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Gauntlet of Parasites: The Seamy Side of Tribal Gaming Business

Jack Fiander
5/23/11

Nearly a quarter century after enactment of the Indian Gaming Regulatory Act, one must wonder why Indian country remains among the most impoverished communities in the nation.

Indian gaming has spawned a host of parasitic industries. As a young lawyer, I was amazed at the speed with which many major law firms throughout the country created an "Indian law section" or "Indian gaming section" within their firms following enactment of IGRA. Often, one of my fellow rookie Indian lawyers would be hired, at meager pay for meager duties, and featured prominently in the firm’s brochure—as if to convey the message that, by selecting this firm, a tribe was furthering the cause of native people. Imagine my consternation after several years as an apprentice Indian law practitioner when I realize that all I really had to do was quadruple my hourly rate and announce specialization in Indian gaming.

Other businesses quickly realized the benefits of this strategy, and took it one step further by adopting business names to attract unsuspecting tribal clients. All sorts of "sovereign nation," Indian First, insurance, financial, investment management, and consultant firms sprang up and offered their services to Tribes and tribal casinos. Except for their title, such companies rarely had Indian owners or investors. Congress’ idea behind Tribal gaming was to "promote tribal economic development, tribal self-sufficiency, and strong tribal government." Very little of the money spent upon such firms or entities, however, trickles down to Indian country.

Numerous trade magazines tout and display the paraphernalia of Tribal gaming, as though whichever tribe constructs the most extravagant building has the least social or economic ills among their people. Like many issues in Indian country, there is a reluctance to engage in a healthy discussion, and thereby address, some of the problem areas associated with tribal gaming. Building a healthy reservation economy requires strong policies designed to trap revenues so that they are recirculated in the local reservation economy. Granted, revenues of tribal casinos are generated in Indian country. However, the receipt of such funds is only half of the solution if the majority to the gaming entity's expenditures are paid out to foreign entities located far outside Indian country with no real ties to the reservation. Here are some thoughts for addressing some of the problem areas associated with Tribal gaming.

Infiltration

Like any business, your tribal Casino probably advertise to fill upper management employment positions. Have you been infiltrated. Infiltration occurs when you unwittingly hire an official or employee who may still secretly be on the payroll of a vendor providing goods or services who simply desires to capture your account as a customer. For example, your casino hires a food and beverage department manager who then sterrs you in the direction of procuring supplies from a particular supplier. Even worse, perhaps you hire a director for your electronic gaming machines department and months later you realize you’ve been persuaded to switch completely over to products manufactured by one particular company. You’ve been infiltrated.

Golden Parachutes

Many tribal casino management staff members are uncomfortable with the pure form of democracy prevalent among Indian tribal communities. Opinions are freely exchanged, grievances are freely petitioned for. Recalls of officials is not uncommon. As a result of this perceived insecurity, it is tempting for senior management staff to do business with particular vendors as a way of currying favor. Throw business, through the procurement process, their way and, if things go wrong employment-wise, there is a safe haven of temporary employment.

To avoid your staff from feeling the need to create golden parachutes, hire qualified staff and pay them well. Persons who are well paid and feel safe are immune from temptations. Create established procurement policies which must be followed without exception. Once there is too much discretion to select who provides goods or services to your establishment, the door is open.

Contracts

Rarely, if ever, should you simply sign the other party’s boilerplate contract. Tribal casinos are enough of an economic power that if a company wants your business they will be willing to negotiate terms. Far too often have I been asked to undo contracts in which a casino agreed in a contract that the terms would be subject to the laws of some far distant state, or one with “automatic rollover” provisions and complicated termination procedures such that in order to cancel the contract you must essentially buy out the remaining years of the contract. Develop your own boilerplate for your protection and use it.

Having signed a contract with a vendor or entity you assumed would be the one actually providing the service, you may notice that someone else is actually doing it, perhaps at a level of service below what you expected. To avoid this, make sure the contracts signed on behalf of your gaming entity are not "assignable." If they are, the provider you selected may simply subcontract, or assign, the contract’s performance to someone else, probably at a discount. Basically, it is a form of skimming, and the company you thought you were using was just a broker. You’ve just been had.

"Reimbursable Expenses"

Many consultants providing services to tribal casinos know how to play this game. You’ve made a selection based upon a firm’s reasonable hourly rates, and later regret it when invoices for their actual out of pocket reimbursable expenses come in claiming reimbursement for extravagant meals or business meetings, newspapers, latte’s first class travel and hotels. Combat this problem by developing written reimbursement rates or limits as to what your casino will pay.

Kickbacks

Unfortunately, these things still happen from time to time and are extremely difficult to discover. If you suspect that your casino management is selecting or recommending a particular general contractor in return for consideration, you are unlikely to find direct proof. The compensation may be deferred for years down the road so no audit will disclose it. Your only resource is to perform regular and thorough background checks, which raises another issue.

Background Checks

Most employers do a thorough background check once, at the ime of hiring. Thereafter, not so much. As a lawyer, I am constrained to preserve the secrets of clients. Therefore, I can only look with alarm at the numerous of my former criminal defense clients, many with suspended drivers’ licenses or felony convictions driving a tribal vehicle or handling funds. Make sure your Human Resources department updates background checks regularly.

Risk Takers

Persons who frequent gaming establishments are often by nature gamblers or risk takers. Indian tribal casinos are perceived as deep pockets. As such, they are vulnerable to patrons who slip and fall "accidentally on purpose" or spill hot coffee on themselves. Often, all they want is a coupon book or some two-for-one tickets to the dinner buffet. Some, however, are capable of feigning injury in the hope of hitting the jackpot in a major way. Handle this one by having a competent legal team modeled, if you wish, after the fabled "Disney" lawyers who are rumored to have never lost a case or, if a matter is settled, it done quickly, fairly and in strictest confidentiality because once word gets out that your establishment is an easy mark, the floodgates are open.

As you can see, building a reservation economy is a difficult task. At the same time you are attempting to improve the lives of your people, there are also people out there who desire your business for their own purposes. Increasing your casino’s revenues is only one measure of success. To build an economy, you must also endeavor to make sure your expenditures are (to borrow a phrase from the Indian Self-Determination Act) “to the greatest extent feasible” spent locally. All of that far away travel to Las Vegas, Reno or elsewhere does nothing to benefit the businesses (restaurants, hotels, etc.) in your community. It creates a mini version of the fiscal crisis the United States economy found itself in when the Government realized that too many U.S. dollars had gone to China rather than spent purchasing from or employing its own people. Utilize trainers who are willing to travel to your location. That way, the expenses they incur will benefit your community, not just theirs. If your tribe has a TERO (Tribal Employment Rights Ordinance), follow it. It’s there for a reason.

Jack Fiander (Yakama/Chippewa-Cree) is an attorney and founder of Sacred Ground Legal Services, which represents tribal clients on a nonprofit basis. He has practiced law in Indian country since before IGRA was enacted.

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opechanga's picture
Let's not forget the tribal officials that use credit cards to take extravagant FAMILY vacations. Nor the corrupt activities since casinos opened, such and disenrollments and moratoriums and banishment for the egrigious behavior of disagreement. Tribes in CA have stolen over $350 MILLION dollars from rightful tribal people. Google Original Pechanga's Blog for more, or visit tribalcorruption.com There will be a protest at the Tribal Leader's Forum on June 2 at the Pechanga Resort and Casino. Pechanga is a tribe that practices apartheid on the reservation
opechanga
snoqualmie9's picture
I’m a Snoqualmie Indian enrolled since birth in the Snoqualmie Indian Tribe in Washington State. In 2008, myself and 8 other tribal members were banished from our tribe in an illegal political move. We took the illegal banishment to Federal Court where our permanent banishment was over-turned in the precedent setting case – “Sweet vs Hinzman”. That case proved a tribal council can violate their tribal citizens civil rights without any penalty and they don’t even have to follow a Federal Judge’s order….they can simply scoff at his decision. They refuse to allow us back into our tribe and no one will enforce a Federal Judge’s order. Our Tribe’s Federal Recognition is barely a decade old. Before the ink was dry on our recognition the talks of a casino grew loud. Before we even knew what was happening we were in an agreement with a company called MGU to build Casino Snoqualmie. This unwise decision and one we fought against proved very costly. In 2003 MGU bought the property where Casino Snoqualmie now sits for $3.8 million. In 2006 we paid $50.8 million to purchase it back because they couldn’t secure a gaming license– $47 million dollars profit on a $3.8 million investment in just 3 years?? Even Warren Buffet would be impressed. Our tribal administrator, called it a “tough pill to swallow.” I call it something very different and that is where the problems began which lead up to our banishment. $47 million could buy a lot of health care and education for our people……where did the money go???? This is the true “Seamy Side of Gaming”…the destruction of our culture and the blatant theft and corruption that is allowed to flourish. P.S. Two months ago our tribal council approved a $14 million buy-out to the original CEO of Casino Snoqualmie before his management contract was due – what other industry pays a contract that is not complete and calls it an “advance payment”? Google Casino Snoqualmie…..these facts are available to the public.
snoqualmie9
chrisrichardson's picture
I'm afraid to admit that your dark scenarios may be more prevalent in Indian gaming than we would like to admit. You forget to mention that Indians are likely to "keep it quiet" to avoid embarrassment or public scrutiny. This is difficult but not impossible even in the highly regulated Indian gaming environment. In short, it all starts ends at the top -- from Tribal governance and casino management. I would add that a strong non-political TGA, a reputable CPA firm and a good vacation policy are helpful. Strong non-political TGA. The ability to lose your badge to the local gaming authority is a strong deterrent to white collar crime. The loss of a gaming badge usually means the end of a career in gaming. Reputable CPA firm. Through the regular annual audit, most of these seamy schemes would not be detected. However, an experienced auditor will tell you whether your internal controls (esp, checks & balances over cash transactions)are weak or strong. As a CPA with operational experience in Indian gaming, it would take me about 1 day to get a sense of the quality of internal controls. Strong Vacation Policy??! Top management and persons in charge of cash transactions and recording of cash transactions should be encouraged to take at least 1 week straight 7 days vacation each year. Many schemes depend upon an otherwise "hard working" employee who must show up for work every day to conceal their dishonesty. This is just one example of many internal policies that can help prevent and detect fraud. The most alarming element of this piece is that Tribes are allowing casino managers to sign contracts without Tribal attorney review or Council resolution. It takes a lot of time, but we --in our Tribal Enterprise group have an attorney review EVERY contract and obtain a resolution over a certain $ threshold or over a certain term.
chrisrichardson
chico2dc's picture
BIA says disenrollment is a Internal tribal Matter(hands off) Interior says disenrollment is a Internal tribal matter> US courts have held that disenrollemtn is a Internal tribal matter. Myself..I believe it is a internal tribal matter. Only recourse is a civil war...seriously. thats what happens in Nations with internal conflict. Either the US takes its Indian civil rights responsibility serious and get involved in the injustices of disenrollment or....stay out of Tribal business all togather
chico2dc
susanbradford's picture
This is an excellent article! Unfortunately, Indian Country has become extremely parasitic. Tribes were established by oil/mineral companies and various interests associated with the industrialists to enrich themselves and their associates. Indians were an after thought, or rather a pretext used to solicit funds from the federal government. Most of those funds are misappropriated. Many Indians, in turn, wind up disenrolled and/or oppressed on their own reservation while the federal government turns a blind eye to their plight. Not to belabor a point, but notice how this parasitic behavior has gotten worse since the removal of Jack Abramoff, whom the tribal establishment accused of betraying and victimizing the Indians. In truth, he was obstructing their interests. He was removed so that the pillaging could resume -- through a campaign of lies and distortions, reflecting the criminal, lawless culture that has taken over Indian Country. Susan Bradford Author, Lynched! The Shocking Story of How the Political Establishment Manufactured a Scandal to Remove Republican Super-lobbyist Jack Abramoff from Power.
susanbradford