Tribe suing former casino CEO

The Coeur d’Alene Tribe is suing the former chief executive officer of its casino in Worley, Idaho, alleging breach of fiduciary duties.

David Matheson, who ran the casino for 13 years, was fired in late May. According to the suit, Matheson paid out a $684,000 severance package to another casino executive who was forced to resign after racking up more than $100,000 in undocumented casino credit card expenses. The suit said Matheson tried to hide the severance payout from members of the Coeur d’Alene Tribal Council.

Jerry Krieg, the casino’s former operating officer, “looted the tribe on his way out the door because Matheson allowed it to happen,” according to the suit. “The payment awarded to Krieg was so utterly inappropriate that it constituted a waste of corporate assets.”

The suit was filed earlier this week in tribal court. The tribe is seeking to recover $751,000 from Matheson, plus punitive damages to be awarded at trial.

Reached Thursday, Matheson called the suit “bogus and frivolous” and said he plans to file a counterclaim for wrongful termination. Krieg did not respond to a message left on his cell phone.

Matheson, 54, had been with the casino since 1993. An MBA who spent three years as the director of the Bureau of Indian Affairs during the first Bush administration, Matheson engineered the casino’s rapid growth from a small bingo hall to one of Kootenai County’s largest business enterprises, with 800 employees. Last year, Matheson earned $1 million in salary and bonuses, according to the suit.

In 2005, the tribal council learned of credit card abuses by executives at the casino, the suit said. The tribe’s gaming board hired an outside auditor to review credit card expense reports.

Joseph Eve & Co., an accounting firm in Great Falls, found that casino employees failed to provide proper documentation for nearly $340,000 charged to company credit cards. Krieg, who was in charge of the casino’s daily operations, and Matheson were the biggest offenders, the report said. Krieg had more than $100,000 in unsubstantiated expenses, and Matheson had more than $67,000, the report said.

According to the suit, the tribal council met with Krieg and Matheson, demanding that they explain the unsubstantiated charges and provide receipts. The two men attempted to gather the receipts, but many of the charges remained unsupported, the suit said.

Krieg was suspended for 30 days in December for failing to enforce and abide by the casino’s credit card policy, according to the suit. In April, the gaming board decided to revoke his gaming license, which would have resulted in his termination, the suit said. Instead, Krieg offered to resign, according to the suit.

On May 1, Matheson and Krieg met behind closed doors and modified Krieg’s termination agreement, inserting a provision granting him severance pay equal to one year’s salary, plus additional sums for a total of $684,000, the suit said.

“Matheson deliberately concealed the large severance payment from tribal council because he knew the council would not approve of his actions,” according to the suit. “… Matheson was not acting in good faith or in the best interests of the tribe.”

The suit also said that Matheson had modified Krieg’s contract three years earlier without the tribal council’s consent, so that Krieg received a bonus worth 1 percent of the casino’s net profits. At the time of his departure, Krieg was receiving a base salary of $230,000, plus $371,000 in bonuses.

Quanah Spencer, spokesman for the tribal council, said he didn’t anticipate criminal charges would be filed over the incident. However, additional civil suits could be forthcoming, he said.

In public comments, Matheson has tied his termination to a proposal to pay each member of the Coeur d’Alene Tribe $1,000 per month from casino profits. Matheson is currently gathering signatures for a referendum to change the tribe’s constitution.

Spencer, however, said the tribal council had “lost confidence in Mr. Matheson’s ability to efficiently and responsibly manage the casino.”

Matheson blamed his termination on a shift in the tribal council’s political sentiment. Two years ago, he said, the council opted to give him annual bonuses worth 2 percent of the casino’s net revenues, because council members were so eager to keep him. Now, he said, “the lawsuit said I was making too much money.”

Matheson also described the lawsuit as “an attempt to smear and slander my good reputation.” The countersuit he plans to file will seek $100 million in damages, he said.

In recent weeks, the tribe has fired two of Matheson’s siblings – his brother, Chuck Matheson, who was director of the tribe’s Homeland Security Department; and his sister, Marge Zarate, who was the director of the tribe’s Education Department.

Matheson said they were fired for seeking signatures for his referendum effort. In addition to the $1,000 per month payments, Matheson wants to amend the constitution to allow recall of tribal council members.

“The Coeur d’Alene Tribe does not release personnel information, but I can tell you that the petitions were not a factor in their termination,” Spencer said.

“The tribe respects people’s rights to participate in political activities, as long as that doesn’t occur during work hours.”