Snoqualmie casino CEO takes $14 million buyout

The Snoqualmie tribal council voted Sunday to write a $14 million check to buy out its casino CEO's employment contract.

At issue were lingering bad feelings festering for years over the firing of some tribal casino employees, and disappointment over the casino's slow start during the recession, said Matt Mattson, tribal administrator.

Michael Barozzi, whose last day was Friday, was regarded as a key member of the casino management team, singled out by tribal officials as the glue holding the operation together as they wooed investors for $330 million in financing to build and open the casino back in 2007.

"We regard Michael Barozzi, our chief executive officer, as highly important to the success of Casino Snoqualmie. The loss of Mr. Barozzi's services for any reason could adversely affect us," they warned in the offering memorandum to potential investors.

Barozzi originally asked for a $19.5 million buyout, but the council balked, settling on the compromise of $14 million.

"I think it is fair; it was the right thing to do to honor his agreement and service to the tribe instead of running him out of town," Mattson said in an interview. "There were some members in the tribe and on the council that felt he wasn't doing a good job. My personal feeling was the tribe should have left well enough alone, but ultimately I don't have a vote."

The vote, which was not unanimous, has sparked outrage among some tribal members, who say the council isn't allowed to spend more than $2 million without the general membership's approval. They filed an emergency injunction in tribal court in an attempt to block the payment. Mattson said he did not know what bearing the injunction has on the deal. Tribal attorney Pete Connick did not return calls for comment.

It was not clear Friday if the payment already had been made. It is regarded as an expense of casino operations, and it is paid out of casino revenues.

The buyout comes at a time when the tribe is struggling with other issues. Two council members are suspended and face criminal charges in tribal court, and the tribe has launched an enrollment audit in response to allegations that many tribal members don't meet the one-eighth blood-quantum requirement in the tribe's constitution to be Snoqualmie.

"I guess my roadshow statements about this being the most progressive, stable tribe in America are sort of off a bit," Mattson wrote in an e-mail to tribal members about the situation after the vote. He was referring to comments he made to potential investors when the tribe was seeking financing to build and open its casino.

Earlier vote backed CEO

Amid the controversy, the casino lately has been a bright spot, with increasing revenues and an improved bond rating, after managers successfully renegotiated a portion of the tribe's debt. And the tribal council had, at another emergency meeting Dec. 14, voted to retain Barozzi to provide stability at its only economic enterprise. But other council members not at that meeting pushed again for a buyout.

Barozzi did not return calls for comment. Nor did Shelley Burch, tribal chairwoman.

In his e-mail, sent Monday, Mattson wrote that the decision was the result of long-standing dissent in the tribe about Barozzi. He even mentioned a campaign to trump up National Indian Gaming Commission charges against him to give the council an excuse to fire him.

That, Mattson warned, could open the tribe to litigation.

It's a natural evolution, Mattson said, for the tribe to want more say in the running of the casino.

"But what is the honorable thing to do ... negotiate or try to frame the man and undermine his agreement?" Mattson wrote. "Not to mention, working to undermine his agreement by deliberately trying to get his gaming license revoked?"

Mattson went on to write: "The only thing I ever said was that framing him was a bad idea and dishonorable and BS and dangerous for the tribe, legally, given his agreement."

Barozzi is protected by a waiver of the tribe's immunity from lawsuits, as part of the employment contract. He was projected to earn $23 million over the next eight years, based on revenue growth of 5 percent a year at the casino — conservative, Mattson pointed out in his e-mail, given the tribe's hope of opening a hotel at the property.

In December, Barozzi "said to the Council that he would accept $19.5 million. The council said no, it was too much, and the tribe was married to him for better or for worse, and that he should go about doing his job," Mattson wrote. But council members not at that meeting took up the matter of a buyout again, "and complaints about Barozzi and hiring and firing decisions of Native employees and unfair employment practices persisted," he wrote.

Details about those complaints weren't available, but Mattson said the terminations were "for cause," including not showing up for work, "and certain tribal members and council members felt and have continued to feel that the casino was not sensitive to the tribal culture in that regard."

Last week, Mattson and other tribal officials showed Barozzi a resolution for the buyout. "He read the resolution," Mattson wrote, "and said basically that the tribe was ungrateful for what he has done to develop the operation, bring the operation up through the worst economy in 80 years, and that he felt the nonsense and false allegations would never stop ...

"Even though the potential upside for him was income of close to $30 million for increased performance with a hotel over the next 8 years, he said he felt it was best for everyone if he just accepted and everyone just moved on before it got ugly and insane."

Searching to fill job

The tribe now needs a CEO who can manage the casino as tribal members contemplate expanding the business with a hotel and refinancing its debt after the 2013 and 2014 maturity of the bonds. The entire $330 million debt comes due at that time.

The tribe is conducting a national search for a new CEO for the casino, Mattson said.

In his e-mail, Mattson wrote: "Maybe there is someone else that can be found with 20 years of [general manager] experience to meet the loan covenant requirements. ... Hopefully the next manager is given the ability to operate or the business will suffer."

In the meantime, James McDermott, the casino's chief financial officer, is serving as interim head of the casino.

W. Ron Allen, chairman of the Jamestown S'Klallam tribe and chairman of the executive committee of the Washington Indian Gaming Association, a trade association, was sympathetic. "They have been through some tough times," he said of the Snoqualmies.

"This has to raise the eyebrows of the financial backers — they want to have confidence that their investment was going to produce, and not miss any payments. It can cause problems when you are renegotiating your finances."

Building business acumen takes time, he noted. In 1995, his tribe had no experience running the casino that today is its economic engine, Allen said. "It took us a good 10 to 15 years just to get to the confidence level that we were running it and we knew what we were doing. They are not there."

Barozzi is well-respected among other tribal casino executives in the region, Allen said.

"If he was making choices on firing people because they are not performing, many of us agree with that business decision," Allen said of Barozzi. But those business decisions often sit poorly with tribal members, who may feel entitled to jobs as citizen-owners of the casino.

"They like to whine and make it political," Allen said. "Which is why most of us have that buffer system between the operation and the tribal government."

Lynda V. Mapes: 206-464-2736 or lmapes@seattletimes.com