Dances with sharks; why the Indian gaming experiment's gone wrong.

Plastic garbage bags stand in as roofs; faucets along a dirt road serve as showers. A 12-year-old might call this a scout camp, but the Kickapoo tribe of Eagle Bend, Texas, calls it a nation--and it's clearly a nation in trouble. A quarter of the population is unemployed, more than half is illiterate, and much to the embarassment of tribal leaders, the signal corp in the community vegetable garden is marijuana.

By the looks of it, the Kickapoo reservation needs several basic things, including electricity, plumbing, and a school. But it wants only one thing: bingo, and step on it. "We're desperate for the money," says Julio Frausto, a tribal leader. And the Kickapoos are not the only ones. In the four years since Congress passed the Indian Gaming Act, which guaranteed tribes the right to run gambling enterprises on their reservations, more than a hundred tribes from North Dakota to Florida have gotten into the act, eager to translate blackjack and bingo into better education and opportunity.

But while the Kickapoo look to Las Vegas for inspiration, they might be wiser to the first glance a few hundred miles north, to Miami, Oklahoma.

When the leaders of the Seneca-Cayugas there hired Wayne Newton Enterprises to run their high-stakes bingo parlor in October 1990, they thought their troubles were behind them. The parlor had been shut down for several months after the tribe terminated its contract with a British management company that failed to turn a profit after running the hall for a year. But now they had a real Las Vegas concern working for them, and Wayne himself--half American Indian--came to the grand opening to give away the evening's big prizes. Sure, the tribe was asked to throw in $224,000 to help restart the operation--over and above the $300,000 it had already spent to guild the hall--but Wayne was going to ante up $125,000, he was sending his best people, and anyway, business during November was good. No worries.

By December, worries. On most nights the huge hall, with its mirrored ceilings and pastel interior, was packed with 1,400 players. But profits were nowhere to be found. Neither, for that matter, was Wayne's $125,000. In December 1991, Newton Enterprises' own ledger sheets reported a gross of $12.5 million for the year, improbably offset by enough expenses to leave a debt of $360,000, which the company asked the tribe to cover. For the whole year the Seneca-Cayugas received $13,000--barely a seventh of the salary of Newton Enterprises' on-site manager. The final outrage came in December, when two jackpot winners were unable to get their checks cashed at the bank. The tribe retaliated by surrounding the bingo hall with pick-up trucks while Newton's security forces barricaded themselve inside. After a tense five-day standoff, a federal judge ruled that the hall was to be returned to the tribe. The question of who will pay the hall's debt is now headed for arbitration.

Although tribes have always kept criminal and financial data to themselves, and while the government seems equally disinclined to discuss the subject of troubles in Indian gaming, there's a growing body of evidence that what happened to the Senecas is not unusual. Since high-stakes, Indian-owned bingo parlors made their first appearance in the late seventies, tribes with gaming operations have been beset by difficulties ranging from graft to fratricide. What Congress envisioned as a fast track out of poverty and unemployment for American Indians has evolved into a billion-dollar-a-year industry that has added precious little to social services on reservations throughout the country.

"If we get the money from bingo, we're going to set up a vocational training program," says Kickapoo administrator Frausto. "Even if thekids don't go to college, they'll have a trade." Perhaps. But they may also get more than they bargained for. In one extreme instance, the Mohawks of upstate New York split into pro-and anti-gambling factions and commenced a brief civil war because profits from their seven on-reservation halls were going exclusively to hall owners and their non-Indian management team. Two tribe members were left dead.

While it's easy--and partially correct--to blame American Indians for the unfolding gambling fiasco, the real culprit may be bureaucrats in Washington, D.C. After all, Indian gaming is an experiment that might convince even Milton Friedman that government regulation is in order: inexperienced, financially desperate Indians entering a slick and crime-infested business. But the Indians don't want help, and the commission the government created to regulate Indian gambling, the National Indian Gaming Commission (NICC), is equally disinclined to provide it, preaching laissez-faire as tribe after tribe gets taken. The shame is that a few tribal success stories suggest that, if properly run and carefully regulated, Indian gambling can pay off as promised--in housing and modern plumbing, scholarships and jobs. Instead, as the Kickapoos break in the tables without expertise or government assistance, the deck has quietly been stacked against them.

To anyone familiar with the effects gambling has had on other communities that have legalized it, the Indians' venture into gaming may sound less like a shortcut to prosperity than a quick way to finish off tribal life once and for all. Wherever it's been tried, gambling has been accompanied by a dramatic increase in violent and property crimes, alcoholism, and drug abuse. Yet there is surprisingly little breast-beating on the reservations about how gambling could destroy what is left of Indian culture. (Could names like "Stands With 17" be far behind?) One reason is that Indians are a little more modern than we think. Another is that, after a decade of penetrating budget cuts, they have few other options.

Indian gaming took hold in the eighties, as most everything else on the reservation was withering away. While funds for education decreased only slightly in the Reagan-Bush era, other aid programs plunged. In 1980, the National Health Service Corps sent 155 physicians to reservations; a decade later it was sending seven. Housing and Urban Development, which had authorized 6,000 new units of Indian housing during Carter's last year as president, was building only 1,500 new units by 1988. The Economic Development Administration, which had funded bricks-and-mortar projects, was slashed to near extinction, while the Community Services Administration, which granted money for development projects, was wiped out altogether.

"The Reagan cuts devastated tribes," says Frank Ducheneaux, who served as counsel on Indian Affairs for the House Committee on Interior and Insular Affairs during this period. "Since most have high rates of unemployment and poverty and rely heavily on the government for social services, Indians had to find alternative sources of funding." And as the need for alternative funding became evident, the legal grounds for gaming were being won.

The first test came in Florida back in 1979, after the Miami Seminoles defied a state law prohibiting bingo prizes of more than $100 and began offering $10,000 jackpots in a 1,200-seat hall. The state sued, but in 1982 a federal appeals court ruled that since the Seminoles were a sovereign nation, state civil regulations did not apply to them. Tribes nationwide took note, and within five years, 113 bingo operations around the country were grossing $225 million annually. Legal challenges from states abounded, but in 1987 the Supreme Court decided that Indians could operate any form of gambling already permitted by the state--and could do so with their own regulations. In the 14 states that allowed groups to run highly restricted "Las Vegas nights" for charity, the door was opened for Indians to start up full-blown casinos.

A year later, Congress bestowed its approval with the Indian Gaming Act, which advocated gambling as "a means of promoting tribal economic development, self-sufficiency, and strong tribal governments." Yet Congress wasn't altogether sanguine about gaming--nor should it have been, considering the then-vivid example of Atlantic City, where the felony crime rate skyrocketed in the first few years of legalized gambling. (Las Vegas was steadier, ranking either first, second, third, or fourth in per capita felonies in the country's metropolitan areas between 1960 and 1984.) Nevertheless, Congress agreed that the Indians had both the legal right to establish gaming parlors and little prospect of raising badly needed money from other sources. So to shield Indians "from organized crime and other corrupting influences" and ensure that "the Indian tribe is the primary beneficiary of the gaming operation," it devised a complicated system of regulation. Yet to date, no government or private agency has examined the successes or failures of Indian gaming--Congress didn't apparently have much of a plan for overseeing how its well-intentioned rules would work. According to the FBI, troubles began almost as soon as the gaming did--and those troubles have included organized crime.

Grift horses

When Stewart Siegel, a dealer and manager at casinos from Las Vegas to the Caribbean, was hired to run the Barona reservation's bingo hall in San Diego, he brought a pro's touch to the reservation's games: Grand prizes like cars and $60,000 in cash were regularly won by planted shills, who then gave the money back to Siegel. After pleading guilty in 1986 to four counts of grand theft, including biking the tribe of $600,000 a year, he joined the witness protection program and started talking. Testifying before the Senate Select Committee on Indian Affairs with a hood over his head, he claimed that he knew of at least 12 halls that were controlled by the Cosa Nostra but guessed that nearly half of all Indian casinos were tainted by it, either directly through management and investors or indirectly through suppliers.

The allegation is hardly far-fetched, given the economics of starting up a gaming hall. Indians are especially vulnerable to mafia infiltration because few banks make loans to tribes; their land, which is sovereign, cannot be foreclosed. So when tribes look elsewhere for start-up money, well- and not-so-well concealed mafiosi are often their most willing backers. According to the FBI, the trendsetting Seminoles unwittingly hired the mob when they opened their hall in 1979. (The FBI routed them out.) Two years later, the Cabazons, a tiny tribe in Riverside County, California, retained Rocco Zangari, a member of a Southern California organized crime family, to run their card room. When tribal vice-chairman Alvin Alvarez accused the management of skimming profits, he was forced out of office. Months later, he and two other critics were found shot to death. The case has yet to be solved.

Disorganized crime my be just as threatening. Under the most common contracts that tribes negotiate with management companies, the Indians are promised 60 percent of "profits after expenses," a clause that often means the tribe gets nothing. Examples of management companies cooking the books are legion. On the Mohawk reservation where the intratribal gambling war broke out, non-Indian investor Emmet Munley was found by his Indian business partner to have deducted $186,000 in traveling expenses and $120,000 in accounting fees. At the Seneca-Cayuga hall, Wayne Newton Enterprises was clearing $20,000 to $30,000 a month, according to Don Deal, who used to work for the company and saw the accounting sheets, while the tribe earned next to nothing. The Winnebagos of Wisconsin got a Halloween party and a back-taxes bill from the IRS for $800,000 but have yet to get any profits from their management company, the Genna Corporation.

Even worse, gambling has cut off the little federal support the Winnebagos had before gaming, says tribal chairwoman Jo Ann Jones. Allegations that the Genna Corporation has bought off half of the Winnebagos' tribal council in lieu of sharing the profits has so riven the tribe that members have been unable to meet and approve applications for government programs. Since June 1, 1990, all their federal grants for housing, education, and other social services have ceased.

So are the Genna Corporation and those other management companies corrupt? No one--neither the tribes not the government--has taken the trouble to find out. While in Nevada and New Jersey the mere scent of ill repute will get one barred from even the lower echelons of casino management, aspiring Indian casino managers are currently disqualified only if the FBI--which runs fingerprint checks on request--discovers a felony conviction. The NIGC is supposed to be doing more sophisticated background checks, sniffing out the mafia and making sure tribes are getting a fair count from their management companies. But the commission is clearly not doing enough homework. Wayne Newton Enterprises' only other experiences in Indian gaming, with the Santa Ynez of California, ended in bankruptcy. Emmet Munley was unable to get a gambling license through the Nevada Gaming Control Board on two occasions because he associated "with persons of questionable and unsavory character." (The NIGC's colleague, the Bureau of Indian Affairs [BIA], which must approve any contract between a management company and a tribe, has also been less than vigilant in sifting out undersiables. Indeed, it was a BIA agent, Thomas Burden, who originally recommended Emmet Munley when the Mohawks were searching for investors.)

What has the NIGC been doing since it was written into existence in 1988? Mostly finding office space; it wasn't until February 1991 that it settled on permanent quarters, and even then it needed an additional eight months to publish its first set of regulations. It has yet to hire field operatives and has no legal apparatus to make and enforce its decisions. The man Bush appointed to run the commission, Tony Hope (adopted son of entertainer Bob Hope), plans to have the commission up and running by this spring. In the meantime, most Indian casinos proliferate and run in a regulatory vacuum. "When we started having problems with our management company," says the Winnebagos' Jo Ann Jones, "we didn't even think of calling [the NIGC]."

Slow motion is a standard feature of federal bureaucracies, but the commission has also been hindered by the combined resistance of Indian leaders--many of whom see the commission as patronizing and unnecessary--and the states, which have their own interest in making sure the halls are functioning responsibly. Adjudicating betwen two sovereign entities makes painstaking debate on the commission's every move inevitable. A set of revised regulations on what types of electronic machines will be allowed in bingo halls was heatedly debated for months in hearings in five cities across the country.

Even after it publishes all its regulations, the commission will probably remain ineffective. For one, it is woefully underfunded. Today the New Jersey Casino Control Commission employs 400 people and spends $23 million per year to keep an eye on Atlantic City's 12 casinos. The Indian Gaming Commission will hire 25 people and spend $3 million per year to oversee more than 150 halls. And what the NIGC lacks in financial way, it won't be making up with regulatory will. Hope intends to preside over a relatively hands-off commission. "There will be no micromanagement from D.C.," he insists.

The style is the legacy of a Republican policy, initiated by Nixon in 1970 and expanded upon by Reagan and Bush, to encourage Indian self-determination by alflowing tribes to make their own decisions whenever possible. When James Watt headed the Department of the Interior, he instructed BIA to review contracts between Indians and bingo hall managers only when tribes requested it, even though long-standing law requires that all such contracts get BIA approval. The NIGC is headed for a similarly minimalist approach in its role as watchdog.

That the growth of Indian gaiming coincides with this new governmental disinterest is a historical accident and not a very fortunate one. Washington's libertarian impulses may arguably be long overdue in other realms of Indian life, but they are misplaced in gambling, an industry that constantly temppts those involved with large sums of immediately available cash and easily fudged ledgers. What is true for the owners and managers of casinos in Atlantic City and Las Vegas is true for the Indians: Without strong, vigiland, and impartial oversight, they are easy marks for the mob and all types of hustlers.

Santee clause

The most recent opportunists have been Nevada entrepreneurs. The legitimate gambling industry, after years of casting an alarmed and disapproving eye on its down-market competitors and pressing Congress to legislate the Indians out of its domain, appears ready to adopt an if-you-can't-beat-'em-join-'em strategy. The first proposal was perhaps the most audacious. It came from Harvey's Wagon Wheel Inc., a Lake Tahoe resort hotel and casino that caters to 2.5 million visitors annually.

Harvey's and the Santee Sioux, a small and impoverished tribe in northeast Nebraska, hatched a plan to petition the federal government to take into trust three acres of land in Council Bluffs, Iowa, a small town just across the river from the 600,000 residents of Omaha. When the petition is approved by the BIA, the land will become sovereign territory, allowing the Indians to permit Harvey's to build a casino on it. Then Harvey's will buy 47 surrounding acres to build a $67 million hotel and convention center, cutting the Indians in on the action once the dollars roll in.

Sound dubious? Not to the tiny Kickapoo nation of Horton, Kansas, which is currently negotiating a similar deal with the massive Mirage Hotel and Casino. Since the Las Vegas-based company approached tribal leaders back in August 1991, the project has gotten a lot of popular support (the governor included) and made the tribe of barely 1,500 members some new friends. "We used to be 'those Indians,'" says Verna Finch, the tribal vice-chair. "People would not even use our name. Now we have a lot of folks acting like they've always been our buddies."

The Mirage deal is clearly good for the Kickapoo leaders' egos. Less clear is whether it is good for the Kickapoo rank and file, who suffer from a 60 percent unemployment rate. Although the nearby town of Hiawatha has offered to donate 70 acres of land within the tribe's ancestral boundaries to build the casino locally, the Mirage has made it clear that it's no dice unless the land is near Kansas City, an hour and a half away.

Because many Indians currently rely on far-flung, low-paying migrant work to survive, the promise of jobs is often a major incentive to tribes considering gaming. But these Vegas-scale operations will not ease unemployment. They need to be located near or within easy access of major population centers; most reservations, however, are in the hinterlands.

Regulation roulette

The jobs issue is even more important than it first appears because it is most often those halls and casinos employing and involving tribe members that succeed. While the Winnebagos went broke and the Mohawks turned to gunplay in squabbles over outside control, several tribes have been quietly fulfilling the gaming act's promise of more jobs and social services by operating their own shops.

Before the Mille Lacs Chippewas of Minnesota opened their Grand Casino in April 1990, 60 percent of their families lived below the poverty line; 45 percent were unemployed. By December, only a handful lived in poverty, virtually none were unemployed (most had gotten jobs in the casino), and the tribe had become the county's biggest employer. A modern sewer system, school improvements, and a health clinic are on the way.

The Oneidas, also from Minnesota, watched their unemployment rate fall from 40 percent in 1976 to 17 percent in 1991, tanks to their gaming facility--which is run with no outside management help. "I can't imagine why so many tribes are willing to give away 40 percent," says Bobby Webster, part of the tribal management team. With proceeds from their bingo hall, they have built a $10.5 million hotel and convention center and an environmental testing lab that has won state and federal contracts. They've subsidized their own Head Start program and built their own K-8 grade school. A high school is now in the works. While most reservations have been losing members, the Oneidas have seen their numbers swell by a third in the past 15 years.

Still, even when it works this well, gambling is no panacea for deep social ills that could be billions of dollars and decades away from a cure. Even among the Oneidas unemployment is still high, and drug and alcohol problems persist. But if a few tribes can make a little progress through gaming, perhaps more can. And in the absence of other sources of funding, it means a few more Indian kids educated and employed and fewer houses with trashbag roofs.

Yet in their current hands-off mode, the NIGC and the legislators who created it are repeating the mistakes of previous would-be benefactors who threw plots of land, and then money, at tribes. By their passivity, they're effectively ensuring that good programs are flukes, not formulas--and that beggared but eager tribes like Eagle Bend's Kickapoos will be playing against the odds.

Keeping decent information about what works and what doesn't, and then providing technical assistance for start-ups, should be the minimal role of the slumbering NIGC. But it's not enough. While some Indians might paint any oversight effort as an infringement on their rights of sovereignty, this is the wrong moment for the government to be daunted byf that charge. After a green light from the federal courts, program-slashing by successive administrations, and a reluctant thumbs-up from Congress, the government now has an obligation to tribes to make sure that gaming is run legally and in the interests of the people it was intended to help--in short, that gambling is the "means of promoting tribal economic development, self-sufficiency, and strong tribal governments" Congress declared it would be in the eighties. The last thing the Kickapoos need, after all, is another broken promise.