By Sean P. Murphy, Globe Staff, 12/16/2000
alling the Indian gaming industry corrupt, two members of Congress
yesterday called for a congressional investigation into the rapidly expanding
$10 billion industry, including the profits taken by some non-Indian casino
managers and the process for approving tribes for lucrative gaming privileges.
"The whole thing looks completely and totally out of control," said US
Representative Frank R. Wolf, Republican of Virginia. "When you look at it,
you find a corrupt process here, and we need to change it. I will be asking
the new secretary of the interior, whenever the new appointment is made, to
look at the whole process and to clean house."
Wolf said he was reacting to a series of articles published in the Globe
this week that portrayed the Indian gaming industry as benefiting only a few
tribes and their early financial backers, while the overwhelming majority of
Indians received little or nothing.
The series pointed out that the financial backer of the Mohegan Sun casino
had a little-known side deal providing at least $430 million above a
congressionally established limit, for a total gain of more than $800 million.
"It's gone beyond the point of helping Indians, to the point where the
process is very corrupt and the way casino facilities are run is very
corrupt," said US Representative Christopher Shays, Republican of Connecticut.
"I have no confidence whatsoever that people are playing by the rules."
Shays added: "It's pretty clear the players in this process are playing at
the very edge, and they are in fact getting away with a lot. And they are able
to do it because they have access to huge financial resources."
On the issue of non-Indians profiting from the casinos, Shays said: "Indian
tribes are basically at the mercy of speculators who get to the tribe when
they have very few resources of their own and when the speculators can almost
write their own ticket. It's a license to print money. It's very unsettling to
me."
With enormous profits at stake, shrewd investors have scrambled to cement
ageements with groups claiming to be Indians and seeking the right to open
casinos by getting the federal government's recognition as sovereign tribes.
This situation has bred widespread skepticism about the tribes' motives
and, in many cases, their authenticity. With hundreds of millions of dollars
in political contributions and lobbying fees in play, the relatively few
government officials responsible for Indian gaming have come under enormous
political pressure.
The Globe series also highlighted the almost complete lack of government
oversight of casinos already allegedly infiltrated by organized crime.
Shays said he is particularly frustrated by the lack of hard information,
because sovereign tribes can keep many financial matters confidential.
"You just don't know what role money is playing in all this, because you
don't know how much tribes are spending on lawyers and law firms that are
politically connected," he said.
Wolf said the cash contributed to politicians and political parties has
blunted serious investigation.
In terms of revenues, the Indian gaming industry is centered in the wooded
hills of Eastern Connecticut, where the Foxwoods and Mohegan Sun casinos gross
more than $2 billion a year, or more than $1 million for each tribal member. A
dizzying number of new groups is seeking a chance to operate tribal casinos.
According to a Globe analysis, the high earnings in Connecticut compare to
gross gaming income of only $167 per member of tribes in South Dakota, per
year. Overall, Native Americans remain the nation's least healthy and most
impoverished group.
"The government should do more on a legitimate basis to help Indians," Wolf
said, even while acknowledging a long history of official injustice toward
Indians.
The Supreme Court first approved Indian gaming on reservations in 1987 as a
means of economic development. A year later, Congress passed the Indian Gaming
Regulatory Act, which tried to ensure that most profits remain in Indian
hands.
To attract capital and business know-how to reservations, Congress allowed
outside investors to receive up to 30 percent of net gaming revenues for five
years, or up to 40 percent for seven years in exceptional circumstances.
But in the instance of the Mohegan Sun casino, the tribal leadership signed
away extremely valuable rights to investors when they were nearly penniless
and were relying on the advice of lawyers apparently paid by those investors.
The Mohegan leaders gave the investors - Trading Cove Associates, headed by
Sol Kerzner, creator of the Sun City casino and resort in South Africa - 40
percent of gaming revenues, but also exclusive rights to develop and manage a
hotel at the casino site.
The hotel deal never got scrutiny from the National Indian Gaming
Commission because of a disputed interpretation of a portion of the
regulations. The rights were later bought back from Kerzner and Trading Cove
for a whopping $430 million.
Kerzner has declined to comment, but a representative of Trading Cove,
Leonard Wolman, has defended the more than $800 million it has taken from the
Mohegans as fair compensation.
While acknowledging the high price paid to Trading Cove, Mohegan leaders say they are satisfied with the deal.
But Frank Cloutire - spokesman for the Saginaw Chippewa Tribe of Michigan, which runs the $350 million-a-year Soaring Eagle casino - said his tribe has never used an outside management company.
He criticized Trading Cove for taking advantage of the Mohegans - and the Mohegans for giving up too much.
"I think Congress has an obligation to investigate this, because it falls far short of what Congress envisioned," Cloutire said.
He urged tribal members everywhere to get involved and scrutinize deals made by their leaders.
