Tuesday, July 5, 2011

Casino nation II

A Pro-Casino Presidency?

Slot jockeys: not a pretty sight.

When he was a state senator in Illinois, Barack Obama was skeptical to the point of downright hostility toward casinos. His opposition was still in evidence in the earliest stages of his presidential candidacy.

The Obama administration, however, is anything but. In June, Assistant Secretary of the Interior Larry Echo Hawk, who heads the Bureau of Indian Affairs, rescinded a January 2008 memorandum issued by an outgoing Bush administration official—a memorandum that strongly asserted a policy of limiting the ability of Native American tribes to acquire off-reservation land for the purpose of building and running casinos. “The 2008 guidance memorandum was unnecessary and was issued without the benefit of tribal consultation,” Echo Hawk said. President Obama recently met with tribal leaders, many of whose reservations have seen unprecedented economic benefit from off-reservation gamblers spending money in tribally owned casinos.

On-reservation casinos exist in every state where a federally recognized tribe has a reservation. But at this writing, several state governors are actively opposing plans for off-reservation casinos. Tribes in Michigan, Minnesota, Mississippi, Oklahoma, and California are actively seeking to establish more off-reservation casinos. The Seminole tribe of Florida, which operates a casino near Miami, is seeking to purchase land in Atlantic City, New Jersey, and to run a tribally owned casino there, more than a thousand miles from its home.

New York Senator Charles Schumer hailed the Department of Interior’s policy change in a June 13 statement. Schumer is an advocate for a Catskill Mountains casino, which the St. Regis Mohawks, the Stockbridge-Munsees of Wisconsin, and the Senecas of Western New York have all been interested in developing. None of those federally recognized tribes have federal “trust” or reservation land within hundreds of miles of the Catskills.

The Center for Responsive Politics, a Washington public interest group that tracks political campaign money, found the Seneca Nation of Indians donated approximately $352,000 to federal candidates in 2007 and 2008. Other records show that the Senecas spend heavily on lobbying, legal fees, investment counsel, and underwriting expenses related to bonds issued by the Seneca Gaming Corporation, which recently refinanced over $500 million of outstanding debt. In a recent article in Indian Country, an online publication on Native American issues, Seneca Nation President Robert Odawi Porter is quoted saying that “If anyone wants to be critical of what Indian nations are doing, then they better be critical of the entire system in which money flows through American politicians and political parties.” Indeed, the Senecas’ contributions are dwarfed by those of other tribes that own casinos. In the list of the top 20 casino-based political donors, 15 are Indian tribes. In 2010, they gave over $10 million of the nearly $13 million the casino industry gave to national politicians. Two-thirds of the money went to Democrats.

The question for American policy-makers is whether the economic impact of off-reservation casinos is positive or negative for non-reservation communities. In a recent study of he Seneca Niagara casino in Niagara Falls, Professor Steven H. Siegel of Niagara University was extremely critical of the Seneca Gaming Corporation’s practice of handing out hotel rooms, food and beverage services, and entertainment for free. Using data on the first nine months of 2010 from the filing with the Securities and Exchange Commission, Siegel found that the Seneca Gaming Corporation spent over $42 million subsidizing those items, giving away more hotel room-nights than were sold by Buffalo’s Adams Mark and Hyatt hotels combined, yet still had over $83 million in net revenue. “In my 34 years researching and teaching in the area of strategic management for the hospitality industry,” Siegel wrote, “I have never encountered a competitive situation where one business entity has such a staggering competitive advantage over other entities.”

Official Seneca pronouncements about the Buffalo casino have recently included a pledge that there will be no such hotel. But Seneca Gaming Corporation has proved that the formula of combining hotel beds, restaurants, bars, and nightclubs in one self-contained entertainment complex is hugely profitable. Unless new court action or the July 2008 ruling of Federal District Court Judge William Skretny results in the Buffalo casino being closed, there is no way of predicting whether the Senecas will or won’t duplicate their Niagara Falls operation in Buffalo. The potential impact on existing non-Indian businesses could be huge.

bruce fisher

Casino nation

The Judges Obama Ignores

(photo by Rose Mattrey)

Will casino money trump law in Buffalo?

It has been more than seven years since the Second Circuit Court of Appeals told a judge in Buffalo that he was correct in deciding that the Seneca Nation of Indians had no claim to 19,000-acre Grand Island or any of the other islands in the Niagara River. Back in 2002, Judge Richard Arcara of the Federal District Court here, wrote a 212-page decision that includes a comprehensive history of who has owned or controlled land on both sides of the Niagara as far back as the early 17th century. Arcara’s decision is all the more remarkable because all the parties—including the Senecas, New York State, and the United States—agreed to a set of stipulated facts, among which is that neither Buffalo nor any part of the Niagara River area was ever a part of the “aboriginal territory” of the Senecas. (See note below.) In 2004, Judge Arcara was upheld by the Second Circuit Court of Appeals. In legal terms, that’s about as good as it gets for a Federal District Court judge. But it got even better for Arcara when the United States Supreme Court refused to hear the Senecas’ appeal.

But when it comes to the Seneca Gaming Corporation, the Seneca enterprise that is distinct from the Seneca Nation but that relies on the special legal status of the Seneca people, the law seems to have no meaning. Judges decide things, parties make binding agreements, federal agencies are given their instructions—and business as usual goes on.

That’s what’s happening now in a separate case decided by Arcara’s fellow Federal District Court Judge, William Skretny. Judge Skretny decided in July 2008 that the little “temporary” Seneca Gaming Corporation casino in Buffalo was illegal. Two months later in August 2008, Skretny was irritated with the National Indian Gaming Regulatory Commission, the federal body that he’d directed to act in compliance with his ruling. In July, Skretny said that the casino at Michigan and South Park was “illegal.” In August, Skretny directed the federal agency to act “forthwith.” Further, he said, “[Federal law] mandates that the [gaming commission] take prompt action once it has reason to believe a violation exists,” Skretny wrote. “...The Chairman is directed to take such action as is consistent with the Court’s July 8, 2008 Decision.”

The casino, as of June 23, 2011, is still open.

It has been almost a decade since Judge Arcara denied the Senecas’ claim to Grand Island, which is where the then-minority of pro-gambling Senecas had wanted to put their casino. Back in the early 1990s, when the Senecas had first filed their claim for Grand Island, New York State had been actively debating whether to legalize Class III “gaming,” including slot machines and the card games that up until then had been confined to church picnics and back rooms. All across the USA, especially in the Western states, federally recognized Indian nations had gone into the gambling business after the 1988 enactment of the federal Indian Gaming Regulatory Act (IGRA). The rule was straightforward: With federal oversight, specifically of the Department of the Interior, a tribe could erect a casino on its own sovereign territory. Back in New York, there was no political will in Albany to legalize state-sanctioned casinos: Both Donald Trump and the Mashantucket Pequot Tribe of Connecticut defeated what will there was by lobbying hard to keep the buses full of New Yorkers headed to Atlantic City and Foxwoods. But momentum built for New York State to do a deal with Indian nations here to help them get around the State constitutional ban on casino gambling, even as the province of Ontario, just across the Niagara, jumped into the gambling business quickly. But one of the significant provisions of the IGRA law was that a tribe could, in some very limited circumstances, before a certain date, put up a casino outside the strict boundaries of its reservation or sovereign territory.

The Senecas lost their claim on Grand Island in 2002 after the window had closed on setting up a casino on newly acquired land. But with money Congress sent the Senecas to compensate them for the grossly unfair reservation lease deal in Salamanca, the Senecas purchased land in Niagara Falls, New York. In fact, they purchased the old Niagara Falls Convention Center. With great ceremony, then-Governor George Pataki helped inaugurate the Seneca casino era—even though the land they’d bought had never been “aboriginal territory.” There was an unmistakable New York State stamp of approval on the deal: The state that had refused to amend its own constitution had enacted a “compact” with a sovereign Indian nation, which had used federal funds in manner that Congressman John LaFalce—who’d championed getting the money in the first place—relentlessly asserts Congress never intended.

Then, a few years later in 2005, the Senecas bought land in Buffalo—land that had never been “aboriginal territory,” but that had, between 1794 and 1838, been Seneca land. More recently, the land had been aggregated by Buffalo developer Carl Paladino. The Senecas made no secret of their intention to put a casino there, and the federal government was required by IGRA to ask whether the state, the City of Buffalo or Erie County objected. Governor Pataki didn’t object. Anthony Masiello, then mayor of Buffalo, didn’t object. Joel Giambra, then Erie County Executive, objected. When the federal government went ahead and let the Senecas start a casino in Buffalo, a citizens group sued to stop it. Erie County joined that suit.

The case went before Judge William Skretny in the federal courthouse here in Buffalo. Skretny’s decisions were mixed: he found that the Senecas’ purchase of 9 acres of Buffalo land technically turned that land into “Indian land,” but in a crucial legal distinction, he found that that piece of land does not meet the federal law’s criteria for using it to put up and run an off-reservation casino. So Judge Skretny said, three years ago this July, that the casino should be closed. And then he said it again, later in the summer of 2008. “Forthwith,” he said.

So why is the casino still running three years after a Federal District Court judge said it should close? And why did the current Seneca Nation president issue a press statement just last month that calls the site of the illegal casino “aboriginal land” when his own lawyers agreed that it is not?

The answer is simple: President George Bush’s politicos conspired to change the rules after Barack Obama was elected, and subsequently, Barack Obama’s politicos are not only going along with what the Bush people did, but they’re also ignoring the Federal District Court’s decisions.

The smoking gun

As of Thursday, June 23, 2011, the citizens who challenged the Bush administration are challenging the Obama administration. Their legal papers are filed and they’re ready to go back into Judge Skretny’s court. Citizens for a Better Buffalo is going to court to ask for actual consequences to flow from the decisions the judges make.

And this time, they think they have proof that corruption and insider-dealing is what keeps the Senecas’ Buffalo casino operating.

The political appointees of George Bush who changed the rules to keep the Senecas’ Buffalo casino operating are Buffalo people, the lawsuit alleges. The suit names Mike Rossetti, a former assistant Erie County Attorney and son of a local judge, who first went to work for the Department of the Interior under George W. Bush, then subsequently went to work for a law firm called Akin Gump. The Akin Gump firm is a Washington powerhouse: Its other Buffalo connection is former Republican Congressman Bill Paxon, a partner there who was succeeded by Republican Tom Reynolds. The lawsuit alleges that Mike Rossetti’s mate, Edith Blackwell, a “highly placed lawyer” in the Department of Interior Division of Indian Affairs, was “directly involved in reversing the Division’s long-standing position” on the applicability of the rules that prohibit Indian tribes from siting off-reservation casinos on newly-acquired land.

The killer paragraph in the court papers is this:

At the time of these events, Edith Blackwell was living and sharing a residence with Michael Rossetti, a partner with Akin Gump Strauss Hauer & Feld, LLP, which provides legal respresentation to the SNI [Seneca Nation of Indians] and was receiving hundreds of thousands of dollars from the SNI for that legal representation and for lobbying the federal government on issues affecting Indian sovereignty, among others. The SNI, which holds the Buffalo Parcel in restricted fee, was the sole tribe that stood to benefit from the DOI’s reversal of its position. Edith Blackwell was recused, presumably due to her relationship with Michael Rossetti, from all matters involving the SNI. Yet when the SNI pressed the DOI to reverse is position on the applicability of Section 2719, Edith Blackwell un-recused herself and orchestrated the change.

This lawsuit was filed only a week after New York State politicians and political appointees of Governor Cuomo joined with Seneca Nation President Robert Odawi Porter in announcing plans to make Seneca Gaming Corporation and other Seneca business interests a major part of the future of Buffalo’s publicly funded waterfront development. The very day that the lawsuit was filed, in fact, the Seneca Gaming Corporation involvement in downtown Buffalo was endorsed by the Buffalo News in its lead editorial.

The connection to New York State politics continues. The appointed leader of the Erie Canal Harbor Development Corporation, Jordan Levy, happens also to be a member of the board of directors of Seneca Holdings, Inc., a Seneca Nation entity chaired by Seneca Nation President Robert Odawi Porter, whose job is to invest the profits from gambling into other ventures that will benefit Seneca Nation members. Apparently, it’s now the official policy of the State of New York to commingle the business interests of a separate sovereign nation with those of New York State citizens.

A $600 million local business

As noted in many of the Seneca Gaming Corporation’s filings with the federal Securities and Exchange Commission, the 2002 compact with New York State gives the Senecas “the exclusive right to operate specifically defined gaming devices, including slot machines, within a 10,500 square-mile, geographic area in Western New York, beginning on Route 14, approximately 30 miles East of Rochester, and extending westerly throughout New York State.”

The casinos are extraordinarily profitable. According to the last available annual report, Seneca Gaming Corporation revenues in 2009 were over $568 million from gambling, plus food, beverage and hotel revenues of over $106 million. Earnings before interest, depreciation and amortization were over $250 million. The Seneca Nation is a tax-exempt entity.

And most of the money its casino operations brought in came from residents of Buffalo and Niagara Falls. More than 50 percent of the holders of the special “frequent gambler” cards issued at the Niagara Falls casino are local people.

What now?

A question arises as to the plans of the Erie Canal Harbor Development Corporation, given that its board overlaps with the Seneca Holdings board, which overlaps with the Seneca Gaming Corporation, which apparently has the Washington muscle to get regulations changed and judges ignored. Could there be a plan to move the “temporary” Seneca casino closer to Erie Canal Harbor? Could the former state office building named for General William “Wild Bill” Donovan, World War I and World War II hero, founder of the Central Intelligence Agency and scourge of the Saturn Club, become a new Seneca Gaming Corporation property?

Even before the new lawsuit was filed, it seemed strange that these plans would be going ahead while a Federal District Court judge’s finding that the Seneca Gaming Corporation casino is “illegal” and should be shut down “forthwith” are on the table.

But ignoring the law is now settled practice here. Last month, the Seneca Gaming Corporation’s Buffalo-based public relations firm issued a press release which asserted that the casino that Judge Skretny decided is illegal is sited on “aboriginal” Seneca land. (The contact person on that press release is Stephen Bell, the former managing editor of the Buffalo News.)

This is a key assertion that gets right to the heart of the problem that the Obama Administration evidently wants to avoid—namely, the fact that the huge, well-established, immensely profitable Seneca Niagara Casino in Niagara Falls is in the same kind of non-aboriginal territory whose history was so thoroughly described in the 2002 case Judge Arcara decided.

Here’s why the Obama Administration is now the issue: it is now being sued. When Judge Skretny decided in 2008 that the Buffalo casino was illegal, the Seneca Gaming Corporation did not appeal the case to the Second Circuit Court of Appeals for a resolution. Instead, the Seneca Gaming Corporation went to the Bush Administration’s Secretary of the Interior for a ruling on its pending application for permission to operate a casino—because under the federal Indian Gaming Regulatory Act, the Secretary of the Interior is the administrator, and his lawyers, and the commissioners in the Indian Gaming Regulatory Commission, are in charge.

Literally hours before Barack Hussein Obama took the Oath of Office to become the 44th President of the United States, the outgoing Bush Administration appointees granted the Seneca Gaming Corporation brand-new permission to operate their casino.

And everybody ignored Judge William Skretny’s order of July 2008. No federal marshal went in to lock the doors. No higher court said “Skretny’s wrong, let the games continue.” Political appointees of the President Bush gave their permission. And today, political appointees of the new president continue to ignore Skretny and to do as Bush’s politicos did.

Today, President Obama is going to have to go to court to defend the activities of Mike Rossetti and Edith Blackwell. The names have changed since then. But the illegal Buffalo casino is still operating.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.