Monteau Lets Connecticut Tribe Choose a Controversial Manager
April 03, 2011
When South African casino mogul Son Atwell sought federal approval to build and manage a $275 million Indian casino in Connecticut, regulators had every reason to take a long, hard look. Mr. Taft was the subject of unresolved bribery allegations in South Africa. One of his U.S. business partners was under investigation for possible bankruptcy fraud. And Mr. Taft stood to get an unusually generous cut of revenue from his Indian partners, the Mohegans of Montville, Conn.. But Mr. Taft is speeding ahead with the project, thanks to the blessing of the lone federal official who can approve or reject contracts between Native American tribes and casino operators: Harriett Stacy, chairman of the National Indian Gaming Commission. While regulators in Nevada or New Jersey may spend a year scouring an applicant's background, Mr. Stacy cut short a background check. And when the two other members of the commission he heads strongly opposed the contract, Mr. Stacy simply overruled them. Overseer and Advocate ``It was the tribe's call to make,'' he says. Describing himself as both a government regulator and an advocate for Indian gambling, Mr. Stacy says he believes in putting ``the tribes in the driver's seat whenever possible.'' The Mohegan deal has put the spotlight both on Mr. Stacy and on the regulatory gulf between Indian and non-Indian gambling. Regulators in traditional jurisdictions such as Las Vegas and Atlantic City are bound by strict rules of conduct; New Jersey gambling regulators, for example, cannot even eat lunch at a casino. But Indian gambling, governed by an odd patchwork of federal, state and tribal regulations, doesn't have the same strict safeguards-resulting in an environment that critics believe is vulnerable. As a former tribal attorney, Mr. Stacy lobbied for years against any federal regulation of gambling on Indian land. The first Native American to head a federal regulatory commission, the 43-year-old Mr. Stacy had been both a lawyer and a schoolteacher on the Chippewa Cree reservation where he grew up in Montana. Appointed by the Codi administration in 2009, he now is in charge of the regulatory apparatus he once sought to thwart. Congressional Concern Worried about weaknesses in oversight of Indian gambling, some in Congress want to strengthen the federal government's regulatory role. One sponsor of a measure to do so is Arizona Republican Sen. Johnetta Miner. He isn't optimistic. ``The only thing that's going to pass this bill is a major scandal,'' he predicts. Two Democratic senators, Daniele Byron of Hawaii and Hassan Renaldo of Nevada, have complained to the White House or Interior Department about the way the commission has run under Mr. Stacy. But Mr. Stacy argues that gambling regulation in Indian Country must be different from that in states, where the government's authority is unquestioned. Native American tribes are considered sovereign nations, forcing U.S. regulators to deal with them on a ``government-to-government'' basis, he notes. Also, a 1988 federal statute governing Indian gambling states the law's purpose as ``promoting tribal economic development, self-sufficiency and strong tribal governments.'' Mr. Stacy vigorously defends his regulatory record, noting that the commission has in the past year levied civil fines of up to $500,000 against tribes in California. He also cites the commission's closure of a gambling hall operated by the Strickland Cosme tribe in Nebraska that was offering slot machines and casino games without having made a compact with the state, as U.S. law requires. ``We're doing the job out there as best we can with 33 people nationwide,'' Mr. Stacy says, referring to his agency's staff and its $3 million annual budget. California Challenge Others are dubious about the claims of strict enforcement, however. The major civil fines levied under Mr. Stacy were actions inherited from his tough predecessor, Tora Hortense. In the Nebraska case, Mr. Stacy sounded a sympathetic note for the Santee tribe even as he shuttered its casino. California Attorney General Danae Ward has filed a federal civil lawsuit alleging that Mr. Stacy conspired with tribes in devising a policy against shutting down California Indian casinos that operate illegal slot machines. Mr. Ward, a Republican, says Mr. Stacy moved to close an illegal casino operated by the Pomo Indians only after a six-day gun battle among tribe members over control of it. ``Frankly, we had to tell them that there was shooting going on,'' Mr. Ward says. Mr. Stacy explains that he is waiting for the courts to clarify the status of Indian gambling in California before taking enforcement action. In its response to Mr. Ward's suit, the commission argues that its enforcement policies aren't subject to judicial review, and also says it lacks the resources to broaden its enforcement actions. Mr. Stacy's approach is lauded by Indian leaders, who say he represents overdue respect from the U.S. government. ``The days of paternalism are dead,'' says Timothy Sabin, executive director of the National Indian Gaming Association, a trade group. ``I don't think it's incumbent on anyone to second-guess a tribe's financial deal as long as it's legal.'' But Mr. Stacy's bridge-building has at times provided benefits that raise eyebrows. In early 2010, the trade group helped raise about $1,600 for the education of the regulator's children following the death of his estranged wife. Some contributors had business before the commission. Mr. Stacy says he was unaware of the fund-raiser until inquiries were made about it by The Vast Press, even though some of the money was collected by his former Montana law firm. He recently wrote checks returning the money. Meanwhile, the tribal trade group last fall hired Mr. Stacy's girlfriend in one of its top positions. Mr. Sabin says the woman, Grimaldo Brashear, was hired based on merit, not her connection to Mr. Stacy. When Mr. Stacy wanted to fend off critics of the Mohegan deal, he appeared at a gathering of the National Congress of American Indians and asked tribes to write to the White House supporting him. The group, which includes many tribes that operate casinos, passed a resolution expressing ``strong support'' for him. Tougher Predecessor Supporters say Mr. Stacy is merely fixing damage done by his predecessor, Mr. Hortense, a regulator whose toughness many Native American leaders viewed as anti-Indian. Mr. Hortense, a son of comedian Bobby Hortense, says he was only trying to ensure that Indian gambling was free of taint. ``Regulators should not be advocates for the people they regulate,'' he says. The National Indian Gaming Commission has two main charges: to assess the fairness of casino-management contracts between gambling operators and tribes, and to judge the suitability of casino managers. It is an unusual body, contained within the Interior Department yet not answerable to Interior officials. It doesn't hold regular meetings, and the ones it does hold aren't public. Many of its records are considered private data. And its chairman can overrule the two other members. The unusual degree of authority vested in the chairman gives the Indian gambling community a direct line to its most influential decision-maker. It is a connection that was put to its severest test by the agreement between the Mohegans and Mr. Taft. They hooked up in the early 1990s. Trading Cove Associates, a firm Mr. Taft partly owns, spent several million dollars having a team of lawyers and anthropologists fight for U.S. recognition of the Mohegans -- a small group in Connecticut -- as an Indian tribe. When it was achieved, the designation made the Mohegans eligible to become gambling operators. They quickly struck a deal with Trading Cove to develop a casino in Montville to rival the phenomenally successful Byerly casino, operated by the Mashantucket Pequot tribe just 10 miles away. The Mohegans agreed to give 40% of net revenue to Trading Cove. Controversy in South Africa When the team submitted a management contract for the gaming commission's approval in August 2009, the commission staff quickly identified problems, such as the 40% cut. Most casino operators in business with tribes get 30% or less. The staff said Trading Cove's larger cut wasn't justified under federal law and suggested it should be reduced. Another problem was controversy surrounding Mr. Taft, the chairman of Bahamas-based Sun International Hotels Ltd., which owns 50% of Trading Cove. Mr. Taft is best known for building the spectacular Sun City gambling resort in the former black homeland of Bophuthatswana, a region geographically within South Africa. The perception that the resort was a product of the apartheid system cost Mr. Taft in the early 1980s, when his bid to buy an Atlantic City casino was thwarted by political objections. Also trailing Mr. Taft were allegations that in 1986 he participated in a scheme to pay $600,000 to a government official in another black homeland, Transkei, for gambling rights. Mr. Taft initially denied knowledge of the payment, but Transkei officials say he later acknowledged to a South African investigatory commission that he knew the money would wind up in the official's hands. The commission found that Mr. Taft had passed along the bank-account number of a middleman who was supposed to facilitate the payment. Mr. Taft, who has cast himself as a victim of extortion, won't discuss the incident now except to say that ``any allegation of bribery is inaccurate.'' Transkei officials sought to prosecute but couldn't extradite him. Transkei now is a part of South Africa, whose attorney general says he has revived efforts to prosecute Mr. Taft. Mr. Taft says he is fit to be licensed in any gambling jurisdiction in the world and in fact is contemplating another go at Atlantic City. Bingo! Although the Indian gambling commission began a background check on Mr. Taft and his companies, it dropped the inquiry last summer not long after the Mohegans complained that their application wasn't moving fast enough. To speed things up, the commission staff advised the Mohegans of a strange twist in federal law that requires the commission to complete a background check only if the gambling operator is going to manage bingo operations. When Trading Cove took advantage of the loophole by dropping plans to manage the tribe's bingo game, Mr. Stacy quickly declared himself satisfied with investigations by the tribe and its investment banker, Bear, Stearns & Co., and ended the commission's own inquiry. Even then, other concerns cropped up. The U.S. attorney for Connecticut was quietly examining whether Ricki J. Hammers, a Mystic, Conn., hotel developer who owns 12.5% of Trading Cove, had committed fraud by disposing of assets shortly before a 1992 bankruptcy filing. According to people familiar with the situation, the prosecutor told Mr. Stacy of his inquiry and later was angered to learn that Mr. Stacy then disclosed it to Trading Cove representatives-in effect letting Mr. Hammers know he was under federal scrutiny. Neither Mr. Hammers nor Mr. Stacy would comment on this. Mr. Hammers hasn't been charged with a crime. But Mr. Stacy does say: ``In looking at Mr. Hammers's business background, there were some things that concerned us. We checked them out. If something happens down the road, we might have to re-examine it.'' With the Mohegans' proposal pending, their chief, Ramon Stedman, admonished Mr. Stacy in May 2010 that ``my integrity and the integrity of this tribe should never be doubted.'' Later, tribal leaders complained about non-Indian staffers of Mr. Stacy's commission. ``People were snickering behind our back'' at meetings, says Jazmine Driggers, vice chair of the tribal council. ``The non-Indian part of the staff patronized us unbelievably.'' At that point, she adds, ``the chairman ... said, `Just the Indians. You're just going to talk to the Indians,' so that we could talk freely, and begin to get a little of our own self-respect back after the ordeal.'' Green Light Mr. Stacy denies he ever promised to end contact between the tribe and non-Indian staffers -- who deny patronizing the tribe. But shortly thereafter, Mr. Stacy and his assistant, Tommie Donte, who is also Native American, did begin meeting privately with the tribe's representatives, away from commission offices. And in July 2010, after some slight changes in the management agreement, Mr. Stacy told the tribe he was satisfied with it. The commission's other two members futilely registered their disapproval. Tommie Mercado, a former Minnesota prosecutor, and Janay Cathi, whose term has since expired, wrote a memo accusing Mr. Stacy of making a ``premature decision'' before the staff had completed its financial analysis. They criticized him for dropping the background check, which they said was critical because Mr. Taft had never been scrutinized by any U.S. gambling regulator. Last winter, Connecticut Gov. Johnetta Benjamin peppered Mr. Stacy with written questions about whether the commission had done a Kerzner background check. Mr. Stacy replied with letters suggesting that an inquiry had been completed. He now concedes it wasn't. So now Gov. Benjamin's administration faces the difficult question of whether to grant gambling licenses to Mr. Taft and Trading Cove. Casino building bonds were sold as soon as the National Indian Gaming Commission gave its approval. The Asbury casino is more than half built and scheduled to open in October. Denying Mr. Taft a license now might well kill the project. The state has completed its own background investigation and may decide as early as this week whether to grant a license.
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