Indians See Battle Ahead Over Future of Gambling : Tribes: Some states consider ways to scuttle casinos. Competition, political pressures are also seen as factors.

When tribal officials from around the country gathered recently in Atlantic City, they expected to hear a success story from Leonard Prescott, the leader of the Shakopee Sioux.

What they got was a gloomy prediction for the gambling that has become the $1-billion centerpiece of reservation economies.

Prescott’s reservation outside Minneapolis, once a wasteland, is wealthy thanks to a sprawling casino, part of it shaped like a huge tepee. But here he was, a gray-suited vision of executive prosperity, telling his fellow Indians: “I see this all falling apart.”

It is not a groundless fear.

Even as Indian gambling grows daily--offered on 150 reservations, with many tribes branching out from bingo to slot machines--he sees a battle over its future brewing from coast to coast.

In Washington and Wisconsin, state legislatures already have considered proposals aimed at scuttling reservation casinos. In half a dozen other states, tribes complain that officials are stalling negotiations over compacts necessary to expand their operations.

Elsewhere, tribal games face a surge of competition: Mississippi riverboats, state-sponsored “video poker,” Old West gaming halls. . . .

And if anyone at the Atlantic City conference thought Prescott was being paranoid, they wouldn’t any longer if they knew of a meeting scheduled only days later in Washington, D.C. On June 5, both U.S. senators from Nevada, the nation’s gambling capital, met with then-Atty. Gen. Richard Thornburgh. Their purpose? To urge action against “a lot of illegal gambling on Indian lands,” a federal official confirmed.

Indian gambling is “a window of opportunity that’s going to be closed,” said Whittier College law professor I. Nelson Rose, an expert on gambling trends.

As he sees it, politicians and the public simply didn’t understand the implications of a series of court decisions and the 1988 federal law that gave Indians competitive advantages in far more than the social game of bingo.

“Once they see full-scale casinos (on Indian land), with craps and blackjack,” Rose said, “they’re going to close it down.”

Jeanette Hayner wasn’t waiting for the casinos to open. Hayner, the majority leader in the Washington state Senate, thought the federal government was forcing big-time gambling on her turf. “It’s unfair,” she declared, determined to head it off.

Later, an attorney for the Tulalip Tribes offered his own term for the resulting confrontation: “Indian bashing.”

It began when eight of the state’s reservations sought compacts under the Indian Gaming Regulatory Act. Congress said states must negotiate such agreements, allowing tribes to offer high-stakes versions of any type of gambling “not specifically prohibited” there.

Because nonprofit groups in Washington can stage “Reno nights,” with many casino games, Indians also could run those games. But while social clubs are limited to two fund-raisers a year, with $10 maximum bets, tribes are exempt from such regulations--and thus planned year-round gambling with bets up to $100.

Hayner was furious: Washington’s voters or legislators had never approved real casinos like that; the state would get nothing because tribal businesses aren’t taxed, and then there was the seamy side of casinos elsewhere, the “racketeering, prostitution, drug dealing,” she said.

But how to stop them? The state’s attorney general suggested a strategy--close the legal loophole. Ban the charity games.

The Tulalip attorney, Doug Bell, replied: “They’ve had charitable casino gambling for 18 years and there was never this concern. But when the red man does it, ‘Here comes the Mafia.’ There’s a legislative tantrum.”

Amid heated debate, Hayner’s bill passed the state Senate, 27 to 21. It stalled in the House in June, however, when Elks and Moose clubs lobbied against it, eager to keep their fund-raising tool. Even then, the Indians were hardly in the clear.

While Hayner is considering new strategies to stop “gambling without restrictions,” only one Washington tribe has reached a compact with the state. Others complain that officials still won’t agree to all the gambling they want.

Nationally, only 21 tribal-state compacts have been completed in the three years since the gaming act passed--11 of those in Minnesota, where officials have been uniquely receptive to Indian casinos, including slot machines. Elsewhere, conflict has been the rule.

* In Connecticut, two federal courts found that the state failed to deal in “good faith” with the Mashantucket Pequot tribe’s plan to open the first casino on the East Coast outside Atlantic City. Much like Hayner, Gov. Lowell P. Weicker Jr. thought it ridiculous that a state had to accept a 40,000-square-foot gambling hall because of harmless charity “Las Vegas nights.” But when the U.S. Supreme Court refused to hear his state’s appeal in April, it cleared the way for a casino--complete with atrium and waterfall--expected to gross $80 million a year. In July, thousands of people lined up to apply for 1,900 jobs as card dealers and the like, which will be created when the facility opens next year near the Rhode Island border.

* In Wisconsin, a federal judge shocked officials by ruling in June that the state’s approval of a lottery was enough grounds for tribes to demand full casinos. In response, Gov. Tommy G. Thompson urged the Legislature to pass a clear prohibition on all casino games and two legislators even proposed a constitutional amendment. But when neither passed quickly, Thompson said, “It’s too late. I can’t stop it,” and predicted a move to approve casinos “all over the state.” That could crush the Indian ventures--who would trek to remote reservations if they could find the same gambling in their cities?

Last month, the attorneys general of 17 states, including California, filed an amicus brief with the U.S. Court of Appeals calling on it to overturn the Wisconsin decision, which could force all of them to allow Las Vegas-style gambling on reservations.

* Governors in Michigan and Iowa have used--or threatened to use--a power given them in the gaming act to veto tribes’ efforts to acquire land for gambling halls. In Iowa, Gov. Terry Branstad said he will stop a joint venture by the Santee Sioux and Harvey’s Resort to build a $67-million hotel-casino in the meatpacking town of Council Bluffs.

* Nothing has sparked more clashes than slot-type gambling machines, which almost overnight have become fixtures on dozens of reservations. Arizona long refused to negotiate compacts with five tribes that insisted on using them. There have been isolated raids in California and New York and lawsuits--or threats of them--against authorities by tribes from Florida to Washington.

The trade group of gambling tribes is lobbying the National Indian Gaming Commission for an interpretation of the 1988 law to allow one device--a “pull-tab” machine-- without the states having a say. But when a third appointee was needed for the panel--a likely swing vote--the tribes saw their candidate rejected in favor of one endorsed by the senior senator from Nevada, seen as their competitor.

Although authorities have cautioned tribes against depending on slot machines, some predict mass protests, and perhaps violence, if there is a move to take away the lucrative devices. “I’ve never seen the tribes so militant,” said Michael Lombardi, who directs a budding casino on California’s Morongo Reservation. Without machines, he said, Indian gambling “could all come crashing down.”

William R. Eadington, an economics professor at the University of Nevada at Reno, sees such conflicts as nothing less than a nationwide battle over “who should be able to reap the economic benefits (of) legalized gambling.”

The competitors? “Private industry. Charities. Government. And you can throw Indians in there.”

For the tribes, Eadington said, the best hope may be to “capture a corner on the market for five or 10 years.”

They’re squeezed from two directions, he said: On one side, by the direct backlashes, as in Washington state, to limit their growth; on the other, by the burgeoning competition--inspired, in part, by their own success.

Indeed, with regional economies sagging and conventional forms of taxation being politically unpopular, the nation is experiencing a frenzy of legalized gambling.

It is seen in the riverboat casinos that began puttering up the Mississippi this spring after a century’s hiatus, approved now in Iowa, Illinois, Louisiana and Mississippi; in the Western-style gambling halls that help draw tourists to Deadwood, S.D., and just opened in three mountain towns in Colorado; in $1 billion in “nonprofit” wagering in Minnesota; in the “video poker” designed to augment lagging state lotteries in South Dakota, West Virginia and Oregon, and in $100-million lottery jackpots that set off hysteria in California and other states.

“To say that Indian Country is foisting gambling on the United States is, I think, somewhat hypocritical,” said Prescott, the Shakopee Sioux leader.

But he knows that non-Indian groups have a powerful argument--that they merely want “a level playing field” with tribal games.

“They say, ‘Let’s be fair, here,’ ” Prescott told the Atlantic City conference. “But what’s fair? I say, ‘Give us back the land, I’ll give you the gaming.’ ”

The reference to land was a reminder of why the issue is so emotional for Indians.

While gambling has brought serious problems--unscrupulous investors, corruption and devastating tribal infighting--it has provided a much-needed source of income, and doses of pride, for some of the poorest Americans.

From the start, however, many Indian leaders feared this golden goose would have a short life; that government, the courts, established gambling lobbies--someone--would try to kill it.

“Whenever Indians have something of value, non-Indian interests, under many guises, mount major efforts to deprive Indians of those assets,” said former Minnesota Fon du Lac leader William Houle. Hadn’t it happened with fish, wildlife, minerals and water as well as land?

Prescott’s Sioux ancestors once owned half of Minnesota. Now his band has 350 acres.

He sees the writing on the wall for their gambling as well.

While he serves as president of the National Indian Gaming Assn., the trade group of gambling tribes, Prescott regularly urges reservations to begin planning for life after gambling. The challenge, he says, is to use casino profits to develop “other enterprises.”

But that’s not easy. Tribal officials are under pressure to divide the take among their rank and file. And what alternative development is there?

While some reservations have timber industries, electronics plants or telephone switching stations, most are in rural areas where industry hardly flourishes. The government suggests get-by projects such as goat farms. Other outsiders push the toxic waste dumps rejected by non-Indian communities.

Many turned to gambling in the first place because of a lack of options.

That’s also why they push now to expand, risking confrontations with authorities. With their casinos expected to grow for at least another year or two--even the pessimists don’t expect a crash that quickly--gross revenues could soon exceed the $1.4 billion allocated for tribal services in the Bureau of Indian Affairs budget.

Tony Hope, the chairman of the National Indian Gaming Commission, said of economic development on reservations: “There are plenty of arguments that can be made that gambling is not the right way to do this. There is one really basic fact, however--right now it’s the only way. When someone comes up with a substitute, we’ll grab it.”