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Indian Wars

Gambling strains tribal-state relations in Oklahoma, elsewhere

Indian Wars

Relations between Oklahoma Governor Mary Fallin and the state’s American Indian tribes were already tense early last year when Fallin’s rock singer daughter Christina had the audacity to pose for an Instagram photo wearing a native headdress.

“I am of the Muskoke/Creek Nation, and Christina Fallin should have known better,” penned writer Joy Harjo.

“Don’t tread on my culture,” Choctaw Indian activist and songstress Samantha Crain wrote on a picket sign outside a concert by Fallin’s band, Pink Pony.

Governor Fallin apologized, calling her daughter’s culturally inept behavior “inappropriate.”

“I have great respect for Oklahoma’s tribal members. I celebrate their traditions and culture,” the governor said in a prepared statement. “Tribal governments are important partners to our state government, and I value the good relationships my administration has cultivated with them.”

Many of Oklahoma’s 39 federally recognized tribes might disagree with Fallin’s characterization of tribal-state relations. They contend her administration is eroding tribal sovereignty and undoing decades of tribal-state cooperation on taxation, water rights, trust lands and other issues.

“Things have really developed into an acrimonious relationship,” tribal attorney Michael McBride says.

Fallin Failing

Tribes opposed Fallin’s decision to abolish the Oklahoma Indian Affairs Commission, replacing the office with a single tribal liaison.

They didn’t appreciate the state’s recent hard line on tax and tobacco compacts.

And they are extremely suspicious of Fallin’s publicly unexpressed desire to renegotiate tribal-state casino regulatory compacts due to expire in 2020, two years after the governor is termed out of office.

Faced with declining state revenues tied to the slumping oil industry, Fallin is pressuring tribes to reopen talks on new compacts, hoping to get a bigger chunk of the gambling win.

“Fallin’s administration is looking to bring more revenue to the state,” says Kiowa-Comanche John Tahsuda, principal of Navigator’s Global and a lobbyist for Oklahoma tribes. “Fallin doesn’t want to raise taxes, so she’s looking around.

“One of the few economic bright spots in Oklahoma is the tribes,” Tahsuda says. “State officials see tribes doing reasonably well economically and they’re saying, ‘Hey, let’s go after the tribes for more money.’”

“The state looks at us as if we have deep pockets,” Comanche Nation Chairman Wallace Coffey says. “But we give our resources back to our membership.”

“We are under attack because we represent potential revenue,” Citizen Potawatomi Nation Chairman John “Rocky” Barrett says.

“But it’s not just about money,” says Barrett, whose tribe has long fought state and local officials on sovereignty and taxation. “It’s about forcing Indian tribes to do things against their will. And it follows the history of how Oklahoma has handled tribal gaming from the very beginning.”

Fallin doesn’t have much leverage in getting tribes to discuss new compacts.

The agreements, which give the state 6 percent of adjusted gross revenues from slot machines and 10 percent of the table game win, have an automatic 15-year renewal clause, so the tribes aren’t anxious to talk. Tribes have generated nearly $1 billion for the state since a compact was agreed to in 2004.

“I doubt that tribes are really looking to engage at this point,” McBride says.

“There have been no discussions” with the governor’s office, Coffey says, informal or otherwise.

To the contrary, tribes are increasing their inventory of Class II electronic bingo machines, which do not require approval or revenue-sharing payments to the state.

Class By Themselves

Technological improvements have made Class II devices competitive with Class III machines, particularly in Oklahoma, where after years of non-compacted gambling players have grown accustomed to bingo-style, Class II gambling.

“A lot of tribes are electing to go back to Class II machines in the casinos and not use Class III machines,” Coffey says.

Forty-two percent of Oklahoma’s 68,000 slot machines in 2012 were Class II devices, up from 34 percent in 2008, according to the gaming compliance unit of the Office of Management and Enterprise Services (OMES). The percentage of Class II machines is believed to have risen even more since 2012.

In what many perceive to be a desperate, ill-advised tactic to press tribes into negotiating new compacts, a state official suggested in a June 11 letter to Kevin Washburn, Interior Department assistant secretary for Indian affairs, that many of the 41,000 compacted machines operated by 33 tribes at 115 casinos, auto plazas and other locations may be illegal.

OMES Deputy Director Jeffrey Cartmell told Washburn the Cherokee Nation, state officials and an industry testing laboratory in 2006 agreed to a “substantive technical amendment” to the compact that was not approved by the state legislature and federal officials.

As a result of the “technical amendments,” Cartmell said, “every machine that could be played in Las Vegas, Reno or Atlantic City was now an electronic instant bingo machine in Oklahoma.”

Tribal and federal officials, including Washburn, rejected Cartmell’s assertion that agreed-to technical standards for compacted, Class III machines constituted an amendment to the tribal-state compact requiring state and federal approval.

“We regret the discord in the relationship between the state government and the tribes,” said Washburn, noting in his August 14 reply to Cartmell that the compact included provisions for mediating disputes.

“We understand the temptation to look to officials in Washington, D.C., to solve disputes in Oklahoma, but the most lasting resolutions are likely to occur when those disputes are resolved locally and without federal intervention.”

 Cartmell’s letter was symptomatic of several states—Alabama, California, Idaho, Michigan and Wisconsin, among others—that have targeted the legality of casino games in Indian Country in an effort to undermine the industry or press for new compacts.

“State compact-based lawsuits are the new avenue states are using to narrow and undermine Indian gaming, particularly Class II-type Indian gaming,” says attorney Kevin Quigley of Gray, Plant Mooty, a Minneapolis, Minnesota, law firm launching a full-service tribal practice.

“In the past, compacts were targeted to the scope of Class III gaming,” Quigley says. “Now they attempt to narrow and undermine the tribes’ right to offer and regulate Class II gaming.”

An Anti-Tribal Gaming Trend

The 9th Circuit Court of Appeals in July ruled that the Coeur d’Alene Tribe could not offer Texas hold ‘em poker because of a state law prohibiting the game. The tribe had argued Texas hold ‘em was a Class II game not subject to state jurisdiction.

Meanwhile, the 7th Circuit Court of Appeals in April upheld the right of the Ho-Chunk Nation of Wisconsin to offer electronic poker, a game the state said was Class III and subject to a tribal-state compact.

The 11th Circuit Court of Appeals in September upheld the right of the Poarch Band of Creek Indians to operate three non-compacted Class II casinos in Alabama. The ruling upended attempts by state Attorney General Luther Strange to have the machines declared illegal.

A U.S. District Court judge in September ruled that the Sault Ste Marie Tribe of Chippewa Indians could file for a U.S. Interior ruling on a land-trust application near Lansing, Michigan, without entering into a revenue sharing agreement with the state.

And federal and California officials are in District Court seeking to prevent the Ipay Nation of Santa Ysabel from offering proxy-service internet Class II bingo.

Many of the legal assaults on tribal rights to operate Class II gambling without interference from the state—a provision of the Indian Gaming Regulatory Act of 1988—are efforts to leverage compact negotiations.

“A national trend is that states are becoming more aggressive in preparing for compact negotiations,” McBride says. “They’re targeting Class II and trying to whittle down the definition.”

“My experience tells me that when a state starts down the path of questioning Class II machines—whether it’s Alabama, California, Oklahoma or whomever—they’re planning, thinking ahead to either compact negotiations or some other action against tribes,” says Joe Valandra, a Sicangu Lakota and CEO of Great Luck Gaming, partner with the Santa Ysabel Tribe.

“It may get wrapped up as a regulatory or policy issue,” Valandra says, “but it’s really a matter of getting more money to the state.”

An Ill-Advised Letter

Former state Treasurer Scott Meacham, who negotiated the 2004 Oklahoma tribal-state regulatory compact under former Governor Brad Henry, says the goal was to provide, as compacted machines, a limited form of Class III gambling that fell short of traditional slots found in most gambling jurisdictions.

“We didn’t want to do full Class III machines in Oklahoma,” Meacham says. “First of all, we didn’t think we needed to. Secondly, it would be much more difficult to get the state legislature to approve Class III machines.”

The compact called for a form of electronic instant bingo that conformed to the Oklahoma State-Tribal Gaming Act.

From there, things apparently got complicated.

Jamie Hummingbird, director of the Cherokee Nation Gaming Commission, told a panel at the recent Global Gaming Expo that the first machines off the assembly line “did not meet the expectations of the compact.”

“The compacted games weren’t performing, economically, the way the tribes had expected,” says Valandra, who at the time served as chief of staff of the National Indian Gaming Commission. “The tribes began to push the manufacturers to make adjustments. That’s how these so-called amendments took place, in that context.”

 Tribal regulators and state officials, assisted by manufacturers and machine testing laboratories—notably Gaming Laboratories International (GLI)—in 2006 agreed to a set of technical standards and specifications for compacted, Class III machines.

GLI recommended for approval a device that lacked a video screen and incorporated a random number generator to calculate winning outcomes. The tribal-state consultations and GLI recommendation, according to tribal and state officials, constituted an interpretation of compact provisions and not an amendment requiring state and federal approvals.

Meacham, who participated in the 2006 tribal-state discussions, says there was no mention of amending the compact.

“It’s a statutory compact,” he says, approved by voters and the state legislature.

“We wanted to give the tribes and racetracks the ability to offer new and attractive, competitive games. We wanted to create a machine that had the heart of bingo … and allow growth and development, because we understood you had to constantly be creating new experiences to keep the gaming public engaged.

“I don’t know what the state’s motivation could be,” Meacham says of the letters to Washburn. “It feels to me like a bureaucratic overreaction.”

GLI President James Maida declined to discuss the matter.

“I am sorry, but as the independent non-partisan lab I am forbidden to speak about this issue,” Maida said in an email. “The letters speak for themselves.”

GLI’s 2006 opinion was submitted to tribes and the state, and received no objections.

However, earlier this year, nearly 10 years after the GLI opinion, state auditors visited six tribal casinos and issued notices of violation (NOVs) contending some machines violated compact provisions. The notices were later rescinded when OMES acknowledged it lacked authority to issue NOVs.

“They agreed to retract the letters,” Hummingbird says. “But they continued to maintain the machines were illegal.”

Standard Variations

State officials met with a handful of tribal regulators and suggested they “come up with a set of standards by which all games would be evaluated and approved,” Hummingbird says.

“The technical standards—all the different things the games are supposed to do—are already spelled out in the compacts,” Hummingbird recalls telling state attorneys. “So why are we here?”

“It appears the terms of the compact and the technical requirements of electronic instant bingo were amended, either by agreement or by … lab certification procedures,” Cartmell said in his letter to Washburn, a process he suggested could have required approval by Interior, if not the state legislature.

Tribal officials expressed outrage at Cartmell’s assertions.

“The allegations that we are operating illegal games are insulting,” Hummingbird says.

“Cartmell has taken the unusual step of alleging to you that the parties may have been acting unlawfully since nearly the inception of their compact relationship,” Choctaw Nation tribal policy director Brian McClain said in a June letter to Washburn.

“In short, his allegations have no basis in law or fact, contradict a longstanding mutual understanding of the compact standard and have been raised in a manner that is, frankly, strange.”

“The first thing state officials were trying to do is show there was an amendment to the compact,” Chickasaw Nation attorney Michael Burrage says. “There never was an amendment to that compact.

“My reaction also was they wanted to negotiate some of the compact provisions. This was a method to do that,” he says of allegations raised in Cartmell’s letter.

Coffey was more succinct.

“It was very evident they were trying to pick a fight,” he says. 

Cartmell and Fallin’s office did not return calls and emails seeking comment. Fallin’s tribal liaison, Secretary of State Chris Benge, and his deputy assistant for Native American affairs, Brian Hendrix, also failed to return calls and emails for comment.

An OMES spokesman issued an email statement that said, “Upon being unable to locate records related to potential compact amendments and interpretations, the state followed proper protocol by requesting clarification from the federal Interior Department as prescribed by federal law.”

It is not clear if the state will pursue efforts to dispute the legality of tribal slot machines.

Eroding Relations

Barrett speaks of the decades the Citizen Potawatomi has fought with state and local officials over taxation issues, a battle that continues despite a 1991 U.S. Supreme Court decision favorable to the tribe.

Barrett blames term limits and the lack of knowledge about state, federal and tribal relations.

“There is a lack of institutional memory,” he says. “There is not a single Oklahoma legislator who was in office when the last gaming compact was signed. Less than half the Oklahoma legislature had graduated from high school when the 1991 Oklahoma Tax Commission v. Citizen Potawatomi Nation case was heard.”

Barrett also believes an anti-Indian sentiment is sweeping the nation.

“It’s not really about state’s rights,” he says. “It’s got an uglier underbelly. It’s about racism.”

Attorney Burrage says tribal-state relations have historically been good. Earlier this year he negotiated a water rights settlement between Oklahoma and the Chickasaw and Choctaw Nations.

“Every issue that’s come up has been worked out in a compact or settlement of some kind,” Burrage says. “The tribes are significant economic engines in this state, and people are starting to see that. The tribes are also sophisticated business people.”

“I thought we put together a pretty good deal,” former Governor Henry says of the 2004 compact. “It’s been great for the tribes. It’s been great for the state,” he says, generating nearly $120 million a year.

Henry, an attorney, ponders the logic of questioning the legality of Oklahoma gambling devices in an effort to force tribes to the negotiating table.

“The state is on some very shaky legal footing to attack the legality of the games at this late date after having acquiesced to what has been occurring for almost a decade,” he says. “In a court of equity, the state would be deemed to have unclean hands, as the law sometimes says.”

Henry also regrets the hardening of relations between tribes and the state.

“I had a great relationship with the tribes, and I’m proud of that,” he says. “Tribes contribute a great deal to our economy and our state, our culture and heritage. There’s just no reason we shouldn’t celebrate the tribes and all they’ve done for our state.

“I just hope there’s not any real discord here, and we can all get along.”

Avatar
Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at dgpalermo1@gmail.com.

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