State, Press/ON file briefs in casino audit appeal

September 20, 2002

State, Press/ON file briefs in casino audit appeal

by Clara NiiSka

John Garry, attorney for the Minnesota attorney general’s office, filed briefs with the Minnesota Court of Appeals on Friday, September 13^th, in the consolidated cases Prairie Island Indian Community vs. Minnesota Department of Public Safety and Mille Lacs Band of Ojibwe Indians vs. State of Minnesota and Charlie Weaver as the Commissioner of the Minnesota Department of Public Safety.

Bill Lawrence, intevenor in the same cases, filed briefs the following Monday on behalf of himself and the Native American Press/Ojibwe News.

At issue is whether casino audits held by the Minnesota Department of Public Safety (DPS) are public information under the Minnesota Data Practices Act. The Tribal-State Compacts, under which Indian gambling enterprises operations are conducted in Minnesota, require the tribes to conduct audits done by “an independent certified public accountant,” and to make “copies of the audit … available to the State upon written request” (§ 6.11 of the video gaming compacts, and § 6 of the blackjack compacts). Annual audits are also required by the National Indian Gaming Commission (NIGC), and must be filed with NIGA 120 days after the end of the casino’s operating year.

The DPS, which also does criminal background checks on prospective casino employees, has only sporadically requested audits from the casinos. The most recent audit held by the state is reportedly from 1997.

In February 2001, Press/ON made a Minnesota Data Practices Act request for all Red Lake casino audits held by the state, but the DPS refused to release them. Press/ON challenged the DPS’s administrative decision.

On June 6, 2001, the Commissioner of Administration issued Advisory Opinion 01-051, which concluded that the Red Lake audits were public data because they did not qualify as a trade secret under Minn. Stat. § 13.37, writing that, “The Band and the State did not agree to Compact language … that says proprietary data are protected, but instead agreed to a vague statement that the data are protected to the extent allowed by [state] law. The failure to include such language indicates that the Band did not exert reasonable efforts to protect the data to the greatest extent possible.” [emphasis added]

Press/ON published excerpts from the 1997 Red Lake audit, which the DPS alleged was the “only” Red Lake audit held by the state, in the June 15, 2001 issue of the Native American Press/Ojibwe News (Press/ON). On June 19, 2001 Press/ON made a data practices request for all of the casino audits, from all eighteen tribally-owned casinos, which were filed with the DPS.

The next week, on June 22^nd, Press/ON published excerpts from White Earth casino audits obtained from another source.

On June 27^th, DPS Commissioner Charlie Weaver filed an application with the Department of Administration requesting ‘temporary classification’ of the casino audits as “private,” non-public information.

As Press/ON detailed in an article published on July 13^th, official correspondence between tribal gambling enterprise attorneys and the DPS revealed an “unusually cozy relationship” between the Indian casinos and the DPS charged with regulating the casinos:

“I can’t thank you enough for your assistance!” Data Practices Compliance official Laurie Bayer-Kropuenske wrote in a fax to attorney Greg Paulson of BlueDog, Olson and Small, the law firm representing the Shakopee Community and Grand Portage Band. “Of all the firms involved, your firm provided Public Safety with exactly the information and arguments we need! I plan to highlight how helpful your firm has been! Beyer-Kropuenske continued.

“I want to thank you for your efforts. Thanks for making yourself available to my phone calls and questions. If need be, we’ll do our best to see that the position your Department has taken is upheld,” responded attorney Paulsen.

The casino audit issue wended its way through the state administrative hierarchy, and on September 14^th, the Attorney General’s office disapproved the temporary classification as to form and legality.

On September 20^th and 21^st, Prairie Island and Mille Lacs sued the state in Ramsey County District Court, seeking an order preventing the State from releasing the audited financial statements filed with the DPS, and Shakopee, Grand Portage, and Lower Sioux sued the state in federal court, also seeking a court order barring the release of the audits.

In a judgment filed April 23, 2002, Judge Louise Bjorkman of Ramsey County District Court ordered that “the financial audit data Plaintiffs [Mille Lacs and Prairie Island] supplied to the Minnesota Department of Public Safety constitutes trade secret information that is nonpublic.”

On Thursday, June 20, 2002 – four days before the Monday, June 24^th deadline for appeal of Ramsey County Judge Bjorkman’s decision – U.S. Federal Judge Ann D. Montgomery denied most of the tribes’ arguments in the federal case, and granted the state’s motion for summary judgment. Judge Montgomery declined to make a federal ruling on a question of state law. “The Eleventh Amendment’s guarantee of sovereign immunity to the states bars federal court adjudication of pendant state law claims against a non-consenting state defendant,” wrote the federal Judge, so “this Court may not decide the question of whether or to what extent the Tribes’ gaming audits received by the State are nonpublic trade secret information under §13.37” of the Minnesota Data Practices Act.

Bill Lawrence and Press/ON appealed Judge Bjorkman’s ruling in Minnesota District Court on June 20^th; the State followed with an appeal on June 24^th.

In its appellate brief filed Friday, the State focused on “two fundamental” errors made by the district court in application of the Data Practices Act: treating “conclusory assertions” as fact “sufficient to satisfy Respondents’ burden of establishing that the audited financial statements are ‘trade secret information,’ and the district court’s error “in not requiring all the other information in the financial statements to be released to requestors as public data.” The clearly public data includes “gross revenue and profit figures, information that has already been publicly disclosed, and information that Respondents did not even attempt to show was a trade secret.”

The state also argues in its appellate brief that the tribal attorneys failed to establish that audited financial statements are “trade secrets,” and that the age of the casino audits – DPS has not requested any audits more recent than 1997 – makes them ‘stale’ documents for which maintaining secrecy is of very dubious ‘independent economic value.’

In its appellate brief, Press/ON concurred with the State’s “argument that the audited financial statements that Respondents submitted to the State are not ‘trade secret information’,” but also pointed out that despite DPS’s failure to obtain recent audits, “Not even the most recent audits should be considered ‘trade secret information’.”

Press/ON also pointed out the “the overwhelming public policy considerations supporting the release of the audits,” and stressed the arguments made by attorney Mark Anfinson, who filed a ‘friend of the court’ (amicus curiae) brief with the district court on behalf of the Minneapolis Star Tribune.

“From the earliest days of our republic, the benefits associated with an informed citizenry have been well understood. The Minnesota Supreme Court has observed that the ‘right to inspect and copy records is fundamental to a democratic state,” and “serves to produce an informed and enlightened public opinion.’ Minneapolis Star & Tribune Co. v. Schumacher, 392 N.W.2d 197, 202 (Minn. 1986). The Court has also recognized that the vital public stake in access to government information justifies broad standing rules when challenging restricts on access: ‘[A]ny member of the public is an injured or aggrieved party by the operation of orders preventing accessibility.’ Northwest Publications, Inc. v. Anderson, 259 N.W.2d 254, 256 (Minn. 1997).

“Similarly, the United States Supreme Court has consistently emphasized the importance of public access to information about government, in light of its relation to popular sovereignty: ‘[T]he right to receive ideas is a necessary predicate to the recipient’s meaningful exercise of his own rights of speech, press, and political freedom.’ Board of Education v. Pico, 457 U.S. 854, 867 (1982) [emphasis in original]. An ‘informed public opinion is the most potent of all restraints on misgovernment.’ Grosjean v. American Press Co., 297 U.S. 233, 250 (1936). ‘[P]ublic debate must not only be unfettered, it must also be informed.’ Saxbe v. Washington Post Co., 417 U.S. 843, 862-63 (1974) (Powell, J., dissenting).

For these reasons, the Court has repeatedly stated that First Amendment protections encompass the receipt of information as well as the right of free expression. The ‘free flow of information’ is ‘essential to intelligent self-government.’ Jacobson v. Rochester Communications Corp., Inc., 410 N.W.2d 830, 836 (Minn. 1987), quoting Saxbe, 417 U.S. 863. ‘Without some protection for the acquisition of information about the operation of public institutions … by the public at large, the process of self-governance contemplated by the Framers would be stripped of its substance.’ Houchins v. KQED-TV, Inc., 438 U.S. 1, 32 (1978) (Stevens, J. dissenting).”

Press/ON also argued that the “state has an obligation to protect all citizens of the state of Minnesota, including Indians.”

“Releasing audits is in the best interests of both the state and the vast majority of tribal members,” Lawrence wrote in his appellate brief. “Indian gambling in Minnesota has been and is currently unregulated and unaccountable. There is really no enforcement going on. There is no meaningful monitoring being done by DPS. They have not even asked for an audit in the past four years. The federal government is not doing any meaningful monitoring, apart from one minimal investigation at Red Lake during the past 4 years. There was a check-to-cash scam involving approximately $270,000 at Leech Lake that the U. S. Attorney’s office declined to prosecute in 1999.

“The monitoring which the State is presently doing, primarily for-fee background checks, is ineffective. Even though a background investigation might reveal that a casino manger is a convicted felon, for example, hiring that felon is at the discretion of the reservation tribal council, and there is not anything that the State can do about it.

“Further, DPS’s Indian gaming enforcement division has a small, under-funded staff. There are not any accountants nor auditors in the division charged with overseeing the multi-billion dollar Indian gambling monopoly, which includes seventeen casinos, 15,000 slot machines, and about 20,000 employees. The U.S. Supreme Court has recently determined that the State does, in fact, retain the authority to regulate tribes. Nevada, et al. v. Floyd Hicks, et al. 533 U.S. 353.

“The only effective way to enforce accountability from the casinos is to release the audits. The people most familiar with the operation of Indian casinos are Indians on the reservations, and releasing and publicizing the audits gives the people to whom the casinos belong the requisite opportunity to examine the audits. The most effective way to monitor the casinos is, in large part, by their owners and the people of the state of Minnesota. It is in the state’s interests that the audits be released. We have an unregulated monopoly, and neither the federal government nor the state government had been effectively monitoring it. The tribal gaming operations have been keeping their accounts secret even from their own members on their own reservation. The present situation is rife with opportunity for corruption.”

Mille Lacs and Prairie Island have thirty days in which to file a response to the briefs filed by the appellants, the State and Press/ON. The appellants then have ten days in which to file reply briefs.

Although Press/ON requested the opportunity to make an oral argument before the three Court of Appeals judges hearing the case, according to the court there will be no oral argument because Lawrence is “pro se,” representing himself.