Osceola remembers his childhood on the reservation. His mother would take him to the lot where his father parked cars, and there they would wait until his father had earned enough tips to buy food, their first meal of the day. He laughs when he recalls the "commods" or commodities that the welfare office would deliver to the reservation during the 1960s when Osceola was a teenager. "The best were the big blocks of cheese that would come every month," he says. They made grilled cheese sandwiches and macaroni and cheese that they lived on for weeks. Osceola still has the thick shoulders of a University of Miami lineman—class of 1974—and they shake when he chuckles. "Every day is good," he says, "but some days are better than others."

Indeed. Last winter, investment bankers from Merrill Lynch invited Osceola to ride with them in their Gulfstream IV while they traveled the country to launch a $500 million bond offering to leverage part of the tribe’s bid to buy Hard Rock International from its London-based parent, Rank Group. The purchase would include the entire Hard Rock organization, including 26 restaurants, three casinos and three hotels, plus several licensing agreements already in the works to build casinos in Macau and Biloxi, Miss. The offering was oversubscribed by a factor of six, and the Seminoles turned away many hungry investors before the road show ended.

TOP VIEW As Indian gaming explodes, various tribes find themselves in a dizzying financial ascent. These groups pursue aggressive expansion of their gaming interests, diversify into new businesses outside of gaming, and work with other tribes for mutual benefit. But as many tribes discover, success breeds resentment and envy among nonnatives, coupled with saber-rattling by revenue-hungry politicians and lawsuits from business partners. For America’s newest affluent group, wealth is both a blessing and a challenge.

For some tribes, the days of welfare and government cheese are gone forever. As Indian gaming explodes, those tribes with the right properties in the right locations, guided by seasoned casino executives, find themselves in a dizzying financial ascent. "We want Wall Street to understand that you can do business with a Native American tribe and make money," Osceola says. He’s no longer laughing. And neither is anybody else. Tribes in Connecticut, Wisconsin, Arizona, Washington, California and Minnesota are transforming themselves into successful enterprises. Like the Seminoles, they pursue aggressive expansion of their gaming interests and diversification into new businesses outside of gambling, all while working with other tribes to mutual benefit.

But this newfound wealth brings to the surface the lingering hostility of nonnatives, along with saber-rattling by politicians eager for a cut of the profits. It also inspires lawsuits from estranged business partners and opportunistic competitors. "When we sold trinkets by the roadside, nobody cared if we made a hundred dollars or a thousand dollars," Osceola says. "All of a sudden they see the profits that come in from gaming; and the local and federal governments, they’re all here with their hands out, saying, ‘OK, how much do I get?’"

Between a Hard Rock . . .
Five years ago, the Seminole tribe was in no position to buy a $1 billion company like Hard Rock. The tribe ran five bingo parlors in warehouses on reservation land and bused in players from neighboring communities. Enter Baltimore-based real estate developer David Cordish and his Cordish Co. He approached the Seminoles with a plan to build casino complexes in Tampa and Hollywood and set up a licensing agreement with Hard Rock to open the only Hard Rock–themed hotels and casinos outside of Las Vegas.

Cordish’s plan seemed promising, but a huge obstacle stood in the way: Traditional slot machines are illegal in Florida. According to the Indian Gaming Regulatory Act of 1988, tribes cannot engage in table games or offer slot machines—also known as Class III gaming—in any state where that type of gambling is not already legal. To create an exception, a tribe must negotiate a compact with the state, which allows the state to demand a revenue-sharing agreement. In Connecticut, a compact ensures that the state collects $20 million or more per month from gaming tribes. California renegotiated with the Pechanga Band of Luiseño Indians in 2006 to garner an additional $3 billion payable over the life of its agreement, which ends in 2030. Florida, however, has no such compact. Governors have steadfastly refused to negotiate one in the hopes that their obstinacy will keep Vegas-style gaming out of the state.

As any gambling executive knows, casinos are incomplete without rows of twittering, flashing slot machines. Jim Allen, an executive at Cordish who later became the CEO of Seminole Gaming, offered a solution. He asked gaming manufacturers to create a bank of slot machines controlled by a central computer, otherwise known as a bingo-based machine. The computer assigns a winner from among all the machines playing within a set time. So, in theory, players win in the same way they do at bingo—by chance—and they play against other gamblers, not the house. These games technically fit Florida’s gaming laws, but seem like regular slot machines to players.

The cost to build the two hotel-casino operations totaled $455 million, much of which originally came from tax-exempt bonds; a later IRS ruling, however, forced the tribe to refinance with taxable bonds. Cordish estimated first-year revenues at $436 million, of which it would take $130 million, or 30 percent, as a fee. Under the terms of the deal, Cordish would continue to receive this cut for 10 years.

THE SEMINOLES opened their Hard Rock hotel-casino in Hollywood, Fla., in 2004. (Photograph by Robert Kippenberger.)

With bingo-based slot machines in place, the Tampa casino opened in the spring of 2003. The Hollywood casino followed a year later. Although tribes do not disclose financial information, several published sources claim that these properties now generate roughly $1 billion in revenue annually, far more than expected—which meant Cordish’s share also rose substantially.

The Seminoles terminated their agreement with Cordish last year, and filed suit alleging that the company violated Indian gaming law with unfair contracts. Cordish claimed that the agreement was viable, and countersued, claiming that Rank, which was working with the Seminoles, gave Cordish’s own bid to buy the Hard Rock short shrift. Cordish and the tribe dropped their suits against each other in April. Settlement details were not released, but it has been reported that the tribe will pay $756 million to Cordish over 22 years.

This type of aggressive growth and diversification is now common among the successful gaming tribes. "They’re becoming ever-more business savvy," says Robert Jarvis, professor at Nova Southeastern University Law Center in Fort Lauderdale. The Foxwoods casino of Connecticut’s Mashantucket Pequot tribe reached an agreement in 2006 to lease the MGM brand name from MGM Mirage. It will create a new themed hotel-casino that will be built next to the existing casino. The new resort will include a ballroom and concert theater. The tribe has also successfully bid for one of five licenses to construct a venue for slot machines in the Philadelphia area. "We were competing against some of the giants in the commercial gaming world," Foxwoods president John O’Brien boasts.

Mohegan Sun, in Uncasville, Conn., is already one of the largest casino complexes in the world with 300,000 square feet of gaming, and it is in the final phases of a $750 million expansion to create another 1,000 hotel rooms, a new gaming area with a Hong Kong theme, and a bowling and billiard lounge. The tribe also owns the Pocono Downs racetrack in Wilkes-Barre, Pa., a sports arena, a professional women’s basketball franchise and a couple of radio stations. "We’ve left the gaming market a bit," says tribal leader Bruce Bozsum, adding that the tribe receives a steady stream of business offers. "Oil fields, rocket ships, film and television, marketing ideas. We have our hands full."

Jessica Cattelino, an assistant professor of anthropology at the University of Chicago who has studied the effects of gaming on the Seminole way of life, has tracked changes in Native Americans as they generate wealth. "Diversification is a buzzword in Indian culture today," she says. "Tribes recognize the danger of relying on a central source of income as they try to manage their own economies."

New Privileges, New Problems
In a scenario that would have seemed impossible only 20 years ago, strangers now stop Seminoles on the street and demand to know how much money they’ve made from gaming profits. Tourists drive around the reservation looking for expensive cars and boats, evidence that tribe members are swimming in money. Some Seminoles who live off the reservation say they try to hide their native background when ordering goods, because they feel that the prices of products and services mysteriously increase when sellers identify them with a gaming tribe.

JIM ALLEN, CEO of Seminole Gaming.

For these reasons, tribes claim, they do not release information about how much money the casinos bring in, nor how much money each Seminole receives in dividends. "It’s just pouring gasoline on the fire," Osceola says. "There are people who hate us just because we’re Seminoles. They call us ‘red niggers.’"

Tribes contend that some of this hostility stems from nonnatives who misunderstand how gaming profits are used. "Many tribes, even those involved in gaming, aren’t making so much money that they can pay out to members," says Liz Walker, a lawyer and government relations lobbyist working on behalf of several tribes that are seeking federal recognition, including some that want no part of the gaming industry. Walker explains that the poorer gaming tribes, those in the upper Midwest whose lands are located far from large metropolitan areas, make just enough to fund some healthcare services and educational opportunities for tribe members. "If people knew how hard it was to create an economy on a reservation, they wouldn’t be so critical," she says.

Tribal resources among the Mohegans first go toward paying for members’ healthcare. Bozsum explains that a baby in the tribe needs a heart transplant, which he estimates will cost $1 million—all of which the tribe will pay. "It’s one more Mohegan we can save," he says.

The Seminoles have their own police force and their own emergency medical services for reservation lands. They operate a school that teaches the Seminole way of life to 150 students. Like other tribes, the Seminoles are attempting to build a government infrastructure and multiple small revenue streams.

But some politicians rely on public misconceptions about Native Americans—and their wealth—when they challenge tribes for a greater cut of their profits, as several state governors have done recently. California governor Arnold Schwarzenegger announced in a 2004 state of the state address that "Indians need to pay their fair share" (meaning 25 percent of all slot machine revenues). At the same time, a coalition of non-Indian California card clubs and racetracks qualified an initiative for the November 2004 ballot, which became known as Proposition 68, the Gambling Revenue Act. Had it passed, the measure would have required all 53 gambling tribes to pay 25 percent of their net slot machine revenue to the state. Even though the tribes annually paid $130 million to the state, the saber-rattling worked. It forced the Pechanga tribe back to the table to renegotiate a better deal for the state. For years, Minnesota governor Tim Pawlenty has insisted that the Indians in Minnesota should "open their books to public scrutiny." Rumors have been circulating that the state might allow a competitor to build a casino near Minneapolis and St. Paul, which would cut deeply into the revenues of casinos built by natives in more-remote locations.

For 28 years, the Seminole tribe, with some 3,000 members, had been in the bingo business. For four years it has had its licensed Hard Rock hotel-casinos. Now, as Hard Rock owner, it ventures into the broader hotel and restaurant business, which doesn’t rely on the easy profits of gaming. But Osceola doesn’t seem concerned. He loves the attention the Hard Rock purchase garnered and the pride it brought to the Seminoles. Osceola recently took a phone call from his cousin, who works as a manager of a chain restaurant in Memphis. This cousin wanted to become manager of the Hard Rock Café in Memphis. "My goal is to become vice president of the café division," he told Osceola, who replied, "That’s great. It’s good to have a goal." Ultimately, the Seminoles aim for more tribal representation among senior managers of the gaming division and Hard Rock, but that will take time.

To speed the process, Allen created a mentoring program for young Seminoles with a high school education who want to learn the gaming business. Participants work in various areas of the hotel and casino business for three years. So far, only 22 young people have taken advantage of the program; five excelled enough to land on a management track. "I tell them, ‘You’ve got the best family business in the world. You want to be an accountant? We count more money than any bank. You want to be a chef? We got restaurants. You want to be in the music business? We’re in the music business,’" Allen says. "It’s a shame how few of them work here."

Michelle Seaton is a senior correspondent for Worth.

Additional Information
 Inside Straight
 Indian Gaming: How It Started