State Baffled by Casinos’ Check for $34 Million

Back on Aug. 8, an accountant representing California Indian tribes that operate casinos delivered a check for $34.5 million to the state. More than a month later, officials still aren’t sure exactly what it’s for.

And California Atty. Gen. Bill Lockyer, the official most responsible for regulating gambling in the state, finds himself facing the first test of the state’s authority to oversee the rapidly growing Indian casino industry.

A landmark agreement that Gov. Gray Davis negotiated with tribes a year ago granted Indians exclusive rights to operate Nevada-style casinos on their reservations in California. The compact, ratified by voters in the March election, limited the number of slot machines that an individual tribe could have and capped the total number of the highly profitable devices statewide.

The state’s difficulty finding information about the $34-million check illustrates ambiguities in the deal that Davis negotiated, and the secrecy that it permits.

“The compact is what it is,” said Lockyer spokesman Nathan Barankin. “It doesn’t necessarily say how you’re supposed to cross the Ts and dot the I’s. We are sorting through that with the tribes.”

At least part of the $34 million is the first payment by casino operators into a fund to benefit tribes that have no gambling operations, officials said. The compact requires that tribes with casinos give $1.1 million a year to tribes that have none. Some of the money comes from a fee of $1,250 per slot machine that tribes must pay when they buy new ones, Barankin said. But the state does not know how much.

Tribes held a closed-door meeting earlier this year to divvy up new machines. Daniel Tucker, chairman of the California Nations Indian Gaming Assn., said the information is “confidential between the tribes and the state” and won’t be disclosed to the public. However, the attorney general still does not have a complete count of the new machines, Barankin said.

“We’ve done what we had to do,” Tucker said. “We’ve done our due diligence. The tribes are more than willing to work with the state to make this work.”

One cause of the state’s confusion over the check is that each of about 100 tribes in California is independent. The 40 or so gambling tribes calculated how much they owed and turned their payment over to Michael Sides, the tribes’ accountant, without knowing how much other tribes contributed. Sides, in turn, wrote a single check without providing a breakdown of what the payment represented.

“We decided it was none of our business,” said Tucker, vice chairman of the Sycuan band of Indians near San Diego. “We didn’t get into those details.”

Nor does Tucker know how many machines other tribes obtained in the closed-door process. The state says it has authority to audit the casinos. However, the tribes that have casinos view themselves as sovereign. Although they acknowledge that the state has a role overseeing their operations, their views differ about how great that role is--and the compact does not clearly spell out the tribes’ obligations.

“Obviously, if you are not required to do something, why would you do it?” said Whittier Law School professor I. Nelson Rose, a gambling expert who has criticized the Davis compact. “They are governments and they are self-regulating, and they figure, ‘Why do it?’ It’s not part of the deal.”

The attorney general’s office has been trying to obtain an accounting of the $34 million since before the check arrived, Barankin said. No letter accompanied the check explaining it.

Lockyer turned the money over to state Treasurer Phil Angelides, who deposited it into an account, where it remains. Barankin said the state has not necessarily agreed that $34 million was the proper sum. Accountant Sides could not be reached by The Times.

Barankin said state regulators are dealing with tribes on a “sovereign government-to-sovereign government basis.”

The effort is fraught with political peril. With riches from their casinos, tribes have fast become a dominant force in California politics, spending more than $100 million on state campaigns since 1998. Lockyer has received at least $65,000 from tribes this year, including the $27,000 cost of a fund-raiser hosted by a San Diego County tribe on his behalf.

The issue may not be resolved until a recently formed state gambling commission convenes. Davis named four of five members to the new commission last week. No date for its first meeting has been set.

“This is uncharted territory in the law,” Davis spokeswoman Hilary McLean said. “But clearly everyone is working diligently to ensure that terms of the compact are upheld.”

The question of the number of slot machines permitted by the compact has been elusive since shortly after Davis signed the document in a ceremony with dozens of tribal leaders last September. The Davis administration initially said the accord limited each tribe to 2,000 machines and capped the number allowed statewide at 45,000.

The nonpartisan legislative analyst’s office, noting the compact’s ambiguity on this key point, said it can be interpreted to allow as many as 113,000 slot machines.

The Davis administration revised its calculation in May, saying the maximum is 45,206. Each machine takes in $100 to $300 a day for casinos. So a casino with 2,000 slot machines could reap $73 million to $219 million a year from its one-armed bandits.

If the entire $34 million turned out to be from licensing fees for new slot machines, it would suggest that the tribes have added more than 27,000 machines, far more than the 15,400 new machines the Davis administration contends should have been available to tribes this year.

“That’s pathetic,” former Lt. Gov. Leo McCarthy, a critic of expanded gambling, said of the situation.

“How can they enforce the terms of the compact without knowing how many machines each tribe has purchased? . . . One thing the public has a right to know is how many slot machines are in California. . . . It’s not too much to ask.”