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|News Items (cont'd)|
- Jerry Zremski - March 2, 2003 - Additional Costs To Casino Loan Deal Revealed
- Michael Beebe - February 22, 2003 - Seneca Aide Faces Charges In Smuggling of Cigarettes
- Robert J. McCarthy - February 12, 2003 - Giambra Opposes Casino For County; Annual Address Calls for Merging Comptrollers' Offices
- Michael Beebe - February 6, 2003 - 2 Linked With Cigarette Smuggling to Fund Hezbollah
- Donald L. Barlett and James B. Steele - December 15, 2002 - Playing the Political Slots PART TWO: How Indian casino interests have learned the art of buying influence in Washington
- NY POST - December 30, 2002 - Pataki's Bad Bet
- Donald L. Barlett and James B. Steele - December 8, 2002 - Who Gets the Money? A TIME special investigation
- Donald L. Barlett and James B. Steele - December 8, 2002 - Indian casinos have fallen far short of benefiting the wider Native American population. A TIME special investigation
- Jerry Zremski - November 1, 2002 - Norton Pact Approval in Lockstep with Pataki, Bush
- <-<-MORE RECENT NEWS ITEMS  EARLIER NEWS ITEMS->->
ADDITIONAL COSTS TO CASINO LOAN DEAL REVEALEDJerry Zremski - Buffalo News, March 2, 2003
WASHINGTON - Nearly 10 percent of the first-year profits from the Seneca Nation's Niagara Falls casino will go directly to the facility's Malaysian financiers. That's just one of several newly disclosed provisions of the casino loan that make it substantially more costly than originally revealed. Those costs would be above and beyond the previously disclosed 29 percent adjustable interest rate on the loan.
Seneca sources told The Buffalo News:
The main 29 percent interest rate is just a base; it also includes an adjustable rate that pushes the total rate to about 30.34 percent - which could go higher if interest rates rise. That interest payment can be deferred during the loan's first year.
The agreement includes two first-year interest charges - including 9.99 percent of the casino's 2003 earnings before debt costs and taxes.
The loan defers all principal repayment to the end of its five-year term, meaning interest would be charged on the full $80 million of the loan each year.
Negotiators believe that because foreign investors, headed by Malaysian billionaire Lim Kok Thay, are financing the casino, they will not pay any U.S. income taxes. But if the IRS determines that taxes are due, the agreement calls for the Seneca-run casino corporation to pay them.
The deal would leave the Malaysian investors in possession of some of the Seneca corporation's casino fixtures, though not the property itself, if the loan were to go into default.
Seneca leaders said the loan was the best they could get on a risky deal, but independent observers and some members of the tribe are not so sure.
"These are outrageous loan terms," said Wayne R. Smith, who was deputy assistant secretary of Indian affairs at the Department of the Interior until June. "This is probably the worst deal for Indians since somebody sold Manhattan for some beads."
Michael L. John, a Seneca councillor, said he's very happy with the casino's management and with plans that are being developed to share the casino's success with the tribe. But John was the one tribal councillor to vote against the loan package when the council considered it in December.
"I believe the interest rates are too high," John said. "As a nation, as a government, I don't see why we should be bending over backwards for these Asian guys."
John said he believes the tribe could have gotten a vastly better deal if it had waited until the casino got its federal approvals and then pursued conventional financing.
That's what has happened with other tribes. For example, when the Oneida Nation decided to expand its Turning Stone casino in Central New York late last year, it sold bonds at a 91/8 percent interest rate.
Through a spokesman, both Seneca President Rickey L. Armstrong and Michael G. "Mickey" Brown, president of the Seneca Niagara Falls Gaming Corp., refused to comment for this story.
But Seneca leaders previously defended the loan deal as the only way they could get a casino open by Dec. 31. Former Seneca President Cyrus M. Schindler Jr. said in fall that the casino was expected to make so much money that the quicker opening would more than justify the higher interest charges to be paid under the Lim loan.
A company created by the Malaysian billionaire called Freemantle gave the Seneca casino corporation the loan. Steven G. Horowitz, a New York attorney who represents Lim, defended the unusually high interest rates, calling the casino "a high-risk venture" because it was planned before the Senecas owned the former Niagara Falls Convention Center site, where the gambling facility is located.
Under the deal, the "fixed rate" on the loan would begin at 29 percent, though it would be adjusted monthly based on a key rate used in London's money markets. That London rate currently stands at 1.34 percent, pushing the real interest rate on the casino loan to 30.34 percent.
Knowing that that rate might be difficult to pay back in the first year of the casino's operation, negotiators structured the loan in a way that gives the casino lower payments through the end of 2003, Horowitz said.
This year, the Senecas will merely have to pay that London bank rate plus 3 percent - a total of 4.34 percent - plus about one-tenth of the casino's earnings before debt and taxes. The main interest charge - the one starting at 29 percent - would accrue this year, but the casino would pay back that 2003 interest in a lump sum at the end of the loan's term.
Next year, the deal becomes much simpler. The casino would no longer have to share profits directly with the lenders. All the casino would have to do is make monthly payments based on that "fixed rate" starting at 29 percent.
None of the $80 million in loan proceeds would be paid back until the five-year loan expires. Then it would be due all at once, along with that deferred first-year interest. Sources said the agreement requires the casino to continually put money into a fund that will eventually be used to pay off the principal and any leftover interest payments.
In some ways, the loan agreement also calls for the Senecas to do something they've always been reluctant to do in the past: waive their sovereign immunity as an Indian nation.
For one thing, it could make the tribal gaming corporation liable for U.S. taxes.
The loan is expected to produce no federal tax burden, given that an overseas business entity is the lender, said Horowitz, the attorney for Lim. But if the Internal Revenue Service determines that taxes are due, the agreement says the Seneca gaming corporation - rather than the lender - would pay them, he acknowledged.
In addition, John said he was concerned because the loan allows the lenders to collect some of the casino equipment if the loan goes bad. He said that would clearly violate the tribe's sovereign immunity.
John said that Brown, head of the casino corporation, strongly backed the loan deal.
Brown and Lim have a long history. When Connecticut's Mashantucket Pequot tribe opened its Foxwoods casino in 1993, Lim's family financed the deal and Brown ran the casino. The Pequots' loan agreement also called for a share of the casino's profits to go straight to the financiers.
While it had previously said it would not review the Seneca casino loan, the U.S. Bureau of Indian Affairs said last week that it would examine parts of the deal.
The loan would be reviewed under provisions of a federal law requiring approval of leases involving Indian tribes, said Nedra Darling, an agency spokeswoman. That law does not, however, call for any oversight of loan interest rates.
In addition, the National Indian Gaming Regulatory Commission is doing a routine check to see if the loan qualifies as a management contract, which would subject it to further review and approval, said Richard Schiff, the commission's general counsel.
Despite the lack of those approvals, the loan funds have already been disbursed and used to get the casino ready for its Dec. 31, 2002, opening.
There was some concern about letting the loan go forward without all the necessary federal approvals, said Horowitz, the lawyer for Lim. But he said the deal could probably be adjusted according to the regulators' wishes.
Critics of the deal say, though, that a more thorough federal review ought to take place.
"The secretary of the interior has a trust responsibility to the tribe," said Smith, the former Indian affairs official, to make sure its financial deals are in the tribe's best interest.
"Where is she?" he asked.
Alexis Johnson, an anti-gambling lawyer based in Arizona, agreed.
"This is the sort of craziness that federal oversight was supposed to catch," Johnson said. "But there has been no oversight."
SENECA AIDE FACES CHARGES IN SMUGGLING OF CIGARETTESMichael Beebe -Buffalo, News, February 22, 2003
Scott Snyder, the chairman of the ruling Seneca Party who helped push through the Seneca Nation's referendum on casino gambling, has been charged by federal authorities in a scheme that smuggled $10 million in counterfeit cigarettes from China for sale on the Cattaraugus Reservation. Snyder, 40, the son of former Seneca Nation president and businessman Barry Snyder, is one of three local men charged in the investigation by U.S. Customs Service agents in New York City.
Federal prosecutors accuse the men of importing counterfeit Marlboro and Marlboro Lights in five shipping containers marked as plastic kitchenware over the past two years, and then trucking the cigarettes to the reservation for sale at smoke shops and through an Internet site, Smokemcheap.com.
Snyder, who posted bail Friday, denied the charges through his lawyer, Barry N. Covert.
"He's a prominent businessman on the Seneca Nation of Indians reservation," Covert said. "We are going to fight these allegations vigorously."
The arrests were the second time this month that federal authorities have brought charges on the reservation for illegal cigarette trafficking.
Two Seneca women, Carole Gordon and her granddaughter, Brandy Jo Bowman, were arrested Feb. 4 by federal prosecutors in Detroit, charged in a racketeering indictment that accuses them and nine others of shipping untaxed cigarettes to Detroit. Some of those profits allegedly helped finance the Islamic terrorist group Hezbollah.
Seneca President Rickey L. Armstrong said the recent arrests have given a false impression of the reservation and its residents.
"The Seneca Nation in no way condones illegal activity of any kind on its territories," Armstrong said.
Armstrong is chairman of the ruling Seneca Party on the Allegany Reservation as Snyder is chairman of the Seneca Party on the Cattaraugus Reservation.
An influential Seneca who asked not to be identified said of Snyder's role as party chairman: "He helps call the shots. He helps decide who gets the jobs."
But Armstrong denied that contention. He said the party chairmen have little influence outside of election years.
"The party leadership after the election ends in November usually becomes non-existent," Armstrong said.
Charged locally with Snyder were his business partners, Donald Deland, 42, of Irving, and Timothy Farnham, 37, of Fredonia. Deland and Farnham are not Senecas.
Federal authorities persuaded Deland to fly to New York City, where he was arrested Thursday. Farnham, who is out of town on vacation, is scheduled to surrender Monday.
Also charged were two brothers from Forest Hills, Simon and Michael Moshel, and Robert Berardelli in Brooklyn.
The U.S. attorney's office in Brooklyn, which will try the case, said the smuggling took place between November 2000 and last November. Prosecutors said the five shipments contained about 35 million cigarettes valued at $10 million. Unpaid taxes, they said, were about $1 million.
Customs agents used helicopters to record some of the shipments arriving, and after they began using an undercover informant, said they recorded more than 200 meetings on film.
Prosecutors said agents watched as Snyder and Deland went to a Brooklyn warehouse in a tractor-trailer, loaded it with cases of the illegal cigarettes, then trucked them to the Cattaraugus Reservation.
Snyder, Deland and Farnham then sold the cigarettes, the government said, at the Double D Smokeshop, Iroquois Tobacco Co. and the Web site.
A source aware of the investigation said criminal gangs in China have been manufacturing more and more look-alike American cigarettes. While the packaging was nearly identical, the flavor was definitely not, they said.
He said the quality ranged from terrible to nearly indistinguishable from the real Marlboros, and said the cigarettes brought to the reservation were somewhere in between.
"You would know the difference right away," he said.
He said the cigarettes would be mixed with legitimate cartons, and if customers complained, they would be replaced with legitimate cigarettes.
Larry Ballagh, a Seneca who has run a cigarette mail-order business for 15 years, was the first to do Internet sales and has helped others start Internet sites. He said the recent arrests cast a cloud over all Seneca businesses.
"I've been in the business since 1987," Ballagh said. "I'm not a millionaire, but I've made a good living and provided a lot of jobs. Everything I do is 100 percent legit. There's no need to do anything illegal."
Deland, who Seneca sources said had a business with Snyder but recently had split off on his own, earlier owned a Fredonia bar called the Graduate Bar that state liquor agents closed because of underage drinking. They later arrested Deland in 1999 for running an unlicensed bar at the same location that catered to Fredonia State College students.
Senecas living on the reservation said that Deland opened the Double D Smokeshop in Irving with a Seneca and was living over the smoke shop with his family.
They object to Deland taking advantage of the Seneca Nation's status as a sovereign nation to sell cigarettes with no state taxes and said the administration needs to end the practice.
"People are getting fed up," a Seneca said. "There are Senecas fronting for non-Senecas. They know what's going on."
Armstrong, the Seneca president, is aware of the complaints, and said a committee is looking at adopting a code to prevent it.
"We want to make sure," he said, "that Seneca businesses are wholly owned by Senecas."
GIAMBRA OPPOSES CASINO FOR COUNTY; ANNUAL ADDRESS CALLS FOR MERGING COMPTROLLERS' OFFICESRobert J. McCarthy - Buffalo News, February 12, 2003
County Executive Joel A. Giambra for the first time says he is against casino gambling in Erie County -- at least for the foreseeable future.
And because he believes combining the city and county comptrollers' offices represents a solid step toward regionalism, he is calling for a countywide referendum on the issue.
Those are two highlights of the State of the County address Giambra was scheduled to deliver this afternoon in the Buffalo Convention Center as he outlines plans to attack a budget shortfall.
Saying he is against "quick fixes" for the region's long- standing economic problems, the county executive outlined an aggressive consolidation of city and county government.
... [unrelated part of article omitted]
But his fourth State of the County address was perhaps most noteworthy for what it did not endorse -- gambling. It puts him at odds with longtime friend and ally Mayor Anthony M. Masiello, who has cautiously embraced the idea of a Seneca Nation casino operation in downtown Buffalo -- under the right conditions.
Giambra said he now believes the Niagara Falls casino opened last month by the Senecas should be monitored over a significant period before trying the same idea in Buffalo. "I don't necessarily see (gambling) as something we have to do today," he said.
He floated the ideas of a shared split of local proceeds between the two counties, of combining their visitor and convention bureaus, and of promoting Buffalo and Erie County as the urban and cultural center complementing gambling in Niagara Falls.
"Let's see if we can't do something family-friendly, distinctive and special -- something that would be complementary rather than competitive with Niagara County," he said. "We have competed with our neighbor for far too long -- and the result is that we have both lost."
Giambra did not rule out a Buffalo casino, which the Seneca Nation has explored in talks with local and state officials. But he said it will require "patience" in following the Niagara Falls experience as well as implementing other economic development proposals either under way or planned.
... [unrelated part of article omitted]
2 LINKED WITH CIGARETTE SMUGGLING TO FUND HEZBOLLAHMichael Beebe - Buffalo News, February 6, 2003
Federal authorities in Detroit say two women from the Seneca Nation of Indians' Cattaraugus reservation played a key role in a cigarette-smuggling ring that helped ship hundreds of thousands of dollars to Hezbollah, the Islamic militant group blamed for the 1983 suicide bombing that killed 241 U.S. Marines and sailors in Beirut, Lebanon. In addition, authorities allege that the leader of the smuggling ring - a native of Lebanon who they say has taken part in Hezbollah incursions in Lebanon - hid out on the Cattaraugus reservation while he was being sought.
One of the two Senecas, Brandy Jo Bowman, 24, is identified as the companion of alleged ringleader Elias Mohamad Akhdar, 30, of Dearborn, Mich.
Among the charges against the two women is arson from the fire at Bowman's Indian Express Smoke Shop on Route 438 in Irving. They are accused of shipping the cigarettes from the smoke shop to Michigan, burning down the building Sept. 24, 2001, and filing a phony insurance claim.
Bowman's grandmother, Carole Thompson Gordon, 58, is accused of heading the New York-based operations of the group. Agents said she hired her daughter, granddaughter and others from the reservation to drive vans loaded with untaxed cigarettes to Michigan for resale.
Prosecutors say Akhdar used his relationship with Bowman - they have two children together - to ensure a steady supply of cigarettes from the Seneca reservation to his group. They say he and others used phony credit cards to buy thousands of dollars of cigarettes from Seneca smoke shops.
Every carton smuggled into Michigan meant $12.50 in savings in Michigan taxes, and prosecutors say the group was able to sell them to retail shops by manufacturing phony Michigan tax stamps and putting them on the contraband cigarettes.
Senecas have long held that cigarette sales on the reservation, as well as mail order and Internet sales, are legal as long as they originate on the reservation, a sovereign nation.
The charges in Detroit allege a criminal enterprise that includes contraband cigarette trafficking, possession of counterfeit cigarette stamps, credit card fraud, money laundering, arson and witness tampering.
Gordon and Bowman were released on bond Tuesday after they were arraigned in U.S. District Court in Buffalo. Telephone numbers for both women have been disconnected, and they could not be reached to comment. They will stand trial in Detroit.
Akhdar, a native of Lebanon, is being held without bail in Detroit, after prosecutors called him a flight and security risk. They said he had taken part in military incursions in Lebanon on behalf of Hezbollah and had sent part of his contraband cigarette profits to help finance the militant group.
Federal prosecutors also said that Akhdar had been involved in more than a half-million dollars worth of cash transactions with Mohamad Hammoud, who was convicted in North Carolina last summer in a cigarette-smuggling ring that helped finance Hezbollah.
When Akhdar learned of the North Carolina indictments, prosecutors said in urging that he be denied bail, he hid on the Cattaraugus reservation. Federal attorneys also said Akhdar had warned several witnesses not to cooperate with the government.
The United States declared Hezbollah a terrorist organization in 1997 and said it was responsible for the 1983 bombing of the Marine barracks in Beirut. In November 2001, the United States put Hezbollah on the list of foreign terrorist organizations whose assets can be seized.
Eleven people were indicted in Detroit on conspiracy and racketeering charges after a four-year probe by the federal Bureau of Alcohol, Tobacco and Firearms and the FBI.
In addition to the charges related to the Cattaraugus reservation, where there are no state taxes on cigarettes, the group is accused of buying thousands of cartons of cigarettes from North Carolina, where taxes are 50 cents a carton.
Some smoke shop owners on the Cattaraugus reservation have been aware of the investigation for some time, after federal agents investigated their being scammed by wholesale cigarette buyers using phony credit cards.
Francis Johnson, manager of the Two Clans Smoke Shop in Lawtons, said his store had been taken for about $20,000 in cigarettes bought with a fake credit card. He said he knew of other shops that had been hit as well.
"The credit card company said they were supposed to pay us back," he said, "but the time for that has come and gone."
Bowman, according to the federal indictment, sent wire transfers of $2,500 on Aug. 21, 2001, to a Dearborn member of the conspiracy, to pay another member of the group to make phony credit cards used for the cigarette buys.
Other reservation smoke shop owners knew little about the investigation. "They just couldn't believe it; nobody knew it was going on," said Joseph F. Crangle, a Buffalo attorney who represents many of the Seneca merchants.
The indictment notes a number of wire transfers between Michigan and New York by Gordon for cigarette sales, including a $4,000 sale she made as "Indian Trader Carole Gordon" to Akhdar.
Prosecutors also said she hired granddaughter Bowman, daughter Barbara Ramsey, Donald Doctor and others to drive shipments of cigarettes to Michigan. Ramsey and Doctor are named in the indictment but not charged.
Investigators said Gordon was stopped in Monroe County, Mich., on Feb. 19, 1999, and found to have $12,000 in cash.
Playing the Political Slots
PART TWO: How Indian casino interests have learned the art of buying influence in WashingtonBy Donald L. Barlett and James B. Steele, Time Magazine, 12/15/2002
If it were a public company, the Mississippi band of Choctaw Indians would be the envy of corporate America. With a return on revenue of 41%, the tribe's Silver Star Resort & Casino would top the Fortune 500 profitability list, dwarfing even money spinners like Microsoft, whose 29% return last year seems modest by comparison. The Choctaw Tribe has proved even more productive by another crucial yardstick: influence peddling in Washington. How successful is it? In 1997 the tribe secured its very own special-interest provision hidden in a massive federal-spending bill. And it taps the government for tens of millions of dollars in federal aid every year, even though the Silver Star rakes in annual profits of about $100 million.
Indian gaming interests have come up with a one-two punch that is helping them get their way with politicians. Indian constituents, acknowledged as long-suffering victims of ill-conceived government policies, often succeed at requesting political favors. Meanwhile, they or their wealthy backers are dumping money -- staggering amounts of it -- into political campaigns, lobbying and state ballot initiatives. This combination has helped create the out-of-control world of Indian gaming, a world where the leaders of newly wealthy tribes have so much political power that they can flout the rights of neighboring communities, poorer tribes and even some of their own members. Their political clout also helps them protect a chaotic gaming system that has served them well, one that is characterized by overburdened and underfunded watchdog agencies, a mishmash of regulations and a lack of financial accountability. As a result, Washington often ignores the needs of Native Americans in distress while assisting those who least need help.
As recently as a decade ago, Indian tribes were barely a blip on the special-interest radar screen. But since 1993, they have contributed $8.6 million to federal candidates. In the Clinton years, most of the money went to Democrats. During his second run for office, in 1996, tribes handed out a total of $1.9 million, 86% of it to Democrats. But with a Republican in the White House, Indian tribes have shifted the target of their largesse. So far this year, 56% of the $1.4 million they have donated to federal campaigns has gone to the G.O.P. The tribes have invested even more heavily in lobbying Congress. In 2000-01 they spent $20 million lobbying on such issues as preserving the tax-free status of casinos, expanding gaming operations and protecting Indian sovereign immunity, which allows them to avoid regulations imposed on other businesses. No tribe spends more -- or more effectively -- than Mississippi's Choctaw. Since 1997 the 8,800-member tribe has distributed some $11 million to Washington lobbying firms. Most of the money has gone to one of the capital's premier lobbyists, Jack Abramoff, a top Republican Party fund raiser.
It was money well spent. In the 1997 legislative caper, Thad Cochran, Mississippi's five-term Republican Senator, slipped into a 40,000-word appropriations bill a 19-word sentence that exempts the tribe from oversight by the National Indian Gaming Commission (NIGC), the regulatory body created by Congress to oversee Indian gambling. The sentence also excuses the Choctaw from paying the fees levied on all other Indian gaming establishments, which are the NIGC's sole source of revenue. The savings for the tribe amount to about $180,000 a year. Cochran's provision argues that the tribe was self-regulating effectively.
Meanwhile, government audit reports show that over the past five years, federal agencies have lavished $245 million in aid on the Choctaw. In 2001 alone -- the same year the tribe bought a $4.5 million corporate plane -- the Choctaw collected $50.4 million from nearly 70 government programs, including $14.9 million to run their tribal government, $1.3 million for law enforcement and almost $371,000 for food distribution. It adds up to an average of $5,700 for each member. In contrast, federal aid for the Navajo Nation, the poorest tribe in America, averaged $900 for each of its 260,000 members. The Navajo have no casino.
None of this is to begrudge the Mississippi Choctaw their newfound gaming wealth. Unlike tribes that are content to rely on a casino to support themselves without looking to the future, the Choctaw have plowed their profits into new businesses, from a car dealership to an electronics plant. Nor is this to begrudge the Choctaw their ability to extract aid from Washington. What is awry is a political system that consigns the majority of Native Americans to a life of poverty while rewarding the few who have casino riches with full membership in the system.
These days some of the highest-stakes lobbying in the nation goes on about two miles west of Capitol Hill at the Bureau of Indian Affairs (BIA). The agency, which oversees Native American affairs, decides, among other things, which tribes qualify for federal recognition -- and are thus entitled to build a casino and receive federal benefits. Not surprisingly, as Indian gaming has evolved from bingo halls to a multibillion-dollar industry, the number of tribes clamoring for recognition has soared: there are now 337 tribes in the lower 48 states -- up almost 25% since 1979.
But since 1993, while the volume and complexity of the petitions have grown, Congress has slashed the BIA's budget, forcing the agency to shrink its staff for handling petitions 35%, to just 11. The agency's Branch of Acknowledgment and Research (BAR) staff, which evaluates applicants on a complex range of factors, including genealogy, culture and continuous existence, is overwhelmed. The result: a November 2001 report by the General Accounting Office (GAO), the investigative arm of Congress, paints the picture of a process in disarray, calling the BIA understaffed, lacking coherent guidelines and having no clear sense of mission. It's a situation ripe for manipulation. In the last two years of the Clinton Administration, despite a recommendation by bar staff to deny recognition to six tribal groups, Assistant Secretary for Indian Affairs Kevin Gover, a former Clinton fund raiser appointed to the post by the President, recognized four of the tribes before he left office on Jan. 3, 2001. His successor, Michael Anderson, another Clinton appointee, then pressured the BAR staff to change its recommendation on the two other tribes. In an atmosphere so tense that a staff member later described it to the Interior Department's Inspector General as "pure hell," BAR was pushed to complete the documentation recognizing the tribes by Jan. 19, the Administration's last day in office. Three days later, on the first working day of the Bush Administration, the BAR staff discovered that Anderson had failed to sign all the documents necessary to recognize one tribe, the Duwamish of Washington State. Alerted to the omission, Anderson drove to the BIA, where an employee took the papers out to his car to be signed. The staff member, according to the Interior Department's report, then backdated the documents to Jan. 19. Anderson says politics played no role in his decision. "These tribes were well qualified to be recognized," he says. Incoming Bush BIA appointees put a hold on Anderson's two 11th-hour approvals. Neither has been recognized so far.
It didn't take the Bush Administration long to pick up where the Clintonites had left off. Last June, Bush appointees in the BIA recognized the Eastern Pequot, an amalgamation of two Connecticut tribes with casino plans that had received preliminary approval under Clinton. In the past four years, spanning both Administrations, the tribe and its investors paid $525,000 to Ronald Kaufman -- a well-connected Republican lobbyist, White House political director for the first President Bush and a brother-in-law of current White House chief of staff Andrew Card -- to press their case. The BIA's recognition came amid widespread opposition by Connecticut politicians and community groups and questions about the tribe's authenticity.
Sometimes having a sympathetic Administration in power isn't even necessary. When their agenda bogs down, well- connected tribes can go to friends in Congress, skirting the BIA and the regulatory process altogether. Congress recognized the Pokagon Band of Potawatomi Indians of Indiana and Michigan in 1994. With help from a financial backer, Lyle Berman's Lakes Entertainment Inc., the tribe is on the verge of building a casino about 70 miles east of Chicago, in New Buffalo, Mich. Meanwhile, in the Senate, Virginia Republicans George Allen and John Warner have introduced a package deal for six Virginia tribes -- despite the opposition of the BIA, which says the bill would permit the tribes to bypass regular channels and allow them "to avoid the scrutiny to which other groups have been subjected."
TAX DOLLARS AT WORK
Even as they reap ever larger profits from slot machines and gaming tables, tribes with successful casinos continue to collect federal taxpayer dollars. An Office of Management and Budget report shows that from 1993 to 2001, overall federal funding for key Native American programs climbed from $5.3 billion to $9.4 billion -- a 77% increase. Government and congressional officials say they have no idea how much of that went to tribes with successful casinos. But data Time has analyzed suggest that Washington often rewards rich tribes and penalizes poor ones by distributing funds based on historical practices rather than need. A tribe with a profitable casino often gets more money per capita than a tribe without one. Consider the BIA's distribution of tribal-priority-allocation (TPA) funds to tribes. Each year the BIA hands out about $800 million for basic programs such as general assistance to individual Indians and families, vocational training and child welfare. While tpa funding is a small fraction of the BIA's total spending on Native Americans, it underscores how awry the system has gone. In President Bush's 2003 budget proposal, the 28,000 Turtle Mountain Chippewa in North Dakota, 68% of whom are unemployed, will receive the equivalent of an average $154 each. But the 400 members of the Miccosukee Tribe in Florida, whose Miccosukee Resort and Gaming Center rakes in an estimated $75 million a year, will collect $2,858 per person -- almost 19 times as much. In South Dakota the 41,000 Oglala Sioux, with unemployment at 88%, will receive $168 per person. But California's Rumsey Band of Wintun Indians, whose casino takes in an estimated $150 million a year, will collect an average of $4,457 for each of its 44 members.
The GAO has twice criticized the BIA's distribution system, pointing out that "tribes with the highest reported revenues can receive more tpa base funds than other tribes with no revenues or with losses." Congress directed the BIA to report by April 1, 1999, "on alternative methods for distributing tpa funds, taking into account tribal revenues and the relative needs of tribes and tribal members." While acknowledging funding inequities, the BIA will not change the system. One reason: the tribes view such government funding as an entitlement. As an official of the Mille Lacs Band of Ojibwe Indians -- a tribe in Minnesota with two casinos, which take in an estimated $200 million a year in revenue -- once told a congressional committee, "The United States has a moral and legal obligation to provide tpa funding to tribal governments ... The facts of the inequities are not that some tribes have been given too much but rather that other tribes have been given too little."
Such inequities occur not only with BIA funds. A TIME examination of spending by the Department of Housing and Urban Development (HUD) shows that tribes with casinos often pull in more hud money per capita than casino-less, poor tribes. Over the past four years, while HUD has handed the Florida Seminoles housing funds averaging $2,800 per member, the tribe's five casinos have generated nearly $1 billion in revenue. The Mississippi Choctaw tribe, with its lucrative Silver Star Resort & Casino, pocketed an average of $5,900 in hud funds per person. By contrast, the Navajo, the country's largest tribe, has a 52% unemployment rate but has received only $1,500 per member.
Tribes may be wielding increased political influence in Washington, but at the state level, small Indian tribes with immensely profitable casinos are exerting even more disproportionate clout. Nowhere is it greater than in California, where combined Indian gaming revenue, at $4 billion and growing, is set to surpass that of all the casinos in Las Vegas. How much are tribes spending? To win passage of the two ballot initiatives in 1998 and 2000 that legalized Indian gaming in the state, several small tribes spent a total of nearly $100 million. The San Manuel Band of Serrano Mission Indians, which owns a casino in San Bernardino County, spent a staggering $34.7 million -- an average of almost $520,000 for each of the tribe's 67 adult members. Both initiatives passed.
It's not only the size of the political expenditures that is causing concern. Some tribes have violated campaign-finance laws. Earlier this year, California's Fair Political Practices Commission, which monitors the state's elections, charged that since 1998 one tribe -- the 232-member Agua Caliente Band of Cahuilla Indians, which has a pair of money-churning casinos near Palm Springs -- had failed to promptly report multiple contributions totaling $8.5 million. When the commission tried to work out a settlement, the Agua Caliente would not negotiate, contending that because the tribe is a sovereign nation, California campaign-finance laws do not apply. Like all federally recognized tribes, the Agua Caliente is a self-governing entity and thus generally exempt from state and local laws.
Despite that, the commission filed a lawsuit, assuming that California's attorney general, Bill Lockyer -- the state's top law-enforcement officer -- would represent the agency. But he declined. Lockyer, by the way, has accepted substantial campaign contributions from Indian tribes -- some $800,000 in the past four years, including $175,000 from the Agua Caliente Band. As a consequence, the commission has had to hire an outside lawyer, a move that will cost unnecessary tax dollars. Jim Knox, California Common Cause's executive director, believes that actions against the Agua Caliente and other tribes must be pursued. "If they are sovereign nations, they shouldn't be able to contribute to candidates or ballot measures," says Knox, pointing out that it's illegal for a foreign state or business to pump money into U.S. elections. "And if they aren't, they should be subject to the state's election and campaign-finance laws. The tribes are trying to have it both ways."
And so far, that has worked. Tribes have become California's largest special-interest donors. In his recent reelection campaign, Governor Gray Davis picked up $1.8 million from them, and he, more than anyone else, is responsible for the face of California gaming. The compacts he signed with the tribes in 1999 paved the way for the explosion in the state's Indian casinos, which number 48 and may climb to 70.
Because tribes pay no state or local taxes, the compacts Davis negotiated provide for tribal contributions to a special impact fund. The money will go to local communities overburdened by booming casinos and help defray the increased costs of local government services. California officials estimate that the tribes will pay about $100 million a year into the fund. By contrast, Connecticut collected $332 million last year from its two Indian casinos, Foxwoods and the Mohegan Sun. If California tribes were paying at the same rate -- 25% of slot revenue -- the state would collect up to $1 billion.
As the profitability and size of Indian casinos have grown, so has friction between the gaming ventures and surrounding communities. Last summer tensions between the Rumsey Band of Wintun Indians and its neighbors in the rural Northern California Capay Valley erupted into a bitter war of words when the tribe announced plans to double the size of its hillside gaming business. Highway 16, the narrow, serpentine road that winds past the Cache Creek Indian Bingo and Casino on its way into the tiny hamlet of Brooks, is already congested from round-the-clock traffic to the casino. In 2001, traffic to Cache Creek, with its estimated $150 million annual revenue, was up 87% from the year before, according to a California department of transportation study.
Indian casinos are overloading other communities across the country. One exacerbating factor: because of tribal sovereignty, if a casino overwhelms local emergency services, draws down the local water supply or pollutes the environment, local authorities have no recourse. Tom Frederick, who owns a small vineyard north of the casino, found that out the hard way. For years, as sewage from the casino seeped onto his property, he tried to get the Rumsey Indians to deal with the problem. Recently the waste-water drainage slowed when the tribe relined a sewage-holding pond, but tribal officials will not talk to him about any damage to his property. "They use sovereignty as a shield," he says.
After protracted negotiations, the Rumsey Band and Yolo County officials reached a tentative accord on the casino expansion. The tribe, which views the deal as a concession, since it is a partial surrender of its sovereignty, agreed to slightly reduce the size of the expansion and pay the county more than $5 million a year for 18 years to deal with traffic, environmental and other problems. But relations remain strained. Bulldozers moved onto the Rumsey reservation and began clearing land even before the county board had approved the agreement.
A TALE OF TWO TRIBES
After the supreme court gave the green light to gaming on Indian reservations, Congress set up a regulatory scheme that is contradictory, inconsistent and shielded from public scrutiny. How arbitrary is it? The National Indian Gaming Commission can levy fines but has no power to collect them. Each tribe has its own gaming commission, but that's like Enron's auditors auditing themselves. States monitor casinos in some situations but not in others. Federal prosecutors may go after one casino for a gaming violation while ignoring the same violation by a wealthy and powerful tribe.
Few tribes are more powerful than Florida's Seminoles, who pioneered high-stakes bingo and won Supreme Court approval for Indian gaming everywhere. James E. Billie, the Seminoles' alligator-wrestling, folk-singing chief from 1979 to 2001, is the person most responsible for creating the tribe's gambling wealth and also personifies its flamboyant excesses. In a power struggle last year, the tribal council suspended Billie pending resolution of a sexual-harassment lawsuit (it was recently dropped) and an audit of questionable tribal financial dealings, which is still going on. At the time, he was the highest-paid elected official in Florida, with an annual salary of $330,000. He was responsible as tribal head for the purchase of a corporate jet and a minifleet of helicopters.
But Billie also shared his wealth with tribe members, who last year received individual dividend checks of $36,000 from casino profits. And he took care of other Seminole leaders. Under his reign, each councilman had a discretionary fund of at least $5 million; Billie's was $15 million.
More was available if needed, and it often was. One councilman ran through $57 million in less than four years. Ordinarily states have no jurisdiction over sovereign Indian reservations. But if an Indian casino wants to offer Las Vegas-style games -- like roulette, baccarat and blackjack -- or slot machines in a state where such gambling is illegal, it must make a regulatory compact with the state. The Seminoles have 3,160 machines that look and perform like slots. Florida, which doesn't allow such high-stakes professional gambling, also known as Class III gaming, says the machines are illegal without a compact and wants the casinos closed down. The Seminoles claim the machines are not slots but "electronic terminals," so the tribe needs no compact. The Clinton Administration, in one of the decisions made as it was turning out the lights on Jan. 19, 2001, issued an order approving the Seminole operation. The incoming Bush Administration promptly rescinded the order pending further study.
But the Seminoles aren't waiting for the Federal Government's go-ahead. They have broken ground for a casino-hotel-entertainment complex with a new partner, Hard Rock Cafe International. The casino-resort, which will also have convention facilities, a beach club and a spa, will add to the Seminoles' lucrative gaming business. Last year the tribe's two casinos, in Hollywood and Tampa, made a combined profit of $216 million on revenue of $254 million -- a return of 85%. By comparison, General Electric, often described by the media as America's best-managed company, reported net income of $13.7 billion for 2001, an 11% return on revenue.
The Santee Sioux casino is a more modest affair. Set on a 200-sq.-mi. reservation along the Missouri River in northeast Nebraska, the gambling hall was set up in a converted cafe and has 60 slot machines. But soon after the casino opened in 1996, federal authorities sought to close it. The issue: the tribe, like the Seminoles, has no compact with the state, though it wasn't for lack of trying.
In the early 1990s the 2,700-member tribe sought a compact with Nebraska to open a casino on the reservation where some 1,000 members still live.
Nebraska refused to negotiate. In February 1996, when the only private employer on the reservation, a pharmaceutical company, closed its small plant, the tribe, with 59% of its members living below the poverty line, went ahead anyway, opening the Ohiya Casino and installing Las Vegas-style slot machines. Thelma Thomas, a Santee Sioux who managed the casino, recalls that the tribe thought it had "the inherent sovereign right and legal right" to offer Class III gaming because, she says, "Nebraska would not negotiate a tribal gaming compact after six years of negotiations." The Indian Gaming Regulatory Act (IGRA), the law governing Indian gambling, seems to support the Santees' decision. The act says, "It is the committee's intent that the compact requirement for Class III not be used as a justification by a state for excluding Indian tribes from such gaming." No matter. The NIGC ordered the tribe to close the casino by May 1996. It did, with the understanding the state would work with the tribe on other economic development ventures.
When the state failed to deliver, the tribe reopened the casino in June. Enter the Department of Justice, which sued to close the operation down. The tribe, reluctant to end its one moneymaking venture, refused. A federal judge imposed a $3,000-a-day levy, then upped it to $6,000. In no time, the tribe owed more than $1 million. Meanwhile, the Justice Department began seizing the tribe's bank accounts, including those containing funds earmarked for child safety seats and nutrition programs for the elderly. It even took money out of individual Indians' accounts. Says Thomas: "They've virtually moved to shut this tribe down -- the United States." The uproar of negative publicity forced the government to return some of the money, but it is still holding most of it. And there is still $4 million in unpaid fines, according to the tribe's attorney, Conly J. Schulte. "The tribe to this day can't use bank accounts for fear that the Federal Government is just going to seize any money," says Schulte. That thwarts the tribe's attempts to invest in any business, even one having nothing to do with gambling.
Casting about for a way out of the dilemma, Schulte and Santee Sioux representatives traveled to Washington in February 2001 to seek the NIGC's guidance. Commission officials advised the tribe to install pseudo slot machines -- like those used by the Seminoles -- to get around the Class III controversy. The tribe complied -- at a substantial economic cost. With the switch to the pseudo slots, Thomas says, revenue has fallen by two-thirds. The casino employs only 15 people, and the income barely covers operating costs. There is no longer any money for tribal programs.
But that's the least of the tribe's worries. The Justice Department sued the tribe again, charging that the machines the NIGC had recommended were actually illegal. A federal judge in Omaha, Neb., disagreed and sided with the Indians and the NIGC. But the Justice Department appealed the ruling and dispatched a squad of high-powered litigators who prosecute organized-crime kingpins to argue the case. Commenting on the Justice Department's actions, Thomas says, "They have done everything they could to make this tribe out to be criminals when all we are is struggling to survive."
With reporting by Laura Karmatz/New York and research by Joan Levinstein, Mitch Frank and Nadia Mustafa
PATAKI'S BAD BETNY POST, 12/30/2002
Already deep in Mario Cuomo fiscal territory with a breathtakingly irresponsible plan to borrow $4 billion for short-term operating expenses, Gov. Pataki is thought to be poised to launch another fiscally risky scheme: counting on $100 million or so in Indian gambling revenues to help balance the budget he'll propose next month.
Given the highly disturbing recent revelations about the finances and characters involved in the nation's $13 billion-a-year Indian gambling industry, such a move could be a huge mistake by a governor who pledged to return fiscal integrity to New York when he first took office eight years ago.
Pataki and the Legislature entered into the New York equivalent of a Faustian pact in December, 2001, saying, in effect, that a deal with the devil - an unprecedented expansion of Indian gambling operations - was justified to help the state through the tough fiscal times certain to follow in the wake of the 9/11 attack.
In return for this seemingly easy money, Pataki and the lawmakers agreed to sell some of New York's soul to an amorphous collection of allegedly deserving "Native Americans" - some of whom now turn out to be in cahoots with such decidedly non-Indian entrepreneurs as Lim Kok Thay and G. Michael "Mickey" Brown.
Malaysian businessman Lim, of course, is the man who has "loaned" New York's Seneca Indian tribe $80 million to build the new Niagara Falls Casino, set to open on New Year's Eve.
We put the word "loan" in quotes because the 29 percent a year interest rate is more akin to the going rate for loans negotiated on the Brooklyn piers or at the Fulton Fish Market than those offered by Midtown banks.
"Mickey" Brown is the man who brokered the original, $130 million-plus deal that put Lim, and his father Lim Goh Tong, in as the lead financiers of the Pequot tribe's Foxwoods Casino in Connecticut, a loan now earning the Lims some $100 million a year.
Putting aside the legality of the casinos - the Court of Appeals still hasn't said how casino-based slot machines are legal in light of their specific prohibition in the state Constitution - and ignoring the socially corrosive impact casinos invariably have, one need only look to recent investigative accounts on Indian gambling to see how serious the situation is.
These accounts - depicting massive profits flowing to shadowy characters with little public accountability and with scant evidence that significant numbers of Indians are benefiting - have raised the specter of congressional inquiries, federal grand juries and, of course, criminal indictments.
As the Wall Street Journal wrote last week, "The national Indian gaming story is about gambling insiders and the Indians and politicians who play along."
Politicians like Pataki, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno seem to be gambling their own reputations along with the state's credit rating.
That last could makes losers of all New Yorkers.
Who Gets the Money?
Needy Native Americans, you'd think. But Indian casinos are making millions for their investors and providing little to the poorBy Donald L. Barlett and James B. Steele, Time Magazine, 12/8/2002
Anita Hollow Horn, a bright, attractive member of the Oglala Sioux tribe, is a fairly typical beneficiary of Indian gaming. She lives in Pine Ridge, S.D., on her tribe's reservation, with its overcrowded dwellings, 88% unemployment and a school-dropout rate of almost 50%. Hollow Horn, 37, and her four children share a three-bedroom home, opposite a landfill, with her mother and stepfather_and seven other relatives. Fourteen people live in the one-story house with a single bathroom. Hollow Horn and her daughter, 9, sleep on a bed in a corner of the basement; her other children sleep on the floor upstairs. Her brother Reginald, 35, who has cancer, sleeps in another corner with his two sons, 10 and 15. It's toughest when the basement floods. "Sometimes the sewer backs up," says Hollow Horn, "and it just gets all over down there." Black mold has already consumed one wall underneath the staircase and is eating its way up the other.
So how, exactly, is Hollow Horn prospering from the $12.7 billion Indian gaming industry? Like most Native Americans, not at all. Last year the Oglala's Prairie Wind Casino, housed in a temporary, white, circus-tent-like structure smaller than a basketball court, turned a profit of $2.4 million on total revenue of $9.5 million. Most of the money went to fund general programs, such as services for the elderly and young people, as well as education and economic development. But even if there had been profit sharing instead, the payout would have worked out to a daily stipend of just 16› for each of the 41,000 tribe members.
That's not to say that members of a few small tribes near big cities aren't doing very well from gaming. In Minnesota, 300 members of the Shakopee Mdewakanton Sioux community reportedly take home more than $1 million a year. But bands like that are the exception. Only 25% of gaming tribes distribute cash to their members, usually no more than a few thousand dollars each.
So if the overwhelming majority of Native Americans like Hollow Horn aren't benefiting from the Indian casino boom, who is? In many cases, the big winners are non-Indian investors, some of whom pocket more than 40% of an Indian casino's profits. Actually, calling these people investors understates their role. They often serve as master strategists who draw up the plans and then underwrite the total cost of bringing a casino online: ferreting out an amenable tribe, paying a signing bonus, picking up tribal expenses and paying the salaries of the tribe's officials, all of this before a spade of dirt is turned. If an Indian band isn't federally recognized as a tribe and is thus ineligible for a gaming venture, these full-service backers will bankroll genealogists to construct a family tree, then hire lawyers and lobbyists in Washington to help change the band's status. And if a reservation isn't prime real estate for a casino, the investors sometimes purchase a more suitable patch and instruct their lawyers and lobbyists to persuade the government to designate the land as a trust, as reservation property is called. Building the casino is the easiest step.
"Almost all tribes are utilizing consulting agreements to circumvent the regulatory and enforcement authority vested in the National Indian Gaming Commission."
DEPARTMENT OF THE INTERIOR INVESTIGATION
There is almost no oversight of the backers. The National Indian Gaming Commission (NIGC), the understaffed, underfunded, underperforming and undersupervised agency that is supposed to police gambling on Indian reservations, knows little about most of the investors. Under its regulations, the agency must approve the management contracts between outside companies and tribes. But a billion-dollar loophole allows tribes to retain companies under consulting agreements without the NIGC's approval. Neither the companies, their investors nor the consulting terms are subject to the commission's review. A Department of the Interior investigation in June 2001 showed that there were 332 Indian gaming operations, from firehouse bingo games to full-scale casinos, but that only 31 were operating under management contracts approved by the NIGC. As the department's Office of the Inspector General later concluded, "Almost all tribes are utilizing consulting agreements to circumvent the regulatory and enforcement authority vested in the National Indian Gaming Commission."
As a result, tribes are pretty much free to cut financing deals as they like. Sometimes investors' names surface; sometimes they don't. Tribal leaders don't have to disclose executives' pay or management arrangements, report their profits, issue audited financial statements or divulge self-dealing contracts to the public or their tribe's members. Not all these deals work out for the moneymen, but the ones that do yield spectacular returns. A few of the outside investors have distinctive -- some would say controversial --pasts. Here are profiles of three:
THE POKER PLAYER
Say what you will about Lyle Berman -- and people have called him a lot of things: a pit bull, an intimidator, a fearsome competitor -- but no one has ever accused him of modesty. Of his casino-development company, Lakes Entertainment Inc., Berman once told reporters, "We're the most successful company in Indian gaming." Because of the secrecy surrounding gambling on Indian reservations, it's impossible to know whether that's true. But Berman has clearly done quite nicely since he began developing and managing Indian casinos more than a decade ago. Among his real estate holdings: a ranch in tony Telluride, Colo.; a house in Palm Springs, Calif.; an estate called Casa Berman Palmillia on the Mexican Riviera; a condo in Las Vegas; and a $5 million estate in Wayzata, Minn. By his account, as of September 2001, he was worth almost $69 million.
A born entrepreneur, Berman first revealed his flair when he turned the family wholesale-leather business into the nation's largest retailer of leather apparel, now known as Wilsons the Leather Experts Inc. But Berman's true passion is gambling: he has won three national poker titles, and is a member of the Poker Hall of Fame at Binion's Horseshoe in Las Vegas. At a poker table, Gaming magazine once wrote, Berman plays "with the insight of a psychiatrist and the determination of a club fighter."
Of all the bets Berman has placed, the smartest was to gamble on Indian gaming with his 1990 decision to join forces with a Minnesota tribe, the Mille Lacs Band of Ojibwe Indians, and build a casino on its reservation 70 miles north of Minneapolis. In return for managing the place, Berman and his partners got 40% of the profits for seven years, after which the tribe took over. Eager to duplicate the model, Berman backed three more Indian ventures: the Grand Casino Hinckley, also in Minnesota, and two casinos in Louisiana. In 1999 a predecessor company, Lakes Gaming Inc., which was publicly owned, earned $54.7 million in management-fee income and had a net profit of $28.8 million. Berman has done so well that in 1997 executive-compensation guru Graef Crystal called his compensation package for the previous year_which totaled $18 million in salary and stock options_the "third most outrageous" in the U.S. But not everyone has fared well from Berman's business ventures. In the mid-'90s, his firm, then called Grand Casinos Inc., invested heavily in a hyped Las Vegas casino and resort, Stratosphere, that ended up in bankruptcy court nine months after a ballyhooed opening. Stockholders lost millions. As for Berman, he unloaded a block of stock before it plummeted. Disgruntled shareholders sued, claiming they had been misled over potential profits. The suit was settled for $9 million, but in the agreement Berman denied the charges.
Today Berman has deals to develop five more Indian casinos: three in California, one in Massachusetts and one in Michigan at a prime spot just 70 miles east of Chicago.
THE AFRICAN CONNECTION
They don't make them more controversial than Solomon Kerzner. There's the over-the-top casino he built on a South African homeland, taking advantage of apartheid; the money scandal that linked him to a Prime Minister who had to resign; the succession of wives, including a former Miss World; and these days the Mohegan Sun, a billion-dollar Indian casino in Connecticut that he made happen.
Kerzner, 67, was ideally placed to make a killing as a financier in Indian gaming. He has succeeded in gaming systems with loose rules before. His native South Africa once banned gambling but allowed it in tribal areas carved out by the apartheid-era white government for blacks to inhabit. Kerzner, who began his career as an accountant, opened the first hotel-casino in 1977 in Mmabatho, the capital of the homeland of Bophuthatswana, about 150 miles from Johannesburg. That year he began planning what would become the opulent Sun City resort-casino-entertainment-theme-park complex. When it opened in 1979, Sun City -- with four hotels, a 6,000-seat arena and a 46-acre manmade lake for water sports -- became a favored destination for whites in Johannesburg and Pretoria who wanted to escape their nation's moral restrictions and gamble, view soft-porn movies and watch topless showgirls, white and black. Dubbed the richest man in South Africa, Kerzner got into trouble in 1986 when he won permission for a hotel and casino in another homeland, Transkei. To acquire an exclusive gaming license, he had paid more than $900,000 to Transkeian Prime Minister George Matanzima, who was forced to resign and was later jailed for fraud. Kerzner maintained that Matanzima extorted the money, and the South African government declined to prosecute him. Kerzner moved his base of operations to Britain, and from there he expanded his hotel-and-casino empire to France, Morocco and the Bahamas, where he opened the very profitable Atlantis Casino and Resort.
In 1994, as soon as the Bureau of Indian Affairs (BIA) formally recognized the Mohegans as a tribe, Kerzner and several partners reached an agreement to develop and manage the tribe's proposed casino. Their fee: more than the legally allowed 40% of net revenues. The deal with the NIGC was negotiated in private, and then chairman Harold Monteau rubber-stamped it. The other two commissioners and several staff members objected, complaining that Monteau had worked out the generous package in secret. Monteau is now a lobbyist on casino issues for more than a dozen tribes.
The Mohegan Sun replicates the outrageous sensibility of Sun City. Its profitability is equally immoderate. This year it became Connecticut's and Indian country's second billion-dollar casino (after Foxwoods) when annual revenue hit 10 figures. The 32% increase over last year follows the opening of a second complex, which makes the Mohegan Sun's total gaming area larger than the combined area of the Mirage, Stardust and Tropicana casinos on the Las Vegas Strip. Kerzner, the Mohegans and the NIGC will not r release details of the full management agreement, but based on financial data drawn from government records, Kerzner will ultimately walk away with an estimated $400 million. His partners will split another $400 million. And Kerzner is going after more. He and his partners have entered into an agreement with the Wisconsin-based Sockbridge-Munsee Band of Mohican Indians to develop a casino in the Catskills.
THE MALAYSIAN BILLIONAIRE
The biggest winner to date in Indian gaming is surely Lim Goh Tong, the 85-year-old Chinese-Malaysian businessman who bankrolled Foxwoods in northeastern Connecticut. Foxwoods, the country's largest gaming venue, is actually a constellation of five casinos about 10 miles down the road from the Mohegan Sun. On an average day, 40,000 people pass through what was a quiet, mostly rural patch of New England.
Lim knows how to compete for government favors. He earned his fortune as a contractor constructing huge infrastructure projects for the Malaysian government. In the mid-'60s while building a hydroelectric dam in the country's Cameron Highlands, he dreamed of developing a resort and casino in the area, which is easily accessible to Kuala Lumpur, the capital. Even though Malaysia is a predominantly Muslim country and Islam forbids Muslims to gamble, he secured the government's approval in less than a day. In the more than three decades since, his exclusive agreement for what is still Malaysia's only casino has been a license to print money.
His deal in 1991 to underwrite the development of Foxwoods for the Mashantucket Pequots, a tribe of fewer than 200 members at the time, has proved similarly lucrative. While financial details have not been made public, one can estimate the tycoon's windfall. Lim provided two loans, one for $60 million, the other for $175 million. His company, Kien Huat Realty Ltd., will receive interest on the loans for years to come. But Lim really hit the jackpot with a clause that reportedly gives him 10% of Foxwoods' net income until 2018. Foxwoods' gross revenue is more than $1 billion a year. Assuming no downturn in the casino's fortunes, TIME estimates, Lim and his family will walk away with $1 billion over the life of the agreement. The U.S. tax bite? As a foreign investor, Lim will pay at a steeply discounted rate_below that levied on an American family earning less than $20,000 a year.
THE GREAT LAND RUSH
When gambling was first proposed as a tool for Indian economic development, it was expected that casinos would be confined largely to rural reservations where impoverished tribes had lived for generations. But as with any transaction involving real estate, it's all about location, location, location. Casinos on reservations near urban areas, with a ready supply of would-be gamblers, have tended to do well. The more remote ones, not surprisingly, have foundered. The result: a mad scramble by tribes and their non-Indian financial partners to find prime real estate that they can claim as "reservation" land_and then build on it a gleaming new casino. The choicest spots are near big cities and along major highways. It doesn't matter if the tribes have ever lived there. With the blessing of the BIA, these instant reservations are cropping up all over the country. The United Auburn Indian community's new reservation is in an industrial park in Roseville, Calif., just minutes from I-80, one of California's busiest highways. The heretofore landless Match-e-be-nash-she-wish Band -- otherwise known as the Gun Lake Band of Potawatomi Indians -- now has a reservation of 50 acres along busy U.S. 131 south of Grand Rapids, Mich. Further west, in Washington State, the BIA has set aside 56 acres along I-90 east of Seattle for the Snoqaulmie tribe to develop a casino.
IN TRUST WE TRUST
To appreciate how frenetic investor activity has become, take a look at the action swirling around an otherwise unremarkable tract of land across the Sacramento River from the California state capital. The Upper Lake Band of Pomo Indians, a 150-member tribe, says in court papers that its ancestral homeland, two hours' drive from Sacramento, has "little economic value." So it wants to develop a casino on the river site, even though it neither owns the land nor has the money to buy it.
But the tribe does have friends with clout and deep pockets. A group of wealthy investors headed by Roy Palmer, a feisty onetime Chicago lawyer, has optioned the 67-acre tract in West Sacramento on behalf of the tribe and is footing the bill for trying to secure government approval for a reservation and casino. Palmer and two fellow Floridians, Robert Roskamp and Philip Kaltenbacher, onetime chairman of the New Jersey State Republican Party, formed a company called SRQ Inc. to develop and manage the casino. They envision it as a glitzy Las Vegas-style resort complex designed to replicate the state capitol building. If the BIA approves the plan and takes the land into trust, Palmer's group would convey the property to the Upper Lake Band. In return, SRQ would manage the casino for seven years and take 30% of its annual net profits.
For Palmer, who favors bow ties and loud sport coats, it could mean a replay of one of the most profitable chapters in his career. In the early 1990s, when Indian gaming was in its infancy, Palmer and a partner formed Buffalo Brothers Management Inc. to develop and manage two casinos for the St. Croix Chippewa Indians in Wisconsin. The company negotiated an agreement to collect 40% of the casinos' total net revenue for running the operations. Then it recommended that the tribe lease slot machines from Interstate Gaming Services Inc., a company that Palmer and his associate happened to own. The fee: 30% of the gross take from each machine. Since slots account for most of the gaming revenue in Indian casinos, Buffalo Brothers was poised to take 70% of the profits -- far in excess of the 40% maximum permitted by law. In one year alone, 1992, the two companies collected $14 million.
Although the BIA had approved the St. Croix arrangements, some tribe members felt they were being gouged. Following an investigation, Michael Liethen, the director of the Office of Indian Gaming for the Wisconsin Gaming Commission, recommended in 1993 that the state revoke Buffalo Brothers' license. Instead, the state fired the director. (Some years later, the state paid him $290,000 to settle a lawsuit over the dismissal.) The disgruntled tribe members sued Buffalo Brothers, and by 1994, amid the rancor, the St. Croix Band bought out its contract, reportedly for more than $30 million. Palmer and his partner exited the state very wealthy men. "I was in the right place at the right time," he later told Sarasota magazine.
Palmer disputes the notion that he took advantage of the tribe and says he was the victim of tribal politics: "We did not do one thing wrong. They lost the case at every level, in every jurisdiction. It was just a smear job." As for the 30% his company received for supplying the slots, he says, "We used all that to pay for the slot machines."
Even in California, where tribes don't hesitate to make claims to land that was never theirs, the West Sacramento casino proposal is in a class by itself. Not only is a citizens' group in West Sacramento fighting it, but eight other tribes in Northern California are also opposed. In a joint letter written in April of this year, the tribes said that if Upper Lake were allowed to "move its land base to any area it wanted, [it] would make a mockery of our own California Indian history and demographics and damage the credibility and legitimacy of tribes across the state."
IN YOUR FACE
For sheer audacity, it's hard to beat the shared vision of a Florida developer and an Oklahoma Indian tribe to build a casino in Kansas. The developer is Alan Ginsburg, who heads North American Sports Management (Noram), which has already cut casino development deals with tribes in five states. The tribe is the 3,900-member Wyandotte tribe of Oklahoma, which has a reservation in the state's northeast corner. Oklahoma prohibits Las Vegas- style casinos, and that is why the Wyandottes want a satellite reservation in Kansas, which does permit big-time gaming.
Because the tribe's ancestors lived in Kansas in the 19th century, it had little trouble persuading the BIA to place in trust an abandoned Masonic temple next to an Indian cemetery in downtown Kansas City, Kans., just across the street from city hall. That makes the old lodge and the small parcel around it eligible for Indian gaming.
Not that the Wyandottes and Ginsburg wanted to build a casino there. But they certainly got the authorities' attention. What they really wanted was a large tract somewhere in the metropolitan area. When negotiations stalled, the tribe moved temporary buildings onto the downtown property and threatened to open a minicasino. They also filed a lawsuit against 1,300 property owners in a nearby industrial district, charging that they are occupying land improperly taken from the tribe 200 years ago.
The Wyandottes' not-so-subtle pressure apparently worked. Local officials agreed to let the tribe build a casino and hotel on a 52-acre parcel on Wyandotte County's western edge. U.S. Representative Dennis Moore, the area's Democratic Congressman, has introduced legislation to bless the deal in Congress, thus bypassing the BIA. If approved, the tribe would then have three reservations -- in two states.
NO TRIBE, NO PROBLEM
The casino envisioned by the Lytton Band of Pomo Indians is poised to become one of the most profitable in the country. Not bad for a clan of Indians that not long ago had neither a tribe nor a reservation.
In the early '50s the Lyttons consisted of two extended families, the Steeles and the Myerses, who were the sole occupants of a 50-acre reservation for homeless Indians north of Healdsburg, Calif. The families sometimes feuded, but they ultimately shared a common dream: they wanted to be landowners, not tenants on a reservation. In 1952 John and Dolores Myers wrote the BIA asking "to secure a patent fee or a deed to this property." The Steeles sent a similar letter: they, too, wanted the reservation land deeded to them personally. For the next several years, the families wrote more letters to the bureau -- and to members of Congress -- pleading their case. Finally, in 1961, after a congressional act paved the way for reservation land to be divided among individual members of tribes, they got their wish and the BIA signed the property over to them. Within two years the families had sold off every parcel.
Two decades later, when high-stakes bingo halls were sprouting up across the state, the Lytton descendants decided to re-form and secure federal recognition, which is needed to own a casino. They bypassed the traditional regulatory process and piggybacked on a lawsuit filed by a group of Northern California Indians who claimed the Federal Government had improperly terminated their tribes in the 1960s. When a judge ruled in the group's favor in 1991, the Lyttons were also formally recognized.
Obtaining reservation land on which to build the casino was even easier. Sam Katz, a Philadelphia financier who has arranged multimillion-dollar financing packages for sports stadiums from Denver to Miami, has become the Lyttons' guardian angel. Katz and his partners found and bought a 10-acre parcel of land for a casino amid the graying stores and modest homes of San Pablo on the East Bay, a 25-minute drive from San Francisco. You might call it a "gaming reservation" because the Lyttons do not intend to live there. Katz has acquired a second piece of property -- near Windsor, 60 miles away -- for the tribe's "residential" reservation. As Katz told TIME, "We've paid all the expenses of applying for and putting their applications into the Bureau of Indian Affairs for both pieces of property, which involved extensive environmental surveys and traffic surveys and archaeological surveys and historical surveys and you name it." Katz has done much more: he has also paid for tribal government staff, for the tribe's leases on property and equipment, and for its public affairs activities. He has paid its legal expenses and hired lobbyists, consultants and advisers.
So when it became clear that the petitions might languish at the BIA, the Lyttons and their backers had everything in place to take a new tack. They approached George Miller, longtime Congressman from the East Bay, whose district includes San Pablo. The ranking Democrat on the House Resources Committee, Miller did what only a senior member of Congress could: he plugged a three-sentence amendment into an unrelated bill that gave the Lyttons their reservation. Later, there would be outrage over the amendment. Frank Wolf, a Republican Congressman from Virginia, called it a disgrace. But for 200 Lyttons and their backers, it's an American success story.
With reporting by Laura Karmatz/New York and research by Joan Levinstein, Mitch Frank and Nadia Mustafa
Indian casinos have fallen far short of benefiting the wider Native American population. A TIME special investigationBy Donald L. Barlett and James B. Steele, Time Magazine, 12/8/2002
Imagine, if you will, Congress passing a bill to make Indian tribes more self-sufficient that gives billions of dollars to the white backers of Indian businesses, and nothing to hundreds of thousands of Native Americans living in poverty. Or a bill that gives hundreds of millions of dollars to one Indian tribe with a few dozen members, and not a penny to a tribe with hundreds of thousands of members. Or a bill that allows select Indian tribes to create businesses that reap millions of dollars in profits and pay no federal income tax, at the same time that the tribes collect millions in aid from American taxpayers. Can't imagine Congress passing such a bill? It did. Here's how it happened, and what it means.
Maryann Martin presides over America's smallest tribe. Raised in Los Angeles in an African-American family, she knew little of her Indian ancestry until 1986, when at age 22 she learned that her mother had been the last surviving member of the Augustine Band of Cahuilla Mission Indians. In 1991, the Bureau of Indian Affairs (BIA) certified Martin and her two younger brothers as members of the tribe. Federal recognition of tribal status opened the door for Martin and her siblings to qualify for certain types of government aid. And with it, a far more lucrative lure beckoned: the right to operate casinos on an Indian reservation.
As Indian casinos popped up like new housing developments across Southern California, Martin moved a trailer onto the long-abandoned Augustine reservation in Coachella, a 500-acre desert tract then littered with garbage, discarded household appliances and junk cars, about 25 miles southeast of Palm Springs. There she lived with her three children and African-American husband William Ray Vance. In 1994, membership in the tiny tribe dwindled from three adults to one when Martin's two brothers were killed during separate street shootings in Banning, Calif. Police said both men were involved in drug deals and were members of a violent Los Angeles street gang.
Subsequently, Martin negotiated a deal with Paragon Gaming, a Las Vegas company, to develop and manage a casino. Paragon is headed by Diana Bennett, a gaming executive and daughter of Vegas veteran and co-founder of the Circus Circus Casino William Bennett. Martin's Augustine Casino opened last July. With 349 slot machines and 10 gaming tables, it's the fifth and by far the most modest casino in the Palm Springs area. But it stands to make a lot of non-Indian investors, and one Indian adult, rich.
And get this: Martin still qualifies for federal aid, in amounts far greater than what many needy Native Americans could even dream of getting. In 1999 and 2000 alone, government audit reports show, she pulled in more than $1 million from Washington, $476,000 for housing, $400,000 for tribal government and $146,000 for environmental programs.
It wasn't supposed to be this way. At the end of the 1980s, in a frenzy of cost cutting and privatization, Washington perceived gaming on reservations as a cheap way to wean tribes from government handouts, encourage economic development and promote tribal self-sufficiency. After policy initiatives by the Reagan Administration and two U.S. Supreme Court rulings that approved gambling on Indian reservations, Congress enacted the Indian Gaming Regulatory Act in 1988. It was so riddled with loopholes, so poorly written, so discriminatory and subject to such conflicting interpretations that 14 years later, armies of high-priced lawyers are still debating the definition of a slot machine.
Instead of regulating Indian gambling, the act has created chaos and a system tailor-made for abuse. It set up a powerless and underfunded watchdog and dispersed oversight responsibilities among a hopelessly conflicting hierarchy of local, state and federal agencies. It created a system so skewed—only a few small tribes and their backers are getting rich—that it has changed the face of Indian country. Some long-dispersed tribes, aided by new, non-Indian financial godfathers, are regrouping to benefit from the gaming windfall. Others are seeking new reservations, some in areas where they never lived, occasionally even in other states, solely to build a casino. And leaders of small, newly wealthy tribes now have so much unregulated cash and political clout that they can ride roughshod over neighboring communities, poorer tribes and even their own members.
The amount of money involved is staggering. Last year 290 Indian casinos in 28 states pulled in at least $12.7 billion in revenue. Of that sum, TIME estimates, the casinos kept more than $5 billion as profit. That would place overall Indian gaming among Fortune magazine's 20 most profitable U.S. corporations, with earnings exceeding those of J.P. Morgan Chase & Co., Merrill Lynch, American Express and Lehman Bros. Holdings combined.
But who, exactly, is benefiting? Certainly Indians in a few tribes have prospered. In California, Christmas came early this year for the 100 members of the Table Mountain Rancheria, who over Thanksgiving picked up bonus checks of $200,000 each as their share of the Table Mountain Casino's profits. That was in addition to the monthly stipend of $15,000 each member receives. But even those amounts pale beside the fortunes made by the behind-the-scenes investors who bankroll the gaming palaces. They walk away with up to hundreds of millions of dollars.
Meanwhile, the overwhelming majority of Indians get nothing. Only half of all tribes_which have a total of 1.8 million members_have casinos. Some large tribes like the Navajo oppose gambling for religious reasons. Dozens of casinos do little better than break even because they are too small or located too far from population centers. The upshot is that a small number of gaming operations are making most of the money. Last year just 39 casinos generated $8.4 billion. In short, 13% of the casinos accounted for 66% of the take. All of which helps explain why Indian gaming has failed to raise most Native Americans out of poverty. What has happened instead is this:
A LOSING HAND
Revenue from gaming is so lopsided that Indian casinos in five states with almost half the Native American population_Montana, Nevada, North Dakota, Oklahoma and South Dakota_account for less than 3% of all casino proceeds. On average, they produce the equivalent of about $400 in revenue per Indian. Meanwhile, casinos in California, Connecticut and Florida_states with only 3% of the Indian population_haul in 44% of all revenue, an average of $100,000 per Indian. In California, the casino run by the San Manuel Band of Mission Indians pulls in well over $100 million a year. That's about $900,000 per member.
THE RICH GET RICHER
While federal recognition entitles tribes to a broad range of government benefits, there is no means testing. In 2001, aid to Indians amounted to $9.4 billion, but in many cases more money went to wealthy members of tribes with lucrative casinos than to destitute Indians. From 1995 to 2001, the Indian Health Service, the agency responsible for looking after the medical needs of Native Americans, spent an average of $2,100 a year on each of the 2,800 members of the Seminole tribe in Florida. The Seminoles' multiple casinos generated $216 million in profits last year, and each tribe member collected $35,000 in casino dividends. During the same six years, the health service spent an annual average of just $470 on each of the 52,000 members of the Muscogee (Creek) Nation in Oklahoma, whose tiny casinos do little more than break even.
Wealthy Indian gaming tribes suddenly are pouring millions of dollars into political campaigns at both state and federal levels. They are also influencing gaming and other policies affecting Native Americans by handing out large sums to influential lobbying firms. In 2000 alone, tribes spent $9.5 million on Washington lobbying. Altogether they spend more to influence legislation than such longtime heavyweights as General Motors, Boeing, AT&T_or even Enron in its heyday.
GAMING TRIBES AS EXCLUSIVE CLUBS
Tribal leaders are free to set their own whimsical rules for admission, without regard to Indian heritage. They may exclude rivals, potential whistle-blowers and other legitimate claimants. The fewer tribe members, the larger the cut for the rest. Some tribes are booting out members, while others are limiting membership. Among them: the Pechanga Band of Mission Indians in Riverside County, Calif., whose new Las Vegas-style gaming palace, the Pechanga Resort & Casino, is expected to produce well over $100 million in revenue.
Since only a federally recognized tribe can open a casino, scores of groups_including long-defunct tribes and extended families_have flocked to the BIA or Congress seeking certification. Since 1979, as gambling has boomed, the number of recognized tribes on the U.S. mainland has spiked 23%, to a total of 337. About 200 additional groups have petitioned the bureau for recognition. Perhaps the most notorious example of tribal resurrection: the Mashantucket Pequots of Connecticut, proud owners of the world's largest casino, Foxwoods. The now billion-dollar tribe had ceased to exist until Congress re-created it in 1983. The current tribe members had never lived together on a reservation. Many of them would not even qualify for government assistance as Indians.
THE IMPOTENT ENFORCER
Congress created the National Indian Gaming Commission (NIGC) to be the Federal Government's principal oversight-and-enforcement agency for Indian gaming_and then guaranteed that it could do neither. With a budget capped at $8 million, the agency has 63 employees to monitor the $12.7 billion all-cash business in more than 300 casinos and small gaming establishments nationwide. The New Jersey Casino Control Commission, by contrast, has a $59 million budget and a staff of 720 to monitor 12 casinos in Atlantic City that produce one-third the revenue. The NIGC has yet to discover a single major case of corruption_despite numerous complaints from tribe members.
THE WHITE MAN WINS AGAIN
While most Indians continue to live in poverty, many non-Indian investors are extracting hundreds of millions of dollars_sometimes in violation of legal limits_from casinos they helped establish, either by taking advantage of regulatory loopholes or cutting backroom deals. More than 90% of the contracts between tribes and outside gaming-management companies operate with no oversight. That means investors' identities are often secret, as are their financial arrangements and their share of the revenue. Whatever else Congress had in mind when it passed the regulatory act, presumably the idea was not to line the pockets of a Malaysian gambling magnate, a South African millionaire or a Minnesota leather-apparel king.
FRAUD, CORRUPTION, INTIMIDATION
The tribes' secrecy about financial affairs -- and the complicity of government oversight agencies -- has guaranteed that abuses in Indian country growing out of the surge in gaming riches go undetected, unreported and unprosecuted. Tribal leaders sometimes rule with an iron fist. Dissent is crushed. Cronyism flourishes. Those who question how much the casinos really make, where the money goes or even tribal operations in general may be banished. Indians who challenge the system are often intimidated, harassed and hreatened with reprisals or physical harm. They risk the loss of their jobs, homes and income. Margarite Faras, a member of the San Carlos Apache tribe, which owns the Apache Gold Casino in San Carlos, Ariz., was ousted from the tribal council after exposing corruption that led to the imprisonment of a former tribal leader. For three years, Faras says, those in control mounted nighttime demonstrations at her home, complete with loudspeakers. They initiated a boycott of her taco business, telling everyone she used cat meat. They telephoned her with death threats. Says Faras: "I don't know what else to say, other than it's been a nightmare."
NORTON PACT APPROVAL: IN LOCKSTEP WITH PATAKI, BUSHEd. Note: The article below explores the political forces behind Secretary Norton' defacto approval of the casino pact. For related information, read these two letters from Congressman LaFalce:
Article by Jerry Zremski, Buffalo News, 11/1/2002:
Some Indian gambling experts think the casino deal gives too much money to New York. Sources say it was OK'd with help from the governor's Republican friends.
WASHINGTON - Some federal Indian gambling experts opposed the Seneca Nation's casino agreement with New York, but Republican political appointees influenced by Gov. George E. Pataki overruled them, sources close to the situation said this week. The Bureau of Indian Affairs gaming management staff thought the deal gives too much casino profit to New York State, rather than the Senecas, said the sources, who include attorneys for other tribes and the bureau's former second-ranking official.
But the federal gambling experts were overruled by Interior Secretary Gale A. Norton, who settled on a proposal to let a 45-day response deadline pass without comment, thereby allowing the Seneca gambling compact to take effect automatically.
"I have no doubt that everyone in the department said "No way' " to the Senecas' eventually sharing 25 percent of slot machine revenues with the state, said Wayne R. Smith, who was deputy assistant secretary of Indian affairs at the Department of the Interior until June. "That was always our internal position."
While bureau officials have been ordered not to discuss the matter with reporters, they have told Smith and other Indian gambling experts that they are upset about the Seneca decision.
Smith and those other sources also said Michael Rossetti, a Buffalo native who serves as counselor to Norton, played a key role in getting the compact approved.
Months ago, Rossetti first suggested letting the New York gambling compact take effect automatically, said Smith, who was fired in June amid controversy over the official recognition of a California Indian tribe.
Rossetti acknowledged mentioning an automatic approval as a possibility to Norton, but denied that he lobbied for it.
"On every one of the secretary's decisions, I always run through the options," he said. "Other people talked about the "deemed approved' option as well."
Before joining Norton's staff in early 2001, Rossetti had an $84,585-a-year job as Erie County's attorney fighting the Seneca Nation's Grand Island land claim. For that reason, Rossetti told The Buffalo News several months ago that he had recused himself from the Seneca gambling issue.
Rossetti - Norton's point person on Indian gambling issues - said he later got Justice Department clearance to work on New York land claims. He said that clearance made him feel comfortable about getting involved in the Seneca Nation's plans to open a casino in Niagara Falls by the end of this year and in Buffalo later.
"Mike Rossetti is a local guy who knows Western New York," said State Sen. George D. Maziarz, R-North Tonawanda. "I've heard the same thing, that he was helpful."
Sources said Rossetti was helpful in pointing out a provision in the 1988 Indian Gaming Regulatory Act that might be seen as a compromise.
Norton let time expire
That law gives the secretary of the interior 45 days to approve or disapprove Indian gambling compacts once they are submitted. But if the secretary fails to act within those 45 days, "the compact shall be considered to have been approved by the secretary," to the extent that it complies with the law.
Norton followed that path exactly, allowing the Seneca compact's 45-day deadline to expire.
Before working for Erie County, Rossetti served as a top aide to State Attorney General Dennis C. Vacco, a Republican elected with Pataki in 1994 but ousted in 1998.
Even critics of the Seneca compact said Rossetti is a well-respected lawyer whom Norton hired because she knew him for his work on the national tobacco industry settlement, not because of his political connections.
Nevertheless, sources said political considerations came to play a role in the federal decision on the Seneca compact. Rossetti acknowledged that Pataki has met with Norton twice in the past two years.
"The two visits were courtesy calls," said Jennifer Farina, a spokesman for Pataki. "They did not discuss the compact."
"Comity" between players
Smith said, though, that it's clear that Pataki has an advantage in getting the compact approved: the typical "comity" between a Republican governor and a Republican administration in Washington.
"The bottom line is: Anything Pataki wants, Pataki is going to get," Smith said.
Rossetti contended, though, that Interior Department officials keep political considerations out of their decision-making process.
Asked why Norton accepted the automatic approval, Rossetti said Norton would explain her rationale in an upcoming letter.
Pataki had one big obstacle to getting Interior Department approval for the Seneca gambling compact: staffers in the bureau's Indian gaming management staff.
That office, headed by veteran Indian gambling expert George T. Skibine, often opposes gambling deals that give large shares of casino revenue to a state government. And just last February, the Interior Department rejected the Jena Band of Choctaw Indians' proposal for a casino in Louisiana, which would have given the state 15.5 percent of casino profits.
Sources who have talked with Bureau of Indian Affairs officials said those staffers think the Seneca deal is even worse for the tribe.
"They're giving up 25 percent and they're not even getting anything for it," said a lawyer who had talked to bureau staff. "The staff people over at BIA are very concerned about that."
Given that Western New York racetracks will have video lottery terminals, federal officials are disturbed that the Senecas aren't even getting exclusive rights to gambling in the region - which is just what other tribes bought when they agreed to give casino money to other states.
Skibine denied that he opposed the Senecas' revenue-sharing proposal.
"There's always a concern when there is a percentage going to the state, but (the state and the Senecas) responded and satisfied my concern," he said.
"I speak for the office here," Skibine added, conceding that some staff members may have disagreed with the Seneca's plans to share money with the state.
Skibine expressed the concern about revenue sharing in a letter to Pataki and the Senecas.
"We responded to their questions, but we never heard one way or the other whether we satisfied all of their concerns," said Barry Brandon, an attorney for the Senecas.
For his part, Rossetti said he felt "blindsided" by bureau staff who opposed the 25 percent revenue share, but never actively fought the proposal.
However, Rossetti added, "I'm not surprised that people have a philosophical objection to revenue sharing."
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