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Regarding Gaming Compacts and Their 'Illusory Exclusivity'

Harold Monteau
9/21/12

The tribal-state gaming compact between the Mashpee Wampanoag Tribe of Massachusetts and the Commonwealth of Massachusetts, recently submitted to the Department of Interior (DOI or Secretary) appears to have bumped Montana (tribes treated like tavern owners) out of 1st place for the distinction for the Worst Tribal-State Gaming Compact in Indian Country. The Secretary of Interior should disapprove it outright, if not for the sake of the Mashpee Wampanoag, than for the sake of protecting tribes across Indian Country from state over-reaching; some might call it extortion.

The Mashpee Compact is a case study in how states attempt to create illusory exclusivity in exchange for extracting revenue sharing (a disguised tax) from tribes. In this case the state and municipalities are extracting what may exceed 25% of gross revenue over “all gaming” from the Mashpee, including from Class II. As a quid pro quo Massachusetts gives only what it is already obligated to give under the Federal Indian Gaming Regulatory Act (IGRA) and includes non-substantive concessions having to do with matters that fall far outside the scope of negotiations authorized by IGRA such as hunting, fishing, and water and land rights. The state ad nauseam claims to be giving Mashpee exclusivity while authorizing other casino gambling all over the state and the compact states that Massachusetts can still collect revenue sharing even if they authorize gambling near the proposed Mashpee Casino. It is as if the State believes that if it says exclusivity enough times in the compact that it starts to be real.

The State even attempts to restrict the Mashpee’s Class II rights and would allow only what is commonly referred to church bingo and would restrict the tribe to paper Bingo with severe day, time and prize limitations ($100). The State has hired the high profile Indian Country firm of Holland & Knight to shepherd the Mashpee Compact though the DOI approval process on behalf of the State of Massachusetts. Holland and Knight have represented many tribes in the gaming arena.

Tribal responsibility in the community of tribal nations aside, the Mashpee Compact violates the Indian Gaming Regulatory Act (IGRA) in so many instances I do not have enough space to list them all. As a general matter, the compact violates the purpose and spirit of the IGRA by transferring the intended befits of the IGRA over to the state and municipalities. The effective rate of “revenue sharing” in the agreement may add up to over 25% of all gaming revenue, including Class II. Assuming that the Financial Contract with its financier, Genting, calls for another double digit percent of its revenue for double digit years, the tribe comes out on the short end of the stick.

Additionally, the machinations which took place in Massachusetts that produced this unprecedented intrusion into Tribal Sovereignty were as unfair and as one-sided as when Bows and Arrows went up against Canons when Massachusetts was a Colony. Massachusetts treatment of its indigenous populations thereby has not changed much nor has its tactic of pitting one tribe against another. In passing the state law that authorizes casino gambling, Massachusetts Gaming Act (Section 91), the State intentionally attempted to exclude Mashpee’s’ sister tribe, the Aquinnah Wampanoag, from the compacting process by authorizing only one (1) Tribal Casino. Aquinnah Wampanoag is the only tribe in the state that actually has trust lands that qualify for gaming under IGRA and the Massachusetts Gaming Act. The Mashpee do not have trust lands. The State argues that the Aquinnah are banned from gaming by their Congressional Settlement Act (1987) even though the Aquinnah Settlement Act was preempted by the IGRA, which was passed the next year (1988) by Congress. Congress excluded several tribes from the effect of certain sections of the IGRA, so Congress knows how to exclude tribes from the coverage of general acts and it certainly didn’t exclude the Aquinnah from the benefits of IGRA.

Ironically, in attempting to leave out Aquinnah, the state may have unwittingly made Aquinnah the only tribe in Massachusetts that has Indian Lands under the definitions in IGRA and the Massachusetts Gaming Act, and thus the only Tribe entitled to a compact under the provisions of Massachusetts Gaming Act. Talk about getting trapped in your own backfire.

The Aquinnah Wampanoag recently intervened in the Federal Court case of KG Urban Enterprises v. Governor Duval Patrick, which is on remand from the 1st Circuit Court of Appeals. The case will potentially determine the constitutional validity of Massachusetts’ Gaming Act which has been challenged on the basis that it gives a constitutionally impermissible racial preference to “an Indian Tribe”. The intervention of the Aquinnah may very well save the state from having its Gaming Act declared unconstitutional. The Aquinnah, being the only tribe in Massachusetts that has “Indian Lands”, under both IGRA and the State Gaming Act definitions, becomes the only tribe that offers a basis upon which the state can argue that its Gaming Act gives a political status preference to a tribe as opposed to a racial preference. A political status preference could survive the constitutional challenge since it is supported by a federal act, the IGRA. The state has to accept the Aquinnah’s right to a compact in order to save its Gaming Act from being declared unconstitutional. The law of unintended consequences; the state law only authorizes a tribal-state gaming compact with the very tribe it tried to leave out, the Aquinnah Wampanoag.

One will not find a specific provision in the IGRA which authorizes states to request a revenue share from tribes. It’s not there. The concept that exclusivity can justify a substantial revenue share to the state was first articulated in the approval of the Mashantucket Pequot Gaming Compact with the State of Connecticut that included a 25 percent revenue share of only Slot Revenue to the state of Connecticut. The BIA Solicitor’s created the legal theory of the exclusivity quid pro quo, which may be implicitly authorized in the IGRA, in order to justify Connecticut’s 25 percent revenue share. The concept has justified numerous states imposing a de facto tax on Indian Gaming in the form of revenue sharing. Many states are now in violation of the exclusivity quid pro quo, having authorized other gaming in those states for other entities that compete with the tribal casinos that were supposed to have exclusivity. This renders the “exclusivity” that numerous states agreed to illusory or non-existent. By authorizing more and more privately held and state sponsored gambling while still demanding the revenue share from the tribes those states appear to be imposing a tax in contravention of the explicit prohibition in the IGRA. California and New York are the worst among them. I don’t think this is what Congress Authorized in the IGRA. The states appear to be taxing Indian Gaming.

California lost in the 9th Circuit Court of Appeals on the question of whether “illusory exclusivity and illusory state concessions” justified the taking of a 15 percent revenue share from Rincon Tribe. In the Rincon Band of Luiseno v. Schwarzenegger (2009) the court ruled that “The states demand for 10-15 percent of Rincon’s net win, to be paid into the State’s general fund, is simply an impermissible demand for the payment of a tax.” Here the Commonwealth of Massachusetts and municipalities will get 25 percent. For what? Massachusetts attempts to characterize as concessions the very matters that it is obligated to negotiate in good faith under the IGRA. Massachusetts also attempts to describe as a concession its willingness to bring closure to Mashpee Claims to land, water, hunting and fishing. Not only is this alleged concession a bit mushy but it looks more like a concession on the part of the tribe, not the state. The state further attempts to skirt the IGRA prohibition on taxation-by-compact simply by having the Municipality of Taunton enter into an Intergovernmental Agreement with the Mashpee under which the municipality extracts what amounts to another 3.5 percent of gross revenue and one time mitigation charges that will obligate the Mashpee to pay $27.62 per assessed $1000 valuation (sound like a tax). It further obligates the tribe to pay yearly for fire, ambulance, police protection, traffic mitigation and improvements and solid waste disposal, sewer and water (sounds like more taxes).

The DOI in the last decade has disapproved the Pinoleville Rancheria and Upper Lake Rancheria compacts with California that had similar provisions to the Mashpee Compact. The Assistant Secretary (BIA) found similar provisions to not be “meaningful concessions” and ruled that “gaming rights that tribes are entitled to under IGRA….cannot serve as consideration for revenue sharing; the consideration must be something separate than basic gaming rights”. While the Massachusetts grant to the Mashpee of some form of exclusivity might be found to be a concession by the Secretary, under Rincon and the Denial Decisions on the Pinoleville and Upper Lake Compacts, there would have to be substantial exclusivity in order for the Secretary to justify a 25 % revenue share for the Commonwealth of Massachusetts and its political subdivisions. It would be a stretch for the DOI to find substantial exclusivity where the state law authorizes substantial private gaming even in the region of the proposed Mashpee Casino. The exclusivity becomes even more illusory when the locale is within a couple hours drive from the two largest Casinos in the U.S., Foxwoods and Mohegan Sun. The exclusivity offered by Massachusetts is rendered even more illusory by the language in the compact that says that the State can still collect 15% even if it allows other gambling operations in the same region as Mashpee’s proposed Casino. This severely limited exclusivity man not be just illusory, it looks to be nonexistent.

As the 9th Circuit so elegantly put it in the Rincon case “no amount of semantic sophistry can undermine the obvious; a non-negotiable, mandatory payment of 10 percent of net profits into the State Treasury for unrestricted use yields public revenue, and is a tax.” I would say that the 25 percent revenue share proposed to be extracted from the Mashpee is more than just semantic sophistry, it is appears to be at the least a tax and, at the worst, a shakedown.

Harold Monteau is a Chippewa Cree Attorney and Gaming Consultant and former Chairman of the National Indian Gaming Commission.

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herbstrather's picture
I pray for the tribe
herbstrather