The 5 Cent Empire

Native American tribes parlayed legalized gambling into a $22 billion lifeline. Now states want a piece of the action.

It remains to be seen how the deal will work out for the tribes. Viejas treasurer Christman believes his band’s amended contract, signed in 2004, will “help us get a running start at the market.” But the Viejas tribe already competes with several other Indian casinos in San Diego County. Hence, the prospect of 5,000 or so more slots may be little more than a mirage. Even Christman grants that “the whole point is not to saturate the market.”

What’s more, it’s no certainty that future lawmakers won’t come back looking for an even bigger rake for the state. “The original 1999 compact was supposed to last for 20 years,” notes Duro of the San Manuel. “We had just signed it, and they wanted to renegotiate it.”

Death Match

Critics contend that tribes should simply walk away from unfavorable deals. That’s easier said than done. An Indian nation can appeal to the Department of the Interior to settle a compact dispute, but it’s often a long, drawn-out process. As Robert Anderson, director of the Native American Law Center at the University of Washington School of Law, explains: “Many tribes would prefer to get their compacts signed now rather than risk going to the Secretary of the Interior.”

Moreover, not all tribes are in the same financial boat. The Mashantucket Pequot’s Foxwoods takes in around $1 billion in revenues a year. By contrast, one out of every five Native American casinos generates less than $3 million in annual gross income. Thus, what looks like a bad deal to a tribe with a thriving casino business may look damned good to a tribe struggling to survive. Lawmakers no doubt know this. Says Michael Marchand, chairman of the business council of the Confederated Tribes of Colville Indians, a Washington State–based band: “There will always be a few tribes that want to make a deal.”

Case in point: in late 2004, Minnesota governor Pawlenty floated a plan that would have required the state’s three biggest tribes to pay $350 million each year to the treasury. At the time, the state was facing a $4 billion budget deficit and Pawlenty had pledged not to raise taxes. Mille Lacs planner Don Wedll says he was stunned when he heard of the governor’s proposal. He claims the tribes don’t make more than $300 million in profits each year. “If Pawlenty’s plan had been reasonable, it would have happened,” insists Wedll. “But he made it impossible with that number.”

In January 2005, in an apparent bid to put the squeeze on the Mille Lacs and others, Pawlenty began talks with three different tribes to open state-run casinos in the Twin Cities. Those tribes, with impoverished reservations in northernmost Minnesota, seemed only too willing to listen. “That would have been a devastating blow to us,” concedes Towle of the Mille Lacs. “Most of our customers come from the Minneapolis metro area.”

The coalition fell apart, apparently after Pawlenty reportedly demanded a $200 million initial payment from the three tribes. (CFO’s interview requests went unanswered by the governor’s office.) “He was playing one tribe against the other,” insists Wedll. “Now the tribes are willing to go to a death match on this.”

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