COLUMN ONE : Tribe Bets Future on Gambling : Indians want to build a casino in Iowa. A federal law may open the door for them and a ‘Pandora’s box’ for state officials.

For almost 200 years, pioneers, adventurers and opportunists have found this Missouri River town a friendly, convenient way station on journeys to discovery, dreams and riches.

Explorers Meriwether Lewis and William Clark, Mormons heading toward their promised land and California-bound gold rush prospectors all paused in this western Iowa town.

Now, thanks to an alliance between a tribe of Nebraska Indians and Nevada casino operators, Council Bluffs is once again a stop on the dream-filled road to riches. The Santee Sioux and the family-owned Harvey’s Resort Hotel and Casino in Lake Tahoe, Nev., want to build a $67-million gambling casino--the biggest between Las Vegas and Atlantic City--even though neither Iowa nor Council Bluffs law permits such an establishment.

To overcome the legal obstacles, the Santee and Harvey’s are planning the first test of the limits of a 1988 federal law that grants Indians broad rights to operate gambling businesses on land that they own.

Known as the Indian Gaming Regulatory Act, the law says Indians may operate casino games, slot machines, horse and dog racing on land they own in states where these forms of gambling are legal.

“It’s a Pandora’s box,” said I. Nelson Rose, a Los Angeles attorney and authority on gaming law and Indians. “The act says that if the state allows legal gambling such as for charities, then the Indians . . . have the right to do it. And they are going to do it better, faster and with bigger stakes.”

“We’re not going to give up until we’ve exhausted all legal options,” said Chuck Scharer, Harvey’s vice president for finance and administration.

“They seem to be here for the long haul,” said Council Bluffs Mayor Tom Hanafan. “I think it eventually is going to be settled in the courts.”

If the Santee and Harvey’s succeed, scruffy, blue-collar Council Bluffs would become a landmark in the expansion of gambling across America. What happens here could determine if, someday, there are Indian-owned casinos in cities like Chicago, Detroit and New York.

Also at stake is the role Indians will play in the gambling industry. Court rulings favoring the Santee in this case, legal observers say, could give Indians a unique advantage that would make them as dominant in American gambling as the Japanese are now in electronics.

“They’re playing big-time loopholes,” said William N. Thompson, a gambling and public-policy expert at the University of Nevada at Las Vegas. And if they succeed, “the floodgates will be opened,” he said.

“Every time a state has a little charity casino-gambling bill in front of the Legislature,” Thompson said, “they would be risking having something like this happening.”

Iowa’s Legislature took the risk and opened the way for the Santee-Harvey’s venture last year when it approved small-stakes casino gambling on excursion boats on the Mississippi and Missouri rivers. Bets are limited to $5 each and losses to $200 per excursion. The low stakes and riverboat limitations were designed to build a new tourist industry to bolster the state’s flagging farm and manufacturing economy. Gov. Terry E. Branstad signed the legislation last April.

Indian Law Faces Test

Now the Santee Sioux, who asked Harvey’s to join with them last May, contend they can open their own casino--not on a riverboat but on land that the Santee of Nebraska plan to buy in Iowa--and run that casino without the limits on betting and losses set by the riverboat law.

The law the Santee-Harvey’s partnership is testing was drafted after the U.S. Supreme Court, ruling in a California case involving the Cabazon Band of Mission Indians, said once a state has legalized any form of gambling, Indians in that state could offer the same games without government restrictions.

Categories of gambling ranging from tribal ceremonial games to bingo to big-time casino gambling are defined in the federal law. It says Indians may operate casino games, slot machines, horse and dog racing in states where they are legal, but only after negotiating agreements with individual states. Indians may buy land for gambling operations if the secretary of the Interior approves and if the governor of the state does not veto Indian control of the land. But the law, legal authorities say, is weighted in favor of Indian rights.

The Santee--a Sioux tribe of 2,300 whose home reservation is 150 miles northwest of Council Bluffs in Niobrara, Neb.--have purchased options to buy 55 acres of land at the intersection of two interstate highways. At the point where Interstate 80, which stretches from New York to San Francisco, crosses Interstate 29, a superhighway that runs from Kansas City to the Canadian border, the tribe plans to build a 450-room hotel and convention center connected to a 30,000-square-foot casino.

“They think it’s a tourism gold mine,” said Mark Ramsey, a public relations adviser to the project. An estimated 65,000 cars go through the crossroads daily and 20 million people live within a day’s drive or a 75-minute airplane ride away. The site is 20 minutes from the Omaha airport, across the road from the Bluffs Run greyhound race track and near a proposed Department of Interior National Historic Western Trail Center to commemorate Council Bluffs’ historic role as a gateway to the West.

Before anything can happen, the secretary of the Interior must agree to make the 55-acre site part of the land the government holds in trust for Indians. “We have an obligation to go to the state and to local governing bodies and get their opinion,” said Carl Shaw, a spokesman for the department’s Bureau of Indian Affairs.

“The governor’s position is that he doesn’t veto legislation before it’s passed and he doesn’t rule on a proposal before it’s made,” said Dick Vohs, an aide to Iowa Gov. Branstad. “But the governor has told the group he is not interested in raising the gaming stakes in Iowa to include unlimited Vegas-style gambling. And he has also told them that he is not inclined to support expansion of Indian trust land for the purpose of developing high-stakes, casino-style gambling.”

Legal Battles Seen

Branstad and his legal advisers were aware of the potential confrontation with Indians over a land-based casino when the governor signed the legislation.

Two Iowa-based Indian tribes are negotiating with Branstad to open casinos on land they own and have lived on for decades. Both tribes have agreed to the games and stakes that tourists will find on riverboats.

Branstad’s objections to the Santee project, legal observers say, are likely to lay the groundwork for the first of many legal battles over the proposal, which the partners have called the “Ohiya” project, which means winning in the language of the Sioux.

“They’re playing real bluff poker,” said Michael E. Gronstall, a Council Bluffs state senator who opposed riverboat gambling while warning about the potential of the Indian Gaming Act. “They are gamblers from Nevada who have come in here with a pair in a game of draw poker, and they don’t know what their next three cards are.”

The outcome in Iowa could have an immediate impact in neighboring Illinois, where legislation allowing riverboat gambling is now on Gov. James R. Thompson’s desk. Currently, there are no Indian lands in Illinois. Aides to Thompson say that they have studied the Indian Gaming Act and believe Thompson has the right to veto any attempt by Indians to buy land for a casino, whether it is in downtown Chicago or in rural Illinois.

“All you need is a governor that is somewhat of a flake and a secretary of the Interior who is bound to support (Indians) and you’ve got it--a casino in the middle of Kentucky, Iowa, downtown Detroit,” said gaming public policy expert William N. Thompson, who is not related to the Illinois governor. “This would be unplanned gaming policy.”

Here in Council Bluffs, the proposed project has split both the population and the business community.

“There is no gray in a casino issue,” said Larry G. Mankin, president of the local Chamber of Commerce. “It has become the talk of the town and either people are for it or against it.”

And while local business and political leaders strive to be neutral about the proposal, there is a growing sense of pride and excitement in their answers to questions.

“We’re kind of the shinning light of Iowa all of a sudden,” said a smiling Mayor Hanafan, who figures the casino and hotel complex could produce about $3 million in taxes a year for the town of 60,000.

“When you think about a $67-million world-class casino in Iowa, it has to put a grin on your face,” Mankin said.

“And if Harvey’s and the Santee succeed, we’ll see other Indian groups come in. Harvey’s is just the beginning.”