. JPW’s management of HSG prior to the approval of the management contract is a
substantial violation for which an assessment of a civil fine was proper. However, the
Commission does not believe that the violation was so egregious as to merit the maximum
fine of $25,000 per day. Rather, the more appropriate amount should be $10,000 per day.
Therefore, the civil fine assessment is reduced to $3.4 million.

FACTUAL BACKGROUND

The Seminole Tribe of Florida is a federally recognized tribe which has owned HSG,
formally known as Seminole Indian Bingo of Hollywood, since 1979. The Tribe does not have an
approved Tribal-State compact for Class III gaming. HSG is located on Tribal lands in
Hollywood, Florida. Seminole Management Association, Ltd. (“SMA”) managed HSG under a
management contract approved by the Bureau of Indian Affairs on September 5, 1979. SMA
managed HSG until on or about May 15, 1996, when the Tribe purchased SMA’s right to
continue performing under the contract and terminated the contract,

In May 1996, about the same time that the SMA contract was terminated, the Tribe signed
@ management contract with JPW (“JPW Contract”). James “Skip” Weisman is the only principal
of JPW. When the JPW Contract was signed, Mr. Weisman was already employed as the general
manager of HSG. He had been employed at HSG since December 1979, Since 1982 the Tribe
paid JPW for services performed by Mr. Weisman. The JPW Contract was submitted to the
NIGC in February 1997. The Chairman has not approved the contract.

NIGC Field Investigator Tim Harper visited HSG in January 1997, to observe the games
offered at the facility. He saw video pull tab machines, Superpick lotto machines, and Touch 6
Lotto machines at the facility. NIGC Senior Field Investigator Carl Olson and Fred Stuckwisch,
NIGC Director of Contracts and Audits, visited HSG on February 12, 1997, and spoke with
several employees including Kenneth R. Smith, the then Security Director of HSG.

On May 30, 1997, the Chairman issued Notice of Violation No. NOV-97-M02 (“NOV”)
to JPW alleging two substantial violations. The first is that JPW had been managing HSG without
an approved contract in violation of 25 C.F.R. Part 533. The second is that JPW “offered” Class
IH gaming in the absence of an approved Tribal-State compact in violation of 25 U.S.C. §2710(d)
and 25 C.F.R. §573.6(a)(11). By letter dated June 6, 1997, Mr. Weisman wrote to Acting Chair
Ada Deer, stating inter alia, that JPW “hereby agrees to cease, and has ceased, all management
activities at Seminole Indian Bingo of Hollywood.”

The Vice-Chairman issued a Proposed Civil Fine Assessment (“CFA”) of $8.5 million to
JPW on June 27, 1997. JPW timely appealed the NOV and the CFA. The NOV was assigned
Docket No. NIGC 97-1 and the CFA was assigned Docket No. NIGC 98-8. Both appeals were


eee ee tee eee ee eee weey

percent of the net revenues, which is what JPW would have received under the
original unapproved contract; and (5) the 6 June 1997 letter indicates JPW was
managing the gaming facility.

JPW disputes the Commission’s interpretation of this evidence and offers
alternative characterizations and explanations. After reviewing the Commission’s
reasons for rejecting the alternatives, we do not deem the Commission’s reasons to
be either unreasonable or irrational.

JPW also contends that the Commission’s decision was arbitrary and

capricious because the Commission did not follow the presiding official’s

recommendations. JPW cites Universal Camera Corp. v. NLRB, 71 S.Ct. 456

(1951), for this contention. But in Universal the Court explained that, under the
APA, the findings of a hearing examiner are to be considered as part of the record

by the agency when making its decision, See id. at 467. An agency is not required

to give such findings a particular level of deference; but instead, a reviewing court
must “determine the substantiality of evidence on the record including the
examiner’s report.” Id. at 467.

JPW argues that the examiner was in a better position to evaluate the
testimony of Weisman. An agency that rejects an examiner’s assessment of the

credibility of a live witness should offer a reasonable explanation for doing so. See

8

APR-16-2001 16:32 3878187 97% P.@9


The agreement was submitted to the Chairman for approval, but the Chairman
neither approved nor rejected the agreement.

In May 1997, the Commission issued a Notice of Violation to JPW for
managing the facility without an approved contract and for offering class III games
in the absence of a tribal-state contract. Under the advice of counsel, Weisman sent
a letter, dated 6 June 1997, to the Chairman. This letter said that “JPW Consultants,
Inc. hereby agrees to cease, and has ceased, all management activities at the
Seminole Indian Bingo of Hollywood.”

In June 1997, the Vice Chairman of the Commission issued a Proposed Civil
Fine Assessment of $8.5 million to JPW for the violations. The amount was based
on factors set out in the guide to civil fine assessments. JPW appealed both the
notice of violation and proposed fine to the Commission. The Commission
designated a presiding official to conduct a hearing and to provide a recommended
decision. The presiding official recommended that the notice of violation and civil
fine be withdrawn.

The Commission, in a twelve page and extensively reasoned order, upheld the
notice of violation on the unapproved management contract but reversed it on the
Class III games. The Commission reduced the fine from the maximum limit of

$25,000 per day to $10,000 per day; the result was a fine of $3.4 million. In doing

3

OPR~16-2001 16:31 O71 A? am Ppa


~” Distribution:

Kathryn A. Lynn, Office of Hearings and Appeals, U.S. Department of Interior,
4015 Wilson Blvd., Arlington, VA 22203.

Henry Latimer, Esq., and Angelia M. Baldwin, Esq., Eckert Seamons Cherin &
Mellott, LLC, 450 E. Las Olas Blvd., Suite 800, Fort Lauderdale, FL 33301.

Richard B. Schiff, Esq., and Barry Brandon, Esq., National Indian Gaming Commission
1441 L St., NW, Suite 9100, Washington, DC 20005.


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A QU99 MON 28588 FE 20P 205 988D BPEL EDD en we ons

w Weisman a tax-iriendly vehicle for building # pension The wx returns filed by JPW reflect thar
the corporation’s husiness activity was “management service” and its product or scrviec was
“sonsukingTM. Mr, Weisman also testified that these representations in the tax Telus were false.

4. In May, 1996, the Tribe bought out ity contract with SMA and signed a management
contract with JPW. That contract was submitted for approval to Defendant Nationat Indian
Gaming Commission (NIGC), but has never been approved.

$, On January 12 and 13. 1997, representatives of the NIGC visited 11SG. to determine
how and by whom the facility was being managed. During that visit NIGC representatives were
advised by Kenneth Smith, the person who identified himsclf as the acting facility manager, that
he was working for JPW.

6, On or about May 30, 1997, the Chalr of the National Indian Gaming Commission
issued 4 Notice of Violation to JPW for managing without an approved euntract and for offering
class IH] games in the absence of a tibal-state compact.

ww 7. By letter dated June 6, 1997. James P. Weisman, as President of JPW Consultants, Inc.
stated that "JPW Consultants, Inc, hereby agrees Ww cease, and has ceased, all management
activities at the Seminole Indian Bingo of Hollywood.” Agency Record, Item 15. Ex. 3. Also in
the same letter, JPW Consuitanis, inc. used ihe cessaiion of ihe management activilies us support
for an extension of time to submit written information. 14, Mr. Weisman secured advice of

counsel before making these admissions. Agency Record. Item 15, at 95.0.0. 0... sume ce ve ce ee vegas

8. On June 27, 1997, the Vice Chairman of NIGC (in the absence of a Chairman) issued

a fine of $8.5 million to JPW for violations described in the Notice of Violation. Agency

" Asil later turns out this was good advice because June 6, 1997 became the date on
which violations ceased to be calculated.

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12/03/99 FRY 17:10 {TX/RX NO 8792}