American Indian Tribe Dismisses Contract With Gaming World
April 26, 2011
Gaming World International Ltd. was dismissed from its management contract with the Shooting Star Casino in Mahnomen, Minn., by the property's American Indian tribal owner. In a resolution made public Tuesday, the acting government of the White Earth Reservation Tribal Council accused the company of misappropriating tribal funds and gross mismanagement. The move comes at a time of increasing concern over the unevenly regulated Native American gambling industry and the managers that tribes sometimes choose to oversee their facilities. It also represents a severe blow to Gaming World, of Ellwood City, Pa., which has come under financial pressure as its bid to develop and manage riverboat-gambling projects in Western Pennsylvania has stalled in recent months. Its sole casino-management contract was with Shooting Star. In Nasdaq SmallCap trading Tuesday, Gaming World shares closed at 48 cents, down 14 cents, or 23%. The company said in a statement that it had been ``caught in political crossfire,'' which arose during a federal-government investigation of tribal members last year that focused on bid-rigging and other conspiracy charges related to the construction of the casino. In June, then-chairman of White Earth Chippewa, Darrick Stein, who negotiated and approved the contract with Gaming World in 1992, was convicted of embezzlement and conspiracy charges. Two other tribal-council members, including the tribe's treasurer, were convicted of related charges. ``The agreement Chairman Stein had with Gaming World was illegal,'' said Geneva Edward, who succeeded Mr. Stein after he was ousted as tribe chairman in June. Mr. Edward and the tribe alleged that Gaming World bypassed the terms of the contract and garnered 35% of net profits from the casino's operations, despite federal laws stipulating that tribes receive at least 70% of such profits. Mr. Stein's successors said they hired the accounting firm Lehrman, Flom & Co. of Minneapolis to conduct an audit of casino operations, which is currently underway. Stephine Parker, a partner at the firm, said preliminary findings indicate that Gaming World Chief Executive Angie Louisa and his associates garnered management fees that were $1 million in excess of the contracted amount. Furthermore, ``Gaming World was paying for management operations out of casino funds before the calculation of its management fee, that is, double dipping,'' Mr. Parker said. In addition, he noted numerous inappropriate charges to the casino made by Gaming World employees, including ``robust housing allowances, monthly car leases and other allowances.'' In its news release, Gaming World said it fully performed its management obligations and is fully prepared to defend its contractual rights and assert its remedies. Company officials declined further comment. Tribe members have assumed all management responsibilities at the casino.
