Would You Trust this Man with $600 Million Part 2

Yesterday we talked about Bill John Baker’s new pick to assist the best CPA in Vian, Lacey Horn. The Cherokee Nation now has some help from another Sequoyah County CPA, Jody Reece-- who just happened to be in charge of either the finance department & grants administration in the 1990s when the Nation got busted for not auditing its own books, for using federal program funds illegally, and using tens of millions of dollars improperly. The details are in yesterday’s blog, and you will find the list is very long and very embarrassing for the Nation.

How embarrassing? Well, the result way back when of all the financial shenanigans during the Byrd/Baker/Reece era was that the Cherokee Nation wasn’t trusted with its own money and had to be put on an allowance, like a third grader.

According to the Tulsa World, because the Nation was in such bad financial shape and the feds had “substantial concerns about the tribe’s financial systems” so they gave the money to the nation “month-by-month until the tribe restores its financial credibility…”

That made Cherokee Nation officials upset at the time.  The Tulsa World quotes one as saying: “While it’s embarrassing and uncomfortable for us to have lost credibility by having weaknesses pointed out everywhere, we’ve got a plan in hand,” said the tribe’s executive director of finance and administration in a November 6, 1998 interview with the paper.

So who said that he was so embarrassed about what happened either under his own watch as the top finance guy or the controller, Jody Reece, who moved over to administer grants, which then somehow got used for purposes they weren’t supposed to be?

None other than Charles Head. Remember him? He was recently appointed by Baker to be the new Secretary of State for the Cherokee Nation.  Head and Reese were in charge of the Cherokee Nation’s finances during the worst financial crisis in the history of the Cherokee Nation.  And now Baker has brought them both back.

Justice Darrell Dowty (left) administers the oath of office to the newly confirmed Secretary of State Charles Head while Frances Head looks on.
Photo Courtesy Cherokee Nation

Would You Trust this Man with $600 Million?

Jody Reece (Photo Courtesy Indian Country Today)

According to a news release on the Cherokee Nation's web site, "the Cherokee Nation has a new controller to manage its finances.  Jody Reece, of Muldrow, took on the job in late February."

Part of Reece's credentials are that, according to the news release, he worked at the Cherokee Nation from "1991 to 1997, starting as an accountant and eventually being promoted to controller, and again from 1998 to 1999 as director of grants administration and land management."

Well, those weren't exactly the glory years for the Cherokee Nation's accounting department and quite frankly-- those might be lines most people would leave off a resume!  Saying you were in charge of the Cherokee Nation finances during those years is a little like saying you were the guy in charge of the checkbook at Enron in 2000 or Worldcom in 2002.

But back to our point today: Mr. Reece (who is the second small town Sequoyah County CPA to be hired by Baker to run the Cherokee Nation's finances) has a pretty scary track record.

Mr. Reece was the financial boss during the years when Baker was chair of the executive and finance committee in the 1990s and Baker says "the Cherokee Nation will greatly benefit from his (Reece's) talents and expertise."

According to the Tulsa World, when Mr. Reece was the Controller in the 1990s (and while Baker was Chair of the executive and finance committee), there was quite a laundry list of financial misdeeds:

• The Nation did not have "prepared financial statements for 1997 and 1998..." according to a federal audit conducted because the Nation didn't do any audits itself.  
• An HHS audit of Reese's previous time concluded that the feds should have "substantial concerns about the tribe's financial accounting systems" and "used $1.9 million of IHS funds to cover deficits in other programs."

You should probably just read the articles in the Tulsa World yourself (after all, they were on the front page at the time and are hardly a secret), because they reveal too many financial screw-ups to list here, but we will provide some highlights during the Baker/Byrd/Reece financial era:

• Incurring legal costs without contracts
• Using taxpayers' dollars to fight the federal government
• Improperly placing $16 million of federal funds in its general operating account
• Improperly charging $88,000 to the (Interior) Department for legal services
• Transferring federal funds of at least $16.1 million to the (tribe's) general operating fund without assurance that federal program expenditures had been incurred previously and were owed.
• Inaccurate financial data in the financial status report submitted to the Bureau of Indian Affairs.
  

Like we said, not exactly resume material, unless your next move was to Enron.   

Tomorrow, we’ll talk about the consequences Cherokee Nation faced for the financial mismanagement that took place when Mr. Reece was in charge of the Cherokee Nation checkbook the first time.  Some of you might be surprised by one of the names that pops up - it's a guy who picked up right where Reece left off…

Severed CNB Head Speaks

David Stewart (Photo Courtesy KOTV)

When last we talked, on Friday, CNB’s board was in the process of putting their CEO on leave.  Turns out, this is a very busy board, because they had another meeting today and KOTV Channel 6 was there.

They got a confession from board chairman/funeral service guy Sam Hart saying that CNB “is in great shape, we’re making great strides, we’re in great shape.”

So if we’re in great shape, then why is the CEO taking a leave of absence?   Well, according to Channel 6, the CEO, David Stewart, says he was “placed on a 30 day leave of absence last Friday. He says he hasn't turned in his resignation, doesn't plan too, and he hasn't been asked to resign.”

So if he’s doing a good job and doesn’t want to go, and his boss, the chairman of the board says he’s doing a good job, what gives?

Channel 6 also says “In 2002, Cherokee Nation Businesses had around a thousand employees, this year it has more than 4,500."

"In 2002, CNB's revenue was close to $25-million, in 2012, it's more than $600-million. Stewart says if this is indeed the end of his time with Cherokee Nation Businesses that he's proud of how the company has grown.”

One person who can shed light on this personnel issue, and has, is the speaker of the council, Tina Glory-Jordan, who shared details of the agreement with the media.  She says that Stewart's situation is neither a “termination or resignation but is a ‘standstill agreement between mutual, voluntary partners…”

CNB Head Gets the Scythe

The Tulsa World is reporting that Baker’s new CNB board chairman/mortician is already taking on grim reaper status: Sam Hart announced today, a mere seven days after being named Chairman, that he and the rest of the board told David Stewart, who runs all of Cherokee Nation’s business operations, to leave his office on Wednesday and turned the keys over to Shawn Slaton, who has been with CNB for “more than a decade.”

The World quotes Hart as saying:  “CNB has established the Cherokee Nation as a strong economic engine in the region, and we look forward to continuing that legacy.”

They also point out that CNB made “record profits -- $87.54 million with nearly $600 million in operating revenues…” in 2010.

So if Stewart was in charge of establishing “the Cherokee Nation as a strong economic engine…” and is making “record profits,” why is he gone, exactly?

We've talked about Baker’s habit of replacing Cherokee citizens with a track record of success with his own folks, because, well, they are his own folks.  Among the highlights: having Hart step away from the embalming table to run all of Cherokee Nation’s businesses because he didn’t want the Cherokee who runs a $5 billion bank giving his advice, and replacing the treasurer of the Nation who won awards for excellence with someone who MIGHT be the best CPA in Vian.

It will be interesting to see where he pulls Stewart’s replacement from.

Background Checks Are For the Little People

If you want to go to work for the Cherokee Nation or one of its businesses, you have to pass a background check.  Unless you want to actually RUN the Cherokee Nation Businesses, in which case the Tribal Council doesn’t care whether you can pass one or not.  They only care if you can run funeral home, in which case you are qualified to run a $600 million a year business.

Last week, Jay Hannah, the executive vice-president of a bank with $5 billion in assets, was replaced as Chairman of CNB by Sam Hart, a mortician.  

This all happened because the council changed a law last week that Baker’s newly appointed board members did NOT have to get security clearance.

These guys get background checks; Bakers guys don't

This means that the council thinks that having someone who fails a background check can't clean the carpets at Housing Authority offices, but someone who can't pass a background check running our casinos is just okie-dokie.  It's the little guys that they are worried about, us common citizens, not Baker's hand picked guys at the top. The Tribal Council decided that doing business with the federal government in the defense industry (only a trillion dollar chunk of change, according to the fine folks at Wikipedia) was not worth pursuing if it meant they had to wait any longer to get rid of a Cherokee who knows how to run a multi-billion dollar business with a guy who knows how to run a small town funeral home.