FEC May Restrict Choctaws

Posted March 8, 2005 at 6:41pm

The Federal Election Commission’s general counsel has concluded that a prominent Mississippi Indian tribe could lose its ability to contribute to federal campaigns if it follows through with a plan to branch into the construction industry.

The Mississippi Band of Choctaw Indians, which operates the lucrative Golden Moon and Silver Star casinos in Philadelphia, Miss., recently set up the new tribal corporation called IKBI Inc. to seek federal construction contracts from several agencies, including the Federal Aviation Administration and the General Services Administration.

But a draft opinion drawn up by FEC lawyers — and preferred by the general counsel’s office — concludes that the Choctaws should be prohibited from making contributions to federal candidates, political parties and political committees once IKBI qualifies as a federal contractor.

Federal law specifically prohibits federal contractors from making any contribution to a political party, committee or candidate for public office out of their general revenue. Contractors, like any corporation, can set up PACs to contribute to federal candidates or incumbents instead.

But PACs can be expensive to create and operate, and American Indian tribes don’t necessarily fit neatly into the normal corporate structure or, for that matter, into the rest of the campaign-finance regulatory framework.

Under federal law, the Choctaws, as an Indian tribe, are allowed to use tribal funds to give directly to federal campaigns, without facing certain restrictions that limit other types of donors.

“The facts that the Tribe created IKBI, provided IKBI’s entire initial and supplemental capitalization, elects all members of IKBI’s board of directors through another entity, shares its sovereign immunity with IKBI, and will indemnify the performance of IKBI on bonds it must obtain, demonstrate that IKBI is not a separate and distinct entity from the Tribe,” the draft FEC advisory opinion, which the agency recently posted on its Web site, states.

Lawyers for the Choctaws had asked the FEC for an advisory opinion on the matter earlier this year, and members of the campaign watchdog agency will make a final ruling Thursday on the complex issue at a public meeting.

However, an alternative advisory opinion concludes that IKBI’s status as a federal contractor is separate from the tribe’s political activities and would not affect the tribe’s campaign contributions.

Unlike the first draft, the second analysis oppositely reasons that the tribe and the business are distinct and separate because of the incorporation of IKBI, the separate leasing and ownership of property and the fact that the construction company has a different legal counsel, bank account, tax identification number and employees than the tribe.

“The tribe may continue to make contributions as a ‘person’… subject to the condition that revenues from IKBI may not be used to fund these contributions,” the second analysis states.

In a March 3 memo to the commissioners, the general counsel urged the adoption of the first opinion, which concludes that the “the tribe and IKBI are inextricably linked.”

Over the past decade, the politically astute Choctaws have spent millions of dollars lobbying Congress and made millions more in political contributions.

Neither the tribe nor its lawyers returned calls seeking comment Tuesday, but last month a spokeswoman for the Choctaws said the tribe had sought the opinion “in an effort to remain in full compliance with all the rules and regulations governing the federal contracting process.”

In 2003-04 alone, the Choctaws gave more than $498,000 in donations to the campaigns of incumbent Members of Congress, party committees and prominent 527 groups.

The Choctaws have attracted unwanted scrutiny over the past year due to the tribe’s ties to former GOP lobbyist Jack Abramoff, who is at the center of federal investigation of his work on behalf of a half-dozen Indian tribes. Abramoff and Republican political consultant Michael Scanlon took in more than $80 million from the tribes from 2001 to 2004, and those payments are now being scrutinized by the Justice Department and other federal agencies, as well as by the Senate Indian Affairs Committee.

Abramoff, who no longer represents the Choctaws, was paid at least $11 million for lobbying services from the mid-1990s until 2004. The Choctaws also gave $1 million to a school that Abramoff founded, and millions more to other political organizations run by Abramoff’s allies.

In a statement she provided to Roll Call in early February, Choctaw spokeswoman Creda Stewart declined to anticipate what effect an adverse opinion from the FEC might have on IKBI’s future in the construction industry.

“We will continue to make business decisions based on what is best for our companies, our customers, and our employees and in compliance with all applicable law,” she said at that time. “Therefore, we will wait to take any action, or discuss any possible action, until after the FEC has issued its ruling.”

John Bresnahan contributed to this report.