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In February 24, 2009, the Supreme Court issued an opinion in Carcieri v. Salazar (129 S.Ct. 1058 (2009)) that limited the secretary of the interior’s authority to acquire land into trust for Indian tribes under the Indian Reorganization Act (IRA). Carcieri held that trust lands may only be acquired by the secretary under the IRA for tribes that were recognized and “under federal jurisdiction” as of 1934.

A year later, the three executive, legislative and judicial branches have had occasion to consider the decision and determine the impact of Carcieri on Indian Country. This article examines the aftermath of the Supreme Court’s decision.

The Executive Branch
The initial response from the Department of the Interior was very positive. On February 27, 2009, Secretary of the Interior Ken Salazar issued a statement that he was “very disappointed by the court’s ruling.” The department also conducted three consultation sessions last summer to seek input from tribal leaders on potential administrative and legislative solutions.

A year later, the department has yet to announce a legal standard for interpreting the phrase “under federal jurisdiction,” or made any determinations on how to apply Carcieri, if at all. In fact, the only determination of note thus far is the Interior Department’s decision concerning the United Keetoowah Band of Cherokee Indians of Oklahoma.

Citing Carcieri, Assistant Secretary for Indian Affairs Larry EchoHawk issued a determination on June 24, delaying the Interior Department’s decision on a land-into-trust application for the band. Although the band is one of two successors in interest to the historic Cherokee Nation, EchoHawk acknowledged that the band did not organize as an Indian tribe until 1950 (under the Oklahoma Indian Welfare Act).

The assistant secretary suggested that band’s application raises the question whether the secretary can acquire land into trust today for members of a tribe that was not in existence in 1934 if that tribe is a successor in interest to a tribe that was in existence and under federal jurisdiction in 1934. He wrote, “This question requires further consideration.”

Recently, department officials have said that achieving an administrative solution could take as long as two years. Unsurprisingly, the department has encouraged Indian tribes to pursue legislation. On November 4, Donald Laverdure, deputy assistant secretary for Indian affairs at the Department of the Interior, testified before the House of Representatives Committee on Natural Resources that the “department strongly supports Congress’ effort to address the recent United States Supreme Court decision.”

The Legislative Branch
Initially, Congress was quick to act after the decision was handed down, and the two primary committees of jurisdiction convened hearings. On April 1, 2009, the House Committee on Natural Resources convened an oversight hearing on Carcieri. Michael Anderson, an author of this article, was privileged to testify at the hearing. The committee chairman, Rep. Nick Rahall (D-West Virginia), observed that “while all of the potential ramifications of this decision are not known at this time, there is one thing that we are certain of: This decision may result in many frivolous lawsuits being filed to challenge the status of virtually every tribe.”

On May 21, 2009, the Senate Committee on Indian Affairs convened an oversight hearing to examine the Executive Branch’s authority to acquire trust lands for Indian tribes. Committee chairman Senator Byron Dorgan (D-North Dakota) offered his deep concern about the court’s decision. He described it as a complicated, interesting and difficult opinion requiring the attention of many Indian tribes and the committee.

Subsequently, three nearly identical bills, known as the “Cariceri-fix” legislation, have been introduced by Congress. These bills would amend the Indian Reorganization Act to apply the act to all federally recognized Indian tribes, regardless of when any tribe became recognized.

A year later, neither the House nor Senate has approved the Carcieri-fix legislation. Both Democrat and Republican members are skeptical that a Carcieri-fix bill could move this year by itself. The current thinking on Capitol Hill is that the legislation’s best chance of approval is to include it in an appropriations measure.

The Judicial Branch
When the Carcieri opinion was first issued, many of us believed that the decision would be extremely disruptive for Indian tribes seeking to exercise rights under the Indian Reorganization Act and expected legal challenges to quickly follow. Indeed, opponents have sought to capitalize on Carcieri to prevent trust acquisitions by bringing litigation against the federal government.

A year later, there are as many as seven Carcieri cases pending across the United States at both state and federal levels. Two of these cases are before the U.S. Courts of Appeals. The first appeal is Patchak v. Salazar (DC Cir. No.: 09-5324). David Patchak challenged the department’s 2005 decision to take land into trust on behalf of the Match-E-Be-Nash-She-Wish Band of Potawatomi Indians. Patchak argued that the tribe was not under federal jurisdiction in 1934. The court never reached the plaintiff’s argument, dismissing the suit on prudential standing grounds instead. The fact that the District Court for the District of Columbia found no standing for individuals under Section 5 of the IRA to challenge trust acquisitions is encouraging.

In the second appellate matter, Butte County v. Hogen (DC Cir. No. 09-5179), the local government plaintiff is challenging the department’s decision to acquire trust land in Northern California for the Mechoopda Indian Tribe. The Carcieri decision was not before the district court, but the plaintiff noted the opinion in a footnote of the appeal brief and requested the court to take judicial notice of the case. The Butte County case is easily distinguishable from Carcieri. In Carcieri, none of the parties contended that the Narragansett were under federal jurisdiction in 1934 and in fact, stated that the tribe was under state jurisdiction. In Butte County, the federal government has argued that nothing suggests that the relationship between the United States and the Mechoopda Tribe is analogous to the Narragansett.

Carcieri continues to appear in several trial court cases, and not always at the hands of tribal opponents. One example is the Wilton Miwok Rancheria v. Salazar (CA-ND No. C-07-02681) case, in which the plaintiff Indian tribe brought a suit to seek federal recognition. In July 2009, the district court entered a stipulated judgment approving a consent decree in which the United States agreed to restore federal recognition to the Wilton Rancheria and to acquire trust land for tribe.

One month later, two local governments sought to intervene. Unexpectedly, the district court has requested supplemental briefing from the parties as to the relevance of the Carcieri decision to the recognition of the Wilton Rancheria.

Looking Forward, A Year Later
It appears that the courts will be the first of the three branches to determine the impact of Carcieri on Indian tribes. Based on at least one recent federal court decision, this generally looks favorable for Indian Country.

However, the judiciary is also the one branch of government with no legal or moral obligation of government-to-government consultation prior to decision-making. Indian tribes have very little input on how the Carcieri decision will be interpreted by a judge. Therein lies the risk.

If opponents begin to see successes in the courtroom, many Indian tribes that believe they do not have a direct “Carcieri issue” may find themselves hauled into court to provide sufficient evidence that they were under federal jurisdiction in 1934. Indian tribes and their investors that believe opponents may seize upon the Carcieri decision to challenge recent, pending or even past fee-to-trust acquisitions would be well advised to begin laying the groundwork for a defense in potential litigation.

An even worse outcome could occur if a court chose not to confine itself to a reasonable interpretation of the IRA, but instead elected to determine the general application of Carcieri to other Indian tribes. It is not unheard of for a court to expand a ruling beyond the dispute before it and establish a new broad rule.

To avoid such disastrous occurrences, tribal leaders and their investors must continue to encourage their congressional representatives to approve the Carcieri-fix legislation, the preferred remedy.

Over the past few decades, casino gaming has unquestionably been a catalyst for enhancing the economic situations of many Native American tribes. Successful casino operations have created hundreds of thousands of jobs, contributed to substantial development of Native American-owned small businesses, provided millions of dollars to non-gaming tribes through special trust funds, and supported essential tribal programs such as schools, hospitals, water and sewer systems, roads, police and firefighting programs, infrastructure needs, and cultural and social projects.     

The lingering effects of the current economic crisis, when combined with the potential for further supply in terms of additional gaming capacity in many markets, will likely keep many gaming markets very competitive for the foreseeable future. As many tribes face the prospect of suppressed profits from casino operations for the next few years, economic diversification strategies will be increasingly important in order to continue to fund programs and grow tribal economies.

Justifying the Need for Diversification
Like non-tribal gaming owners and operators, tribes are being forced to address the many challenges in their gaming operations resulting from the current economic crisis. Across the U.S., gaming revenues are down, in some markets quite substantially, as consumers react to job losses as well as steep declines in their investment portfolios and housing prices.

Anecdotal evidence suggests that the revenue declines casinos are experiencing are a combination of both a cutback in the number of trips that consumers are making and a reduction in their per-trip gaming budgets. In addition, many operators have reacted to the revenue declines they are experiencing by offering more incentives to consumers, thereby putting further pressure on operating margins and profits from their casino facilities.

While there are some encouraging signs that the economy is on the mend, most financial experts agree that the timing and extent of a sustained recovery remain large question marks. When the economy does turn, the question that remains on the minds of many gaming operators is to what extent, and how quickly, consumers return to their pre-economic crisis gaming habits.

Some consumer research that the Innovation Group has completed suggests that a rebound in gaming factors (i.e. number of trips, spend per trip) back to the levels experienced during the 2006-2007 period may be prolonged.

While job growth and job stability are critical factors in getting some consumers back to feeling as if they can participate in gaming like they have in the past, other consumers have experienced such a devastating blow to their net worth and economic situations that their gaming habits may be impaired for a long period of time, thereby keeping the much-anticipated rebound somewhat subdued.

While tribal and non-tribal operators are dealing with the decreases in demand in the industry, there continue to be significant spikes in competition, primarily from new venues. While Maryland and Ohio begin to implement recently passed legislation and Pennsylvania gears up for table games, other states such as Massachusetts, New Hampshire and Kentucky continue to seriously consider and debate the topic. Additionally, pressure builds as nearby jurisdictions like Bermuda and Jamaica also consider gaming. Finally, i-gaming is receiving serious attention, offering the prospects of even further competition for consumers’ discretionary dollars.

Hence, with more supply imminent, demand subdued for the near future and profit margins already under pressure in the gaming industry, there is not only a sense of urgency to improve operational efficiencies but also the need for tribes to diversify their long-term economic and investment strategies.

Tribes with successful gaming operations have the means to discover new potential streams of economic money flow. Historically, many tribes strategically reinvested back into the gaming operations by building hotels, conference centers, golf courses and other amenities that drove incremental gaming trips to the casino.

While the right strategic developments should continue to be considered in order to augment their casino operations or provide a competitive edge, more emphasis needs to be placed on leveraging their success in casino operations into investments in energy, other strategic businesses, and even in public and private enterprises. These investments could help provide tribes with a balanced revenue steam that can be complementary to their gaming operations.

Approaching Economic Diversification
Venturing into new opportunities or lines of business has inherent risks. Tribes are often approached about investing in a wide variety of new business enterprises. Determining which ones are appropriate for a tribe to consider and ultimately invest in can be a time-consuming and expensive process if there is not a clearly defined economic diversification plan in place.

The basis of a well-defined economic diversification plan is to provide tribes with a framework that allows them to move forward with their economic diversification goals while attempting to minimize the risks associated with new ventures or investments. Having a plan in place will ensure that only those projects or companies or investments that fit a tribe’s goals in terms of size, scope, risk, acceptable returns and other factors are considered.

A well-defined economic diversification plan can be developed following several basic steps as summarized below.

Step 1:
Identifying and Understanding Tribal Goals and Objectives
The first step in creating an economic development plan is the identification of the overall goals and objectives of the tribe. The goals of the tribe may go beyond just a pure financial return on an investment. For example, is tribal employment a consideration? What about the importance of emphasizing tribal entrepreneurship growth? From a geographic perspective, is the goal to make investments only within the local community or is a wider sphere important?

These and other key questions can be answered through a series of stakeholder interviews. By gathering feedback from tribal leaders, council members, tribal members, advisers and other parties, the specific goals and objectives can be determined.

Step 2:
Outlining Specific Investment Criteria
The next step in the process of developing the plan is to identify specific investment criteria that are acceptable to the tribe based on desired returns, levels of risk and resources available. This step is important so the tribe (or entity charged with developing and managing these economic diversification projects) does not spend needless time evaluating projects that do not meet the minimum criteria. It is also important to have a thorough understanding of the resources, capital, time and energy that the tribe is willing to devote to projects. For example, some of the specific questions that need to be answered regarding investment criteria may include:

• What is the size of investments or projects to be considered?
• Are there specific businesses that the tribe does or does not want to be in, and what should the priorities be?
• What capital resources are available? Internally? Externally?
• What tribal resources are available (institutional/labor/professional) for potential implementation?
• What is the tribe’s acceptable level of risk?
• What is the tribe’s threshold for a minimum return on investment (ROI)?

In addition to internal financial resources, tribes need to consider external financial resources that are potentially available for projects. Indeed, access to capital in these times is more difficult, especially for casino-related projects. However, there are a number of opportunities available to tribes, including stimulus funds established under the American Recovery and Reinvestment Act of 2009.

This stimulus funding can allow tribes to issue low-interest bonds for projects such as health care centers, water plants and wind farms. Tribes will be able to issue either traditional tax-exempt bonds or special Build America Bonds for designated projects. The bonds are intended to help states, local governments and tribes build schools, hospitals, roads and other infrastructure. No casinos or gambling projects are allowed under this funding.

Other tribal funding opportunities include resources from the Small Business Administration (8a), as well as tax credits for natural resource and clean energy development. The Jemez Pueblo in New Mexico recently announced it is developing a new large-scale solar energy project. The proposed 30-acre site for the project will contain 14,850 solar panels that will be able to generate four megawatts of solar energy, or enough to power approximately 600 homes. The project, which is expected to cost $22 million, will be financed entirely through various loans, grants and tax credits from federal and local governments and other entities.

Step 3:
Implementing the Right Governing Structure
Governing and monitoring any new tribal economic development activities can also be a challenge for many tribes looking to diversify. Some may be branching into new businesses they will oversee, and for which they may not have in-house expertise to adequately mange. Establishing the proper approach to governance and establishing an entity and a protocol that works for the tribe are therefore essential.

There are a number of tribes around the country that have set the standard for diversifying their economic interests and establishing the appropriate governance over these investments. Benefitting from these tribes in terms of studying the best practices and lessons learned regarding how to structure the oversight of these investments can be a valuable approach for those just initiating their economic diversification strategies.

Some of the more successful tribes have established separate entities for owning the interests in these alternative investments. Separating these new business operations from the ongoing operations of the tribe and tribal councils can be an effective structure that allows these entities to operate independently on a day-to-day basis without interference, yet still allows control by the tribe over strategic initiatives.

These new entities are usually governed by a board consisting of tribal members, and in some instances outside third-party members who can bring valuable expertise to the table. In evaluating what structure is right for a tribe, the following questions should be considered:

• What type of entity should be formed to hold these alternative investments?
• Should a governance board be elected by general membership or appointed by tribal councils?
• What role should independent third parties play?
• How should the board be structured in terms of length of services, compensation, removal criteria, etc.?
• Should management of the oversight entity be in-house with dedicated staff, contracted out or a combination of the two approaches?

Step 4:
Sourcing Deal Flow and Opportunities
Once the tribe’s goals and objectives have been set, investment criteria determined and a governing process put in place, the next step is to begin identifying and evaluating potential projects and investments.

There is a variety of ways to begin sourcing potential deals and opportunities. The key is to compare the prospective source against the strict criteria that the tribe has established, so that only opportunities that are of the right size and scope, are in geographic areas the tribe wishes to concentrate its efforts, and are in industries or businesses that the tribe has determined are a potential fit for them are presented for evaluation.

While this process will restrict the overall universe of potential opportunities, it will ensure that the tribe is properly allocating its energy and resources and evaluating only those opportunities that fit its overall goals and objectives. Potential sources of deals and opportunities can include the following:

• Industry publications
• Various conferences
• Developing relationships with banks, investment advisors, equity firms and other financial entities
• Law firms and accounting firms that the tribe works with
• Local chambers of commerce and business leaders
• State or regional economic development entities

Due Diligence
Once opportunities are identified that potentially fit the tribe’s investment criteria, it is critical that adequate due diligence be completed on the opportunity or the company prior to committing to any investment.

Depending on the nature of the investment, the tribe may or may not have the internal expertise to adequately evaluate the prospective opportunity. In these situations, reaching out to financial and legal advisers and/or consultants knowledgeable of the industry or situation is recommended.

Casinos have been a cornerstone of many tribal economies over the past few decades. However, the current state of affairs in the gaming industry suggests that for certain tribes, now is the time to leverage the success they have had with their casino operations and invest in other businesses in order to diversify their economies.

Internet gambling could be either an economic savior or the downfall of brick-and-mortar casinos, depending on with whom you’re speaking. Debates on the topic are occurring at both the federal and state levels, and the recent discussion over legalizing intrastate internet poker in California has been divisive.

Past and Present
The Morongo Band of Mission Indians has been at the forefront of the internet poker movement in California, though a push for legislation last year was unsuccessful. Morongo Chairman Robert Martin is attempting to garner more support for an internet poker bill this year, and recently testified at a state Senate hearing on the matter. In 2007, the Morongo tribe partnered with cardrooms in Los Angeles to offer card games online when legislation is passed.

“I think the handwriting is on the wall,” Martin says. “Legislation is coming at some point. State lawmakers made clear at that hearing that they realize online poker is growing and are interested in tapping that revenue stream for the state. They also clearly want to protect Californians and regulate the industry, and they seem to agree with Californians that regulation should happen on the state level.”

Internet poker opponents think the writing on the wall says something entirely different. California Tribal Business Alliance spokesman Doug Elmets says the fact that no legislators have penned a bill is indicative of a lack of support for internet poker.

“It’s a non-starter from the vast majority of tribes and clearly has very little support, if any, in the California legislature,” Elmets says. “In fact, the Morongo tribe has not been able to find an author for their legislation. They weren’t able to find an author for their legislation last year. It appears to be running into the same roadblock this year.”

The California Tribal Business Alliance represents many of the gaming tribes in California.

Testing the Waters
It is unclear how much support intrastate internet poker has from California residents themselves. There are few definitive studies showing how Californians feel about legalizing intrastate internet poker, though the Innovation Group recently surveyed 550 internet users in the state on the issue. The study was commissioned by the California Commerce Club-a company affiliated with the Commerce Casino cardroom in Los Angeles-and was skewed toward people who had played online poker before.

The study was conducted online, and asked questions like, “If internet poker were legalized, would you visit your local casino or cardroom more or less often?” Fifty-two percent of respondents said they would continue visiting their nearby casino or cardroom as frequently as before, while 14 percent said they would visit less and 13 percent said they would visit more.

“What that suggests to me, at least among this subset of folks, is that they’re playing online poker, and if internet poker was legalized, they’re saying they wouldn’t really change their habits,” says Paul Girvan, managing director of the Innovation Group. “That suggests to me there would not be a significant impact on brick-and-mortar casinos.

“The other reason why I believe that is the level of wagers that occur in an internet poker room are very low. We’re talking quarters, 50 cents. The Native American casinos and brick-and-mortar casinos don’t want that business. Their bets are $5 bets. They can’t afford to provide the services, the room, the staff to accommodate all these people who want to play quarter games.”

Contention in California
Many tribes disagree with Girvan’s analysis, and have said they are concerned about the potential effects of intrastate internet poker on land-based casinos. Considering that no bill has been proposed in the California legislature, it is uncertain if internet poker would be exclusively operated by tribal gaming enterprises, or if non-tribal gaming companies would be allowed to operate gambling sites.

“A lot of it would depend upon what is and what isn’t legalized and who can offer it and who can’t,” Lewis and Roca attorney Anthony Cabot says. “It could be very favorable for the tribes if only the tribes were authorized to do it. It could have a different impact if it were more open so others could do it as well, such as the cardrooms.”

The partnership between the Morongo Band of Mission Indians and Los Angeles cardrooms is cause for concern, Doug Elmets says, because of the exclusivity agreements that California tribes have in their gaming compacts.

“We’re opposed to the state legalization of intrastate internet gambling of any kind, because we believe that it’s going to violate the exclusivity provisions in our compacts,” Elmets says. “Those exclusivity provisions in our compacts give tribes the sole right to operate gaming devices, which are broadly defined and include personal computers.”

Tribes with exclusivity provisions in their gaming compacts share a portion of their revenues with the state, which totals $365 million per year for California’s general fund. Elmets says that if tribal gaming exclusivity is violated, California will be left with a budget gap amounting to hundreds of millions of dollars.

“Tribes that have compacts with the state that have exclusivity provisions are helping in a substantial way offset the state budget deficit,” Elmets says. “Should that exclusivity provision be violated by the legalization of intrastate internet gambling, then clearly the tribes would no longer be compelled to contribute to the state’s general fund. That is a substantial amount of money (to lose) on an annual basis.”

Internet poker would generate approximately $50 million per year, according to early estimates.

Few tribes currently support legalizing internet poker in California, though Agua Caliente Band of Cahuilla Indians Chairman Richard Milanovich says he is interested in discussing the issue further. Morongo Chairman Martin says he is optimistic that more tribal leaders will be swayed.

“We respect the views of all tribes and have taken time to have many conversations about this subject,” Martin says. “We are continuing those conversations and finding more and more tribes that are interested in intrastate internet poker. They’re recognizing that legitimate online poker is not a threat to our casino businesses or our exclusivity but a new opportunity to maintain and expand our business models.”

Martin also contends that a large number of Californians are already gambling online, and that the state should take control of the industry.

“Legalization of intrastate internet poker will provide Californians with important consumer protection against fraud, identify theft and cheating that they currently do not get from illegal offshore operators,” Martin says. “Californians are playing on sites operated by offshore companies that don’t pay taxes and don’t generate local jobs. Legalization also offers the state an opportunity to tap into a multibillion-dollar revenue stream, all of which currently is pouring into the pockets of offshore companies.”

The Innovation Group’s Girvan says that additional studies are needed to determine if tribal casinos would be positively or negatively affected by intrastate internet poker.

“I understand what the issues are on both sides of this,” Girvan says. “Would more studies help alleviate some of the concern? I think it would. To really hammer down these issues, two things would need to happen. One, you would need to survey the actual customers of Native American casinos, and have them as your survey base. Two, you’d probably want to do focus groups with these folks. I think those are two aspects that could be put together and could at least provide some information on that issue that would be really unequivocal.”

The Big Picture
Tribes are not only concerned about the legalization of intrastate internet poker in California. The Unlawful Internet Gambling Enforcement Act is currently dominating the discourse among internet gambling supporters and foes. Many tribes oppose the UIGEA, and are anticipating the federal debate to “fix” the bill and legalize online gaming in the United States.

Though the Indian Gaming Regulatory Act enables tribes with established reservations to conduct gaming, many tribal reservations are in rural areas, where a gaming facility would be unsuccessful. Legalizing online gambling would enable tribes in remote locations to launch internet gaming enterprises.

Other tribes, like the Morongo Band, support the UIGEA because of its allowance for intrastate internet gambling. While the UIGEA prohibits the transfer of funds from American banks to offshore gambling websites, there are no federal restrictions on intrastate internet gambling.

“We support the regulation and taxation of internet gambling at the state level as the best mechanism to ensure consumer protection and to maximize the benefits to local economies,” Martin says. “Current federal law that provides states the ability to assume regulatory control of Internet gambling is appropriate and no new federal law is needed.”

Organizations like the National Indian Gaming Association and the California Tribal Business Alliance have remained neutral on the subject of U.S. Rep Barney Frank’s bill to neutralize UIGEA, but NIGA is expected to address the topic at its conference. The California Nations Indian Gaming Association opposes Frank’s bill.

“The California Tribal Business Alliance hasn’t taken a position on the Frank bill or the various other federal bills to legalize and regulate internet gambling,” CTBA’s Elmets says. “We need to understand how their enactment is going to affect the tribal gaming business. The reality is that the legalization of internet gambling in the United States could be a disaster for tribal governments as it relates to gaming, or it could be a wonderful new avenue for tribal economic development.”

Many tribes outside of California have expressed support for internet gaming, as it presents additional opportunities, and as long as it does not threaten the exclusivity that some tribes enjoy in their own states.

“It has the potential to create economic development opportunities for Indian country,” Miko Beasley Denson of the Mississippi Choctaw tribe and Chairwoman Lynn Malerba of the Mohegan tribe said in a letter to United South and Eastern Tribes President Brian Patterson earlier this year. “States like Connecticut and Mississippi are unable to support an intrastate internet gaming system.”

In addition, tribes that haven’t been able to capitalize on land-based gaming because of their remote reservations would be able to participate, according to some experts.

Internet gaming expert Sue Schneider told Indian Country Today, “Internet gambling is inevitable and the sooner tribes get entrepreneurial about it and not be afraid of it the better off they will be. Some tribes are there with it. Others are not, and should be.”

Even before the model compact for Oklahoma Indian tribes was drawn up in 2005, the state had a robust Class II gaming industry. As the compacts were being negotiated, there were already 30,000 slot machines in the state-at least 90 percent of them Class II games.

Today, there are well more than 50,000 machines in Oklahoma, but now, more than two-thirds of them are Class III traditional slot machines.

Right from the start, Oklahoma customers were more sophisticated than the normal new jurisdiction. They had experience in Missouri, Louisiana and even Las Vegas, so a boring bingo machine wasn’t going to cut it. To solve that problem, several small companies stepped up to the plate to develop new games. The only catch was that the federal government, via the National Indian Gaming Commission, kept threatening to draw a “bright line” between Class II and Class III machines that might have, at any time, short-circuited this remarkable technology revolution.

Chris Korpi, vice president of sales for slot manufacturer and longtime Oklahoma supplier Cadillac Jack, says boring games were never the norm in Oklahoma.

“Tribes in Oklahoma have always been interested in the newest technology” he says, “and as the market has matured and many tribes are now operating full-scale casino resorts, we have enhanced our game development to remain ahead of the competition using free-spin bonuses, in-house progressives, and variable volatilities in our video reel product.”

Another company with deep roots in Oklahoma is Austin, Texas-based Multimedia Games, which introduced the first linked progressive to the state in 1995, MegaMania. Mick Roemer, the company’s vice president of sales and marketing, says a second progressive game, MegaNanza, used the more traditional spinning reels to give it a real slot machine feel, but with the bingo technology.

“The ‘bonanza’ (pre-drawn) aspect of that game was challenged by the NIGC in 2002, so Multimedia Games and its tribal customers converted those deployed machines to Reel Time Bingo, a ‘standard-sequence’ game that featured the results in an entertaining, spinning-reels manner. Standard sequence simply refers to the fact that all cards are sold before the bingo numbers are drawn,” said Roemer.

Jim Nulph, marketing director at Tulsa-based VGT, says innovations were the key behind the success of the smaller slot companies in Oklahoma.

“Our company’s founder and CEO, Jon Yarbrough, had the vision to recognize the importance of investing in improvements to bingo,” he says. “First, it simply presented a good business opportunity. Secondly, Jon realized that a strong-performing bingo game is vital to the independence and sovereignty of Native American tribes. As a result of VGT’s vision and leadership, we were able to develop long-lasting partnerships with Oklahoma tribal leaders. These partnerships played an important role in bringing highly profitable bingo games to the Oklahoma market. VGT games have generated close to $4 billion in Oklahoma tribal profit, more than the games of any other manufacturer.”

It’s this insistence on sovereignty that drives the business of Cadillac Jack, according to Korpi.

“We consider Class II products as tribal sovereignty enforcement devices,” he says. “The placement and use of Class II is vital to the sovereignty of tribal nations, and we are honored to have been a significant contributor to the success of Indian gaming in Oklahoma. Revenue from Class II devices remains entirely with the tribe, without any revenue sharing with other governments. It is Cadillac Jack’s goal to continue to be a part of tribal economic self-sufficiency.”

Nulph says the issue has always been important to his company.

“At a recent tribal conference,” he explains, “tribal leaders equated a strong Class II business to the preservation of sovereignty. Disruptions and unclear definitions threaten the foundation of what is clearly a tribal right, and from a business perspective, make it inefficient for all Class II business interests. So, while the work that has been done to protect Class II bingo games has been a great effort by us all, we know that the rewards are worth it and we can’t let our efforts wane.”

But there was always the threat that the NIGC could end the experiment, if rigid rules and regulations were put into place.

“In the last decade the NIGC tried to promulgate new game classification standards that would make games such as Reel Time Bingo less marketable,” says Roemer. “Beginning in 2008, MGAM joined with other Class II gaming manufacturers, including Rocket Gaming, Bally, IGT, VGT, AGS, Nova Gaming and Planet Bingo, in a working group alongside tribes from across the country and two NIGC committees to fight the NIGC’s proposed restrictions. In the end, the NIGC pulled back its classification standards proposal and its attempt to redefine ‘facsimile’ (for Johnson Act purposes) and instead published Class II technical standards and Class II minimum internal control standards.”

Korpi says Cadillac Jack was able to minimize this disruption by working closely with the tribal gaming regulators and other manufacturers within the industry.

“Since the tribal gaming regulators are the only entity that can define what is or what isn’t a Class II device, we looked to these regulators to guide us as to how our Class II devices should operate,” he says. “As part of a concerted and cooperative effort with the tribes and other manufacturers, Cadillac Jack was able to help defend tribes against efforts by the NIGC to erode tribal sovereignty.”

For manufacturers, the ability to help grow the gaming market in Oklahoma was more gratifying than simple profits for their companies.

“The stronger our games perform, the more that the casino, and ultimately the tribe, earns, which results in better lives for the members of the tribes with which we do business,” says Korpi.

Roemer says Multimedia has been a true partner to the state tribes.

“Multimedia Games was the first company to support Oklahoma tribes by financing the construction of new gaming facilities,” he says. “The original Chickasaw WinStar Casino in Thackerville, Riverwind near Norman, the two Osage Million Dollar Elm casinos near Tulsa and the Peoria tribe’s Buffalo Run Casino in Miami were among development projects where Multimedia provided financing and project support. Other gaming companies have since joined with that type of financing support to tribes. Multimedia Games remains a major financing partner with the Chickasaw Nation, Oklahoma’s largest gaming tribe.”

VGT has also partnered with tribes.

“It is an honor to be part of an industry that does so much good for its communities and employees,” says Nulph. “The transformation of our partner tribes and the communities in which our games are placed has been just phenomenal. It is rewarding to know that almost $4 billion in tribal profit has come from VGT machines alone. It is difficult to say how many students have been educated, how many sick have been cared for, and how much Native American culture has been preserved from this tribal partnership. The word gratifying does not begin to capture how good this all makes company associates feel about their contributions.”

While the entry of the main Class III slot manufacturers into Oklahoma has created more diversity in the market, the original Class II providers still achieve a major level of sales in the state. The tribes recall the suppliers’ commitment to them when others were reluctant to make the technology adjustments necessary to compete in the market. And as a result, companies like Multimedia, VGT and Cadillac Jack have become major players in the Class III gaming markets beyond Oklahoma.

In Indian Country, casino gaming has proven itself a powerful engine for economic development, job creation and social betterment. In 2008, Indian gaming stimulated 636,000 jobs nationwide, both at tribal enterprises and in related businesses. The revenues from tribal gaming establishments have been put to use funding a wide range of community benefits-from health care and job training programs to infrastructure and community safety initiatives-and continue to be a vital source of support in helping increase investment and development on reservations, and helping address critical issues such as poverty and unemployment.

Though Indian gaming has returned significant rewards over the past two decades, it also has increased awareness among tribal leaders and tribal gaming operators about the need for programs addressing important issues such as problem and pathological gambling.

“Tribes really have a serious concern about any negative impacts of gambling,” says Eileen Luna Firebaugh, associate professor of American Indian Studies at the University of Arizona. “They want people to have fun and want it to be a popular place for the community, so they have gone far and beyond what’s expected of them with regard to responsible gaming.”

The implementation of responsible gaming programs is an important aspect of any casino gaming business, and the state governments that regulate gaming-either directly, in the case of commercial casinos, or through a tribal gaming compact-universally require a minimum level of responsible gaming efforts on the part of gaming entities.

Responsible gaming programs are designed to help educate employees, customers and the public about the risks of gambling and where to go for help with a gambling problem. They also can provide tips and information about ways to keep gambling fun-such as making it a social event with friends and family, gambling only for a limited period of time and setting a budget before beginning to gamble.

For commercial casinos, responsible gaming programs are a critical component of broader corporate social responsibility efforts. For tribes, the issue is one of community and tribal government social responsibility as well.

“In general, tribes have a strong commitment to responsible gaming because tribal gaming facilities are within their communities,” says Dr. Kate Spilde, chair of the Sycuan Institute on Tribal Gaming at San Diego State University. “The social expectations for tribal government are higher than they are for state and local governments. Since tribal gaming is established with a social purpose-to drive development and recovery-tribal leaders know it is important to acknowledge the potential problems associated with introducing a gaming facility into the community and to take measures to address those problems.”

Challenges
Though tribal governments and gaming facilities have demonstrated a strong commitment to responsible gaming, the implementation of responsible gaming programs can present certain challenges. For some tribes, the challenge lies in communicating this commitment to their surrounding communities and to the states with which they have their tribal gaming compacts.

“There is an idea that a tribe’s commitment to responsible gaming can be gauged by the amount of dollars spent, but this is an incomplete metric,” Spilde says. “Tribes demonstrate support for responsible gaming programs and problem gambling initiatives in a number of ways that cannot be detached or disentangled from the broader social purpose of tribal gaming.”

According to Spilde, because tribal governments are constantly working to address a number of different priorities within the community-whether it be to create a new health care facility, establish a training program for young adults or find innovative ways to meet other community needs-responsible gaming is but one of many important issues tribes must address.

Operational challenges also play a role, notes Jana McKeag, president of Lowry Strategies and a former commissioner of the National Indian Gaming Commission.

“Finding the time for training can be a challenge when you are managing a tribal gaming facility. You want to ensure your employees receive proper training, but you still need to ensure there are employees available on the gaming floor to help patrons,” she says.

Perhaps one of the less well-known challenges is the lack of research on problem gambling in tribal communities. “The value of peer-reviewed research in developing effective programs is immense,” Firebaugh says. “Unfortunately, there rarely are proposals from within or about Indian Country. I wish we could change that, because research is critically important.”

Using Research
Like many tribes, the San Manuel Band of Serrano Mission Indians has been implementing responsible gaming education and training initiatives for several years at its San Manuel Indian Bingo and Casino in Highland, California, which draws approximately 2.2 million visitors each year. The casino posts information about problem gambling and the 1-800-GAMBLER helpline number at several key locations throughout the facility, including near the entrances, cages, ATMs, club booths and in restrooms. The tribe also has an established relationship with the California Council on Problem Gambling that includes yearly training for its managers and front-line employees.

“Every new employee is provided with responsible gaming training before they ever set foot on the casino floor,” says Dianna Scina, guest services director at San Manuel Indian Bingo and Casino. “And all employees receive annual refresher training, too.”

Last year, San Manuel Indian Bingo and Casino expanded its existing responsible gaming efforts by becoming the first member of the National Center for Responsible Gaming’s PEER program, which stands for Partnership for Excellence in Education and Responsible Gaming. The NCRG is the affiliated charity of the American Gaming Association and the only national organization devoted to funding research on gambling disorders and developing science-based responsible gaming programs.

To implement and adhere to the NCRG Code of Conduct, PEER members have access to a variety of resources through the PEER Resource Guide. Available online, the guide includes tools such as:•  Best practice resources, which outline elements of successful existing programs

• Videos, worksheets and other learning tools for employees
• Brochures and signage about responsible gaming, the odds of casino games, unattended minors and more
• Materials and resources for setting up a self-exclusion program
• Tools and practices to train employees on how to prevent
• underage gambling
• Guidance and tools for designing and implementing a responsible
• alcohol service  policy

“One of our primary goals at the NCRG is to support the development of responsible gaming programs that are grounded in sound science, thereby increasing their effectiveness,” says Glenn Christenson, chairman of the NCRG. “The PEER program was created to help gaming companies provide employees and patrons with a full suite of educational resources about problem gambling and responsible gaming that reflects the findings from the latest peer-reviewed research in the field.”

The PEER program is a unique collection of research-based tools and resources that gaming facilities can use to help educate various stakeholders about problem gambling and responsible gaming. At the center of the program is the NCRG Code of Conduct, which details specific commitments PEER members make to casino employees, patrons and the public about promoting responsible gaming, preventing underage gambling, serving alcoholic beverages responsibly, advertising responsibly and training employees about problem gambling and responsible gaming.

Emerging Program
For San Manuel, a significant draw of PEER was the EMERGE training program, an online and in-person training program created by scientists at Harvard Medical School using the latest and highest-quality research available on gambling disorders. EMERGE stands for Executive, Management and Employee Responsible Gaming Education.

“The field of research on gambling disorders has expanded significantly over the past decade, and we now not only know much more about the nature and course of the disorder, but we also have gained considerable insights into the most effective types of prevention and treatments,” says Christine Reilly, executive director of the Institute for Research on Gambling Disorders, an independent program of the NCRG. “All of this knowledge is incorporated into the EMERGE program, which is updated regularly with new research findings.”

When San Manuel first implemented the EMERGE training program for its managers last year, Reilly and Spilde conducted an in-person training session. This year, San Manuel is taking advantage of the online version of the program. Scina says she worked with Reilly to customize the program so it would be tailored specifically for use by San Manuel employees. The program can be customized for gaming facilities of any size and can be adjusted to incorporate video messages from senior management or tribal leaders and other important information from the tribe.

“The EMERGE training program is a great enhancement to what we already have been doing,” Scina says. “This program has created a whole new level of awareness among our managers about the science behind pathological gambling, and since management deals with both players and employees, this additional level of education has really benefitted our entire program.”

Due to its web-based design, EMERGE is available for gaming entities and employees to use 24 hours a day, seven days a week, and does not require gaming facilities to purchase any special software or equipment. It also allows employees to come back to the training program multiple times if, for some reason, they are unable to complete the program in one sitting.

Reilly points out that this versatility helps gaming managers address the operational challenges of providing appropriate training for all employees while simultaneously ensuring that the casino’s guests are still being attended to.

EMERGE content is credentialed by the American Academy of Health Care Providers in the addictive disorders and, according to the NCRG, exceeds the requirements of current gaming regulations regarding training of employees. The program tracks employees’ progress through the program and provides a quiz at the end for employees to test their knowledge. Employees who successfully complete the program receive a certificate of completion from the NCRG and the institute, and employers are provided with a record of which employees have completed the program.

“One of the values of the PEER program and EMERGE is that they look at problem gambling in the larger context of all addictions,” Spilde says. “It’s very important to understand how problem gambling relates to other addictions, because when a tribe is opening a new gaming facility, it is coming into a community that may already have experience with other addictions and addiction treatment, so understanding that relationship can be valuable.”

Scientific Breakthroughs
Other materials offered through the PEER program also reflect important findings from the latest science in the field. In their groundbreaking paper, “The Reno Model: A Science-Based Framework for Responsible Gaming,” Drs. Alex Blaszczynski, Robert Ladouceur and Howard Shaffer wrote about the importance of informed choice for gambling patrons to help them practice responsible gaming.

PEER’s brochure “The House Advantage: A Guide to Understanding the Odds” facilitates informed choice by detailing the odds of several common casino games. To help address questions about underage gambling, the brochure “Talking with Children about Gambling” and “We Care About Your Children” incorporate research about youth risk-taking to help educate casino patrons about the topic.

The NCRG Code of Conduct requires an annual audit of adherence to its provisions. PEER members have access to a gaming facility “report card” that demonstrates their annual commitment to responsible gaming and indicates participation in the PEER program to regulators, tribal governments and the community at large.

“By mirroring the Code of Conduct and being able to issue a report card every year, tribes can create a gold standard for demonstrating their commitment to responsible gaming in a more qualitative way,” Spilde says. “The report card creates a standardized measurement, allowing tribes to translate what they are already doing into specific categories, which helps them receive credit for what they’re already doing.”

Spilde also notes that for tribes organized within the same gaming compact, using the same report card to organize and detail their efforts to address problem gambling and promote responsible gaming may be of further value in helping to demonstrate Indian Country’s commitment to this issue.

“The PEER program is state-of-the-art and truly represents the next wave of responsible gaming programming,” McKeag says. “It provides a proactive approach to responsible gaming, but does so from a ‘first, do no harm’ perspective.”

Charting a Course for the Future
Firebaugh, who also serves on the Scientific Advisory Board for the Institute for Research on Gambling Disorders, says existing peer-reviewed research on gambling disorders can be used as a springboard, but that more research is needed specifically in tribal communities to continue developing effective prevention and treatment programs.  

Spilde, Firebaugh and Reilly all note that it can be difficult for non-tribal researchers to navigate the tribal government approval process for conducting research in the community.

“Many tribes simply have not had positive experiences with researchers in the past, and so they are understandably uncomfortable about repeating that experience,” Reilly says.

Firebaugh points to the dedicated tribal “NCRG at G2E” conference session each November-a combined conference session that brings together scientists from the NCRG Conference and tribal gaming professionals from Global Gaming Expo-as a starting point for increasing interest in this research on both sides. “By having these discussions, our hope is that more people will see something they’re interested in and that more people will begin doing research in this field, and have that research welcomed by tribal nations.”

Ever since “the mark” was seared into a cow rump, a brand has come to signify ownership, and now, ownership of a product or service, besides just the beef. To the consumer, a brand means, quite simply, a promise-the conviction that whatever product or service I’m buying will be what I’m told it is, or what I believe it to be.

Good brands are distinctive.

Distinction drives preference, so powerful brands affect choice and wield tremendous purchasing power.

When it comes to branding tribal casinos, is there a value to making individual tribal casino brands, or does it make more sense to license a well-known brand to attract more customers? The answer to that question wholly depends on whether or not the casino is in a competitive environment.

Where there’s big demand and little supply in a monopoly situation like Foxwoods first was, or Seminole Hard Rock Tampa is, the argument can be made that the casino could be any brand, or non-brand, and do exceptionally well given a healthy economy. The people with a propensity to gamble are going to come to the place and play because it is there and it is convenient, not because it is a well-known brand. It is, after all, about location, location, location.
    

Close Is Best
To paraphrase what Steve Wynn recently said in his proposal to take over the Foxwoods casino project in Philadelphia, “We are 10 minutes away from every ethnic group that gambles.” The vitality of regional gaming (such as it is), at the expense of the branded casino destinations of Atlantic City and Las Vegas, is a testament to the paramount importance of “convenient location.” So, in a non-competitive environment, more customers are not necessarily going to turn out because the casino is a well-known brand.

But that being said, there are benefits-like civic pride and enhanced geographic recognition-in bringing a well-known, respected brand to a smaller, “non-metropolitan/cosmopolitan” area, even if there is no competition. A big brand can help put a place “on the map.”

What is exciting are the individual tribal casinos that have become respected gaming brands themselves-like Grand Casinos or Foxwoods and Mohegan Sun, which have poured millions of hours and dollars into creating compelling brands that tribes throughout the nation look to as the gold standard for successful gaming operations. These successful brands are now successfully leveraging into non-tribal areas like Grand Casinos did before its Harrah’s purchase, and the stunning Mohegan Sun at Pocono Downs. But, to quote Mitchell Etess, president and CEO of Mohegan Sun, “We spent many years and hundreds of million dollars building our brand here at Mohegan Sun, and that might not be possible given the economic realities of 2010.”

Creating or Licensing?
So, is it better to just license a brand? In a competitive market it might be. When the customer has a choice of where to play, and convenient location is not the primary driving factor in the decision-making process, a well-known brand can make a difference.

“Robust brands absolutely have the potential to contribute to incremental revenues,” says Jeanine Repa, senior vice president of brand marketing for the Seminole Hard Rock casinos. “Experts have estimated that value in double-digit percentages. Studies also indicate that a guest’s number of trips would also be influenced by a well-known brand. Hard Rock is one of the most highly recognized brands in the world. Our guests are baby boomers, and our brand wins big among those between the ages of 44 and 64.”

So if there are casinos on every corner, and one of them is a Hard Rock, and Hard Rock is a distinctive, well-known, well-liked brand by the gaming-age demo, and since we know that distinction drives preference, they would presumably get more than their fair share of the first visits (and lion’s share of the spend). Consumers know what to expect with a respected brand, as they see a specific brand name as a contract. A brand’s name may reduce consumers’ sense of uncertainty; there’s familiarity with it, there’s comfort, there’s trust, there’s psychic satisfaction of being a part of or partaking in a brand one finds alluring or compelling.

The Cherokees in Tulsa, Oklahoma have seen the advantage of partnering with the Hard Rock brand.

“In today’s ever-changing and boundary-less business world, the leaders of the Cherokee Nation have seen an opportunity with Hard Rock to expand the ability to attract customers from around the world,” says Meredith Frailey, speaker of the Cherokee Nation Tribal Council.

“Being part of the Hard Rock brand, combined with our expansion, sets us apart from any other entertainment option in the region,” adds David Stewart, CEO of Cherokee Nation Enterprises.

There is also the almighty power of a big brands database, which can be leveraged to a new property’s advantage. With Hard Rock operating 159 venues in 54 countries, how many people are in their database that can be leveraged locally? In 2002, Harrah’s became the first major Las Vegas-based casino brand to jump into the California tribal casino market with the Harrah’s Rincon Casino and Resort in San Diego.

The San Diego market already boasted eight other tribal casinos, but Harrah’s executives knew the name recognition of the Harrah’s Entertainment brand was the key to success-not to mention, the hundreds of thousands of Harrah’s Total Rewards slot club members who live in Southern California who could be immediately enticed to visit a Harrah’s tribal casino in their back yard.

However, to take a page from acclaimed world leader in casino marketing research Mike Meczka, the biggest differentiating factor isn’t simply the brand itself, but the amenity set that comes with it. Hotel towers, luxury guest rooms and suites, indoor/outdoor pools, convention space, multi-purpose theaters for concerts and sporting events, new restaurants and lounges with live entertainment-all may play a greater part in creating differentiation and distinction than brand name alone.    

Big Brands
Of course, the price/value equation plays a leading role in attraction and differentiation as well-the lead role, many would say. No brand, no matter how big and bad the brand name is, will survive in the casino world without a competitive amenity set and value proposition.

If a well-known brand is employed, it seems incumbent upon the operator to strike a balance with tribal heritage. Tribes like the Cherokee have “customized” big brands to make them more uniquely their own. The Cherokee Hard Rock brought its own version of the Hard Rock experience to Tulsa, Oklahoma with influences from Cherokee heritage and Oklahoma’s rich history of musical artists.

As Gay Kingman of the Cheyenne River Sioux said in a 2009 G2E speech, “While gaming is very important to our nations, we must never leave our culture, traditions and spirituality behind as we embrace this new world.”

In tribal sub-brands lies perhaps the best chance to increase awareness of tribal heritage, and further Indian Nation pride. The various amenities within tribal casino resorts abound with opportunity. For example, at the new Northern Quest Resort Casino in Spokane, Washington, the Kalispel tribe’s heritage is on full display.

At Masselows, the new fine dining restaurant named for Chief Masselow, who led the Kalispel Tribe more than 100 years ago, diners are welcomed in Salish, the native language of the Kalispels. An image of Chief Masselow is prominently displayed, along with archive photos depicting the tribe’s history, and bread is served in small bark canoes. The new spa, aptly named “Current,” reflects the tribe’s legacy as “people of the river.” Some spa rituals are based on the tribe’s practices of seeking solitude and solace. Each of the boardrooms and meeting rooms honors luminary tribal figures.

Great brands all have a story, and tell a story. Travel around Indian Country, and you see hallowed tribal traditions and heritage honored in the names and appearance of places within the walls of the casino property. Visitors are rewarded with intimate connections to the culture of the Indian tribe that owns the resort, and the tribe builds and burnishes its own image. That’s branding at its best, and in the long run, maybe just as important as burnishing the bottom line.

Does a well-known brand matter? Yes. And tribes are doing a great job making their brands well-known, with or without the big brand name partnering.