Tribal members want to reverse purchase of Caesars Southern Indiana Casino's gaming operation
Friday 8th January 2021
n a protest letter and proposed resolution, a group of 14 tribal members aims to reverse the purchase of the gaming operation at Caesars Southern Indiana Casino for $250 million.
The group of tribal members, which includes two sitting Tribal Council members and a former principal chief, claim the decision voted on December 17, and the meeting in which it was made violated the tribe's Charter and Governing Document -- its highest law, analogous to the Constitution in U.S. law -- on multiple fronts.
In particular, the protest points to Section 16 in the Charter, which states Tribal Council "shall direct the management and control of all property, either real or personal, belonging to the Tribe" and that "no person shall be entitled to the enjoyment of ... any monies which may belong to the tribe, unless such person shall be an enrolled member of the Tribe, and in case any money, derived from any source whatsoever, belonging to the Eastern Band of Cherokees, shall be distributed among the members thereof, the same shall be distributed per capita among the members entitled thereto."
The protesters believe that the decision violated this section, because profits from the venture will not contribute to per capita payments and because the LLC board set up to oversee the gaming venture "is not controlled or in any way under the control of the EBCI and Tribal Council," according to the resolution.
Only two members of the five-member board must be members of the EBCI, the Smoky Mountain News reports, and though the tribe has the right to make the initial appointments, future board appointments would be made by sitting members. However, the EBCI would own 100 percent of the LLC the board would oversee.
The protest also alleges that the special-called Dec. 17 meeting violated Section 10 of the Charter, which states that the principal chief may call such sessions only in case of an emergency.
"The purchase of a business is not within the defined provisions of law as an emergency under Section 10 of the charter and as such was an unauthorized session of Tribal Council," the protest claims.
Finally, the protest alleges, the purchase violates tribal law stipulating the manner in which casino proceeds can be spent. Section 16-C of the Cherokee Code states that half of casino revenues must go to per capita payments and the other half must be used to "support Tribal government operations, enterprises or programs; provide for general welfare of the Tribe and its members; promote Tribal economic development; donate to charitable organizations; or fund operations of local government agencies; all as the Tribal Council may deem necessary or appropriate, subject to the provisions of the various funds established in this chapter."
While the protest resolution argues that "nothing contained within Section 16-C permits the use of these funds for the purchase of any Casino or other operations outside the boundary of the EBCI," the statute does name tribal enterprises and economic development as allowable uses, and the casino purchase would not be the first time tribal monies were spent for an out-of-state business endeavor. Last year, the tribe spent millions to help its existing business arm, Kituwah LLC, develop property along Interstate 40 in Sevierville, Tennessee.
The protest attempts to make the case that not only is the casino purchase illegal, but that it is ultimately an unwise investment of tribal dollars.
"EBCI has already identified a reduction in gaming revenue at its existing facilities," the resolution reads. "Purchasing another gaming facility during a pandemic and with the knowledge that gaming facilities across the country are losing revenue is a fools errand. The Tribe's desire for diversifying its business holdings is not accomplished by purchasing or creating the same business models elsewhere, especially in light of the current economic climate."
The protest points out that no specific funding source for the $130 million promised as a down payment was identified in the resolution passed Dec. 17 and argues that the 5 percent interest rate discussed to pay off debt associated with the purchase is far higher than should be expected in the current economic climate.
Meanwhile Principal Chief Richard Sneed, who has championed the purchasing plan from the beginning, maintains that the project is in the tribe's best interest and has been thoroughly reviewed and vetted by elected officials, staff and consultants alike.
"My track record shows that I am here to serve EBCI tribal citizens and my faith in the validity of this project sustains despite this protest," he said in a statement. "I am happy to speak with any tribal citizen that has concerns about this project as I fully believe it is the best next step forward in the EBCI's larger economic diversification plan to sustain tribal programs and services in years to come."
It is unclear when the protest will be heard. Tribal Council's Jan. 7 meeting has been moved to Jan. 14 due to surging COVID-19 numbers. In the past, Tribal Council has acknowledged protest resolutions and voted whether or not to hear them during its regular session and then scheduled a hearing for a later date.
Tribal law allows "interested parties" -- defined as people with a direct financial stake in the outcome of the decision or with property interests that will suffer due to the decision -- to protest any decision of Tribal Council provided they do so within 10 calendar days of the decision being made.
Robert Osley Saunooke, a tribal member registered as an attorney in Florida and Washington, D.C., is representing the protestors and is a protestor himself. Saunooke sent the document to Chairman Adam Wachacha on Dec. 24, as tribal offices were closed for the holidays. On that same day, Caesar's Entertainment formally announced a "definitive agreement" to sell the operation to the EBCI.
"As an enrolled member, the actions of the Tribal Council personally impact my ability to receive benefits, enjoy the ownership and control of tribal business and secure funding for programs and other services that I enjoy as a member of the Tribe," reads a letter, signed by Saunooke, attached to the resolution. "The actions of the Tribal Council violate the oath of office taken by its members including the obligation to act as a fiduciary in protecting resources and enforcing and upholding the laws of the Tribe."
The 14 signatories also include former Principal Chief Michell Hicks, Birdtown Representative Albert Rose, Wolfetown Representative Bo Crowe, Nolan Crowe, Gaynell Crowe, Kema Crowe, Annie Owens, Albert Arch, Horace Arch, Vanessa Lawson, Dennis Junaluska, Keith Wachacha and Randy Catt.
In an interview, Rose said that he disagrees with the venture on multiple fronts but that for him the most critical issue is the management agreement for the LLC. He felt like the vote was rushed and that Council members were not given enough time to absorb the final, redlined version of the document. In fact, they were handed the final version of the management agreement the same day they were asked to vote on it, he said.
"When we set Kituwah LLC up, we vetted it out right there in the chambers how we wanted the board set up and what the qualifications were for the board," he said. "I have asked for several work sessions on making amendments to the management agreement and have yet to be granted a work session to go over the management agreement."
Rose is alarmed as to how little control the tribe will have over EBCI Holdings LLC.
"Tribal Council oversees every board, and this board will oversee itself," he said. "We have no control."
The tribe has been discussing the potential purchase since Nov. 5, when Chief Sneed posted a video to his Facebook account discussing the project. On Nov. 12, Tribal Council approved a resolution authorizing Sneed to move forward with the due diligence process. On Dec. 15 the body tabled a resolution that would have allowed Sneed to enter into a purchasing agreement, ultimately approving that same resolution two days later in a purportedly open meeting that did not stream online as is typical with Tribal Council meetings and was not announced beforehand.
The vote followed a separate question-and-answer session announced only on Sneed's Facebook page after hours the previous day. It was held via Microsoft Teams and open only to tribal members. Sneed's office asked tribal members who work as journalists not to report on the proceedings.
The decision to purchase prevailed by a razor-thin vote of 49-44. Ultimately, the tribe agreed to a $250 million deal with $130 million up front from tribal monies. The remaining cost would be financed through a loan that the newly created EBCI Holdings LLC would service using casino proceeds. As a result, the tribe would own the gaming operation at Caesars Southern Indiana, but not the land -- the annual lease payment for the 238-acre property totals $32.5 million.
The purchase is part of the tribe's ongoing effort to diversify its income streams in the face of looming competition for its extremely lucrative casinos in Cherokee and Murphy. The venture is expected to bring in $40 million annually in earnings before interest, taxes, depreciation and amortization, though state laws in Indiana mean that the LLC may remit only 25 percent of the profits back to the tribe each year, estimated at $3 to $5 million. Casino taxes in Indiana are hefty, with operations bringing in $150 to $600 million in gross revenue required to pay 35 percent.
However, Sneed said, the overall return on investment would be 19 to 23 percent because the tribe would still own 100 percent of the LLC. Proceeds above the 25 percent remitted to the tribe could be used to purchase other commercial gaming enterprises, and the tribe could access all the LLC's assets should it ever choose to dissolve it.
The casino is up for sale as the result of a July merger between Eldorado Resorts and Caesars Entertainment. The merger created the nation's largest casino and entertainment company, and in some states -- including Indiana -- the company had to sell off certain operations in order to avoid running afoul of market share laws. According to reporting from Casino.org, Caesars Southern Indiana consistently ranks among Indiana's top five casinos based on adjusted gross revenue.