Gaming Guru

Bits and Pieces from Indian Country - June 2006

As of 2004, Indian casinos accounted for almost half of all gambling revenue in California -- an estimated $5.78 billion. About $4 billion was wagered on horse racing, $3 billion was spent on lottery cards and $655 million was bet at card clubs. -- Sixty-six of California's 108 federally recognized Indian tribes have compacts to run casinos, and 61 are already operating gambling centers. Another 67 tribal groups are seeking federal recognition and thus the potential to run casinos. California's Indian casinos earn more money than tribal casinos in any other state. As of 2004, they accounted for 58,100 gambling machines, 1,820 table games and extensive bingo operations. David Lazarus, San Francisco Chronicle, 6-4-06

National Indian Gaming Records show that Oklahoma has significantly more casinos than do surrounding states. The organization's records indicate that Oklahoma has 83 tribal gaming centers, 25 percent more than five years ago. Fewer than 10 of the state's 39 federally recognized tribes don't operate at least one casino. KTEN News, 5-2-06

Competition is becoming more and more apparent in Indian country. There are the obvious competitions, such as the one between Mohegan Sun and Foxwoods. There the battleground is slot machines, hotel rooms, entertainment and the glorious amenities that thousands of slot machines doing between $300 and $400 a day in revenue can fund.

Foxwoods Resort Casino opened a new slot room Thursday, hoping the new machines will give the casino a larger share of the slot players market. The casino opened 650 new machines in the Rainmaker Casino, most of them penny slots and progressive games…Mohegan Sun, Foxwoods' closest competition, regularly shows more profits in monthly slot reports…In the current fiscal year which started in July, Mohegan Sun has posted $62.5 million more in earnings with an average of 800 fewer machines. Brian Wallheimer, Norwich Bulletin, 5-19-06

The other competition - not quite so obvious to non-Indians - is the competition for the ability to operate a casino in a given location. That battleground produces different tactics. In Oregon and Wisconsin, the battleground is the media and the halls of the legislature. The Confederated Tribes of Grand Ronde very much want to prevent a rival tribe from Warm Springs from opening a casino at Cascade Locks, a move that would capture a tourist market and cut into Grand Ronde's market in the Portland area. The campaign has centered on pointing out that some politicians, "the bad guys," are supporting the new casino, which besides being bad on its merits is worse because it is not located on a recognized reservation. However, like the tribes in Connecticut, the tribes fund their media campaigns with slot machine cash. It isn't likely that Charles Fey anticipated the impact of his invention in 1897. No one could imagine the impact his invention would have on the gaming world or on the political world for that matter.

Worried by recent polls and alarmed at TV ads attacking him, Gov. Ted Kulongoski's subdued re-election campaign is hitting back in the final days before the election. The campaign released its first TV commercial Tuesday, and it's not one of those soft-focus, feel-good ones…The Confederated Tribes of Grand Ronde last week shoveled $205,000 into a new ad campaign that rips into Kulongoski on education and health care as well as his support for a competing casino proposal at Cascade Locks. Harry Esteve, Oregonian, 5-10-06

The central issue is basically the same in Wisconsin. One tribe is lobbying for a casino in a new off-reservation location, and another is fighting the move to protect its market. The battleground is again the media and the legislature. The Forest County Potawatomi tribe is trying to keep the Menominee tribe on the reservation. The state legislature helped the Potawatomi cause by passing legislation requiring all Indian gaming compacts and agreements to be approved by the legislature. The governor, however, does not agree and believes that power lies with the governor.

The Forest County Potawatomi tribe launched a new radio ad Wednesday urging Gov. Jim Doyle to sign a bill that would give the Legislature a say in approving off-reservation casinos. The ads are running in Milwaukee and other major media markets around the state for two weeks and are aimed at pressuring Doyle to change his mind on the bill…Doyle's communications director, said that Doyle would veto the bill. To do otherwise would be in conflict with federal law, Leistikow said. The Indian Gaming Regulatory Act requires a governor's concurrence in a federal decision to allow an off-reservation casino but is silent on whether a Legislature may also be involved. Though the ad doesn't mention it by name, the Potawatomi tribe's big concern is a proposed $808 million casino complex in Kenosha for the Menominee tribe. Steve Schultze, 5-18-06

Indian gaming has become so competitive that any off-reservation casino in a state that already has Indian gaming is almost certain to have other tribes as its main opponents. In the meantime, Congress is still debating bills that would limit or eliminate the opportunity for any off-reservation, especially urban, casinos.

As Congress is working on that and other refinements of Indian gaming, the National Indian Gaming Commission is attempting to get ahead of Congressional oversight and is publishing regulations that they hope will close some of what Congress may view as loopholes that need legislative closure.

Tribes will have to certify every year that their casinos are operating within the law as part of a new rule developed by the National Indian Gaming Commission. Last Friday, NIGC Chairman Phil Hogen released a working draft of the proposed facility licensing regulations. He said tribes have until June 30 to submit comments as the agency moves forward with the rule-making process. "The intent of these regulations is to provide a method of identifying the Indian lands on which tribes are gaming and assuring that the environmental and public health and safety standards are adopted by each tribe," Hogen wrote in the May 12 letter. Indianz.Com Casino Stalker, Indianz News, 5-19-06

The NIGC seeks to address a narrow but important issue in Indian gaming. The new Part 546 would draw a clear line of demarcation between Class II bingo, lotto, "other games similar to bingo," pull tabs or instant bingo played primarily through "electronic, computer or other technologic aids" and Class III "facsimiles of any game of chance." Advancements and improvements in technology have blurred the distinction, made it difficult to classify these games when played electronically, and caused confusion for tribal operations, tribal & Federal regulators, equipment manufacturers, and states. The second notice proposes changes to the definition of electronic or "electromechanical facsimile of any game of chance." This change to the definition clarifies that facsimiles of bingo are not permissible Class II games under IGRA. Press release, 5-26-06

The Seminoles of Florida are always trendsetters. Among the first tribes in the United States to operate bingo, the first tribe to sue a state over the application of National Indian Gaming Regulatory Act, and always pushing the envelope with the types of Class II games the tribe operates, the Seminoles are not followers. Operating without a Class III compact, the tribe still built one of the largest gaming operations in the country. Now, a new phase: the tribe is challenging a contract that promised to make someone unduly wealthy in the tribe's eyes. The object of the tribe's suit is the Cordish Company of Baltimore, Maryland. The company is also the target of a suit by Donald Trump, who alleges the company unfairly unseated his company with the tribe. I wonder how the Donald feels about it now?

This will be an interesting case to follow. Tribes have often had to pay a very steep price for casino financing, and tribal casino financing is always complicated by the issue of trust land. By the nature of federal Indian law, all tribal casinos are located on tribal trust land, and that land cannot be used as security for a loan, and it cannot be encumbered in any way. Additionally, it is not a simple matter to sue a tribe over broken contracts or unpaid loans. The lenders, therefore, feel that with the increased risk they deserve a much higher return. In this case, the Seminoles agreed, that is, until they realized just how much money was at stake.

"The tribal leadership isn't taking this action because it is being greedy, but because it has a fiduciary duty to its members. Obviously, $1.7 billion or $2 billion is not reasonable." The Seminole Tribe wants a judge to break what it calls an "illegal and unconscionable' contract with the developers of the Seminole Hard Rock Hotel & Casino complexes, saying the deal negotiated by its leaders could cost tribe members $2 billion. The filing in Broward Circuit Court said developer Power Plant Entertainment has been paid more than $310 million in the two years since the tribe opened new casinos in Hollywood and Tampa. Power Plant is an arm of the Baltimore-based Cordish Company and Coastal Development. The tribe contends that Power Plant stands to make more than $2 billion over the first 10 years of the contract for "doing absolutely nothing.' Since the Hollywood Hard Rock opened in May 2004, Power Plant has "provided no services to the tribe,' the lawsuit said…the tribe will keep making payments of $18 million a month during the lawsuit. John Holland, South Florida Sun-Sentinel, 5-23-06

One certain outcome of the Seminole suit: it will cost other tribes that need financing more, and reinforce the belief that it is difficult to do business with Indian tribes. That doesn't mean that the Seminole position is unfair or unreasonable; it simply means that non-Indians will use it as justification for their beliefs. And the Seminole have bigger fish to fry at the moment as they try to force Governor Bush and the State of Florida to the negotiating table - something the tribe has not been able to do in the last 18 years.

But now, that is simply my opinion, isn't it?

Ken