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  • THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

    High Stakes

    Imagine if a small Indian tribe won federal status and opened a casino, and it grew until the lights shining out of the woods lured one of the biggest casino giants in Vegas. It happened in Ledyard, Connecticut, and if Massachusetts officials don't learn from the Foxwoods experience, it could happen here, too.

    Foxwoods and MGM Mirage have joined forces to add a $700 million casino-hotel, theater, and convention center to the Foxwoods property.
    Foxwoods and MGM Mirage have joined forces to add a $700 million casino-hotel, theater, and convention center to the Foxwoods property. (Rendering by Dennis Champlain / Foxwoods Resort Casino) Rendering by Dennis Champlain / Foxwoods Resort Casino
    By Charles P. Pierce
    July 30, 2006
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    There is a silver rain that falls in the hills. It began falling over a decade ago, and it has fallen, steadier and harder, ever since. It falls out of the pockets of all the people who get off all the buses. It falls with a monotonous metallic clanging into the slot machines. It sluices across the blackjack tables. It stands in puddles on all sides of the shooting galleries where the dice sail through it. There is a silver rain that falls in the hills, and people there say they've gotten used to it. Nobody wanted Vegas in the woods of Connecticut, but its spirit walks the hills, and you can hear it in the bells and whistles and the acts that play in the Fox Theatre, the same way the locals say you can hear the old Indian ghosts in the ground over Moodus.

    In 1992, the Mashantucket Pequots, a heretofore obscure Indian tribe, opened the Foxwoods Resort Casino on what had been deemed its tribal land within the boundaries of the small town of Ledyard. Over the next 14 years, the place - along with the Mohegan Sun casino, opened by another tribe not far from Foxwoods - has become one of the primary destination spots in all of New England, easily surpassing the Freedom Trail and challenging, among other things, the Atlantic Ocean for the region's tourist income. Foxwoods is omnipresent now, from its cheery Rat Packish jingle on the radio ("Let's live! For the wonder of it all!") to its looming influence on the culture and politics, not merely of Connecticut but of all of the surrounding states as well.

    It's the estimated $1.6 billion annual Foxwoods take that has inspired the Narragansett tribe to try and duplicate it in Rhode Island. It's the hidden momentum behind the drive to legalize casino gambling in Massachusetts. Almost alone, Foxwoods brought New England into the national debate over the economic benefits and the social costs of making legalized gambling an essential part of the public economy. And it's in Connecticut where the issues are most keenly felt. The state has married itself to gambling revenues even as it has accommodated gambling's insatiable demands. It's made a deal with itself that the $400 million a year it gets from the slot machines at its casinos - the only revenue the state derives directly from gambling - is worth the social problems inherent in the industry.

    "Money, money, money," says John Kindt, an economist at the University of Illinois who has been vocal in his opposition to the spread of gambling generally throughout the economy. "This is not driven by good, valid government decision making."

    Critical to this bargain is Connecticut's sense that it can control the industry, that it can ensure that casino gambling will go as far as it has and no farther. Of course, when Foxwoods originally opened, it wasn't supposed to have slot machines. Then it wagged a piece of the huge profits from slots - the true engines of any casino economy - in front of the state, and that changed, quickly.

    "It's really hard to do business with the devil and not give the devil his due," says Jeff Benedict, an anti-gambling activist and author of Without Reservation: The Making of America's Most Powerful Indian Tribe and Foxwoods, the World's Largest Casino. "The state sold its soul over this a decade ago, and I think it recognized that when it did."

    Connecticut had no choice about the casinos. The federal courts made them possible. Ever since then, Connecticut has fought a determined holding action against further expansion of the state's gambling industry. It has battled to restrict casinos to the two Indian reservations and to keep the Mashantucket Pequots and the Mohegans as the only federally recognized tribes in Connecticut. It's an odd struggle to be forced upon a state that once proudly billed itself as the "Land of Steady Habits."

    Consequently, the entire state went to DefCon 3 on April 25, when Foxwoods announced it was joining forces with MGM Mirage, the giant gaming multinational based in Las Vegas. The two companies said they had agreed to develop joint ventures around the world and to slap one of MGM's signature trademarks - MGM Grand - onto a new $700 million development on the Mashantucket Pequot property. This development would include a new 824-room casino hotel, a 4,000-seat theater, and a convention center. The announcement was made in a press conference at Foxwoods, and it took many of the relevant state and local officials completely by surprise.

    "We were all caught off guard," says Paul Young, the executive director of the Division of Special Revenue, the state agency empowered to oversee gambling in Connecticut. "I got a call from our contacts up there, and they said, 'We're announcing this today.' To which I said, 'OK, what is this you're doing really?'"

    Foxwoods and MGM Mirage have presented the agreement as simply a matter of corporate branding and technical assistance: Foxwoods takes advantage of the MGM Grand name and its expertise at running casinos, while, for its part, MGM buys what is essentially a $700 million billboard at Foxwoods. (Though it should be noted that MGM will provide Foxwoods with a $200 million loan to invest in the pair's joint ventures.) Looked at from a distance, it appears to be a fairly unsurprising corporate maneuver, particularly for MGM Mirage, the explosive growth of which is almost a perfect map with which to chart the equally explosive growth of legalized gambling in America. MGM Mirage already owns two dozen casinos in Nevada, Mississippi, and Michigan; the Foxwoods partnership gives the company access to the Northeast market.

    "I don't know that I can tell you much beyond what we've announced," says Bruce MacDonald, a Foxwoods spokesman. (MGM Mirage officials did not return phone calls asking for comment.) However, the size of the deal, and the participants involved, guaranteed scrutiny from those people in Connecticut who have sought to maintain the status quo of having only two casinos in the state, both of which are run by Native American tribes.

    "There is still a lot we don't know [about the deal]," says Richard Blumenthal, the state's attorney general. "The law forbids casinos to be operated in Connecticut, the exception to be made for federally recognized tribes. . . . There are a lot of issues raised by this agreement, and they may have to be decided one at a time."

    The deal would seem to be a blow against one of the longest, hardest battles the state has fought - to keep casino operations within Connecticut free of involvement with huge gambling conglomerates that would like nothing better than to turn the state's southeastern corner into Las Vegas in the woods.

    "Like most big businesses, they're going to take what you give them," muses Benedict. "If you lay down, why wouldn't they advance? IBM would. As with any successful Fortune 500 company, where you allow them to tread, they'll go. The Mohegans and the Mashantuckets have the legal right to expand indefinitely within their own borders. . . . They can build as many casinos as they want, as long as they call it Foxwoods. Now it's: 'So Foxwoods is building another casino? What difference does it make now?' Most people have reached that point now." He adds: "The everyday citizen has thrown up his hands on this."

    Once gambling exists, anywhere, in any form, the attempts to control its spread inevitably break down into a not altogether futile - and occasionally morally incoherent - holding action. Consequently, anything that happens in Connecticut materially affects its neighboring states, which, in this case, quite definitely include Massachusetts. State law here still forbids casinos, which has done nothing to stop the casino proposals that pop up - for the Berkshires, the New Hampshire border towns, along Route 9 - every few years or so. And the prohibition against casinos has done little to slake the Commonwealth's promiscuous thirst for the revenues those casinos provide.

    Three years ago, Governor Mitt Romney floated a proposal by which Massachusetts would ban casinos permanently in exchange for a $75 million payment from the Connecticut casinos and the smaller "racinos" in Rhode Island. That proposal, which contained more than the whiff of a shakedown, disappeared like a coin into a nickel slot.

    But, in March, the US Department of the Interior granted preliminary recognition to the Mashpee Wampanoag tribe from Cape Cod. If that recognition is finalized as expected, the landmark 1988 Indian Gaming Regulatory Act would permit the Wampanoags to establish on their tribal lands the highest form of gambling allowed in the Commonwealth. To this point, that does not include either slot machines or casinos. But, as we've noted, things change.

    And so the people in Massachusetts watch Connecticut because, in the most important ways, that's where this all began, where this silver rain, like any rain that falls in the hills, first became a flood.

    In one sense, the general experience with legalized gambling is a variation on the old folk tale about the man who invites a snake to share his living room. The snake bites him, and when the man complains, the snake replies, "You knew I was a snake when you invited me in." With states starved for cash and legislatures unwilling to tax their constituents directly, revenues from gambling are seen as a painless alternative. Except that, as has become increasingly clear, that is a relative assessment. In 1999, the National Gambling Impact Study Commission found 7.5 million Americans could be classified as "problem gamblers" or "pathological gamblers," with all that entails as regards family breakdown and personal bankruptcy. The town of Ledyard, Connecticut, where Foxwoods is located, estimated that it spent nearly $2 million on casino-related issues such as traffic control and law enforcement in a single year.

    "The tragic thing about this industry," says Massachusetts state Senator Susan Tucker of Andover, a Democrat who opposes the expansion of gambling in the Commonwealth, "is that it doesn't pay the true costs of its operation. The state has to pick up those."

    As Connecticut has now learned, there are only two immutable truths about legalized gambling: First, the house always wins and, second, like so many of the people who participate in it, gambling always doubles up. It's in the very nature of the industry to expand. It expands to new territories, and it expands within the territories where it already exists. "It's the nature of the beast," Tucker says. "It's like the state lottery, which started out as a once-a-week drawing."

    And state lotteries then expand enough to be used to justify slot machines, which are said to be the panacea for the dying business of parimutuel horse racing, producing the weird phenomenon of racinos, which now exist in Rhode Island as well as in other places. There are poker parlors on the Wisconsin plains and riverboats along the Iowa waterfronts. Casinos stand at the top of this food chain. In 1999, the National Gambling Impact Study Commission reported that casinos, once the exclusive province of Nevada, had spread to 28 states. There are casinos in Greektown in Detroit and in the Mississippi Delta, where the signs along the roadside read, "Sell Your Car for Cash."

    IT WAS THE EARLY 1990s, and Richard Blumenthal was in Washington, D.C., representing Connecticut at the annual national conference of state attorneys general. At one point during the conference, Blumenthal went off to a meeting with the secretary of the Interior so that some of his colleagues could discuss the myriad legal issues arising from the presence of Native American reservations within their states. The secretary looked out over the conference table and saw the attorneys general of Arizona, Montana, and Wyoming. They had come to him to talk about water rights, and land rights, and mining agreements. He also saw Richard Blumenthal.

    "He asked me, 'What in the world are you doing here?'" Blumenthal recalls. "I told him I was there to talk about gambling." As far as he knows, Blumenthal has dealt more with Native American issues than any other Connecticut attorney general has since the middle of the 19th century, and this in a state in which Native Americans make up less than half of 1 percent of the population. The reasons for this are tucked in their shining neon splendor into the hills and hamlets of the eastern part of the state, dropped so incongruously onto the rural landscape that the mayor of one small town refers to them as "the UFOs." It's gambling, after all, that has brought Indian issues back into Blumenthal's office. "The most contentious issues are those of tribal recognition unrelated to the two tribes already operating the casinos," he says. "Less than gambling, the really contentious issues relate to the Bureau of Indian Affairs in Washington, and decisions by that agency."

    The history of casino gambling in Connecticut is the chronicle of a state ambushed repeatedly by circumstance, lawyered shrewdly out of its socks and underwear. All of a sudden, it seemed, there was an endless parade of buses and RVs roaring down the state's highways and onto its back roads, disgorging an endless stream of retirees who seemed happily willing to pour their pension checks, one silver quarter at a time, into the slot machines.

    "Nobody could comprehend what it was going to do," says Young of the Division of Special Revenue. "When Foxwoods opened, everybody thought they'd lock the doors that first night at 1 a.m., and everybody would go home, and maybe they'd reopen again the next day. From the day it opened, though, it has never closed."

    It all began with a series of loopholes. In the late 1980s, the federal government was searching for some way to relieve the intractable poverty endemic to the nation's Indian reservations. In 1988, Congress passed the Indian Gaming Regulatory Act, a law so hastily and heedlessly written that it seemed to function most effectively as a seedbed for endless litigation and stunning corruption. How stunning? The huge scandal around Republican uber-lobbyist Jack Abramoff is almost entirely fed by the money sluicing in from Indian gambling enterprises.

    The IGRA mandated that states negotiate "compacts" with federally recognized tribes within their boundaries and that the principles of tribal sovereignty demanded that the tribes be allowed to conduct on their land any gaming enterprise that the state allowed elsewhere. No more, no less. At the time, Connecticut had a state lottery, and it allowed off-track betting on horse racing as well as parimutuel betting on dog racing and jai alai. In theory, then, according to the provisions of the IGRA, any federally recognized tribe could open up a dog track or a jai alai fronton on its reservation. There were no casinos in Connecticut. State law prohibited them. And, anyway, even though the Mashantucket Pequots were granted federal recognition in 1983 and celebrated by opening a $4 million bingo hall three years later, it was a long way between that and a casino. But the Pequots would soon find a loophole that yawned widely in Legion posts and Knights of Columbus halls all over the state.

    For years, the state had allowed charitable organizations and fraternal groups to operate so-called "Las Vegas Nights" for fund-raising purposes. In 1989, the Mashantucket Pequots sought to negotiate a gaming compact with the state for the purposes of opening a casino on what had been granted to them as their tribal lands in the small town of Ledyard. The tribe argued in a 1990 court case, successfully it turned out, that the state allowed casino gambling in the form of Las Vegas Nights and must therefore let the tribe operate casino gambling on its own land for whatever purposes it chose. Less than five years from the time that the IGRA had passed, Foxwoods opened its doors on the morning after Valentine's Day in 1992. Subsequently, the Mohegan tribe used the Mashantucket Pequot case as a precedent to open its own casino, Mohegan Sun, down the road a bit in Uncasville. Both casinos were instant sensations.

    The state has spent the last decade and a half determined to restrict casino gambling to just those two casinos. It has fought hard against federal recognition of any other Native American tribes within the state, and in 2003, at Blumenthal's urging, the Legislature banned Las Vegas Nights in Connecticut, closing the loophole through which Foxwoods was born.

    "The bright line here is that only federally recognized tribes have been accorded the right to operate casinos here," Blumenthal explains.

    There was a lot about the deal between Foxwoods and MGM that resonated deeply within this recent history. It happened suddenly. It was virtually devoid of details. History has made Blumenthal - and Connecticut - wary of surprises.

    "We had no advance word of any kind of agreement," Blumenthal says. "There may have been some people in the gambling world that said, 'This fit is a natural one,' but I was surprised. . . . We'll be monitoring it closely as it's implemented."

    VICE IS THE REASON THE TOWN of Ledyard developed a police force in the first place. During Prohibition, bootleggers cooked up their potions in the hills and the hollows and ran them through the little town on their way to the fleshpots and speak-easies in Hartford and Waterbury. As a response to this rising crime wave, the First Selectman of Ledyard authorized the hiring of six police officers, whose job was to roust the moonshiners, wreck their stills, pour the booze on the ground, and issue summonses for the miscreants to appear in court. Even in a small town like Ledyard, popular vices were hard to stamp out. When Prohibition was repealed, the policemen all lost their jobs.

    Some 15,000 people live in the 40 square miles that contain Ledyard, and the median household income is about $55,000 a year. From the front porch of the Town Hall, Ledyard looks like a hundred other small rural towns. You can't see the casino from there, though. It's somewhere down the road, behind the trees.

    Foxwoods is a great gravitational force on the little place, as though a larger planet has swung through and changed the orbit of a smaller one. Some of the effects are quantifiable. In 2001, Ledyard commissioned its most recent impact study of Foxwood's effects on the town. The report noted that, just for the calendar year 2000-2001, the costs to the town from the casino totaled more than $2 million. At the same time, Ledyard's share of the state's take from the casinos located within its borders is calculated through the same formula that is used to award revenues to every other town in Connecticut. As one of five towns the state deems impacted by Foxwoods, Ledyard does receive an additional $250,000 every year, but town administrators say that's not nearly enough. With the state's primary focus always on keeping any other casinos from opening elsewhere in the state, Ledyard, and the towns surrounding it, are likely to be carrying significant costs in perpetuity.

    (Perhaps the most bizarre impact Foxwoods has had on local government came in 2000, when Ledyard's tax collector got caught feeding town funds into the casino slots. She went to prison for embezzling more than $300,000 from town coffers.)

    Moreover, the presence of the huge resort changed the character of the town as well. The bad blood that arose when the tribe took over local properties after its recognition by the federal government flows close to the surface of every issue surrounding the casino. Ledyard originally believed it would benefit from spinoff industries from Foxwoods. However, the resort inevitably evolved into a self-contained, independent destination. Despite the 40,000 visitors a day that clog its winding roads, the town of Ledyard itself might as well be in New Hampshire.

    "We have a lot of balls in the air," says Mayor Susan Mendenhall. "We have the normal responsibility of any town government to the taxpayer to maintain the quality of life that people expect us to maintain, and we also have this huge international corporation sitting in our backyard. It's difficult.

    "One of the things that people don't understand is that, in small towns in the country like this one, we do not have the infrastructure in place to help sustain this massive development coming into southeast Connecticut," she says. "The sewers aren't here. The water's not here. The highway's not here. It's crazy. There aren't any streetlights, so we get these people coming out of the casinos dead drunk, and they smack into a tree. Well, that's why."

    It's no surprise, then, that the deal between Foxwoods and MGM caught the people in Ledyard off guard as much as anyone. "On many of the business ventures that the tribe goes into on the reservation, they don't give us a heads-up," says Brian Palaia, the town planner for Ledyard. "I can understand the issue of a private organization doing business on the reservation. This is the first time that an outside organization has put its name on something there, so it has to be going into an area where the attorney general is concerned."

    But even if the agreement passes Blumenthal's rigorous vetting and is judged to be within the bounds of the compact between the state and the Mashantucket Pequots, it's Ledyard that's going to have to deal with the logistical consequences of 824 new hotel rooms, a 4,000-seat theater, and a new convention center. For the mayor, the issues of gambling are tangential to those that arise from increased pressure on an already overtaxed infrastructure and an increasingly overtaxed, well, tax base.

    "We've lost about 10 percent of our land to the reservation. That's off the tax rolls," Mendenhall explains. "The majority of that was taken into trust prior to June of 1999, and tax revenues from the properties were worth $1.9 million then. They have to be worth more than that now. That's a lot of tax dollars lost, but try explaining that to the state."

    Mendenhall and the mayors of other surrounding towns have been pushing for years for a regional solution to the problems of having large-scale casino development in a rural setting. "I think the state has to step up and acknowledge that southeast Connecticut needs financial support," she says. "We cannot balance this on the backs of the property owners in our town - the needs that are going to be driven by this development. I don't want to use 'fair,' because nobody cares about fair, but the state's got to start paying attention to what's going on down here."

    Maybe a big neon flashing MGM sign will catch their eye.

    Ever since Foxwoods opened 14 years ago, Connecticut has been waiting for the second wave to hit. Almost everyone believes that, however it eventually is framed, this latest deal is the leading edge of that wave. Once invited in, gambling almost always finds a way to expand. The Foxwoods story is proof enough of that. So Richard Blumenthal makes sure that MGM's just a sign on the building, and Susan Mendenhall tries to keep the bridges and roads from falling apart. The construction begins again on Mashantucket Pequot land. The buses keep rolling through town, and everybody realizes all over again that everything involving gambling involves the unknown. Everything about gambling involves blind chance.

    Charles P. Pierce is a staff writer for the Globe Magaazine. E-mail him at pierce@globe.com.

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