Thursday, August 11, 2011

Blue Lake Racharia v. United States (9th Cir. - August 11, 2011)

Forget gambling.  Forget cigarettes.  There's a much easier -- and lucrative -- way for Indian tribes to make tons of money.  Help corporations evades taxes.

It works.

An Indian tribe creates a corporation owned by the Tribe.  Its sole function is to hire employees and then "lease" those employees to other companies.  Who hires the employees?  Not the Tribe.  Where do the employees work?  Not on the reservation.  Who do the employees work for?  Formally, for the Tribe's company, but actually, the outside employer.  It's as if Oracle said to its employees:  "Okay, I want all of you to be formally employed by this outside entity.  You'll still work here, and for me, but your paycheck will come from someone else."

Why do that?  Because tribal corporation don't have to pay Federal Unemployment Tax on its employees, which is around six percent of the first slice of an employee's wages.  So the company thus hoses the United States (and, secondarily, the states) for those taxes, which pay for unemployment benefits, and instead the employer and the Tribe keep for themselves (and then split) those taxes.

How much money can you make this way?  Well, this case involves the Blue Lake Racharia, an Indian tribe in Humbolt County.  How many members does it have?  53.  How many "employees" did it have?


That's a lot of change.

The Ninth Circuit holds that all you have to do for this scheme to work is to have some pro forma policies for your employees (don't smoke, take breaks, etc.) and get reimbursed from the real employer for all you give "your" workers (salaries, benefits, etc.) instead of having the employer pay 'em directly and you're good to go.  Not hard at all.  Even someone unsophisticated like me can set that up easy.  Especially after reading this opinion.

So forget trading on human misery.  There's an easier target out there.  The government.

Perhaps it's karma.  The U.S. stuck it to the tribes when it took their land.  Now they're sticking it to the U.S.