Investors Evaluating Bets on Tribal Recognition

As reported by the Courant: "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.

"…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.

"…'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.

"…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.

"…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…"