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Dog Track, Local Vote Keys to Controversy on Babbitt and Indian Casino

By Edward Walsh
Washington Post Staff Writer
Sunday, December 21, 1997; Page A08

HUDSON, Wis.—The controversy that has cast a cloud over Interior Secretary Bruce Babbitt and could lead to an investigation by an independent counsel began here almost 10 years ago. Since then, it has divided this upscale community on the Minnesota border, left a trail of ruptured personal relationships and hard feelings and caused periodic upheavals in local politics.

But it was not until the night of Feb. 6, 1995, that this long-running local civil war over gambling began to enter the realm of national politics, becoming part of the investigation into campaign finance abuses during the 1996 election cycle.

That night, the Hudson City Council voted 4 to 2 to oppose a plan to locate an Indian gambling casino at the site of a failing dog racetrack. Five months later, overruling a recommendation of its area office in Minneapolis, the Interior Department's Bureau of Indian Affairs (BIA) cited the council vote and other signs of local opposition in rejecting the casino proposal.

But Republicans accuse Babbitt and other Interior Department officials of making their decision for more insidious reasons, the influence of high-priced lobbyists and close to $300,000 in contributions later given to the Democratic National Committee by Minnesota Indian tribes that have their own successful casino operations and strongly opposed the entry of a nearby competitor.

Amid all these charges and the thousands of pages of evidence – gathered by House and Senate investigators, the FBI and lawyers in a civil damages suit – virtually no attention has been paid to the views of local people and to the rich history of the gambling wars that began here in the late 1980s over the dog track. Yet this is a key element in the controversy because it is local opposition that Babbitt and others say was most crucial to the decision.

"The bottom line," Babbitt told the Senate Governmental Affairs Committee, "is that the department's decision on the Hudson matter was based solely on the department's policy not to approve off-reservation Indian gaming applications over community opposition."

What the people of Hudson thought of the casino proposal is still a matter of dispute. Sandra Berg, who lost a bid for reelection to the City Council in 1989 largely because of her support for the dog track, said that the community is almost evenly divided. Others insist that a solid majority of area residents has consistently opposed turning Hudson into a gambling mecca.

Greyhound Track Fight

"The denial was made for the right reasons; I still believe that," said Nancy Bieraugel, a Republican member of the St. Croix County Board of Commissioners and a leading casino opponent.

What is clear is that gambling has been the hottest political topic for almost a decade here. Located on the banks of the picturesque St. Croix River, Hudson is among Wisconsin's fastest growing communities, a convenient haven for the families of mid-level managers who work at 3M and other corporations on the eastern fringes of St. Paul. For many of these people, a gambling facility, be it a dog track or a casino, would be a jarring intrusion into their bucolic surroundings.

The controversy started with a bitter fight over building a greyhound racetrack. Through a series of controversial zoning changes, the track was approved. But in 1989, the two City Council members who supported it and were on the ballot, as well as Mayor Thomas H. Redner, a strong track supporter, were defeated by track opponents.

The St. Croix Meadows track opened with high hopes in June 1991. But it was not long before its owners made their first proposal to bring a casino to Hudson. The reason was simple: the track had quickly become a financial disaster, as it continues to be today, losing up to $7 million a year by some estimates.

The track's owner, HAH Enterprises, a private firm controlled by a wealthy Miami family, blames the track's financial plight on competition from nearby Indian casinos. The largest and most successful of these, Mystic Lake Casino on an Indian reservation south of Minneapolis, opened a few months before St. Croix Meadows.

"It was the death knell from day one," said Mark Goff, a Milwaukee public relations consultant and spokesman for the casino promoters.

HAH launched its own attempt to get into Indian gaming under a provision of the law that allows "off-reservation" Indian gaming in some circumstances. Their first partner was the St. Croix band of Chippewa, which operates a casino in Turtle Lake, Wis., about 50 miles to the northeast from here.

No one doubts that the Hudson dog track would be a prime site for a casino. Located a mile south of Interstate 94, the track is a 30-minute drive from the heart of Minneapolis-St. Paul. The St. Croix band, like many other Wisconsin and Minnesota tribes whose casinos are located in remote areas, was eager to get closer to the region's population center. But Hudson apparently was not eager to accommodate it, and the City Council voted against the idea. Track supporters later forced a referendum on the issue, warning in their campaign that, if the track did not "expand," it would be forced to close and property taxes would skyrocket.

When the referendum was held, 51 percent of voters approved turning the track into a casino. The same day, Troy Township, the largely rural area between Hudson and River Falls, Wis., from which the dog track property was annexed, held its own referendum; voters opposed a casino by more than 2 to 1.

The Hudson referendum has become important because it is the only time that a majority of Hudson city voters approved a casino proposal. Critics of Babbitt have often cited the vote to suggest that the Interior Department not only overrode the recommendation of its Minneapolis office but also ignored local sentiment in order to reward political supporters.

"We had a referendum and it passed by 69 votes. What would you call that?" said former city councilman Don Bruns, a longtime supporter of both the dog track and the casino. But casino critics here say that the 1992 vote had virtually nothing to do with the plan that the Interior Department eventually rejected.

3 Tribes Back Casino

For one thing, after the referendum the St. Croix band dropped out of its tentative partnership with HAH Enterprises and, to protect its Turtle Lake casino, joined the opposition. Then the dog track owners found new partners, three other Wisconsin bands in poor financial shape – the Red Cliff, Lac Court Oreilles and Mole Lake bands of the Chippewas – and formed a new group, the Four Feathers Casino Joint Venture.

In addition, the new group agreed to pay $1.15 million a year for government services instead of the voluntary payment of at least $5 million a year HAH Enterprises had said during the referendum fight it would make to Hudson and St. Croix County.

Hudson City attorney William J. Radosevich contends that the 1992 referendum has no relevance to the current casino dispute. "I think it's apples and oranges," he said. "It doesn't say anything about the proposal of Four Feathers. It was another time, another set of circumstances, under different rules."

Casino supporters, however, cite an agreement Hudson and St. Croix County ratified with Four Feathers by early 1994 as another sign of local government support. The pact said that, if authorities in Washington approved an Indian casino in Hudson, taking the property off local tax rolls, the casino operators would pay $1.15 million a year in lieu of taxes.

This agreement was also cited by BIA's Minneapolis office in its recommendation. Casino spokesman Goff said local officials knew that without such an agreement the Interior Department was unlikely ever to approve a casino in Hudson, and that the department could have killed the casino plan simply by refusing to negotiate it.

In Hudson, however, those involved in the negotiations said the agreement was not an endorsement but merely a hedge against a decision that would be made in Washington and over which they had little or no control. "What they were attempting to do was protect themselves if there was going to be a casino," Radosevich said.

The agreement set off alarms among casino opponents. Bieraugel spearheaded a petition drive against the casino and gathered 3,100 signatures. A petition signed by about 800 people went to the BIA's Minneapolis office.

In its final, November 1994 recommendation to Washington, the office reported these conflicting opinions but clearly came down on the side of casino supporters. "It is our determination that none of these issues form a basis to reject the proposal," the office said.

It was shortly after this that the Hudson gambling war shifted east and some of the Minnesota and Wisconsin tribes hired Patrick O'Connor, a well-connected Democratic lobbyist and former DNC treasurer, to help stop the project.

In early February 1995, a small mountain of information landed on the desk of George T. Skibine, a lawyer who had just taken over as head of the Interior Department's Indian Gaming Management staff in Washington. He is Babbitt's main line of defense in the Hudson dispute, the "career employee" who made the crucial final recommendation on which Babbitt says the decision, signed by a political appointee, was based.

The Hudson case confronted Skibine not only with conflicting opinions but also difficult policy issues. This was to be an "off-reservation" facility, probably the most controversial aspect of Indian gaming law. It would require the Interior Department to acquire property – the dog track – "in trust" for the three tribes to be used for their benefit. For the land to be used for a gambling casino, Interior Department officials would also have to determine that this was in the "best interests" of the tribes and that it would "not be detrimental" to the surrounding community, including other, nearby Indian tribes.

Gaming has been a hugely successful economic development tool for many Indian tribes, particularly those fortunate enough to be located near major urban centers. But its success has also provoked resentment in places like Wisconsin and Minnesota, which have large numbers of Indian reservations.

Among some of the tribes there is a fear, shared by Interior Department officials, that the movement of "off-reservation" casinos into urban areas of the region would trigger a political backlash that could undermine all Indian gaming.

John McCarthy, executive director of the Minnesota Indian Gaming Association, an organization of tribal casino operators, argues that the frequent portrayal of the Hudson dispute as a conflict between "rich" tribes in Minnesota and impoverished Wisconsin tribes has overlooked the long-range political dangers the Minnesota tribes saw in the Hudson proposal.

These tribes have had an unwritten understanding with the state government that they will confine their gaming ventures to their reservations, and the state will not allow others into the gambling business. But that understanding is coming under increasing pressure. Earlier this year, there was a move in the state legislature to open up gambling to pay for a new stadium for the Minnesota Twins baseball team. Minnesota bar owners annually seek legislative permission to install gambling devices at their businesses.

Long-Range Threat

For those who would like to break the tribes' monopoly on casino gambling in the state, an off-reservation casino in Hudson "was exactly the kind of ammunition they were looking for," McCarthy said. "They would then say, `Well, all of our money is going to Wisconsin.' "

At a Feb. 8, 1995, meeting with Skibine and John J. Duffy, then Babbitt's counselor who has since gone to work for a law firm that represents the Mystic Lake Casino, members of the Minnesota congressional delegation advanced the same argument, that an off-reservation casino so near the Twin Cities could pose a long-range political threat to all Indian gaming in Minnesota.

They persuaded Duffy to reopen the "comment period" on the Hudson dispute. This allowed into the record more negative comments, including the 4 to 2 vote against the casino that the Hudson City Council had taken two days earlier.

Skibine began sifting through all this material, including conflicting opinions on his own staff. It was during this period in the spring of 1995 that the White House became interested in the issue after O'Connor talked to President Clinton. There were a number of memos and phone calls from aides to White House Deputy Chief of Staff Harold Ickes to various Interior Department officials about the Hudson case.

Babbitt testified to the Senate that by the spring of 1995 it was Interior's policy not to approve off-reservation gaming over the objections of local communities. According to an internal department document, Duffy thought the Hudson case presented "the perfect opportunity" to demonstrate that the federal government would not impose Indian gaming on a community against its wishes.

Babbitt's Wide Discretion

But there was debate in the Interior Department about whether expressions of local opposition alone, without concrete evidence of actual detriment, were enough to turn down an off-reservation casino proposal.

Skibine told Senate investigators, and later repeated in an interview, that he had doubts that this was an adequate legal basis for a rejection of the Hudson casino. But he also said that he became convinced that the local opposition was genuine. He and others suggested that, in rejecting the Hudson casino, the Interior Department merely cite Babbitt's wide discretion to decide whether to take land in trust for a tribe.

In the end, the Interior Department's formal rejection letter, signed by Michael J. Anderson, the deputy assistant secretary for Indian affairs, cited Babbitt's discretionary authority as a basis for the decision. But Duffy had won the internal argument about using the Hudson case to have a "calming effect" on local communities. Interior gave as the main reason for the decision evidence that "surrounding communities," including the St. Croix tribe that first tried to open a casino in Hudson, were "strongly opposed" to the proposal.

Regardless of the legal basis used, Skibine said in the interview that he thought this was the right decision.

"In my opinion, because of the opposition from the local community, from the town, because of the opposition from the nearby tribe, the opposition of the congressmen, the opposition of other state officials who were all very much opposed to this, for all these reasons I thought that this was not a good idea," he said.

"The only thing I can say," he added, "is that my recommendation was made on the merits."

© Copyright 1997 The Washington Post Company

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