Jackpot

How four tiny Indian tribes, with help from powerful gambling interests, are trying to transform the Bay Area into a slot machine Mecca

Such cutting-edge bingo machines could conceivably end up drawing as many customers -- read: commuters -- to San Pablo as would a gaming hall crammed with full-fledged slot machines, observers familiar with the devices say. If so, insofar as traffic is concerned, it might matter little how many slots are eventually part of the compact. Also, as Class II machines under gaming law, such bingo equipment falls outside the Class III category of devices such as slot machines from which the tribes are obligated to share revenue with the state. The Lyttons agreed, in the compact with Schwarzenegger, to fork over up to 25 percent of the revenue from slots. With Class II slot look-alikes, the tribe doesn't need to pay a dime.

The Lyttons haven't said what their intentions are should the tribe not get as many slots as it wants. Tribal Chair Mejia declined interview requests for this article, and both the tribe's press spokesman, Doug Elmets, and its attorney, Tony Cohen, begged off discussing the casino. "I think they feel like they've been burned and are just lying low," says a source who has dealings with the tribe and who asked not to be identified.

Someone else who's lying low is Sam Katz, the tribe's chief moneyman, who did not respond to interview requests.

Don Arnold, chairman of the Scott's Valley Band of 
Pomo. His tribe's casino ambitions are underwritten by 
Florida investor Alan Ginsburg.
Paolo Vescia
Don Arnold, chairman of the Scott's Valley Band of Pomo. His tribe's casino ambitions are underwritten by Florida investor Alan Ginsburg.
A sign beckons gamblers to the San Pablo card club, 
where the Lyttons want to open a casino.
Paolo Vescia
A sign beckons gamblers to the San Pablo card club, where the Lyttons want to open a casino.

In May a Delaware judge found him liable in an embezzlement lawsuit and ordered him to pay $2.1 million to former partners in an ice-skating rink venture. But once the Lyttons open their casino, he should have more than enough cash to make up the loss: Sources familiar with the matter say that Katz's Sonoma Entertainment Partners, the entity he set up to acquire the San Pablo property, stands to earn "tens of millions of dollars" from a guaranteed slice of the casino's revenue during its first 10 years.


After Katz's breakthrough, gaming observers say, it was inevitable that other casino developers would try to set up near San Francisco. First among them was the publicity-averse real estate investor Alan Ginsburg from Maitland, Fla., whose North American Sports Management and its sister entities have worked with tribes in five states to open casinos. Ginsburg began exploring the idea of working one or more casino deals in the Bay Area in 2002. At about the same time, Jim Levine, who heads Upstream Investments, headquartered in Emeryville -- and who acquired Harrah's, the Nevada gaming giant, as a partner -- began trying to accomplish the same thing.

Although California has 107 federally recognized tribes, the most of any state, it is no mystery why -- with the Lyttons already wrapped up by Katz -- Ginsburg and Levine turned to other tiny Pomo tribes to push their projects.

Thanks to the 1988 Indian Gaming Regulatory Act, the Pomo, by virtue of their history, were uniquely suited to be at the forefront of any Bay Area casino sweepstakes. By the early 1900s Pomo bands were living on about two dozen rancherias, or small reservations, mostly in Mendocino, Sonoma, and Lake counties. These small tribes were stripped of federal recognition in the 1950s as part of a policy of assimilation advanced by the Eisenhower administration. Their lands were taken out of trust and deeded to individual Indian families in return for promises of economic assistance that mostly never materialized. The tribes later sued the federal government, claiming that their tribal recognition was wrongfully terminated. In the 1980s the government began entering settlements to restore many of the groups as tribes. The Lyttons, in 1991, were among the last to settle.

But while the law generally prevents tribes from setting up casinos on land they didn't already own in 1988, restored tribes -- such as those of the Pomo, which had no land when the law was passed -- are exempt. And there is something else. The law lets such tribes procure land for casino purposes, either administratively through the Department of the Interior or by an Act of Congress, without having to obtain the "concurrence" of a state's governor. In other words, should the Pomo tribes Ginsburg and Levine are working with succeed at the federal level in getting their respective properties placed in trust as reservations, there is nothing the governor can do to stop them from opening casinos.

That rather obscure legal oddity sheds light on a controversial feature of the Lytton pact that has drawn the ire of some of its opponents: Schwarzenegger's granting the tribe a 35-mile exclusivity zone. Press accounts have widely misinterpreted the provision to mean that no other tribe would be allowed to establish a casino within 35 miles of San Pablo, which would allow the Lyttons to claim almost all of the Bay Area for themselves. But it merely says that if Schwarzenegger or some future governor were to concur in allowing another tribe to acquire reservation land within the 35-mile zone for a casino, the Lyttons' obligation to share their slot machine revenue could be reduced to almost nothing.

The Governor's Office has spun the provision as a Schwarzenegger warning to other tribes that while he had no choice but to negotiate with the Lyttons, he doesn't intend to bless another Bay Area casino. "The governor used that compact as an opportunity not only to secure significant revenue for the state, but to indicate his own opposition to the expansion of Indian gaming," Schwarzenegger spokesman Vince Sollitto says.

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