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Indiana casino protest fails

Caesars Southern Indiana Casino is home to 1,200 slot machines, as well as sports betting, poker and table games. Laurencio Ronquillo photo Caesars Southern Indiana Casino is home to 1,200 slot machines, as well as sports betting, poker and table games. Laurencio Ronquillo photo

A $250 million deal between the Eastern Band of Cherokee Indians and Caesars Entertainment will go forward after Tribal Council voted Jan. 14 to deny a protest challenging the deal’s legality. 

The protest resolution came from a group of 14 tribal members that included two sitting Tribal Council members and a former principal chief, and it claimed that the Dec. 17 decision to purchase the gaming operation at Caesars Southern Indiana — the tribe would pay $32.5 million to lease the physical property — violated the tribe’s Charter and Governing Document on multiple fronts.

The majority of council voted to deny the protest on the grounds that the challengers did not qualify as “interested parties” as defined in the tribal law covering protest hearings. The law defines an interested party as “a person who has a direct financial stake in the outcome of the decision being protested or a person whose individual property interests will suffer a direct adverse effect because of the decision being protested.”

The protest resolution states that, “the persons submitting this resolution have a vested interest in the expenditure of tribal funds and resources and compliance with Tribal law and are directly impacted by the expenditure of funds in violation of the Charter and Governing Documents of the Tribe and in violation of Tribal law.” However, Legislative Counsel Carolyn West said that this was a “broad statement” that alleged direct financial impact but “did not show exactly” how benefits might be affected as a result of the decision. Therefore, she said, the protestors did not qualify as interested parties. 

“We reached the same conclusion that Carolyn reached,” said Attorney General Mike McConnell, speaking for the Office of the Attorney General. “Carolyn and I did not discuss this before reaching our separate conclusions. We examined the law independently and we ended up at the same place.”

With the protest denied, the deal is free to proceed. Principal Chief Richard Sneed has ratified the two resolutions passed Dec. 17 that approved the purchase and created EBCI Holdings, LLC, a new tribal business arm that will oversee the EBCI’s commercial gaming ventures. The tribe and Caesars Entertainment signed a purchasing agreement last month, and closing is planned for the end of June. 

 

Questions about structure

While the decision whether to hear the protest was to be predicated solely on the issue of standing — whether the protestors qualified as “interested parties” under the law and therefore had a right to protest the decision — the final vote nevertheless followed an hour of discussion that dipped into various particulars of the deal itself. 

“I wasn’t trying in this protest to question the numerical sound idea of this,” said Rob Saunooke, one of the 14 protestors. “It was the structure of how you were setting it up.”

In November, Tribal Council approved a resolution that outlined the form of an LLC operating agreement for a company that would oversee the tribe’s future commercial gaming ventures. However, Saunooke said, when the time came in December to vote on the casino deal and officially form the LLC, McConnell and Chief Sneed asked Council to approve “a totally different” operating agreement instead. 

“That operating agreement says unequivocally that this tribe, the member of the company, will have no voice, no vote, no say in any of the management of its company that’s being created,” said Saunooke, a charge likely referencing the makeup of the board that will oversee the LLC. According to the resolution passed last month, only two of the five members must be EBCI members, and while the tribe makes the initial board appointments, future vacancies will be filled by the board itself. 

“The charter says you cannot own property the tribe doesn’t control. Kituwah (LLC) you control. The TCGE, you still control that. All of the organizations you put together, you appoint the board, control the board, can remove the board,” said Saunooke.

“In this structure you have no say — none,” he added.

Reading from a memo McConnell had sent Tribal Council members to explain his legal position on the protest, Wolfetown Representative Chelsea Saunooke said that it’s not quite true that the agreement leaves the tribe without any control over the board. In his memo, Chelsea Saunooke said, McConnell noted that certain actions require either a supermajority vote from the board or direct consent from the tribe. In the case of a supermajority vote, at least one of the two EBCI members on the board would have to agree. 

McConnell also disputed the insinuation that he and Sneed were attempting to sneak in changes to the operating agreement that clash with Tribal Council’s desires. The changes presented in December were the result of work that the law firm Brownstein Hyatt Farber Schreck, LLP — whose hire Tribal Council approved to represent the EBCI in the casino deal — completed on the tribe’s behalf. The firm is working to craft an agreement that can meet approval from Indiana state regulators, and additional changes are likely this month after regulators review and respond to the draft document approved in December, Sneed and McConnell said. 

“Those calls (with Brownstein) were open to anybody on Council to be on,” said Sneed. “More importantly, it’s the team that we hired that you all approved. We hired attorneys specifically to work on that, so to suggest that somehow we excluded Tribal Council’s attorney is false.”

Birdtown Representative Albert Rose, who had signed on to the protest resolution, took issue with that statement. 

“You’ve excluded every one of us,” said Rose. 

“How have I excluded you?” asked Sneed. 

“I’m not going to get into that today,” Rose replied. 

 

Technical questions

Former Principal Chief Michell Hicks — also one of the protestors and a CPA by trade — focused on the numbers when giving his comments.

“I’m not here fighting diversity. I’m not here fighting the chief or the council, but I’ve got a ton of questions that people have asked me, and I’m just trying to clarify,” he said. “I want this deal to go. I want this tribe to diversify, but the numbers have to make sense, and that’s where I’m having a little difficulty this morning.”

According to his calculations, said Hicks, if the tribe left the $120 million it intends to use as a down payment on the purchase in investment accounts earning 6 percent interest, it would make $82 million over a 10-year period. However, that same $120 million will bring only $38 million to tribal coffers under the terms of the deal. 

“These are very technical questions that are not going to be answered sitting in this council session,” said Sneed. “We’d be happy to sit down with Chief Hicks and anybody else to go over the numbers.”

However, he said, it’s important to note that the tribe would be the sole owner of the LLC, so all of the company’s assets — including those not directly distributed to the tribal government — would ultimately be the tribe’s property. 

Chairman Adam Wachacha added that the proposal was reviewed by an outside accounting firm and that three of the country’s largest financial institutions have offered lending services for the deal. He also reminded Hicks that, while the tribe might receive only about $3 million per year in direct payments, those direct payments represent only one-quarter of the entire profit. Indiana law would allow the LLC to distribute only 25 percent of profits to the tribe each year, but the remaining 75 percent would stay with the LLC and be available for use in future commercial gaming opportunities. Next time a purchase opportunity comes up, the LLC will be able to act using money it’s already saved up from the Indiana venture. 

“Indiana is the most difficult state to operate in,” said Sneed. “If you can get established in Indiana, you can pretty much get licensed in any state.”

The deal has been controversial in the tribal community. While the physical chamber was nearly empty due to COVID-19 restrictions, the meeting live stream had received 867 views as of Jan. 18. An online petition opposing the casino deal gathered 60 signatures in 18 hours between its launch Jan. 13 and the Tribal Council discussion Jan. 14. However, some Tribal Council members said they had heard more feedback from constituents who supported the deal than from those who opposed it. 

The vote to deny a formal hearing broke down along the same lines as the Dec. 17 vote to pass the resolution in the first place. However, this time the margin was wider because Vice Chairman David Wolfe, who was absent Dec. 17, was present for the vote and joined those who voted to deny the protest. 

The protest was denied by a weighted vote of 56-44, with Painttown Representative Tommye Saunooke, Snowbird Representative Bucky Brown, Birdtown Representative Boyd Owle, Big Cove Representative Perry Shell, Wachacha, Wolfe and Chelsea Saunooke voting against it. In favor of hearing the resolution were Painttown Representative Dike Sneed, Yellowhill Representative Tom Wahnetah, Big Cove Representative Richard French, and the two Councilmembers who signed on to the protest, Rose and Wolfetown Representative Bo Crowe.

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