Appeals Court Sends Casino Dispute Back to District Court, Again

Appeals Court Sends Casino Dispute Back to District Court, Again

A long-running dispute over revenues from the Fond du Luth Casino is headed back to U.S. District Court after a ruling Friday by a three-judge panel from the 8th Circuit U.S. Court of Appeals.

Updated: 05/08/2015 3:48 PM
Created: 05/08/2015 3:46 PM WDIO.com 
                 
For the second time, a federal appeals court has sent a dispute over Duluth casino payments back to district court, saying the district court did not rule on all of the six factors it had been ordered to consider.

Friday's ruling from a panel of three judges on the 8th District Court of Appeals is the latest in the six-year-old dispute between the City of Duluth and the Fond du Lac Band of Lake Superior Chippewa. This case deals specifically with payments of revenue from the Fond du Luth Casino that the city says should have been made from 2009 to 2011.

The band stopped making payments to the city in 2009 after concluding that its agreement with the city violated federal law. In 2011, the National Indian Gaming Commission issued a notice of violation confirming that the agreement was illegal, but a federal judge ruled in 2011 that the band should still pay nearly $10.4 million for the years 2009, 2010, and 2011.

The band appealed the 2011 ruling, and in 2013 the appeals court sent the case back to U.S. District Court for Minnesota to consider six factors. However, the appeals court now says the district court did not consider one of the factors: the question of whether Congress intended "to ensure that the primary beneficiaries of Indian gaming operations are to be the tribes themselves."

The appeals court has now sent the case back to district court to consider the sixth factor.

Though the notice of violation said federal law requires tribes to be the sole beneficiary of casinos, the City of Duluth has argued that federal law does allow Indian gaming revenues to be used to fund local government operations. However, the appeals court says there is nothing in the record to suggest that the agreement between the city and the band was ever intended to solely cover the cost of city services.

The ruling said that the record indicates property taxes for a non-Indian owner of the casino property would have been $180,930 for 2010, far less than the $6 million the city is seeking for that year. The ruling also said the city has provided almost no evidence regarding the costs of services to the casino and admitted during oral arguments that it had never calculated the costs.

The band had paid 19 percent of gross revenue, totaling $75 million, to the City of Duluth from 1994 to 2009. Mayor Don Ness and other city leaders have repeatedly expressed frustration with the loss of revenue for the city.

Earlier this year, U.S. District Court Judge Colleen Kollar-Kotelly denied the city's attempt to have the NIGC's 2011 notice of violation overturned. The city also lost a federal lawsuit that had tried to prevent the band from placing the Carter Hotel property adjacent to the casino into trust.

Slots get little or no state review

Slots get little or no state review
Article by: TONY KENNEDY , Star Tribune

The state's biggest casinos have gone years without inspections, even with three agents on the job. In contrast, Wisconsin, with a staff of 15, follows detailed procedures and audits every casino once every 18 months.

Slot machines and blackjack tables at Minnesota's Indian casinos have been operating with little to no state scrutiny since at least 2008, records show, including zero slot machine inspections at Mystic Lake Casino in Shakopee, by far the state's biggest gambling house.

Slots at Grand Casino Hinckley and Grand Casino Mille Lacs have gone four years without inspections, which are supposed to guarantee compliance with state-mandated payout ratios. And there were no blackjack inspections at any of the state's casinos in 2008, 2009 and most or all of 2011, according to documents reviewed by the Star Tribune.

The state agency with authority to inspect tribal casinos -- the Alcohol and Gambling Enforcement division of the Department of Public Safety -- has attributed the decline in inspections to budget constraints. But even with three full-time agents assigned to Indian casinos, it has not reviewed any tribal casino audits since 2005. And unlike its counterparts in neighboring states, the agency has no manual of procedures for slot and blackjack inspections.

"Who is looking out for the people of Minnesota here? It's not happening," said Rep. Steve Drazkowski, R-Mazeppa, whose staff has been investigating the matter since last June.

Sen. Mike Parry, R-Waseca, chairman of the State Government Innovation and Veterans Committee, said he will call a hearing on the issue this year.

"I just feel we need to get to the bottom of this," Parry said. "It's absolutely uncalled for that our enforcement department is not fulfilling its obligation."

John McCarthy, executive director of the Minnesota Indian Gaming Association, said there has never been any question about the integrity of Minnesota's tribal gaming and that the tribes have complied with all regulations. Besides oversight from the state, Indian casinos in Minnesota are regulated by the tribal governments themselves, the Bureau of Indian Affairs, the U.S. Department of Justice and the National Indian Gaming Commission.

"There just is no problem,'' McCarthy said. "It's the most regulated gambling in the country.''

Wisconsin, where a similar industry of Indian casino gambling is thriving, has a much more rigorous inspection protocol.

Using a staff of 15, the Wisconsin Division of Gaming follows detailed procedures and a tight schedule of five-day compliance audits at every casino once every 18 months.

Wisconsin agents inspect 10 percent of slot machines on those visits while also observing and inspecting card games. They always do a follow-up audit, the state's compliance chief said in an e-mail to a Minnesota legislative staffer.

Protecting games' integrity

Steve Knudson, administrator of Wisconsin's Gaming Division, wouldn't comment on specific inspection findings but said they are "necessary to maintaining the integrity of casino gaming in our state."

Parry and Drazkowski said the purpose of sending state inspectors to the floors of the casinos is to protect the integrity of the games.

"It's to provide deterrents for mischief in a variety of areas," Drazkowski said.

Slot machine payouts, which are controlled by software, are mandated by law to be a minimum of 80 percent to 95 percent of what goes in over the lifetime of the game. Among other things, inspectors are supposed to ensure that casinos follow control standards on removal and replacement of the software.

When blackjack games are reviewed, inspectors are supposed to run a variety of checks on cards in use by dealers, storage of cards, security of cards, dealing practices, table bets, tipping by patrons, table supervision and other elements.

A fresh start

Michele Tuchner, the new director of Minnesota's Alcohol and Gambling Enforcement, said she is considering a fresh approach to fulfilling the agency's casino inspection obligations. Hired in October from the State Patrol, she has been discussing how to accomplish more with limited resources.

After talking with the staff, she said, she has concluded, "We've kind of been a little neglectful of casino inspections.''

For starters, she said, inspectors immediately will resume the practice of reviewing audited tribal financial reports on gambling. The first stop will be Mystic Lake, which recently notified the agency that its latest reports are available.

To be sure, state inspectors have reported few problems, even when they were doing hundreds of game inspections a year, Tuchner said. When concerns have risen, the tribes have worked to address them.

Jim Arlt, Minnesota's former acting director of gambling enforcement, said in a letter to Drazkowski last August that since 2008 the agency had limited its inspections to "primarily being reactive to complaints."

The result was the near elimination of slot machine inspections. In the four-year period stretching to the end of 2007, just 35 of 15,150 slot machines at the state's seven largest Indian casinos were inspected, according to Department of Public Safety records obtained by Joe Marble, committee administrator for the Minnesota House.

Arlt had put a priority on blackjack inspections for 2011 after they were revived in 2010, but by mid-year no blackjack inspections had been completed. In October, when Tuchner took over, Arlt's goal was unmet, she said.

As recently as 2007, the state had a different strategy for casino inspections, putting slot machines first.

"Video games of chance [slots] are the largest form of gambling in the tribal casinos and inspections of those devices are given priority,'' then-Public Safety Commissioner Michael Campion wrote in a January 2008 letter to a state representative who inquired about card game inspections. Campion said there had not been recent inspections of blackjack because of the emphasis on slots.

100 percent inspections

Like Wisconsin, South Dakota invests heavily in on-site casino visits, Marble's research showed. Even if a tribal gaming commission operates its own testing program, the state tests 20 percent of gambling devices at a casino. When South Dakota audits privately owned casinos, it inspects all slot machines.

When Minnesota signed gambling compacts with the state's 11 Indian tribes starting in 1989, the tribes agreed to pay $13,636 each year for state oversight.

The combined annual payment to the state is $150,000.

Parry said it might be appropriate to review whether the contribution is still adequate. The compacts were signed in perpetuity with no revenue sharing for the state.

"If Gambling Enforcement has a problem, they need to talk to the Legislature about it or else get out there and do their job," he said. "Just saying, 'Well, we don't have the time or we don't have the manpower,' that just doesn't cut it."

Tuchner, the new enforcement director, said her staff is already striving for more efficient ways to oversee tribal gaming.

A pilot project in cooperation with the Red Lake Band of Chippewa is giving state inspectors access to a computer database that tracks slot payouts en masse at the tribe's casinos. If it goes well, the Leech Lake Band of Chippewa is prepared to join the effort.

"I do feel that the inspections are a responsibility of this division," Tuchner said.

Native American Loan-Sharking

Tribe's high-interest online lending venture booms
As states rein in risky lending, Indian tribes use sovereignty, Internet to make loans
By Matt Volz, Associated Press AP

HELENA, Mont. (AP) -- An Indian reservation in the heart of Montana's farm country may seem an unlikely place to borrow a quick $600, but the Chippewa Cree tribe says it has already given out more than 121,000 loans this year at interest rates that can reach a whopping 360 percent.

As more states pass laws to rein in lenders who deal in high-interest, short-term loans, Indian tribes like the Chippewa Cree and their new online lending venture, Plain Green Loans, are stepping in to fill the void. The Internet lets them reach beyond the isolated Rocky Boy's Indian Reservation to borrowers across the nation, while tribal immunity has allowed them to avoid bans and interest-rate caps several states have set.

To Neal Rosette, Plain Green Loans CEO and the Chippewa Cree's former executive administrative officer, it's a win-win. The online lending venture is a resource for people who can't or won't borrow from banks, while it gives the tribe a steady revenue stream and jobs with unemployment on the reservation at nearly 40 percent.

Rosette said this model could be the successor to gambling for tribes looking for an economic boost. Some tribes have owned online lending businesses for several years, and Rosette said the Chippewa Cree and three other tribes have started the Native American Lenders Alliance to encourage more.

"I believe this is the new outlook for Indian Country, not just Rocky Boy," Rosette said. "We are sovereign nations and we have the ability to create our own laws that regulate our businesses such as this."

That's a problem for consumer groups and the states that have tried to bring such lending under control. The issue with these loans, consumer advocates say, is that their high interest rates make it too easy for a borrower to become trapped in a cycle of debt as they have to borrow more to repay their original loans.

Forty-two states and the District of Columbia have taken different regulatory approaches, from outright bans to interest-rate caps. Montana voters last year passed a ballot initiative that capped such loans at a 36 percent annualized interest rate, which has led to a nearly 83 percent drop in so-called deferred deposit lenders, according to Montana banking and financial institutions director Melanie Griggs.

But as the cap drives lenders out of the state, more people are turning to the Internet, which adds the danger of passing along personal bank account information that can be distributed to other lenders and brokers and can lead to overdrafts.

"When they were getting it from brick-and-mortar businesses it was easy to monitor how many people were getting payday loans. Now that it's all on the Internet, it's harder to monitor," Griggs said.

The Chippewa Cree tribe says its loans are not payday loans, those two-week loans with annualized interest rates of more than 600 percent or more. Instead, the tribe says, its highest annualized interest rate is 360 percent. Payments are made over a period of months, usually in monthly or biweekly installments.

By any account, those rates are still very high. By the company's own example, a first-time borrower who takes out a $600 loan would end up paying $1,261.32 over 12 bi-weekly payments.

Less than a year old, Plain Green Loans already has an F rating by the Better Business Bureau after the agency received 20 complaints mainly dealing with billing and collection issues. Eleven of the complaints were resolved, but the company didn't respond or failed to resolve the other nine, according to the BBB.

Rosette said those complaints are relatively few when compared to the thousands of loans the company has administered.

"We've got a process in place that we believe is very quick at handling any type of complaint that we get. That's part of this industry, complaints, regardless of who you are," Rosette said.

As long as it doesn't make any loans to Montana residents, state prosecutors plan to let Plain Green Loans and the Chippewa Cree tribe be.

"We haven't looked specifically at the tribe," said assistant attorney general Jim Molloy. "We've not pursued it based on the understanding with the tribe that they're not lending to Montanans."

Rosette confirmed that the tribe is not lending to Montana residents, but he bristled at the idea that the state could enforce its rate cap even if the tribe were lending in the state.

"If we wanted to defend our position in Montana, we could. But why? It's a small market. It wasn't worth the fight if there was one," Rosette said.

Other states have entered legal battles with lending businesses owned by tribes. A closely watched case is playing out now in Colorado, where the state is attempting to sue Western Sky Financial, an online lender owned by North Dakota's Cheyenne River Sioux Tribe.

Colorado is trying to prevent Western Sky from making loans within its borders, while the tribe counters that the state is attempting "to reach into the reservation and regulate commercial activity."

Other legal battles are being fought or have been fought in California, West Virginia, Missouri, New Mexico and Maryland, creating an unsettled regulatory environment, said Jean Anne Fox, director of financial services at Consumer Federation of America, a consumer advocacy group in Washington, D.C.

"It's a real threat to the ability of state regulators to enforce the loan market to police caps and other consumer protection measures," Fox said.

Some non-tribal businesses have seen tribal immunity as a shield that they can use to make high-interest loans outside of the regulatory spotlight and a way to avoid state law enforcement, Fox said. So they affiliate themselves with the tribe and conduct business under that shield, she said.

It can be difficult to obtain records that define the relationship between a tribe and non-tribal entity. That's the case with Plain Green Loan's relationship to a Fort Worth, Texas-based company called Think Finance Inc.

Think Finance says on its website that Plain Green Loans is one of its "products," along with online lenders owned by two other tribes.

"Our latest product, Plain Green, launched in April. Customers in need of emergency cash can apply online in minutes, get an answer in seconds, and get cash as soon as the next day," a Think Finance press release from September reads.

Neither the tribe nor Think Finance returned calls and emails for comment on the relationship between the companies. Better Business Bureau spokeswoman Chelsea Dannen said her agency also tried to contact Think Finance to clarify the relationship but received no response.

Rosette said Plain Green Loans is wholly owned by the tribe, though he acknowledged that his staff of 25 isn't equipped to handle the volume. It employs a Las Vegas call center and uses brokers to provide it with databases of potential borrowers. It borrows just enough money each day to cover its loans.

There are a lot of things the tribe won't disclose. Rosette says the default rate is on Plain Green loans is proprietary information. He won't name the companies the tribe is involved with or say where company borrows its money or at what rate.

If it turns out that Plain Green Loans is not a bona fide tribal lender, that could change state prosecutors' laissez-faire approach to the company, Molloy said.

But just the obscurity and the uncertain relationship between the tribe and the Texas company exemplify the underlying problem with tribal online lending businesses, Fox said.

"We're not sure who's doing what here," Fox said.

Minnesota court upholds Chippewa tribal ruling against gaming company

Minnesota court upholds Chippewa tribal ruling against gaming company
By Torsten Ove, Pittsburgh Post-Gazette

A Minnesota court has recognized a Chippewa Indian tribal court judgment of more than $19 million against Gaming World International of Lawrence County and its owner, Angelo Medure, paving the way for tribal lawyers to pursue Mr. Medure's assets in Pennsylvania, Ohio and Florida.

The order was signed last week by a judge in Becker County, Minn., although Mr. Medure's lawyers are still waiting for the outcome of their appeal of the tribal court ruling.

Last year the Indian court said that Mr. Medure, 82, owner of Medure Development in Ellwood City, conspired with three leaders of the White Earth Band of Chippewa to steal $10 million in profits from the tribe's Shooting Star Casino in Mahnomen, Minn., which Gaming World had been contracted to manage.

The Indian leaders were prosecuted by federal authorities.

Mr. Medure was not charged, but the White Earth Band sued him after removing Gaming World from the project in 1996.

The suit has been wending its way through the legal system ever since.

In its ruling, the tribal court determined that Gaming World never had any employees at Shooting Star yet was paid $10 million that should have gone to the tribe, whose only source of income is the casino. The $19 million judgment represents the $10 million plus accumulated interest since 1996.

Getting a state court to recognize the Indian court's decision was a major step toward recovering that money, according to Zenas Baer, a lawyer representing White Earth.

Mr. Baer said he next will file motions to determine Mr. Medure's assets. He lives in Coral Gables, Fla., and owns farmland in Ohio and various commercial entities in the New Castle area, including paving and construction firms.

Robert Manly, Mr. Medure's lawyer in Minnesota, said by e-mail that he couldn't comment until conferring with Mr. Medure's lawyers in Pennsylvania but wrote that "we are confident that the trial court's judgment will be reversed." Arguments before the White Earth Tribal Court of Appeals were held Dec. 2.

The 15-year court battle has its origins in a long-standing fight over the development of the casino and allegations that La Cosa Nostra families, including the Pittsburgh mob, had control of Indian casinos across the nation.

In addition to the federal case that led to the convictions of the tribal leaders, Gaming World's involvement with the casino was the subject of several lawsuits Mr. Medure brought against two newspapers and a magazine that implied he was connected to the Genovese crime family in Pittsburgh.

The news stories began in 1993 with a U.S. News & World Report investigative piece on Mafia infiltration of Indian casinos in the U.S. and Canada. The story said Mr. Medure was under investigation by the FBI.

He sued and won an undisclosed settlement in 1997.

He also sued the Youngstown Vindicator for defamation, but a federal judge in Pittsburgh dismissed the suit on the grounds that Mr. Medure is a public figure and the paper did not act with malice.

Another suit against the Santa Rosa (Calif.) Press Democrat and the New York Times Co. also was dismissed by a federal judge in Pittsburgh.

Corruption in Mexico's casinos reaches across U.S. border

Corruption in Mexico's casinos reaches across U.S. border
By Tim Johnson
McClatchy Newspapers


WATERSMEET, Mich. – Hard times have been a constant for most members of the Chippewa Indian tribe known as the Lac Vieux Desert Band.

Nestled in a wooded corner of Michigan's Upper Peninsula, the tribe owns a modest casino, a hotel and a golf course. But the complex is far off the beaten path for tourists or gamblers, and many of the tribe's 600 or so members find that steady work is as unlikely as winning a jackpot.

So when a Mexico casino czar named Juan José Rojas-Cardona offered the tribe the chance to invest in Mexico's booming gambling industry, it seemed like a godsend.

But rather than a big payout, the disadvantaged Lac Vieux tribe got swindled. Its multimillion-dollar "investment" disappeared, adding the tribe to a list of victims that included a mammoth hedge fund in London, an Australian manufacturer of gaming machines, an Arizona investor and two Mexican textile tycoons.

Rojas-Cardona, however, has gone on to build one of the biggest gambling empires in Mexico. Relying on a silky sales pitch and apparent close connections to Mexico's top politicians, perhaps including presidents, Rojas-Cardona holds 60 permits to operate casinos in Mexico – even though gambling remains technically illegal there.

A horrendous act of violence on Aug. 25 first exposed the dark underside of Mexico's casino industry when gangsters firebombed the Casino Royale in Monterrey, Mexico's industrial northern hub, killing 52 people. Those arrested later confessed that they were pressuring the casino owners for payoffs on behalf of Los Zetas, one of Mexico's two biggest crime groups.

But a McClatchy probe in the months since has found evidence that the corruption in Mexico's gambling industry goes much deeper than a shakedown by drug gangs. Indeed, the entire industry appears to be deliberately opaque, designed by political barons as a way for them to hand out licenses as favors, tap casino coffers for cash, and let casino operators flout the law.

The Mexican system is so corrupt and unregulated that U.S. casino companies refuse to enter the Mexican market. That, however, has not kept Americans from being victims of the corruption.

It's unclear what, if anything, the U.S. government has done to warn investors of the risks or to help prosecute alleged scammers such as Rojas-Cardona, whose criminal record in the United States includes the dismissal of a drug charge in New Mexico.

Rojas-Cardona's life in Mexico includes a near-assassination in 2007 that was laid to drug barons or rival casino operators.

Ironically, gambling in Mexico has thrived under the National Action Party, or PAN, which swept into power in 2000 promising an end to the corruption and cronyism that had flourished in Mexico during the long reign of the Institutional Revolutionary Party, or PRI.

The PAN's candidate in 2000, Vicente Fox, was the country's first non-PRI president in more than 70 years, and his successor, current President Felipe Calderón, a fellow PAN member, won the post in 2006 in one of the most closely contested races in Mexico's history.

In a dizzying inconsistency, Fox's government in 2004 issued regulations that essentially ignored Mexico's 1947 law that bans gambling. Even though that law remains in effect, Mexico's Supreme Court allowed the new regulations to go forward.

In the ensuing years, first Fox's administration, and then Calderón's, issued licenses allowing 867 gambling venues, permitting some bingo, sports betting and slot machine parlors to expand into poker, roulette and craps without explicit legalization.

Calderón's office declined to comment on whether the president knows Rojas-Cardona.

Hundreds of full-fledged casinos now dot Mexican cities, and scores, if not hundreds, more operate off the books or under court protection from friendly judges who provide legal relief. Politicians balk at enacting new laws legalizing the current situation for fear that under-the-table payments may dry up and that global gambling companies could move in and dominate.


Rules ignored

Mexican regulators couldn't seem to bend the rules fast enough once they were in place. For example, Mexico's assistant general director of gambling and lotteries, Roberto Correa Méndez, issued permits for 41 new casinos on the day he quit in 2009.

"You visit any of these establishments, and most have games with dealers, card games, baccarat, and this is prohibited," said García Coronado, who's a member of the leftist Democratic Revolutionary Party.

The corruption and favoritism rampant in the Mexican gambling industry served as an incubator for the rise of Rojas-Cardona, 44, a man who spent much of his adolescence and early adulthood in Iowa, where his parents had immigrated from Hidalgo, a state in central Mexico.

From early on, Rojas-Cardona displayed a knack for winning friends. At the University of Iowa, Rojas-Cardona was elected president of the student senate.

After studying economics for five years, Rojas-Cardona left in mid-1990 without getting a degree, the university says. A small cloud followed him. The Iowa state auditor demanded that Rojas-Cardona and other senators return nearly $2,000 in "extravagant" spending on hotels, alcohol, rental of two Cadillacs and double-billing for meals.

Rojas-Cardona, known to one and all as Pepe, ignored the demand.

Rojas-Cardona was charged with a far more serious crime two years later when Border Patrol agents staffing a checkpoint at Orogrande, a remote New Mexico outpost less than an hour from the southern border, saw a white Buick with no license plates approach, then turn south shy of the checkpoint. It was 12:50 a.m., Feb. 11, 1994.

Court records retrieved by McClatchy from a federal records facility in Denver tell what happened next: Agents gave chase and when they stopped the car, they found a "very nervous" Rojas-Cardona. A Border Patrol dog grew excited, and when agents searched the vehicle, they found 17 pounds of marijuana.

Rojas-Cardona signed a plea agreement on the felony trafficking charge in June of that year, but by September he'd skipped bail and vanished.

In late 1998, federal prosecutors asked a judge to quash the arrest warrant and lift the indictment, a practice that sometimes indicates a defendant has become a federal informant. McClatchy could not determine if that was the case with Rojas-Cardona.


Permits granted freely

Rojas-Cardona's criminal past was of no apparent concern to Mexican regulators, who gave enthusiastic endorsements to him and his brother Arturo and their Las Vegas-based partnership, Emex Holdings LLC, one of a web of companies they set up.

Within a few years, Rojas-Cardona and his brother would hold a winning lottery ticket: federal permits to operate 60 casinos and gaming venues.

Just how Rojas-Cardona won the permits is far from clear. But he boasted of friendships with the highest-level politicians and even the primate of Mexico's Roman Catholic Church.

Rojas-Cardona had cast a wide net for foreign investors, sending a Louisiana intermediary to query U.S. Indian tribes if they wanted in on action south of the border.

His trump card: legal Mexican casino permits.

The Lac Vieux Desert Band of Lake Superior Chippewa was a perfect target. While some U.S. tribes had prospered since Indian gambling became legal in the United States, the Lac Vieux were not among them.

When Rojas-Cardona's U.S. agent came calling in early 2006, the tribe's leaders liked what they heard and saw a chance to take a ride on a gambling juggernaut.

Moreover, the Rojas-Cardona brothers insinuated that they had backing from the highest politicians in Mexico.

Claims of bulletproof political connections were stock in trade for Rojas-Cardona. William A. Graven, an Arizona investor, said in an interview in Phoenix that Rojas-Cardona claimed to need foreign funds because he was using his own profits to fill the campaign coffers of powerful politicians in national elections in 2006.

While some foreign investors claimed they were getting stiffed, Rojas-Cardona larded politicians, giving a small helicopter in 2007 to the mayor of San Nicolas, site of his first gambling club, Bella Vista. To angry investors, Rojas-Cardona pointed to his high-level political connections and told them to forget about their money.

"He gave the impression that he was Teflon," said Richard J. Verri, an attorney from a Chandler, Ariz., law firm representing the Lac Vieux Desert Band in a lawsuit against the Rojas-Cardona brothers.

Today, the Rojas-Cardonas operate 22 casinos under the Palmas brand and an untold number of others, making them among Mexico's biggest operators.

Angry investors such as the Michigan Indian tribe say they are frightened to come to Mexico to file a criminal complaint. The Rojas-Cardona brothers are "powerful, dangerous men, connected to the highest levels of the Mexican political establishment," Verri, their attorney, wrote in an email.

James Williams Jr., the former tribal leader, still ponders what went wrong, and why both the Mexican and U.S. governments refuse to take action against Rojas-Cardona.

U.S. federal law treats stealing from Indians harshly, requiring that non-Indians guilty of the theft repay twice the value of what was taken.

"What do we do? Do we just say, well, it's over? I can't accept that, especially when you've taken from 600 tribal members," Williams said.

Chippewa win $18 million

Tribe wins $18 million judgment against casino firm

After a 14-year legal battle, an Indian tribal court in Minnesota has awarded an $18 million judgment to a Chippewa tribe against its former casino management firm, Gaming World International of New Castle and owner Angelo Medure, over the development of the troubled Shooting Star Casino in Mahnomen, Minn.

The tribal court said Mr. Medure, owner of Medure Development in Lawrence County, conspired with Darrell Wadena, former chairman of the White Earth Band of Chippewa, to steal $10 million in profits from the tribe.

Mr. Wadena and two other tribal leaders were convicted in federal court in the 1990s on corruption charges related to the scheme.

The White Earth band sued Mr. Medure and Gaming World to get its money back. The case started in White Earth Tribal Court, was removed to federal court at Mr. Medure's request and then sent back to tribal court by the Eighth U.S. Circuit Court of Appeals.

The tribal court ruled last month that Gaming World, which was contracted to manage and operate the casino, had no employees there at any time yet was paid about $10 million in profits.

In addition to the federal investigation, the Shooting Star Casino had been at the heart of several lawsuits that focused on allegations that Mr. Medure was associated with the Pittsburgh mafia. Mr. Medure sued U.S. News & World Report over a 1993 story called "Gambling with the Mob?" that examined La Cosa Nostra infiltration of Indian casinos across the country. He later sued the Youngstown Vindicator in federal court in Pittsburgh after he said the paper defamed him during its coverage of the U.S. News trial.

A federal judge here threw out that case in 2002, saying that Mr. Medure is a public figure and that the paper did not act with malice.

Greektown's Bankruptcy Haunts Tribe

Greektown Casino's failure haunts Chippewa Indians
Jaclyn Trop / The Detroit News
The reservation of the Sault Ste. Marie Tribe of Chippewa Indians, 60 miles north of the Mackinac Bridge, has come a long way from the dirt roads and tarpaper shacks tribal elders recall.

The tribe has generated enough wealth through its Kewadin Casinos gaming empire and gained enough state and federal aid during the past 25 years to modernize the buildings and most of the homes on its 40-acre reservation. This helps them blend into the surrounding city.


But dreams of self-sufficiency were dashed when the tribe bet on its most ambitious gambling venture — the construction and management of Greektown Casino Hotel in Detroit — only to lose it in bankruptcy in June.

The failure of the casino still stings, said Joanne Carr, a secretary in the tribe's administrative building, as she dabbed her eyes with a tissue.

When the tribe struggled to pay its construction bills and escalating attorney fees, it had to make cuts elsewhere, she said.

"People who worked here for 10 years or more were being let go," Carr said. "It was a nightmare. It just seemed to be loaded on everybody."

Coupled with the tough recession, the loss of Greektown Casino struck a blow to the tribe's plans for supporting its 30,000-member community, especially its growing number of elders and children. The tribe is dealing with the financial reverberations from the casino's failure and trying to diversify into other businesses to solidify its future.

"That casino was our children's future," said tribal board member Deb Pine.

The tribe originally projected the casino would generate $50 million annually, enough to meet the growing health and housing demands of its elders. The population of elders — those 60 and older — is expected to double in the next seven years.

Instead, the tribe had to use its own money to plug losses in the gaming hall until it finally was forced to declare bankruptcy in May 2008. Tribal board members estimate the tribe spent $100 million to $200 million of its own money.

Instead of adding more doctors and dentists to its overburdened health system, the tribe had to cut jobs on the reservation and in its remaining casinos, where revenues declined 6.5 percent last year.

The consequences rippled through the reservation. The tribal government missed out on federal grant money because it couldn't match the funds, said board member Keith Massaway. It also had to borrow money at a higher cost to make payroll.

"There is a lot of bitterness," said the tribe's chairman, Joe McCoy, who took office months after the casino declared bankruptcy. "The casino was our main focus for the last two years."

The tribe receives state and federal money, including $4.8 million in American Recovery and Reinvestment Act funds to make housing upgrades. But maintaining its community health and educational programs with tribal money has been a challenge.

The tribe will never know what it truly lost when the court ordered Greektown's ownership transferred to several East Coast hedge funds, said spokeswoman Michelle Bouschor.

"The revenue stream could have helped many programs, but because it is not there, we don't know what it could be," Bouschor said.

Members like 59-year-old George Eicher, who will become a tribal elder upon his next birthday, are worried that elder benefits — including an annual check, meal programs and extra health services — will be cut.

"The tribe didn't play their cards right, so to speak," Eicher said.

Improving quality of life
Now, the tribe sees the future lies beyond gaming. It is diversifying its holdings, investing in its five remaining casinos in the Upper Peninsula as well as non-gaming related businesses. Those include gas stations and retail outlets such as its Northern Hospitality furniture store and services such as its industrial carpet cleaning business.

Shunk Road, the reservation's main street, tells the story of the tribe's quest for a better life. The street used to be wetlands and dirt paths marked with potholes, said Martin Reinhardt, an assistant professor at Northern Michigan University's Center for Native American Studies and a member of the tribe.

Now the road boasts the tribe's first casino and entertainment complex and a modern recreation center with two Olympic- and National Hockey League-size ice arenas. Many houses have been renovated, though a handful of shacks remain.

When the tribe members opened Michigan's first Native American-owned casino 25 years ago, its goal was to provide for themselves and create jobs without relying upon the state or federal government. Close to a dozen federally recognized tribes in the Great Lakes State followed the Sault tribe's lead and opened gambling halls on their own reservations.

The tribe's five-casino Kewadin chain is one of the U.P.'s largest employers. The reservation has a Blue Ribbon school — recognized by the federal government for high or improving performance, especially among disadvantaged students — with laptops for every child beginning in second grade.

The tribe also has a health center that provides the most comprehensive services in the U.P. and draws non-members from surrounding counties for medical and dental care and services from tobacco cessation programs to HIV testing, which are in short supply off the reservation.

"Gaming has certainly elevated us from the fringes of society to being a major employer," Reinhardt said.

But he added: "Casinos are a mixed blessing."

'A golden opportunity'
Sensing opportunity to expand, the tribe began petitioning in the mid-1990s to open a casino on non-tribal lands in Detroit. In 1996, Michigan voters approved Proposal E, which created permits for three downtown casinos. MotorCity Casino Hotel and MGM Grand Detroit received the other two licenses.

"When we got licensed down there, it was a golden opportunity," McCoy said. "It was the right thing to do, and it was the future."

The casino did well for its first few years, but the venture crumbled beneath the demands of the city's development agreement, which stipulated that Greektown must include amenities such as a theater, 400-room hotel and parking garage.

Construction began at the height of the recession, making it difficult to get capital and sending loan costs skyrocketing, Massaway said.

Meanwhile, the casino was taxed at 24 percent, five points higher than MGM Grand and MotorCity because it hadn't yet fulfilled the development agreement.

"If we didn't have to open a hotel and a parking garage, we would still own it," Massaway said. "We signed development agreements that had unrealistic goals.

"Though the bankruptcy settlement erased the tribe's casino debt, it remains a huge blow to their pride, said Carr, the administrative secretary.

"We trusted that we were on the same playing field as MotorCity and MGM, but we found out we weren't," Carr said.

Today, the tribe is trying to move forward after "an expensive lesson learned," McCoy said. The future of the Sault Ste. Marie Tribe of Chippewa Indians now lies in picking up the cards, he said, and rebuilding its assets.