Pojoaque says it lost nearly $9M during gambling compact fight

Pojoaque Pueblo maintains it lost nearly $9 million in revenue because state government took action against vendors doing business with the pueblo’s casinos during a protracted legal fight over Pojoaque’s gambling compact with the state.

Starting as an old compact expired in 2015, the pueblo fought in court against signing a new agreement providing the state with an increased share of slot machine revenues.

While proceedings in that dispute continued, the pueblo filed another court action that said vendors – like gambling machine suppliers – received letters from the state threatening penalties if the vendors continued to work with Pojoaque. The state maintained the pueblo was operating casinos illegally without a compact.

In February 2017, a federal judge sided with the administration of Gov. Susana Martinez and ruled that the state could in fact go after the vendors for trading with Pojoaque’s gambling operations, because federal Indian gaming law requires a compact with the state.

At that point, “the Pueblo’s revenue declined precipitously after the State threatened the Pueblo’s gaming vendors with substantial fines for doing business with the Pueblo,” says a court filing in Pojoaque’s latest court battle with state government.

“This caused vendors to cease certain business with the Pueblo, including pulling the most profitable gaming machines off the Pueblo’s gaming floor, causing the Pueblo to incur direct and consequential losses in net revenue approximating $8.84 million.”

In August 2017, Pojoaque finally signed the same state gaming compact that other tribes had previously agreed to.

The capitulation came after a federal appeals court refused to reconsider its earlier ruling that Pojoaque had to negotiate a new compact with the state instead of with the federal government – in effect mandating that Pojoaque agree to the state’s terms.

The new compact increased the state’s share of “net win” from tribal slots from 8 percent to 9 percent, with higher rates over the next two decades. Pojoaque also had wanted to lower its minimum age for gambling, and lift restrictions that ban serving alcohol in gambling areas and prohibit cashing paryoll, Social Security and welfare checks at its casinos.

Pojoaque and the state now continue to fight over another issue involving big bucks – what should happen to money that the pueblo deposited in a trust account over two years in lieu of providing the state with a share of slot machine revenue while the compact dispute was resolved in court.

In 2015, then-U.S. Attorney Damon Martinez agreed to allow Pojoaque to continue its gaming operations without a compact while the litigation played out, on condition that the pueblo set aside the slot revenue it would have paid to the state under the old compact that expired that year.

In March, the federal government seized the accumulated trust money – $10.1 million.

Those dollars are “proceeds of illegal gambling” that took place between the expiration of the old compact in 2015 and the pueblo signing a new one in 2017, said the forfeiture complaint filed by current U.S. Attorney John Anderson.

“These funds would have been paid to the State as revenue sharing” had the old compact, which dated from 2005, “been extended,” said the seizure complaint.

Pojoaque says the money should be distributed for the pueblo to use for the general welfare of its people and to promote economic development – a position that, if upheld, would mean that Pojoaque essentially achieved a two-year pass on making revenue-sharing payments to the state during the compact litigation.

The Martinez administration, the winner so far in the series of court fights with Pojoaque, has steadfastly argued that Pojoaque wants “to play by a different set of rules than other New Mexico tribes.”

In a footnote in its claim for the $10.1 million filed in May, the pueblo points out that the $8.84 million in losses it maintains were caused by state enforcement actions against casino vendors “is nearly commensurate with the total Trust Funds deposited by the Pueblo” in lieu of revenue sharing from 2015-17.

Casinos’ ‘bread & milk’

A written declaration from a Pojoaque gambling manager filed in court says that, because of the enforcement actions, machine vendors removed crucial, newer “Wide Area Progressive” slot machines and “Participation Games” from casino gaming floors in Pojoaque.

These games “are bigger, flashier, have eye-catching beacons and other features, and are immediately noticeable by patrons as new and different from anything they’ve seen before,” said Michael Allegeier, identified in his January 2018 statement as CEO of the enterprises that manage Pojoaque’s Buffalo Thunder Casino and Resort, and Cities of Gold Casino.

“All gaming establishments – including ours – aggressively market these machines to the public to get patrons in the door,” Allegeier added. “This is especially important in a saturated market like ours where there are so many casinos to choose from.

“These gaming machines are analogous to milk and bread at a supermarket. If supermarket customers go to the supermarket and it has no milk or bread, which are core staple items, customers likely will not buy additional items from the supermarket. Instead, customers will go to other supermarkets where they can find bread and milk … . Similarly, if the Pueblo cannot obtain WAP or Participation Games, casino patrons will notice and go elsewhere, causing us to lose revenue.”

When the state started to threaten vendors doing business with Pojoaque in February 2017, the vendors removed the WAP and Participation Games, causing losses of $750,000 a month over the next eight months, Allegeier wrote, a big part of the pueblo’s losses from state enforcement actions.

The Santa Fe New Mexican reported in May that six companies that did business with Pojoaque casinos during the compact dispute made financial settlements to resolve administrative and enforcement actions by the state Gaming Control Board. The amounts of the payments were not disclosed.

Pueblo’s arguments

In resisting seizure of the $10.1 million in trust funds, Pojoaque cites wording in agreements that the U.S. Attorney’s Office – which has jurisdiction in Indian country – made while the compact dispute played out.

The final non-enforcement agreement required that “the Pueblo and the State of New Mexico reach an agreement over the disposition of the Trust Funds” once the compact issue was resolved, the Pueblo says in its court filings.

But there has been no agreement, the pueblo says, “despite the Pueblo’s concerted efforts.”

The pueblo says there were five negotiation meetings, including one mediated by a retired state court judge.

Pojoaque says it offered what it describes as concessions, including distribution of a “large portion” of the $10.1 million to various community organizations and for emergency services in the Pojoaque Valley, disbursing all of the money to other tribes and pueblos or splitting the money with the state.

Pojoaque also said it offered to have the dispute resolved in court, but the state “intransigently refused to negotiate in good faith” and demanded that all of the $10.1 million “plus substantial additional payments approximating $1.1 million” be paid into the state’s general fund. The pueblo also argues that nothing allows the federal government to seize the trust funds.

The pueblo says it eventually went to Pojoaque Tribal Court, with notice to both state and federal officials, and a judge there issued an order declaring that the pueblo was entitled to all of the trust funds under both Pojoaque tribal law and the federal Indian Gaming and Regulatory Act. Documents indicate the tribal court ruling was made by Chief Tribal Court Judge Kim McGinnis.

Pojoaque argues that federal court should recognize and enforce the tribal court ruling under “comity,” the legal principle that different political entities should recognize each other’s legislative, executive or judicial acts as a matter of mutual respect.

EDITOR’S NOTE: This story has been changed from the original version that included an incorrect date for when threatened state enforcement actions resulted in gaming machine vendors pulling crucial games from Pojoaque Pueblo gaming floors.

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