Snoqualmie Tribe's big bet: The casino that almost wasn't
The Snoqualmie Tribe is betting the premier location for Snoqualmie Casino will make it the golden goose this tribe of about 600 people — many of them unemployed and living in poverty — has long hoped for.
Seattle Times reporters
It's the grand opening that almost didn't happen, and a bigger gamble than any player at Snoqualmie Casino will ever take.
Not 10 years ago, the Snoqualmie Tribe was so poor it relied on the annual salmon bake at the Evergreen State Fair to fund its tribal budget. Snoqualmie elders picked berries to help pay for their fight to regain federal recognition as an Indian tribe.
The tribe had no reservation. No money in the bank, or prospects to earn it — not even a smoke shop or a fireworks stand.
But Thursday night, the tribe will open the only tribal casino on the Eastside, right off I-90 near some of the state's wealthiest ZIP codes and just a half-hour's drive from downtown Seattle. The Snoqualmie Tribe is betting the premier location for Snoqualmie Casino will make it the golden goose this tribe of about 600 people — many of them unemployed and living in poverty — has long hoped for.
The tribe has bet $375 million in borrowed money on the success of a 170,000-square-foot casino, with 1,700 electronic slot machines and five restaurants, including fine dining, a cigar lounge and a cellar stocked with 300 wines. With windows overlooking a sweeping view of the Cascades, it's a casino that promises to be "more than just slots in a box," as the marketing team at Snoqualmie Casino likes to say.
When the doors open, there won't be any sign of what it took the tribe to get here. Indian Country can be a closed world, with few public records, open meetings or discussion outside the inner circle. But documents and interviews have provided a look inside the world of Indian casino startups, where business partners shower tribal members with gifts, trips and money to fend off rivals and buy loyalty.
It's also the story of how the tribe almost lost the project. The tribe's original business partner, which bought the land for the casino for $3.8 million and promised financing and a critical gambling permit, didn't hold up its end of the deal, according to the tribe. The Snoqualmies felt they were left with no choice but to borrow $76 million to buy out their partner and ransom the property.
"They kind of painted themselves into a corner in the way they put this together and with the liabilities they incurred in terms of the cost and the kind of people they dealt with. They just didn't know what they were doing, and so they are paying the price for it," said W. Ron Allen, chairman of the Washington Indian Gaming Association and longtime chairman of the Jamestown S'Klallam Tribe, which operates the 7 Cedars casino in Clallam County. "People took advantage of them."
The tribe had to take on even more debt to build the casino, ultimately borrowing $375 million, the biggest startup financing in the country for a tribe building a casino.
With that debt came internal dissent that drew unwanted attention to the tribe. Conflict over the casino startup led, some former tribal members say, to their banishment by the tribe last spring. That wound still festers: Nine banished tribal members, including four members of the tribal council and its former chairman, are fighting their removal in federal court, claiming violation of their civil rights. At stake is their very identity as Indian people as well as important tribal benefits, including medical care and a potential share in casino profits.
But then, it's never been easy for the Snoqualmies, survivors of more than 150 years of dispossession from the homeland that bears their name. Promised a reservation as part of a treaty signed in 1855, they never got it, and they were terminated as a tribe by the U.S. government in 1953. The Snoqualmies, after a long struggle, were re-recognized in 1999. Finally, the 56-acre casino property was declared their reservation by the federal government in 2006.
The Snoqualmies still are forming their new government. Their reservation is the casino property. They've set up a tribal court and a one-man police department. The tribe also launched two health clinics that serve not only its own members, but the surrounding community. Plans to build a courthouse are in the works. And the tribe hopes to open a hospital and provide housing for some members.
Already the tribe is making an impact: Overnight, the casino has become the largest employer in the Snoqualmie Valley. But only about 20 of the 1,300 new employees at the casino will be Snoqualmie Tribe members, despite competitive wages and benefits ranging from free meals to full medical coverage. Part of the reason is the tribe's makeup: Many members live nowhere near the casino or one another.
Most have long lived and worked away from the valley that is their homeland, in the non-Indian world. They are scattered to the four directions, in towns across Washington and more than a half-dozen other states.
It might be years before the tribe realizes significant economic benefits, as the tribe pays down its debt.
Moreover, the tribe's cash flow could be slowed. The opening of the grand new facility comes just as the economy is in a tailspin and consumers are cutting back, even on gambling. Some tribes in the I-5 corridor are reporting flat revenues at their casinos for the first time ever. The heavy debt the tribe took on also will limit how much expansion it can undertake, such as a hotel and conference center already in the master plan for the site.
Allen, the Jamestown chairman, believes the casino will thrive anyway. "Their market is so strong over there on the east side of Puget Sound, it is not going to be a problem for them," Allen said. "They are going to succeed almost despite themselves."
An early investor
It all started with a phone call.
Emery Parish, a Tlingit tribal member, was pushing his tribe in Southeast Alaska to invest in the casino-gambling action in the Lower 48. He said that as he trolled lists of petitions for tribal recognition, "You are looking for three things. There are only so many states with recognized tribes. And there are only so many tribes with good locations. And then there are only so many with petitions that look ready to pop.
"The Snoqualmies looked on track," Parish recalled in a recent interview. He picked up the phone and cold-called, and he was put through to tribal council member Mary Anne Hinzsman. The year was 1996.
"I talked with her probably once a month for two years. I said 'You guys are sitting good,' and she said, 'When we get recognized you are the first in line; we are getting calls from everybody.' I was a tribal member, she was a tribal member, it was going to be tribal to tribal. Mary Anne thought it was a great idea, she trusted me and I trusted her, we were two little chipmunks going down the path, going to do this casino."
Parish, through connections dating to a cigarette-manufacturing business started by the Squaxin Tribe near Shelton, Mason County, hooked the tribe up with Jerry Moyes, owner of Arizona-based Swift Transportation, one of the largest trucking companies in the country. Moyes had no casino experience.
But Moyes had money. He promised to put up the cash to buy land, foot the startup costs, secure financing and get the federal gambling license.
In return, the tribe ultimately promised to give the company Moyes had formed for the startup, MGU Companies of Phoenix, a 30 percent cut of the casino profits. The tribe also offered a chance at the one thing non-Indian moneymen can't get on their own: federal approval to turn land into an Indian reservation.
On Jan. 4, 2000, Moyes sealed the deal with a handshake. Suddenly the tribe, with one non-Indian employee — Matt Mattson, fresh out of law school, working out of a garage furnished with an AstroTurf rug and a kerosene heater — was in the casino business.
MGU opened the cash spigots, beginning with a $12,000 monthly payment plan devised by Parish to put council members on a stipend.
The money, Parish said, was intended to buy council members' loyalty and keep rivals at bay. "Feed a kitty once, it is always going to come back," was how he described it.
The payments, which included money for economic development, youth programs and flying tribal members to see Indian casinos, were legal and common practice, according to experts on Indian gaming.
But some experts questioned the propriety of $10,000 in payments to a lawyer to take care of traffic-ticket troubles for tribal council member Ray Mullen, the tribe's public face and spokesman on the casino project.
"It's a stretch," Bill Eadington, an economics professor at the University of Nevada, Reno, said of the payments.
Mattson, who became the tribe's administrator, defended the expenditure, saying, "He was in the public eye and it seemed like, given the level of scrutiny, it seemed the right thing to do."
MGU paid for all kinds of things, from buying elk skin for making regalia to picking up the tab for meals and trips.
"The eyebrows were raising on who they were doing business with," said Allen, the Jamestown chairman. "They were making some choices where many thought: 'Be careful who you are getting into bed with.' "
Soon there was trouble in paradise, as Parish put it. As the tribe's effort to get federal permission to use the property for gambling slogged into the fifth year, suddenly there was bad news at the home office of Moyes' trucking company. In September 2005, Moyes agreed to pay $1.25 million to the federal Securities and Exchange Commission to settle insider-trading allegations unrelated to the casino venture.
Then a bitter ownership dispute rocked MGU. Parish, the man who brought the Snoqualmies and MGU to the dance, was ultimately fired by MGU. And MGU wasn't providing financial records required by the National Indian Gaming Commission to approve a management contract with the tribe and issue a gambling license.
The project was on the brink. And the partnership with MGU was falling apart. In July 2006, the Snoqualmies turned to the Kalispell Tribe for a $1.5 million loan to pay the bills when MGU stopped paying project contractors.
As the relationship with MGU cratered, an idea took root: Over the previous few years, tribes had begun self-financing development projects, including casinos, known to banks by then as proven moneymakers. Maybe it was time for the Snoqualmie Tribe, who call themselves the People of the Moon, to shoot the moon and borrow the money to do this project on their own.
In September 2006, the tribe hired away MGU's general manager for the project, Michael Barozzi, a casino veteran who would prove to be a linchpin in keeping the project alive. The tribe agreed to pay him $480,000 per year plus step increases, lucrative incentives and nearly $900,000 in bonuses.
In October 2006, Barozzi and Mattson got their financing the same place as other startups: Wall Street. They came back with an $85 million loan — enough to acquire the casino property and pay MGU $76 million to go away. The fat settlement included the $26 million Moyes put into the deal, and it also included, without having to take the risk or do the work, the amount of profit the company had expected to make from the casino.
"They asked for an astronomical sum," Mattson said of MGU. "I call it an intergenerational debt."
Thomas LeClaire, who served as MGU's president and chief executive officer, said in a recent interview that the severed relationship stemmed from the Snoqualmies' desire to go their own way, not from any failures on MGU's part.
"It was not a result of anybody's fault," LeClaire said, asserting the licensing process is slow and arduous.
Tribal members have a different view of MGU.
"Life travels in circles. It will come back to them," said Katherine Barker, 76, a longtime member of the tribal council. "They made so many promises. They were just feeding you tidbits, and when it comes down to it Jerry [Moyes] couldn't even get OK'd by the gaming commission to do this."
In January 2007, Mattson and Barozzi went back to Wall Street and asked for $330 million to build the project and pay back the original $85 million loan.
Investors were more than happy to oblige. "It was surreal," Tribal Administrator Mattson said. "We had no collateral, no revenue, it was based on an idea. We had people wanting to invest from all over, all the biggest firms, Hancock, Fidelity, you name it."
The rocky start did not sit well with some, including new tribal council members elected in May 2007, Carolyn Lubenau and Sharon Frelinger. Managers at Boeing, they had new expectations and ways of doing business.
Frelinger, tribal treasurer, wanted to know why the tribe had flunked an audit, and she questioned check-signing practices. Lubenau raised questions about everything from the policy behind handing out free tickets for the tribe's Seattle Seahawks luxury suite at Qwest Field to tribal hiring practices and decorum in tribal offices.
Why were kids in the tribal offices, watching "Sponge Bob"?
Why was the tribe giving so much control over the casino to Barozzi? And to investors, who insisted the tribe rewrite a section of its constitution to ensure they'd get repaid? Why had the tribe gotten into such a bad deal with MGU in the first place, forcing the tribe into enormous debt before construction even started?
"We had questions about that $85 million," Lubenau said.
Their questions weren't necessarily appreciated. "I was raised the old way: When we went to a meeting, you sit and wait and see what's going on," Barker said. "Nowadays, you just burst into a meeting and start talking.
"They were wanting to change things around; they were trying to push their ways onto us. They knew how to do Boeing, but they didn't know how to do the traditions of their own people."
Lubenau strongly disagrees. "They always wanted to play the elder card. Well, we're elders, too. We were asking tough questions. They felt threatened by it."
By August 2007, the election results had been abruptly suspended by the tribe's traditional chief. By September, some of the new members were replaced in another election. By last winter, some of the ousted council members were informed they were no longer qualified to be enrolled in the tribe, or hold office.
By spring, Lubenau, Frelinger and others were banished.
The tribe bears the scars of its troubles.
Its banishment lawsuit will be in the public eye just as the casino is getting its footing, and the Snoqualmies will carry a heavy debt load for years. The tribe borrowed another $45 million last August to buy slot machines.
"It's taking a large gamble," Mattson said. "We could have put up a tent, with no debt. We decided to up the game. We hope the reward is that much greater. Greater risk, greater reward."
Asked what he wants most when the tribe finally swings open the casino doors this week, Tribal Chairman Joseph Mullen doesn't hesitate:
"Peace and prosperity."
Copyright © 2008 The Seattle Times Company
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