Ho-Chunk Nation bankruptcy overstated

David Melmer
5/25/05

BLACK RIVER FALLS, Wis. - As reported in the media, the immanent demise of
the Ho-Chunk Nation has been overstated, tribal sources said.

An audit report issued last October instructed the tribal leadership to
make changes in the way it did business or face bankruptcy.

Changes have been made and more are on the way which, claims a tribal
official, will alleviate any more financial woes.

It was no secret that the nation was in financial turmoil following poor
budget procedures, overextended expenses and changes in casino operations
which left the nation with lower revenues and more expenses.

One year ago, Ho-Chunk President George Lewis hired a Milwaukee accounting
firm to audit the nation's books. Lewis, a former tribal legislator, when
elected in 2003 knew that something was wrong with the business side of the
nation, and used that as part of his campaign platform.

The result of the audit by Virchow, Krause & Co. was bleak. According to
the audit report the nation erased a $21 million surplus in 2001 to create
a deficit of more than $100 million by 2004; and a $60 million reserve fund
was also depleted, the report said.

Lewis admitted that poor budgeting practices lead to the depletion of the
surplus and reserve accounts. "Some changes have been made and others are
under way, others will be assessed later," Lewis stated.

"There have been changes in the spending process," said Tracy Littlejohn,
nation spokesman.

"Many statements are misleading and the outcome is only relevant if changes
are not made," she said.

A secretarial election will be set for later this summer or fall to offer
members a chance to change the constitution that would allow veto power for
the president and take the businesses out of government control. The
current constitution is only 11 years old and is still undergoing change,
Littlejohn said.

"The nation would like to announce that the areas deemed problematic have
been and continue to be assessed in regards to sustain-ability and
determining which recommendations are the most feasible," said Lewis in a
prepared statement.

Because of the downturn in revenues, a per capita payment to the tribal
membership was reduced from $3,250 to $2,280. Littlejohn said the per
capita payment was distributed as budgeted.

Littlejohn emphasized that the financial picture looked bleak because the
nation made the decision not to suspend or cut any of the programs for the
tribal members.

The Ho-Chunk Nation maintains and finances a medical clinic at Black River
Falls, the home of the tribal offices. Littlejohn said contract work has
been vastly curtailed in the attempt to save funds. The report pointed out
that medical expenses were underestimated by $13 million last year.

The Ho-Chunk also finance a large legal department that has been active in
litigation procedures over the years.

Business expansion also led to the depletion of funds, with a land purchase
at a cost of $20 million for a casino in the Chicago area and the need to
put $60 million in escrow to cover the first two years of revenue the state
requires.

In 2003 casino revenue sharing with the state jumped from $8 million to $30
million a year. Negotiations with Gov. Jim Doyle allowed the Ho-Chunk to
increase the number of slot machines in exchange for the increase in
revenue given the state.

The nation suffered a revenue drop from the estimated $130 million profit
in the 1990s to $100 million last year. Lewis said all indications show
that the revenues will be up this year.

Littlejohn said that a decision was made to change the slot machines from
coin-operated to ticket in - ticket out machines. She said it took some
time for the public to accept that change, therefore revenues suffered. The
new system is now working, she said.

The Ho-Chunk Nation started in business with a smoke shop more than 25
years ago, and in the late 1980s opened its first casino.

The nation now owns Ho-Chunk Casino, Hotel and Convention Center in
Baraboo, Wis., the largest of its four casinos with 2,500 slot machines,
five restaurants and a 315-room hotel; Rainbow Casino in Nekoosa, Wis.;
Majestic Pines Casino at Black River Falls; and DeJope casino at Madison.

The nation also owns five convenience stores and a bottled water company,
and it recently purchased a soccer complex in Illinois. Tribal housing
construction and infrastructure maintenance and construction are all under
the control of the government.

The Ho-Chunk Nation has no reservation, but claims all of southern
Wisconsin, northern Illinois and part of eastern Iowa as its homeland. The
6,400 tribal members reside mostly in District V, which covers the entire
nation. A large number reside in Milwaukee, Chicago and the Twin Cities in
Minnesota.

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