Let the games continue: Beware the wrath of the hacked-off backer

Jim Adams
4/28/03

WHITE PLAINS, N.Y. - Hell hath no fury like the financial backer scorned. As if gaming tribes didn't already know this lesson, two blooming controversies are teaching it anew. The firm now pairing with the Cayuga Nation for a Catskills casino is still smarting over its dismissal three years earlier by the St. Regis Mohawk Tribal Council. Even though its lawsuit in the case isn't going its way, the company is using the forum to make fascinating charges about the behind-the-scenes manipulations.

And over in Connecticut Donald Trump, no stranger to Indian controversies is threatening to make a scene of his own. It appears he might be the odd man out in the federal recognition of the Eastern Pequot Tribal Nation.

The fight in New York state came back in the headlines when the group pushing an Indian casino at the Monticello Raceway in Monticello, N.Y., recently signed a surprise deal with the Cayuga Nation. Under the name of Catskill Development, the group had signed a deal in 1995 with the previous Tribal Council at the St. Regis Mohawk (Akwesasne) reservation on the New York-Canada border, around 200 miles north of the racetrack. The Catskill group was offering to put some 30 acres at the racetrack into federal trust for the tribe. Its application had just received the required BIA approval in April 2000 when the new St. Regis council abruptly canceled its management contract and switched to the gaming giant Park Place Entertainment.

The new St. Regis council said the old one had kept everyone in the dark about its business partners, and new information raised doubts whether the Catskill group could even qualify for a gaming license. (Apparently the doubts were justified; one set of investors was subsequently indicted for fraud, another backing company ran three years of losses, and the group went through a total reorganization and recapitalization, shedding the members under the legal cloud, before it signed up with the Cayugas.)

But the Catskill group accused Park Place and its since-deceased president Arthur Goldberg of improperly interfering in its contract with St. Regis. After a long-running suit in U.S. District Court, the presiding judge decided the case had no merit, but the Catskill group hasn't given up. Not only is it appealing the dismissal, it has unearthed tapes of conversations between Park Place officers, the Mohawks and their gaming management that it thinks should cause the District Court judge to reopen the case.

Catskill attorney Thomas Puccio, a noted trial lawyer in his own right, filed a brief in mid-March that at the least makes interesting reading. Some of the argument is highly colored, as you might expect from the attorney who got the notorious society figure Claus Bulow off the hook for the alleged attempted murder of his wife. But there is one shocking nugget. Puccio's brief claims that Park Place conspired with the manager of the Mohawks' existing, then troubled Akwesasne Mohawk Casino in the reservation capital Hogansburg to pressure the tribe into breaking the Catskill contract.

According to the brief, the new St. Regis council was troubled by the demand from Park Place for an exclusive casino deal in the Catskills. The carrot offered by the casino giant was a $3 million loan to help straighten out the financial fiasco at the Hogansburg casino. The stick, according to Puccio's interpretation of one taped conversation, was a deal with the Hogansburg casino manager, Presidents Resort Casino to create a crisis on the reservation by holding back paychecks.

The tape captures a Feb. 16, 2000 conversation between Ivan Kaufman of Presidents and Clive Cummis, the Park Place corporation counsel. Kaufman doubts whether the Tribal Council will drop the Monticello deal, but he continues: "But you've got to remember the pressure on them with how we're squeezing them in Akwesasne is huge. I mean they - you know, I have kind of delayed their payrolls and

CLIVE CUMMIS: Yeah.

IVAN KAUFMAN: - slowed it down so badly that, you know, they're looking at Arthur [Goldberg] as their savior."

This on the face of it is a shocking betrayal of trust and helps explain why, by Kaufman's own account in a later tape, the Tribal Council came to "hate" him. We would like to get an explanation from Kaufman or Park Place but could not get a detailed reply by press time.

(Robert Stewart, Park Place senior vice president for corporate communications, said he understood that his company's lawyers had not yet filed a reply to the brief. Perhaps that document will give a fuller picture of Kaufman's claims.)

But what goes around, comes around, and the apparent temporary alliance between Park Place and Presidents ended very quickly. Kaufman was purged from Akwesasne Casino, and the Tribal Council reports that its returns have sharply improved under tribal management. Park Place and the former Akwesasne Casino managers have fought out a separate lawsuit over the canceled contract.

Trump, the Atlantic City casino mogul, made a sideshow appearance in the Mohawk gaming saga, but now he is starring in his own spurned-backer performance over in Connecticut. The most recent federal recognition action put together two once feuding Eastern Pequot groups who are making impressive progress now in reunification. But they have a problem from the days when they pursued separate recognition petitions.

Each petition had a separate financial backer, each hoping very openly for a share in a future casino as his reward. The petition process in Connecticut is costing upwards of $10 million, so each backer made a substantial outlay, and one of these was Donald Trump. As the backer of the smaller group, the former Paucatuck Eastern Pequots, Trump apparently lost out in a recent vote of the unified Eastern Pequot tribal council. Now he is threatening a messy lawsuit of his own, including a challenge to the sovereignty of the Eastern Pequots.

This talk could be part of a war of nerves in advance of negotiations, a tactic Trump does well. The Eastern Pequots are certainly hoping to resolve this tricky situation with good will. Given the circumstances of the separate recognition petitions, it's hard to see how this game of musical chairs could have been avoided. But it underscores the moral for any tribe involved in gaming.

Financial backers are necessary, and not even necessarily evil, particularly for a tribe with a costly recognition petition. In untried conditions, they will ask a high up-front return, just as American corporations might in a Third World investment. The breathless exposes in media like TIME Magazine miss this point. But tribal governments have to realize that contracting with an outside backer requires the utmost care. The tribes have to know everything they can about the financial, legal and ethical background of a potential business partner, and it would be in everyone's interest to share this information with their membership. A disadvantageous deal with less than the most upright people can be guaranteed to haunt everyone down the road.

These two cases show just how much trouble a backer scorned can cause, and they are hardly the only examples to be found in Indian country.

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