February 2, 2018

MGM spends $3.8M lobbying in Hartford, but wins in Washington

Interior Secretary Ryan Zinke wears a "veteran's blanket" presented by the Mohegans in happier times in June. Right of Zinke is Kevin Brown, the Mohegan tribal chairman. They are now suing Zinke.

MGM Resorts International spent $3.8 million on lobbying in Connecticut last year, more than three times any other interest group, in a vain attempt to stop the General Assembly from doing what no legislature in the U.S. had ever done: Award a commercial casino license by a direct legislative act, not a competitive process.

MGM loudly cried foul over passage of a law sought by its casino competitors, the Mashantucket Pequot and Mohegan tribes, to undercut the MGM gaming resort under construction in Springfield. The law permits the tribes' to jointly develop a casino on a hillside overlooking I-91 in East Windsor, halfway between Hartford and Springfield.

But if the Nevada-based gaming giant was at a disadvantage in Connecticut, which made nearly $270 million last year in a profit-sharing deal that gives the state a financial stake in the tribes' success, MGM was better positioned in Washington, where the new Trump administration has looked dimly on tribes developing casinos off tribal lands.

Now, it is the tribes and their supporters, including the state's two U.S. senators, who are crying foul over the Department of Interior's role in blocking the tribes from breaking ground in East Windsor on the site of a long-shuttered Showcase Cinema.

Exactly two months after President Trump took office, MGM had hired a lobbyist brand new to Washington, but familiar to Trump — Brian Ballard, a major Trump fundraiser and lobbyist for the Trump Organization in Florida. With a modest initial payment of $30,000, MGM quietly began working a second front in Connecticut's ever-evolving casino war.

On September 14, the Washington strategy seemed to pay off in a late-afternoon meeting in the second-floor, West Wing office of Rick Dearborn, the White House deputy chief of staff.

Dearborn met with Interior Secretary Ryan Zinke and James E. Cason, the Interior Department's point man on off-reservation casinos. Cason previously had assured the tribes that the project would not jeopardize their revenue sharing arrangement with Connecticut, part of a deal that gave them exclusive casino rights in the state.

The next day, the Department of Interior notified the tribes it saw no reason to accept or reject amendments to their gaming compacts with Connecticut, a seemingly innocuous stance with a devastating effect for the tribes: The state law authorizing the East Windsor casino was conditioned on Interior's acceptance of the amendments.

Without it, the tribes were stopped. They are now suing the Interior Department.

The letter was copied to two Republicans from MGM's base of Nevada, Sen. Dean Heller and Rep. Mark Amodei. According to Zinke's publicly available calendars, the cabinet secretary spent 30 minutes on the phone with Heller shortly before the letter was faxed to the tribes and Gov. Dannel P. Malloy. Two weeks earlier, according to Zinke's calendars, he had met with MGM's lobbyists: Ballard and Syl Lukis, one of his partners at Ballard Partners.

"It seems pretty clear to me what happened," Sen. Chris Murphy, D-Conn., said in an interview earlier this week. "MGM got to Secretary Zinke and convinced him to overrule the decision of a career public servant at the Department of Interior. The timeline is pretty clear."

In a separate interview last week, Sen. Richard Blumenthal, D-Conn., said he had "no inside information" about what happened, but he didn't need it.

"No one has to be a mind reader or a CIA operative to figure it out, I mean they left their footprints visibly, even apparently proudly on their path to the insides of the Department of Interior," Blumenthal said. "It's regrettable, particularly for an administration that said, 'We're going to drain the swamp and eliminate special privileges for lobbyists and others."

Ballard, who eventually was paid $270,000 by MGM, did not return calls for comment.

Zinke's office declined to say what direction the White House gave him over the issue of the tribes' desire to build an off-reservation casino to compete with MGM.

"I have nothing to add to your story," said Heather Swift, a spokeswoman for Zinke.

Murphy took that as a confirmation of the White House's involvement.

"It's pretty remarkable they are not denying it," Murphy said.

'The tribes have done this in spades'

Uri Clinton, the lawyer and senior executive overseeing MGM's continuing efforts to protect its Springfield investment of nearly $1 billion — and potentially end Connecticut's longstanding exclusivity deal with the tribes with a proposal for a gaming resort in Bridgeport — is alternately annoyed and amused by the outrage over its aggressive lobbying.

Its lobbying spending here has topped $5 million over two years, and MGM isn't finished. The company has proposed a casino in Bridgeport, which would require convincing the state to end its long agreement with the tribes and open the state to competition.

"Are there high stakes? Absolutely. MGM is very transparent," Clinton said. "When we spend $3 million lobbying, do we think it's going to be a news story? Yeah. This is high stakes, and it's amazing to me people are surprised. The tribes have done this in spades."

Clinton says the exclusivity deal is an anachronism, given the competition from casinos in neighboring states and the potential advent of sports betting. The U.S. Supreme Court is now reviewing the constitutionality of a law limiting sports betting to Nevada and New Jersey.

"The fact is this has been a mutually beneficial relationship of the state and the tribes," said Andrew Doba, a spokesman for the tribes. "The only one who wants to see the compacts go by the wayside is MGM. They are spending an ungodly amount of money to prevent Connecticut from doing the right thing, which is protecting casino jobs and revenue."

Rep. Joe Verrengia, D-West Hartford, the co-chair of the legislative committee with jurisdiction over gaming legislation, plans on inviting independent, national experts to an informational hearing in the next month to gauge what the future of gaming might look like.

The tribes were pioneers in casino gaming in New England, arguably opening the doors to the commercial competition that has slowly followed in New York, Rhode Island and, more recently, in Massachusetts.

The Mashantucket Pequots were first with Foxwoods in the woods of Ledyard in eastern Connecticut, quickly growing it into one of the world's largest casinos. The Mohegans followed with the Mohegan Sun to the north in Uncasville on an old industrial site. Connecticut protected them with an exclusivity deal in return for a 25 percent share of gross slots revenue.

They were goldmines, producing about $7 billion for the state over a quarter century. In 2007, their annual contribution to the state hit a high of $434 million, a number that tumbled during the Great Recession of 2008 and continued to fall in the face of competition. The legislature's Office of Fiscal Analysis projects it to keep falling, possibly dropping below $200 million.

The tribes never were shy about protecting their turf.

With the help of Connecticut and its congressional delegation, they successfully lobbied the Interior Department during the administration of George W. Bush to withdraw federal recognition from two competing tribes, the Eastern Pequots and Schaghticokes. With federal recognition would have come the right open casinos.

News of the lobbying victory came in a letter faxed in October 2005 by none other than James E. Cason, the same official who joined Zinke last fall at the White House. Stopping the other tribes from opening casinos was worth an estimated $6 billion over the next decade to the Mohegans and Mashantucket, according to a story in Indian Country Today that quoted projections developed by the Mohegans.

Cason is a controversial figure in Indian Country, described in some trade stories as hostile to the expansion of Indian gaming. But he played a crucial role in the passage of the state law authorizing the East Windsor casino, countering concerns raised by Attorney General George Jepsen in March 2017.

In an opinion sought by the governor, Jepsen warned that the state was risking its revenue-sharing deal with the tribes if it allowed a commercial casino, even one owned by the state's two federally recognized tribes. He conceded that the Interior Department's past practice, as well the advice in a technical assistance letter the department provided in 2016, indicated a reluctance to upend tribal compacts.

"However, it cannot be ignored that there has been a change in presidential administrations," Jepsen presciently noted. "There is no guarantee that the Interior Department will follow past practice in the exercise of its authority, nor even that it will adhere to the limited views expressed in the technical assistance letter. Notably, in his past business ventures, President Trump was actively involved in pursuing casino gaming interests in Connecticut, and the significance of those activities, among other things, for our present consideration is, at best, difficult to judge."

In a letter solicited by the tribes, Cason wrote on May 15 that his agency stood by the advice given by the Obama administration in 2016, "We confirm that the current Administration supports the views expressed in the technical assistance letter."

"In practice, the Department has not disturbed long-standing compacts when reviewing amendments to the underlying agreements," Cason wrote. "Here, the Tribes and the State have long-relied upon the Compacts that have facilitated a significant source of revenue for the Tribes and the State. The Department does not anticipate disturbing these underlying agreements."

Three weeks later, the legislature passed the casino bill by overwhelming margins.

So, what changed?

Clinton said he could not confirm or deny the White House played a role.

"I'm not saying it's out of the question," Clinton said. "We did provide legal analysis to the Department of the Interior. We reminded them of the scope of their jurisdiction, and this was an abuse."

MGM's position is that the Interior Department and its Bureau of Indian Affairs has no business under the Indian Gaming Regulatory Act endorsing commercial gaming ventures attempted by tribes outside their reservations.

Clinton said its lobbying could have played a role, just as the tribes were successful in stopping the federal recognition of the two competing tribes in 2005 — and convincing Cason to write his reassuring letter last May.

All was friendly when Cason and Zinke visited the Mohegan Sun on June 13, a week after passage of the casino law. The occasion was the annual meeting of the National Congress of American Indians, the local tribes were jubilant.

Kevin Brown, the Mohegan tribal chairman and West Point graduate, gave Zinke, a former congressman and Navy SEAL, a "veterans' blanket" as a gift. Brown and Rodney Butler, the Pequot chairman, then publicly thanked Cason, presenting him with a gift blanket before the assembled tribes, a gesture a Mohegan official says they first cleared with ethics lawyers at the Department of the Interior.

Cason downplayed the role his letter played in neutralizing an MGM talking point that the third casino would run afoul of the Bureau of Indian Affairs. He said, "It was a simple matter."

Not any more.

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