Trial exposes fraud against Choctaw Nation for gaming project

Friday, November 14, 2014

Then-assistant chief Gary Batton went on a 2010 hunting trip that was financed by a company whose executives pleaded guilty for defrauding the Choctaw Nation. Photo: Pueblo of Acoma Big Game Trophy Hunts

MUSKOGEE, Oklahoma -- A former ditch digger who oversaw millions of dollars in construction projects for the Choctaw Nation is at the center of a corruption trial that has touched the Oklahoma tribe's top leadership.

Six people have pleaded guilty for defrauding the tribe in connection with the fraudulent purchase of $8.5 million in steel for a casino project. All worked for contractors that did business with the tribe.

But a former tribal employee named Jason Merida is fighting the charges. Although he admitted in an interview with federal agents that he accepted hundreds of thousands of dollars in gifts, trips and other items of value from the outside contractors, he's pointing the blame at the tribe's two top leaders -- Gary Batton and Greg Pyle.

"There is overwhelming evidence that former Choctaw Assistant Chief Gary Batton, former Choctaw Chief Greg Pyle, and other listed government witnesses are unindicted co-conspirators," Merida's attorneys wrote in a brief last week.

Janie Dillard, executive director of Choctaw Nation gaming enterprise, is seen on the right outside of the federal courthouse in Muskogee, Oklahoma. She is accompanied by her husband, Anthony Dillard, a tribal council member. Photo: McAlester news Rebuttal / Facebook

Batton, who was elevated from assistant chief to chief when Pyle retired in April, has not been charged with any crimes. Neither has Pyle, who served 17 years as the leader of the third largest tribe in the U.S.

Both, however, are aware that they may be called to testify in Merida's trial, which began October 29 in the federal courthouse in Muskogee. Batton addressed the matter publicly in response to questions from concerned tribal members.

"I have been subpoenaed to testify in this case so I am a witness but not the accused," Batton said on Facebook after the trial began. "Once the court proceedings are over I will be able to give any information about the case and will be glad to do so."

On Facebook, Batton acknowledged that he went on a 2010 hunting trip that was financed by Builders Steel, whose company executives defrauded the tribe and have pleaded guilty. He was flown to Acoma Pueblo in New Mexico on a private plane.

"I went on an elk hunt in New Mexico before I knew there were any wrongdoings going on," Batton said. Photos from Acoma Game and Fish Enterprise show the then-assistant chief with trophies from the excursion.

This photo from October 2012 shows the addition of a hotel to the Choctaw Casino in Pocola, Oklahoma. Photo: Choctaw Pocola

Documents filed in federal court also show how the scheme touched the top leaders. In an email to federal prosecutors who are handling the case against Merida, an attorney for the tribe acknowledged that Batton accepted "certain gifts" from Builders Steel.

"Gary thought the value of these gifts was $27,500," the May 2013 message stated. In addition to the private plane ride, he accepted hunting gear and at least one firearm, according to the notes taken by federal agents.

The attorney who wrote the message is Michael Burrage, a Choctaw citizen who is the former chief judge of the federal court in Muskogee. He told federal prosecutors that Pyle accepted campaign donations from Builders Steel and from Flintco, whose former employees also pleaded guilty for their role in defrauding the tribe.

Both Batton and Pyle wrote checks to various entities to cover the gifts and contributions they accepted from Builders Steel and from Flintco. Batton donated $20,000 to Southeastern Oklahoma State University, his alma mater, and $7,500 to Children's Hospital Foundation.

Pyle wrote checks totaling nearly $235,000 to six charities, according to the message. He also created a "compliance committee" in early 2012 -- long before the announcement of the guilty pleas of the six people in August 2013.

"Choctaw Nation leaders as well as the employees of the Nation have fully cooperated in the federal investigation," Chief Batton said on Facebook on Monday in response to another query from a tribal member.

Tribal employees have indeed provided information that has been used in the case against Merida. Janie Dillard, the executive director of the tribe's gaming enterprise, testified at the trial yesterday.

Dillard was called by federal prosecutors, who are expected to wrap up their presentation later today. Testimony was still ongoing when Indianz.Com took a short break during the proceedings this afternoon.

If the prosecution rests, Merida will likely begin his defense on Monday. His attorneys want to call Batton, Pyle and Burrage but there is no guarantee any of them will appear on the stand.

Merida started working for the tribe in 1997 as a ditch digger when he was in his early 20s. A decade later, he was promoted to executive director of construction for the entire Choctaw Nation.

In that role, he quickly became involved with a series of casino construction projects. The notes from the interview with the federal agents indicate the tribe was eager to open, remodel or expand casinos as quickly as possible in order to capitalize on the growing market in Oklahoma.

For a casino expansion in Pocola, Builders Steel convinced the tribe to buy $8.5 million worth of steel in 2009. Two company executives -- a husband and wife team who have pleaded guilty -- pushed the deal on the grounds that steel prices were likely to rise in 2010.

But tribal auditors became suspicious because they weren't given crucial information about the deal. After receiving in a series of invoices from January through September 2010, three auditors went to a Builders Steel warehouse in Tulsa in October 2010 to count up the steel beams.

The auditors discovered that Builders Steel only had about half of the beams the company said it had acquired with tribal funds. They also learned that steel prices did not rise so the tribe in fact was cheated out of a significant amount of money.

"It was determined by the CNO Audit team, that Builders Steel was not holding the full inventory purchased by the CNO, and over charged the CNO a price of $1.86 per pound, when the market price was approximately $0.63 per pound," the U.S. Attorney's Office said in its trial brief.

The fraud prompted the Choctaw Nation to sue Builders Steel and Flintco in state court. A settlement was reached in June 2013 and Batton has said that the tribe recovered "most of the overcharges."

Flintco, which was Indian-owned up until being acquired by a larger company last year, apologized to the tribe for the scheme. Three former employees pleaded guilty.

"We highly value our relationship with the Choctaw Nation and our company's Native American heritage," Flintco chairman Tom Maxwell said in August 2013. "We will continue to cooperate with the government and the Choctaw Nation in any further investigation of persons involved."

Flintco also issued a lengthy statement today after Indianz.Com asked about the case. In it, the company reiterated its cooperation with federal prosecutors and addressed testimony from a witness that will be the subject of another story.

Although the tribe appears to have been made whole, at least financial wise, the fraud has stirred raw emotions among some of its members. Kalyn Free, an attorney and prominent citizen, has been posting her accounts of the trial on Facebook.

"So for those who think that our chiefs have done nothing wrong, you may just be right," Free, a former district attorney in Oklahoma, wrote on Wednesday. "That is if you subscribe to the belief that when you get caught with your hand in the cookie jar at your neighbor’s home and cookies are missing you run out and buy some more cookies and give them to your other neighbor, then everything should be forgiven."

Mike Bailey, who served as assistant chief under Pyle until he was replaced by Batton, has been following the proceedings as well. He's planning to challenge Batton for the chief's position in the next election.

"The buck stops at the top. A free and fair election for chief is absolutely required," Bailey said on Facebook last week.

Court Documents: Choctaw Nation Fraud Case