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Jackpot!

Poarch Band finds success with Class II machines

Jackpot!

With three casinos in Alabama and two dog tracks and a card club in neighboring Florida, the Poarch Band of Creek Indians can boast of operating one of the country’s largest and most successful American Indian gambling enterprises.

By most estimates, Poarch Creek was generating upwards of $300 million a year in gambling revenue before the December opening of a 20-story Wind Creek hotel and casino expansion in Wetumpka, Alabama. The tribe also operates Wind Creek casinos in Atmore and Montgomery.

As is the case with many gambling tribes, Poarch Creek has used its casino revenue to build a strong tribal government and diversified economy consisting not only of tribal and commercial gambling, but agriculture and manufacturing.

“Our motto is to be self-sufficient,” says James Martin, president and CEO of the Poarch Creek Indians Enterprise Development Authority. “We don’t believe gaming will go away. But we don’t want all our eggs in one basket. We want to use the windfall we are experiencing and diversify, so we have a stable foundation for future generations.”

What is impressive about Poarch Creek is the fact the tribe has achieved success in a conservative, anti-gambling state that refuses to negotiate a federally mandated agreement that would allow the band to operate lucrative, casino-style slot machines.

The Indian Gaming Regulatory Act (IGRA) of 1988 requires tribes seeking what are known as Class III machines and house-banked table games such as blackjack, roulette and craps to enter into tribal-state regulatory agreements, or compacts.

No Talks, Plenty of Action

Alabama Governor Robert Bentley and his predecessors have refused to discuss such a partnership, which comes as no surprise in a Bible Belt state where alleged political corruption led to sweeping raids that by 2012 shut down most of Alabama’s non-Indian gambling operations.

Lacking a tribal-state compact, Alabama’s only federally recognized Indian tribe has crafted its success with Class II bingo-style slot machines. Poarch Creek has 6,200 of them, making the tribe arguably the largest operator of Class II machines in Indian Country.

“Poarch Creek is unique because we have been able to flourish economically in a conservative political environment that is not conducive to Class III gaming,” tribal Councilman Robert McGhee says.

“A tribal-state compact simply has not been an option.”

Poarch Creek, which consists of 3,082 citizens, was a pioneer in Indian gambling, opening a high-stakes bingo parlor in 1985, a year after the tribe was federally recognized and the very day 230 acres was placed in trust by the U.S. Department of the Interior as an initial reservation.

Through the efforts of such visionary leaders as Calvin McGhee, Eddie Tullis and current Chairman Buford Rolin (see sidebar, page 40), Poarch Creek has established itself as a major economic force, with nearly 3,000 casino, non-gaming and government employees.

The tribe also is a significant political player, funneling hundreds of thousands of dollars annually to the state Republican and Democratic parties.

“We realized early we need a good relationship with both the local communities and the politicians,” says Tullis, tribal chairman for 27 years.

The dollars have proven valuable in warding off attacks from Alabama’s anti-Indian and anti-gambling elements.

The late segregationist and populist Governor George Wallace assisted Poarch Creek in its bid for federal recognition. But the tribe has continually encountered local and state opposition to its status as a sovereign government.

State Attorney General Luther Strange has filed a federal lawsuit contending Poarch Creek slot machines are illegal. And Escambia County Tax Assessor Jim Hildreth, in a filing with the state Supreme Court, is seeking to assess and tax Poarch Band trust lands.

Both cite Carcieri v. Salazar, a damaging 2009 U.S. Supreme Court decision which contends the Department of the Interior has no authority to place land in trust status for tribes not “under federal jurisdiction” with passage in 1934 of the Indian Reorganization Act.

Poarch Creek, whose members are descendants of a Creek Indian nation that existed in the Southeast for generations, was not federally recognized until 1984.

Battle For a Compact

Soon after Congress enacted IGRA, Alabama and Florida officials announced their refusal to negotiate Class III tribal-state compacts. So Poarch Creek joined the Seminole Tribe of Florida in what became a landmark federal court case.

The 11th Circuit Court of Appeals eventually ruled in 1994 that Indian governments could not sue states that refused to negotiate tribal-state compacts, upholding 11th Amendment immunity against lawsuits.

But judges noted that IGRA allowed tribes to request compacts through Interior Department secretarial procedures.

“We immediately hopped on an airplane, met with Interior and said, ‘We want secretarial procedures,’” recalls Poarch Creek attorney Teri Poust, a member of the band.

Unfortunately, Interior had not yet established procedures to handle the requests. The application remained on hold for several years.

“Finally it got to the point that the tribe was doing so well we really didn’t need to do it,” Poust said.

Poarch Creek is aware tribes seeking compacts are often forced to share revenues and cede regulatory authority to the state, a sore spot for a band proud of its sovereignty and self-governance.

“Right now we would give the state some money for a Class III compact. We have customers that would like Class III gaming,” Tullis said. “But we’re not willing to give up an awful lot because we’re making money hand-over-fist.”

Poarch Creek also realizes that should it continue to press for secretarial procedures, Carcieri would be a factor in potential litigation.

“If Poarch Creek pursued secretarial procedures there would be a lawsuit, and Carcieri would be included in the argument,” Poust said.

Carcieri and a related Supreme Court ruling in Salazar v. Patchek is also discouraging Poarch Creek from seeking to place most of 10,000 acres of fee land in federal trust, although land/trust applications have been filed with Interior.

Class II Debate

Poarch Creek’s gambling revenue is difficult to verify because the band does not disclose its earnings. But slot manufacturers estimate Poarch Creek’s inventory of 6,200 Class II machines, in a non-competitive market, could generate $500 million or more a year.

There are some 425 Indian casinos in 28 states, but only 12 are equipped exclusively with Class II machines, according to the 2013 Indian Gaming Industry Report and other sources.

Manufacturers estimate of the 350,000 slot machines in Indian Country, 7 percent to 10 percent are Class II devices.

Federal regulations classify bingo as a game played against other players, regardless of whether machines resemble house-banked Class III slots.

The National Indian Gaming Commission (NIGC), the federal regulatory authority for tribal casinos, last year revised rules and regulations to make Class II machines more profitable.

The agency also announced a proposed “reinterpretation” of a 2008 NIGC rule that “one-touch” bingo machines were a facsimile of Class III machines requiring a tribal-state compact. The opinion was published last summer in the Federal Register by a tribal-friendly NIGC headed by outgoing chairwoman Tracie Stevens, a President Obama appointee.

“Indian Country spent many years and buckets full of money beating back an attempt by the prior NIGC administration to have one-touch declared Class III gaming,” attorney Dean Luthey told attendees of last year’s Oklahoma Indian Gaming Association conference and trade show.

More than a third of the 65,000 slot machines in Oklahoma are Class II devices. The state did not get a tribal-state compact until 2006 and has retained a loyal Class II customer base.

Class II machines are also operated by the Lytton Band of Pomo Indians in California, Kickapoo Tribe in Texas, Miccosukee Indians in Florida, Ho Chunk Nation in Wisconsin and tribes in Nebraska, Montana and Kansas.

Attorneys general in several states have rebelled against the NIGC ruling.

Jacob Appelsmith, adviser to California Governor Jerry Brown, said the NIGC was “stretching the definition of bingo beyond all reasonable limits.”

Strange said Poarch Creek devices are, for all intent and purposes, “the same kind of slot machine gambling one might find in Las Vegas or Atlantic City.”

The NIGC twice rebuffed Strange efforts to shut down the Poarch Creek casinos as he did others throughout the state.

“Since IGRA pre-empts Alabama’s laws, Poarch Band may operate bingo, as defined by IGRA, on its Indian lands,” NIGC Chairwoman Stevens said in a March 14, 2013 letter to Strange.

But the NIGC has not yet signed off on the one-touch reinterpretation, which would likely result in state litigation.

The issue is largely moot, however, as tribes have offered bingo machines operated by a single touch for several years without enforcement action by NIGC or federal authorities. 

The machines provide tribes with leverage in negotiating expiring tribal-state compacts.

Technological advances in the devices, making them more attractive, entertaining and faster to play, are fueling an increase in Class II gambling. It’s been said that the best Class II machine can generate up to 70 percent of the revenue of a Class III device.

“What we’ve done is closed the gap in terms of the quality of the product,” Brad Johnson, an executive with Multimedia Games, told OIGA conference attendees.

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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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