Gauntlet of Parasites: The Seamy Side of Tribal Gaming Business
By Jack Fiander May 23, 2011
Nearly a quarter century after enactment of the Indian Gaming Regulatory Act, one must wonder why Indian country remains among the most impoverished communities in the nation.
Indian gaming has spawned a host of parasitic industries. As a young lawyer, I was amazed at the speed with which many major law firms throughout the country created an “Indian law section” or “Indian gaming section” within their firms following enactment of IGRA. Often, one of my fellow rookie Indian lawyers would be hired, at meager pay for meager duties, and featured prominently in the firm’s brochure—as if to convey the message that, by selecting this firm, a tribe was furthering the cause of native people. Imagine my consternation after several years as an apprentice Indian law practitioner when I realize that all I really had to do was quadruple my hourly rate and announce specialization in Indian gaming.
Other businesses quickly realized the benefits of this strategy, and took it one step further by adopting business names to attract unsuspecting tribal clients. All sorts of “sovereign nation,” Indian First, insurance, financial, investment management, and consultant firms sprang up and offered their services to Tribes and tribal casinos. Except for their title, such companies rarely had Indian owners or investors. Congress’ idea behind Tribal gaming was to “promote tribal economic development, tribal self-sufficiency, and strong tribal government.” Very little of the money spent upon such firms or entities, however, trickles down to Indian country.
Numerous trade magazines tout and display the paraphernalia of Tribal gaming, as though whichever tribe constructs the most extravagant building has the least social or economic ills among their people. Like many issues in Indian country, there is a reluctance to engage in a healthy discussion, and thereby address, some of the problem areas associated with tribal gaming. Building a healthy reservation economy requires strong policies designed to trap revenues so that they are recirculated in the local reservation economy. Granted, revenues of tribal casinos are generated in Indian country. However, the receipt of such funds is only half of the solution if the majority to the gaming entity’s expenditures are paid out to foreign entities located far outside Indian country with no real ties to the reservation. Here are some thoughts for addressing some of the problem areas associated with Tribal gaming.
Infiltration
Like any business, your tribal Casino probably advertise to fill upper management employment positions. Have you been infiltrated. Infiltration occurs when you unwittingly hire an official or employee who may still secretly be on the payroll of a vendor providing goods or services who simply desires to capture your account as a customer. For example, your casino hires a food and beverage department manager who then sterrs you in the direction of procuring supplies from a particular supplier. Even worse, perhaps you hire a director for your electronic gaming machines department and months later you realize you’ve been persuaded to switch completely over to products manufactured by one particular company. You’ve been infiltrated.
Golden Parachutes
Many tribal casino management staff members are uncomfortable with the pure form of democracy prevalent among Indian tribal communities. Opinions are freely exchanged, grievances are freely petitioned for. Recalls of officials is not uncommon. As a result of this perceived insecurity, it is tempting for senior management staff to do business with particular vendors as a way of currying favor. Throw business, through the procurement process, their way and, if things go wrong employment-wise, there is a safe haven of temporary employment.
To avoid your staff from feeling the need to create golden parachutes, hire qualified staff and pay them well. Persons who are well paid and feel safe are immune from temptations. Create established procurement policies which must be followed without exception. Once there is too much discretion to select who provides goods or services to your establishment, the door is open.
Contracts
Rarely, if ever, should you simply sign the other party’s boilerplate contract. Tribal casinos are enough of an economic power that if a company wants your business they will be willing to negotiate terms. Far too often have I been asked to undo contracts in which a casino agreed in a contract that the terms would be subject to the laws of some far distant state, or one with “automatic rollover” provisions and complicated termination procedures such that in order to cancel the contract you must essentially buy out the remaining years of the contract. Develop your own boilerplate for your protection and use it.
Having signed a contract with a vendor or entity you assumed would be the one actually providing the service, you may notice that someone else is actually doing it, perhaps at a level of service below what you expected. To avoid this, make sure the contracts signed on behalf of your gaming entity are not “assignable.” If they are, the provider you selected may simply subcontract, or assign, the contract’s performance to someone else, probably at a discount. Basically, it is a form of skimming, and the company you thought you were using was just a broker. You’ve just been had.
“Reimbursable Expenses”
Many consultants providing services to tribal casinos know how to play this game. You’ve made a selection based upon a firm’s reasonable hourly rates, and later regret it when invoices for their actual out of pocket reimbursable expenses come in claiming reimbursement for extravagant meals or business meetings, newspapers, latte’s first class travel and hotels. Combat this problem by developing written reimbursement rates or limits as to what your casino will pay.
Kickbacks
Unfortunately, these things still happen from time to time and are extremely difficult to discover. If you suspect that your casino management is selecting or recommending a particular general contractor in return for consideration, you are unlikely to find direct proof. The compensation may be deferred for years down the road so no audit will disclose it. Your only resource is to perform regular and thorough background checks, which raises another issue.
Background Checks
Most employers do a thorough background check once, at the ime of hiring. Thereafter, not so much. As a lawyer, I am constrained to preserve the secrets of clients. Therefore, I can only look with alarm at the numerous of my former criminal defense clients, many with suspended drivers’ licenses or felony convictions driving a tribal vehicle or handling funds. Make sure your Human Resources department updates background checks regularly.
Risk Takers
Persons who frequent gaming establishments are often by nature gamblers or risk takers. Indian tribal casinos are perceived as deep pockets. As such, they are vulnerable to patrons who slip and fall “accidentally on purpose” or spill hot coffee on themselves. Often, all they want is a coupon book or some two-for-one tickets to the dinner buffet. Some, however, are capable of feigning injury in the hope of hitting the jackpot in a major way. Handle this one by having a competent legal team modeled, if you wish, after the fabled “Disney” lawyers who are rumored to have never lost a case or, if a matter is settled, it done quickly, fairly and in strictest confidentiality because once word gets out that your establishment is an easy mark, the floodgates are open.
As you can see, building a reservation economy is a difficult task. At the same time you are attempting to improve the lives of your people, there are also people out there who desire your business for their own purposes. Increasing your casino’s revenues is only one measure of success. To build an economy, you must also endeavor to make sure your expenditures are (to borrow a phrase from the Indian Self-Determination Act) “to the greatest extent feasible” spent locally. All of that far away travel to Las Vegas, Reno or elsewhere does nothing to benefit the businesses (restaurants, hotels, etc.) in your community. It creates a mini version of the fiscal crisis the United States economy found itself in when the Government realized that too many U.S. dollars had gone to China rather than spent purchasing from or employing its own people. Utilize trainers who are willing to travel to your location. That way, the expenses they incur will benefit your community, not just theirs. If your tribe has a TERO (Tribal Employment Rights Ordinance), follow it. It’s there for a reason.
Jack Fiander (Yakama/Chippewa-Cree) is an attorney and founder of Sacred Ground Legal Services, which represents tribal clients on a nonprofit basis. He has practiced law in Indian country since before IGRA was enacted.
By Jack Fiander May 23, 2011
Nearly a quarter century after enactment of the Indian Gaming Regulatory Act, one must wonder why Indian country remains among the most impoverished communities in the nation.
Indian gaming has spawned a host of parasitic industries. As a young lawyer, I was amazed at the speed with which many major law firms throughout the country created an “Indian law section” or “Indian gaming section” within their firms following enactment of IGRA. Often, one of my fellow rookie Indian lawyers would be hired, at meager pay for meager duties, and featured prominently in the firm’s brochure—as if to convey the message that, by selecting this firm, a tribe was furthering the cause of native people. Imagine my consternation after several years as an apprentice Indian law practitioner when I realize that all I really had to do was quadruple my hourly rate and announce specialization in Indian gaming.
Other businesses quickly realized the benefits of this strategy, and took it one step further by adopting business names to attract unsuspecting tribal clients. All sorts of “sovereign nation,” Indian First, insurance, financial, investment management, and consultant firms sprang up and offered their services to Tribes and tribal casinos. Except for their title, such companies rarely had Indian owners or investors. Congress’ idea behind Tribal gaming was to “promote tribal economic development, tribal self-sufficiency, and strong tribal government.” Very little of the money spent upon such firms or entities, however, trickles down to Indian country.
Numerous trade magazines tout and display the paraphernalia of Tribal gaming, as though whichever tribe constructs the most extravagant building has the least social or economic ills among their people. Like many issues in Indian country, there is a reluctance to engage in a healthy discussion, and thereby address, some of the problem areas associated with tribal gaming. Building a healthy reservation economy requires strong policies designed to trap revenues so that they are recirculated in the local reservation economy. Granted, revenues of tribal casinos are generated in Indian country. However, the receipt of such funds is only half of the solution if the majority to the gaming entity’s expenditures are paid out to foreign entities located far outside Indian country with no real ties to the reservation. Here are some thoughts for addressing some of the problem areas associated with Tribal gaming.
Infiltration
Like any business, your tribal Casino probably advertise to fill upper management employment positions. Have you been infiltrated. Infiltration occurs when you unwittingly hire an official or employee who may still secretly be on the payroll of a vendor providing goods or services who simply desires to capture your account as a customer. For example, your casino hires a food and beverage department manager who then sterrs you in the direction of procuring supplies from a particular supplier. Even worse, perhaps you hire a director for your electronic gaming machines department and months later you realize you’ve been persuaded to switch completely over to products manufactured by one particular company. You’ve been infiltrated.
Golden Parachutes
Many tribal casino management staff members are uncomfortable with the pure form of democracy prevalent among Indian tribal communities. Opinions are freely exchanged, grievances are freely petitioned for. Recalls of officials is not uncommon. As a result of this perceived insecurity, it is tempting for senior management staff to do business with particular vendors as a way of currying favor. Throw business, through the procurement process, their way and, if things go wrong employment-wise, there is a safe haven of temporary employment.
To avoid your staff from feeling the need to create golden parachutes, hire qualified staff and pay them well. Persons who are well paid and feel safe are immune from temptations. Create established procurement policies which must be followed without exception. Once there is too much discretion to select who provides goods or services to your establishment, the door is open.
Contracts
Rarely, if ever, should you simply sign the other party’s boilerplate contract. Tribal casinos are enough of an economic power that if a company wants your business they will be willing to negotiate terms. Far too often have I been asked to undo contracts in which a casino agreed in a contract that the terms would be subject to the laws of some far distant state, or one with “automatic rollover” provisions and complicated termination procedures such that in order to cancel the contract you must essentially buy out the remaining years of the contract. Develop your own boilerplate for your protection and use it.
Having signed a contract with a vendor or entity you assumed would be the one actually providing the service, you may notice that someone else is actually doing it, perhaps at a level of service below what you expected. To avoid this, make sure the contracts signed on behalf of your gaming entity are not “assignable.” If they are, the provider you selected may simply subcontract, or assign, the contract’s performance to someone else, probably at a discount. Basically, it is a form of skimming, and the company you thought you were using was just a broker. You’ve just been had.
“Reimbursable Expenses”
Many consultants providing services to tribal casinos know how to play this game. You’ve made a selection based upon a firm’s reasonable hourly rates, and later regret it when invoices for their actual out of pocket reimbursable expenses come in claiming reimbursement for extravagant meals or business meetings, newspapers, latte’s first class travel and hotels. Combat this problem by developing written reimbursement rates or limits as to what your casino will pay.
Kickbacks
Unfortunately, these things still happen from time to time and are extremely difficult to discover. If you suspect that your casino management is selecting or recommending a particular general contractor in return for consideration, you are unlikely to find direct proof. The compensation may be deferred for years down the road so no audit will disclose it. Your only resource is to perform regular and thorough background checks, which raises another issue.
Background Checks
Most employers do a thorough background check once, at the ime of hiring. Thereafter, not so much. As a lawyer, I am constrained to preserve the secrets of clients. Therefore, I can only look with alarm at the numerous of my former criminal defense clients, many with suspended drivers’ licenses or felony convictions driving a tribal vehicle or handling funds. Make sure your Human Resources department updates background checks regularly.
Risk Takers
Persons who frequent gaming establishments are often by nature gamblers or risk takers. Indian tribal casinos are perceived as deep pockets. As such, they are vulnerable to patrons who slip and fall “accidentally on purpose” or spill hot coffee on themselves. Often, all they want is a coupon book or some two-for-one tickets to the dinner buffet. Some, however, are capable of feigning injury in the hope of hitting the jackpot in a major way. Handle this one by having a competent legal team modeled, if you wish, after the fabled “Disney” lawyers who are rumored to have never lost a case or, if a matter is settled, it done quickly, fairly and in strictest confidentiality because once word gets out that your establishment is an easy mark, the floodgates are open.
As you can see, building a reservation economy is a difficult task. At the same time you are attempting to improve the lives of your people, there are also people out there who desire your business for their own purposes. Increasing your casino’s revenues is only one measure of success. To build an economy, you must also endeavor to make sure your expenditures are (to borrow a phrase from the Indian Self-Determination Act) “to the greatest extent feasible” spent locally. All of that far away travel to Las Vegas, Reno or elsewhere does nothing to benefit the businesses (restaurants, hotels, etc.) in your community. It creates a mini version of the fiscal crisis the United States economy found itself in when the Government realized that too many U.S. dollars had gone to China rather than spent purchasing from or employing its own people. Utilize trainers who are willing to travel to your location. That way, the expenses they incur will benefit your community, not just theirs. If your tribe has a TERO (Tribal Employment Rights Ordinance), follow it. It’s there for a reason.
Jack Fiander (Yakama/Chippewa-Cree) is an attorney and founder of Sacred Ground Legal Services, which represents tribal clients on a nonprofit basis. He has practiced law in Indian country since before IGRA was enacted.
