December
23, 2002 Time
Magazine Playing
the Political Slots PART
TWO: How Indian casino interests have learned the art of buying influence
in Washington 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. MONEY
TALKS 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. CALIFORNIA
SCHEMING 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. NIGHTMARE
NEIGHBORS 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. Com-menting 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 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, ac- knowledged 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. MONEY
TALKS 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. CALIFORNIA
SCHEMING 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. NIGHTMARE
NEIGHBORS 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. Com-menting 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."
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