The 5 Cent Empire

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

While Pombo’s bill was defeated, a growing number of Native Americans fear an antigaming (read: anti-Indian) backlash. Thus, many are leveraging casino money to diversify their business portfolios — often off the reservation. The Stockbridge-Munsee have already acquired a golf course and properties outside the 17,000 acres currently held in trust for the tribe by the federal government. The San Manuel Band of Mission Indians, whose small reservation mostly sits atop mountains in Highland, California, has partnered with three other tribes to build a hotel in Washington, D.C. Perhaps the most intriguing project in Indian country, however, is Cayuse Technologies. Founded in the fall of 2006 by the Confederated Tribes of the Umatilla Reservation, the information-technology specialist will operate in the tribes’ newly built industrial park near Pendleton, Oregon.

Cayuse is working with consulting firm Accenture Ltd. to establish a 40,000-square-foot business-process outsourcing and support center. Set to open in the summer of 2007, Cayuse will help Accenture serve government and other clients that choose not to offshore back-office work.

“Cayuse won’t be cheaper than India,” acknowledges Randall Willis, a Lakota Sioux and senior executive at Accenture. Still, given the low costs of labor on the reservation, the center will likely be 30 to 40 percent cheaper than back-office operations in urban centers like Boston or New York. Sometimes, being in the middle of nowhere has its advantages. — J.G.

Gaming the System

The Indian Gaming Regulatory Act, which authorizes states to bill tribes for regulatory oversight, prohibits them from assessing a charge on gaming revenues. It hasn’t worked out that way.*

Regulatory fees

$22.1 million

Local revenue sharing

$87.5 million**

State revenue sharing

$987.2 million

*2005 figures.

**Based on incomplete data.
Source: Alan Meister, “Indian Gaming Industry Report”

Six Sigma? How about Seven Generations?

In the corporate world, long-term planning typically involves a 5-year forecast. In the Indian world, it covers a slightly longer stretch. Generally speaking, tribes plan for seven generations. That’s 140 years.

Indeed, despite endless variables, tribal decisions must be based on how they will affect descendants seven generations down the line. Not surprisingly, the idea lost much of its relevance when tribes were forcibly pushed onto reservations and left to live off handouts from government agencies. Even in recent times, seven-generation planning was mostly a pointless pursuit. Says Robert Chicks, president of the Stockbridge-Munsee Band of Mohican Indians: “We used to plan a year at a time because federal funds come in a year at a time.”

Tribal gaming has changed all that. Buoyed by casino cash, officials of Native American nations are again looking ahead. “Gaming has given us the ability to take control of our destiny,” Chicks says of the Wisconsin tribe, a band that recorded unemployment levels of 70 percent just 25 years ago. “We now think about our long-term future.”

Part of that thinking is based on hard lessons learned from the past. After 200 years of government-sanctioned maltreatment, it’s hardly surprising that many tribal leaders focus on risk management when putting together tribal plans. Indeed, most gaming tribes funnel a portion of their casino revenues into bond funds and other money-market instruments — vehicles designed to generate interest income in perpetuity. “We set up a foundation to help secure the future,” says Vincent Duro, vice chairman of the San Manuel Band of Mission Indians. “If we do lose gaming, the tribe will be able to last.”

A number of tribes, including the San Manuel, have also begun investing in long-term assets such as real estate. In eastern Washington, the Confederated Tribes of the Colville Indian Reservation used some of its casino money to purchase 20,000 acres of timberland — forests that once made up part of the tribes’ original homelands. The acquisition of those vast tracts, says Michael Marchand, chairman of the group’s business council, squares nicely with the tribe’s investment horizon. Says Marchand: “We’re going to be here forever.” — J.G.

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