Why are there Indian casinos anyway?

Bill Bembenek, chief executive officer for Pala Casino Spa & Resort, plugs in the EVSE re-charging equipment into a 2011 Nissan Leaf this morning at Pala as Andy Hoskinson, area manager for ECOTality, Inc. for San Diego looks on. (Photo courtesy of the Pala Band)
Bill Bembenek, chief executive officer for Pala Casino Spa & Resort, plugs in the EVSE re-charging equipment into a 2011 Nissan Leaf this morning at Pala as Andy Hoskinson, area manager for ECOTality, Inc. for San Diego looks on. (Photo courtesy of the Pala Band) Indian Country Today, 9-9-11

Indian casinos are by definition owned by Indian tribes and the profits from the casinos go into supporting tribal governments and services.  Tribes have taken to casino gambling, not because Indians are inherently lovers of casinos, but because it was one of the only economic development options open to them; the mostly rural locations of reservations are not the best places to start a new business.  However, most tribal casinos had no competition when the started and therefore the gamblers were more than willing to travel to a reservation to gamble.  For an Indian tribe the casino revenues provide the means to fund its independent existence – and after of 200 years of federal attempts to integrate individual Indians into the mainstream population and eliminate tribal differences – that is the primary goal of every tribe – continuation and perpetuation of each tribe’s individual and unique culture. That goal often gives an Indian casino a broader sense of social responsibility than most casinos or ordinary businesses.

A skeptical or jaded person might say that any press release or newspaper article that describes the actions of an Indian casino in social terms is propaganda and the real purpose is to exploit an opportunity to make a profit..  And maybe they are right – still some of the recent announcements by Indian casinos could be described as socially aware policy.  In the last week, the Mohegan Sun opened gas station for employees and the Pala Tribe in California added an electric car charging unit.  Both will probably help the tribes’ image and help profitability, but both also show a sense of social awareness.

There was a story today in the Las Vegas Sun; that depicts the opposite side of Indian gaming, a tale of greed and no social responsibility.  It was a small back page mention of the restructuring of an Indian gaming management company .  The article only says the CEO is stepping down and the CFO is leaving the company; both had reportedly made nearly $500,000 a year, but as the company only had revenues of the $127,000, that might have been too much.  While, the company still has $9 million in the bank it has no real source of cash flow, although they have plans – it is a company that always has a plan.

The company started in business in 1991 managing a casino for a tribe in California; “Wait,” you might say, “Indian casinos were not legal in California  in 1991.”  And right you would be, but the company was making millions a year for managing the casino, using “gray area” – illegal – slot machines – the casino was an instant success.  At the time the nearest casino was either in Las Vegas or Reno hundreds of miles away.  The tribe did need some expertise and financing to get started, but after a year or two the tribe thought the price was excessive and took over the management of the casino.  The tribe was not able to avoid all of the payments and continued to pay the company $9 million a year for several years  With no expenses and $9 million a year in free cash flow, it was a very profitable venture.  However because the casino was illegal at the time, the company could never get a license from the National Indian Gaming Commissions to manage another tribal casino.   Over the years the company has tried other businesses; it tried restaurants, movie making and cemeteries – the company has changed its name several times, but never its stripes.  The company was founded to exploit an unsophisticated Indian tribe and to pay large salaries to its founders – it has managed to survive and meet its goals and objectives for 20 years – surely that is worth something.

That really does represent the other side of Indian gaming, but there are very few opportunities for that type of company or individuals any longer.  Now, the tribes for the most part operate their own casinos and have used the revenues not merely for government and social services, but also for other economic development – such as buying the Hard Rock Cafe chain as the Seminole Tribe of Florida has done.  Indian gaming has grown from $100 million a year in the first year to $27 billion.  That revenue has created some individual wealth, but for the most part it has done just want the original act anticipated:

(1) to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments; (2) to provide a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation, and to assure that gaming is conducted fairly and honestly by both the operator and players; and (3) to declare that the establishment of independent Federal regulatory authority for gaming on Indian lands, the establishment of Federal standards for gaming on Indian lands, and the establishment of a National Indian Gaming Commission are necessary to meet congressional concerns regarding gaming and to protect such gaming as a means of generating tribal revenue.

Tribal casinos may not have significantly more social or moral awareness than non-tribal enterprises, although a very good argument can be made for that they do, but they do provide social services to tribal members and ensure to continuity of tribal culture.  Some tribal officials or individuals may have profited unjustly from tribal casinos, but it is the exception and not the rule.  The act has given Indian tribes a means for economic development and therefore a means to provide basic services to tribal member; it has also strengthened tribal governments.


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