Big-Time Casinos, Tribes Teaming Up Once Unheard Of, Deals Draw Critics From Both Sides
When Indian tribes started building casinos a decade ago, many in the gambling industry dismissed them as fly-by-night operators sure to be run over by Atlantic City and Las Vegas, if not by the mob.
Now that is changing. Realizing that Indian gaming isn’t going away - and that there are millions of dollars to be made - commercial gaming companies are cutting deals with the tribes they once disparaged.
“It’s been a mutually beneficial relationship for all of us,” said William Antone, chairman of the AkChin tribe in Arizona. “We get the benefit of their experience. They get a piece of what we make.”
Still, such partnerships have detractors on both sides. Indian critics think the outsiders want to rip off tribal members, and some in the gaming industry, noting the lack of regulation on reservations, say such deals are exceedingly risky.
The reason for the moves toward cooperation is hardly surprising.
Tribal gaming is the fastest-growing segment of the U.S. gambling trade, according to the American Gaming Association, a casino trade organization. Of the $21.5 billion that casinos pull in every year, $3.5 billion of it comes from the nation’s 182 licensed Indian casinos.
With an eye toward that growth, some commercial casinos have been lending their names and expertise so that tribes can obtain Wall Street and bank financing.
The four leaders - Harrah’s of Las Vegas, Boyd Gaming of Las Vegas, Grand Casinos Inc. of Minneapolis, and Capital Gaming of Atlantic City - have helped tribes develop casinos in at least a dozen states, typically getting multimilliondollar contracts in return.
Harrah’s leads the way. Besides the Ak-Chin, the company manages casinos for a tribe in Washington state and has an agreement to manage a casino in Dowagiac, Mich., for the Pokagon Band of Potawatomi, from Michigan and Indiana. Other agreements are with the Eastern Band of Cherokee in North Carolina, the Prairie Band of Potawatomi in Kansas, and the Porch Band of Creek Indians of Alabama.
Federal Indian gaming laws say companies with Indian management contracts can earn up to 40 percent of a tribal casino’s net revenue. The law says such contracts cannot exceed seven years, though they can be renegotiated.
“Obviously, the money is a big attraction, but it’s not the only reason why we got into this,” said Dean Hesterman, an executive with Harrah’s. “We thought we could bring something of value to the tribes.”
Edward Tracey, who started his own casino-management firm in 1991, said he’s earned millions in his affiliations with tribes over the past five years. Tracey had been a top executive with Donald Trump, the casino and hotel magnate, who has been strongly critical about Indian gaming and the fact that it’s subject to less-stringent federal tax and regulatory laws than non-Indian casinos.
Tracey rejects Trump’s position and said he now only works with Indians. His company has agreements with three tribes, in Washington, Arizona and Oregon. He’s also helping a tribe in Louisiana and another in Rhode Island develop casino projects.
But he says the money is not the reason behind his work.
“I have clients who have lived in very impoverished conditions all their lives,” said Tracey. “Now they have jobs, health care, housing, and they’re not dependent on whatever handouts the government gives them. I feel good about having helped with that.”
Of course he does, said Robert Goodman, a Massachusetts college professor and author of “The Luck Business,” a study of the casino gambling industry.
“No one seemed to be interested in the plight of Indian tribes before their gaming came along,” said Goodman, who teaches environmental design at Hampshire College. “Now, suddenly they all want to go into business with them.”