Post by blackcrowheart on Oct 22, 2005 11:22:48 GMT -5
Investors Evaluating Bets On Tribal Recognition
By RICK GREEN
Courant Staff Writer
October 17 2005
Millions of dollars into a high-stakes game in which they are losing
their
shirts, the investors behind Connecticut's Indian tribes are now facing
that bleak late-in-the-game moment that inevitably arrives.
Is it time to fold?
For Subway Restaurants' founder Fred DeLuca and his Eastlander Group -
who
are paying the Schaghticoke Tribal Nation's bills at a rate of more
than
$60,000 a month - the time of reckoning may be approaching. Along with
the
Eastern Pequots, the Schaghticokes were stripped of recognition this
spring
and lost a final reconsideration of their case last week. Fighting on
means
paying more lawyers and researchers in a long-shot court challenge that
will take years.
Lyle Berman, expert poker player and gaming corporation CEO, knows from
painful experience what must be done when the federal Bureau of Indian
Affairs denies recognition to the tribe you are backing.
"It's not worth it," said Berman, whose casino company, Lakes
Entertainment, dumped more than $6 million into a failed effort for the
Nipmuc Nation of Massachusetts, a group that dreamed of a casino in
Connecticut. Late last year, not long after the BIA denied the tribe
recognition, Berman walked away from the Nipmucs.
"But here's the problem," Berman said Friday. "The payback is so huge.
If
you are looking at a [casino] management contract for seven years and
you
are getting 30 percent of gross profit, the payback is astronomical."
Visions of that sort of payday have kept DeLuca and the Eastlander
Group
behind the Schaghticoke Tribal Nation. Thus far, they've invested more
than
$14 million. Similarly, Florida industrialist William I. Koch and
Southport
golf course developer David Rosow, who are millions of dollars into a
deal
backing the Eastern Pequots, face a similar choice.
"They are throwing away money," said Berman, whose high-profile World
Poker
Tour has made him flush. With the Nipmucs, "all the experts that we
hired
told us it was a slam dunk. We listened to them and we paid them. And
that
took a couple of years. Finally, when [the Nipmucs] got rejected again,
we
said we can't keep going."
Along the tribal recognition highway, plenty of investors have already
crashed. The Easterns have at least four previous backers, and court
documents indicate that a Stamford firm, Severin Hills LLC, has lent
the
Schaghticokes more than $500,000, and perhaps far more.
Investors also don't always give up in the face of huge losses. Despite
spending $1 million a year since the 1990s on the Golden Hill
Paugussetts,
New York shopping center developer Thomas Wilmot is still behind the
tribe.
The Paugussetts, with a small reservation in Trumbull, plan to appeal
in
court the BIA's denial of federal recognition.
Eastlander representatives did not return a call for comment, but
Schaghticoke lawyers said this week that they will try to devise a
strategy
to win the tribe recognition. It remains to be seen who would pay their
sizable bills, which can run more than $300 an hour.
Rosow said his lawyers were still studying the BIA's "cowardly"
decision,
but emphasized he was still fully behind the Eastern Pequots. The BIA
"caved in to the political pressure that they received from the
lobbying of
government officials and the state of Connecticut to castigate us and
the
tribe," he said.
"The goals are much more substantial beyond a casino. The goals are for
housing, education and health care," said Rosow, who declined to say
how
much he and Koch have invested in the effort.
To businessmen like Koch, who Forbes Magazine says has an estimated net
worth of about $650 million, betting $10 million or even $20 million on
a
tribe seeking federal recognition may not be such a crazy bet. The
jackpot
is an Indian casino in Connecticut, perhaps the most lucrative gambling
market in the country, if not the world.
"These are guys who are used to dealing in numbers that to most people
are
incredibly high," said Jeff Benedict, president of the Connecticut
Alliance
Against Casino Expansion.
For example, the backers behind the Mohegan Tribe, including Waterford
hotel developer Leonard Wolman and South African casino impresario Sol
Kerzner, stand to reap hundreds of millions of dollars in return for an
initial investment that was a fraction of that. Still, with the latest
BIA
rulings, Connecticut may have lost its luster for gambling investors -
despite two casinos whose annual revenues from slot machines alone run
well
over $1 billion.
If the Eastern Pequots and Schaghticokes decide to press forward,
Attorney
General Richard Blumenthal said they must be prepared to finance a long
legal battle against the U.S. government in federal court, where there
is
little chance of prevailing. The tribes "would be delayed for decades,"
he
promised.
With so much money on the table, it's also not surprising that casino
investors end up suing each other.
A few years ago, the Easterns dumped Donald Trump as an investor in
favor
of Rosow and Koch. Trump is now suing them and the tribe. In the
Schaghticoke case, Eastlander has gone to court in the past to force
the
Schaghticokes to abide by their contract. Eastlander is also suing
Severin
Hills for interfering in their deal with the Schaghticokes.
"Anybody who gets involved with Indian casinos has to understand that
it is
very risky," said Robert Reardon, a New London lawyer who represents
Trump.
Court records show that Trump paid out more than $10 million and
perhaps as
much as $14 million, backing a faction of the tribe that eventually
turned
against him. Reardon said he is suing to get that back - and more.
"It is unlikely there will ever be an Eastern Pequot casino," Reardon
said.
"It is regrettable that they didn't keep Donald Trump as their
investor.
It's a shame for the Indians. [Trump] told me that they could have had
a
casino if they just stuck with him.
"The one thing that Donald Trump understands is how to be successful,"
Reardon said. "I don't think Donald has one regret. He is an optimist."
Meanwhile, another spurned Eastern Pequot investor, J.D. DeMatteo, is
also
suing. Jon Crane, a spokesman for DeMatteo, said he won't give up
either,
regardless of whether a casino is ever built.
"We will not be deterred. Mr. DeMatteo will pursue his lawsuit against
the
Eastern Pequots and its backers aggressively," Crane said. "Payments
are
owed. And they are many."
DeLuca, who was fighting with the Schaghticokes as recently as this
spring
over how much of his money they were spending, appears to fully
understand
the high stakes game of tribal recognition.
In a letter to the National Indian Gaming Commission explaining his
arrangement with Schaghticoke Tribal Nation last year, DeLuca described
his
investment as "extremely risky and speculative."
"It is not possible to say how many years and how many millions of
dollars
will be needed to reach the point where the Nation can begin
construction
of a gaming facility," said DeLuca, who is No. 207 on the Forbes' list
of
wealthiest Americans. He went on to say that he has "accepted the
substantial risk that we will never be repaid or otherwise receive
compensation."
On the other hand, DeLuca's contract with the Schaghticokes, signed in
2000, promised a handsome upside: $1 billion in return for its
investment.
Copyright 2005, Hartford Courant
By RICK GREEN
Courant Staff Writer
October 17 2005
Millions of dollars into a high-stakes game in which they are losing
their
shirts, the investors behind Connecticut's Indian tribes are now facing
that bleak late-in-the-game moment that inevitably arrives.
Is it time to fold?
For Subway Restaurants' founder Fred DeLuca and his Eastlander Group -
who
are paying the Schaghticoke Tribal Nation's bills at a rate of more
than
$60,000 a month - the time of reckoning may be approaching. Along with
the
Eastern Pequots, the Schaghticokes were stripped of recognition this
spring
and lost a final reconsideration of their case last week. Fighting on
means
paying more lawyers and researchers in a long-shot court challenge that
will take years.
Lyle Berman, expert poker player and gaming corporation CEO, knows from
painful experience what must be done when the federal Bureau of Indian
Affairs denies recognition to the tribe you are backing.
"It's not worth it," said Berman, whose casino company, Lakes
Entertainment, dumped more than $6 million into a failed effort for the
Nipmuc Nation of Massachusetts, a group that dreamed of a casino in
Connecticut. Late last year, not long after the BIA denied the tribe
recognition, Berman walked away from the Nipmucs.
"But here's the problem," Berman said Friday. "The payback is so huge.
If
you are looking at a [casino] management contract for seven years and
you
are getting 30 percent of gross profit, the payback is astronomical."
Visions of that sort of payday have kept DeLuca and the Eastlander
Group
behind the Schaghticoke Tribal Nation. Thus far, they've invested more
than
$14 million. Similarly, Florida industrialist William I. Koch and
Southport
golf course developer David Rosow, who are millions of dollars into a
deal
backing the Eastern Pequots, face a similar choice.
"They are throwing away money," said Berman, whose high-profile World
Poker
Tour has made him flush. With the Nipmucs, "all the experts that we
hired
told us it was a slam dunk. We listened to them and we paid them. And
that
took a couple of years. Finally, when [the Nipmucs] got rejected again,
we
said we can't keep going."
Along the tribal recognition highway, plenty of investors have already
crashed. The Easterns have at least four previous backers, and court
documents indicate that a Stamford firm, Severin Hills LLC, has lent
the
Schaghticokes more than $500,000, and perhaps far more.
Investors also don't always give up in the face of huge losses. Despite
spending $1 million a year since the 1990s on the Golden Hill
Paugussetts,
New York shopping center developer Thomas Wilmot is still behind the
tribe.
The Paugussetts, with a small reservation in Trumbull, plan to appeal
in
court the BIA's denial of federal recognition.
Eastlander representatives did not return a call for comment, but
Schaghticoke lawyers said this week that they will try to devise a
strategy
to win the tribe recognition. It remains to be seen who would pay their
sizable bills, which can run more than $300 an hour.
Rosow said his lawyers were still studying the BIA's "cowardly"
decision,
but emphasized he was still fully behind the Eastern Pequots. The BIA
"caved in to the political pressure that they received from the
lobbying of
government officials and the state of Connecticut to castigate us and
the
tribe," he said.
"The goals are much more substantial beyond a casino. The goals are for
housing, education and health care," said Rosow, who declined to say
how
much he and Koch have invested in the effort.
To businessmen like Koch, who Forbes Magazine says has an estimated net
worth of about $650 million, betting $10 million or even $20 million on
a
tribe seeking federal recognition may not be such a crazy bet. The
jackpot
is an Indian casino in Connecticut, perhaps the most lucrative gambling
market in the country, if not the world.
"These are guys who are used to dealing in numbers that to most people
are
incredibly high," said Jeff Benedict, president of the Connecticut
Alliance
Against Casino Expansion.
For example, the backers behind the Mohegan Tribe, including Waterford
hotel developer Leonard Wolman and South African casino impresario Sol
Kerzner, stand to reap hundreds of millions of dollars in return for an
initial investment that was a fraction of that. Still, with the latest
BIA
rulings, Connecticut may have lost its luster for gambling investors -
despite two casinos whose annual revenues from slot machines alone run
well
over $1 billion.
If the Eastern Pequots and Schaghticokes decide to press forward,
Attorney
General Richard Blumenthal said they must be prepared to finance a long
legal battle against the U.S. government in federal court, where there
is
little chance of prevailing. The tribes "would be delayed for decades,"
he
promised.
With so much money on the table, it's also not surprising that casino
investors end up suing each other.
A few years ago, the Easterns dumped Donald Trump as an investor in
favor
of Rosow and Koch. Trump is now suing them and the tribe. In the
Schaghticoke case, Eastlander has gone to court in the past to force
the
Schaghticokes to abide by their contract. Eastlander is also suing
Severin
Hills for interfering in their deal with the Schaghticokes.
"Anybody who gets involved with Indian casinos has to understand that
it is
very risky," said Robert Reardon, a New London lawyer who represents
Trump.
Court records show that Trump paid out more than $10 million and
perhaps as
much as $14 million, backing a faction of the tribe that eventually
turned
against him. Reardon said he is suing to get that back - and more.
"It is unlikely there will ever be an Eastern Pequot casino," Reardon
said.
"It is regrettable that they didn't keep Donald Trump as their
investor.
It's a shame for the Indians. [Trump] told me that they could have had
a
casino if they just stuck with him.
"The one thing that Donald Trump understands is how to be successful,"
Reardon said. "I don't think Donald has one regret. He is an optimist."
Meanwhile, another spurned Eastern Pequot investor, J.D. DeMatteo, is
also
suing. Jon Crane, a spokesman for DeMatteo, said he won't give up
either,
regardless of whether a casino is ever built.
"We will not be deterred. Mr. DeMatteo will pursue his lawsuit against
the
Eastern Pequots and its backers aggressively," Crane said. "Payments
are
owed. And they are many."
DeLuca, who was fighting with the Schaghticokes as recently as this
spring
over how much of his money they were spending, appears to fully
understand
the high stakes game of tribal recognition.
In a letter to the National Indian Gaming Commission explaining his
arrangement with Schaghticoke Tribal Nation last year, DeLuca described
his
investment as "extremely risky and speculative."
"It is not possible to say how many years and how many millions of
dollars
will be needed to reach the point where the Nation can begin
construction
of a gaming facility," said DeLuca, who is No. 207 on the Forbes' list
of
wealthiest Americans. He went on to say that he has "accepted the
substantial risk that we will never be repaid or otherwise receive
compensation."
On the other hand, DeLuca's contract with the Schaghticokes, signed in
2000, promised a handsome upside: $1 billion in return for its
investment.
Copyright 2005, Hartford Courant