Gaming conference examines all aspects

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When the White Bear First Nation decided to challenge the Saskatchewan government over its sovereign right to operate a casino on their reserve in the southeast corner of the province, it knew government seed money for start-up costs was out of the question.

And they soon discovered that Canadian bankers didn't share their confidence that Native gaming was the way to economic prosperity and jobs.

"We wanted $50,000," Edward Pasap, the chairman of the board for the Bear Claw Casino, said at a Native gaming trade show and conference in Vancouver last week.

"We went to all the financial institutions. We were a joke to them. They wouldn't touch us with a 10-foot pole."

U.S. investors sought

The White Bear band then went shopping for investors in the U.S., where management companies offer to front bands the money for casinos, supply equipment

and then run the operations, usually for 40 per cent of the take.

The White Bear entered into a five-year contract with the Native-run Indian Entertainment Systems, Inc., of Wisconsin, which provided the band with 100 slot machines and six black jack tables, for a 60-40 split, said Pasap.

The casino opened in March only to be shut down after three weeks by the RCMP, who confiscated the gaming equipment and $100,000 in profits. Pasap and two other band members who were charged with keeping a common gaming house were due to appear in Carlyle provincial court May 19.

The Wisconsin firm also faced charges and a court appearance for supplying the equipment.

Alan King, an Oneida Indian who is part-owner of Indian Entertainment Systems, said in a phone interview from his office that he expects at least $350,000 in legal fees and a possible five-year jail sentence, as well as a loss of the equipment and his cut of the profits. But it was worth the risk.

Belief in Indian rights

"All we're doing is helping them (Canadian Natives) to obtain their rights," he said. "I'm an Indian and I believe in Indian rights."

But with the big risk comes the potential for big profits and King admitted backing the band was about more than helping it assert its sovereignty.

"We're going into it to make money because we're in the business of making money," he said. "We're not a charitable organization."

And his firm is not the only one to recognize the growth in Native gambling should the industry get the government's go-ahead north of the border.

Las Vegas casino giants Bally's and Harrahs were among the throng of U.S. and Canadian companies hawking their wares at the two-day casino convention in Vancouver. The conference floor of the historic Hotel Vancouver was transformed into a flashing and buzzing mini-casino as casino companies showed off the latest in slot machines, electronic poker dealers, coin-sorting machines, oversized bingo boards and the more modest pull-tab ticket dispensers.

Seminars varied

Seminars focused on topics such as success stories from the U.S., where Indians own and operate multi-million dollar casinos with the government's blessing, a review of Canadian laws, feasibility studies and marketing and the social impact of gaming operations on tribes and surrounding communities.

The most lively debate took place during the seminar called Choosing Your Partner: Management Contracts or Go It Alone. After hearing from a management company representative on the benefits of having his company virtually run the casino - getting expertise and easy financing - delegates were warned to go in with their eyes open.

"I haven't seen any good management contracts," said Allene Ross of Little Six Inc., a company that runs the Native Mystic Lake casino in Minnesota, the largest casino in the U.S. outside Las Vegas.

She said management companies offer to build a 4,500 square-metre casino for $37 million, which works out to a pricey $8,000 a square metre. The companies bring

in their own equipment and supplies, which bands must pay for out of their 60-per-cent share. And theres always the danger that a band will make 60 per cent of nothing, she said.

Tribes not profiting

"Someone's making a lot of money, and it's not the tribes."

The companies also bring in their own staff and don't offer proper training for Indians, defeating the purpose of job creation on reserves and making it difficult to sever ties once the casino is profitable, she said. And the firms usually keep their own books, making it inconvenient for Natives to get a true accounting of the business.

"I think a management contract should be a last resort, not a first option," she said. Her company offers consultants who work with bands to train casino employees for a set fee.

"We're doing it to save tribes from entering into these horrendous management contracts."

Pasap said that was no help when the Bear Claw Casino was getting started.

Money major hurdle

"The number one thing, don't forget is that we have no money," he said. "It pisses me off to hear people talk about offering money and when it comes time, it just disappears."

White Bear investigated a number of management companies before deciding on Indian Entertainment Systems and Pasap said the band got a good deal. The casino could open as early as this summer if the band can negotiate an interim agreement with the province while a final decision is being made. But it's still early in the talks and the province is insisting on 85 per cent of the revenues, while the band is offering nine per cent.

Under the five-year deal with Indian Entertainment Systems, the band would run the casino with the company, on a 64-40 split, and have an option to buy out the operation in three years, Pasap said.

The U.S. company's investment is secured under a complicated arrangement called a lease-hold mortgage. The Indian Act makes it difficult to use Native property for collateral, in a provision designed to protect reserves from outside interests. The lease-hold mortgage was made possible through a 1988 amendment to the ct, through which the reserve as "designated lands" is turned over to the Crown and leased back to the band as a tenant. This allows the company, as lender, to recoup its investment in the event of default on the agreement.

Incorporation casino - lawyer

A Vancouver lawyer specializing in Native law also advised delegates to incorporate gaming operations because restrictions in the Indian Act do not extend to property owned by a corporation, even if the corporation is owned and controlled by the band or its members.

Despite the seemingly onerous financing arrangements, Pasap bristled at the notion that Natives are betting at a losing game with management contracts. The terms are justified by the high risk and job creation and eventually gaining control of their own enterprises for economic development is more important than making a pile of cash right off the bat.

Neither the band nor the government had anything to lose because the deal requires no band or government money.

Canadian Natives insist on negotiating with the federal government, which has jurisdiction over Native affairs. However, Ottawa passed responsibility for gambling and lotteries to the provinces in 1985 and refuses to get involved in gaming issues.

While White Bear doesn't object to having the province monitor its casino, the band will resist any regulation of their business.

"The province of Saskatchewan has no business telling anyone how to run their business when they can't even run their own, with the deficit that they've got."