Jan. 15, 2005 - Seminole leaders are confident the bonds used to build their new hotels and casinos are not taxable, but said others involved in the deal would have to pay any fines resulting from a recent ruling by the Internal Revenue Service.

Last month's preliminary IRS ruling that $396 million in municipal bonds should have been issued as taxable does not worry Seminole Tribal Councilor Max Osceola.

"We've been assured by our lawyers that everything was done right," Osceola said. "You've got to remember as Indians, we're used to the federal government making claims that aren't true."

The IRS is seeking taxes that could total more than $200 million over the 10-year life of the bonds.

If the ruling stands, Osceloa said "other entities" would have to pay, including partners in the deal and lawyers who advised the Seminoles.

Charles Anderson, field manager for the IRS' bond division in Washington, D.C., said the financing for the Seminole Hard Rock Hotel & Casino projects in Hollywood and Tampa skirts laws prohibiting tribes from issuing municipal bonds.

"The IRS is troubled by any attempts to issue municipal bonds indirectly when the tribes can't do it themselves," Anderson said.

The agency, which made the finding last month, is holding talks with the tribe and its bond issuer, Capital Trust Agency. The IRS concedes the tribe may have believed the transactions were proper based on the advice of its bond lawyers and CTA.

But the IRS insists the tribe and CTA are responsible for paying taxes.

Two years ago, the tribe contracted CTA, a non-profit formed by the Panhandle municipalities of Gulf Breeze and Century, to issue the tax-exempt bonds.

CTA Executive Director Ed Gray said the transaction was legal and his agency will contest the ruling.

"I disagree with it. But to be honest with you, I don't know what the next step is," Gray said. "It's such a large web of legal entanglement that this is going to take months or longer to be sorted out."

The Hard Rock casinos were built by the Cordish Company of Baltimore and financed by $396 million worth of bonds. Cordish receives a percentage of the tribe's profits over the next 10 years and stands to make more than $100 million per year from the project, according to financing arrangement.

Cordish Vice President Joseph Weinberg, who led the construction efforts, was traveling and could not be reached for comment, the company said.

The IRS intervened because the government stood to lose more than $200 million, which would have been paid if the tribe issued taxable bonds.

If the decision is upheld, the tribe and CTA would have several choices.

The tribe could sue its partners, saying they were given bad advice. Or they and CTA could pay the taxes themselves, protecting the bondholders.

The tribe and CTA could also settle with the IRS for back taxes, then borrow $400 million from a bank to retire the bonds, Anderson said.

Either way the tribe can expect to see a rush of lawsuits if the IRS decision is upheld.

"When we decide we're going to tax municipal bonds, investors usually take action and would probably sue everybody involved in this transaction," Anderson said.

Osceola declined comment on an unrelated lawsuit filed by the bankrupt Trump Hotels & Casino Resorts against former Trump employee Richard Fields, Cordish and others involved in the Hard Rock development.

The lawsuit said Donald Trump met with tribal leaders in 1996 and relied on Fields to negotiate a deal. Fields recruited Cordish and cut Trump out, according to the lawsuit.

The tribe is not named.

"It has nothing to do with us at all, so there's no reason for us to even talk about it," Osceola said.

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