ONTVILLE, Conn. - A ranking member of the Mohegan tribe says two former tribal chairmen were being paid salaries funded by a South African casino operator when they agreed to a controversial hotel deal with the operator worth some $430 million in profits from the Mohegan Sun casino.
Former Mohegan treasurer Carlisle M. Fowler says he believes the deals gave unwarranted millions to Trading Cove partners, a group headed by casino impresario Sol Kerzner, the creator of South Africa's Sun City resort. Trading Cove and the tribe are already under criticism for failing to disclose the full extent of their financial relationship to federal regulators.
''They made so much money - it's terrible,'' Fowler, 73, said of Trading Cove, while speaking publicly for the first time in two recent interviews in his Montville home.
Fowler is the first senior member of the Mohegans to break with the tribe over the issue of profit-taking from Mohegan Sun. He said he had long been suspicious of the close ties between tribal leaders and Trading Cove, but was convinced he couldn't do anything to stop their deal-making, much of which was conducted in private.
During that period, he said, the tribal chairmen were collecting salaries covered by Trading Cove's money. The salaries were ''more or less'' approved by the nine-member council, which eventually began collecting $50,000 salaries of their own.
One of the former chairmen, Ralph W. Sturges, began drawing a considerable income from the South African group long before the casino opened, during a time when Trading Cove was gaining many of the rights over the casino, Fowler said.
The other former tribal chairman, Roland Harris, was originally paid as tribal planner, then moved up to the chairmen's pay when he replaced Sturges in 1995, about a year before the casino opened. Meanwhile, Harris received $883,000 from Trading Cove for surveying work done by Harris's company at the casino grounds, according to financial disclosure records.
The large profits taken by non-Indian investors in the hugely lucrative Mohegan Sun have come under sharp scrutiny in recent weeks. Following a Globe series last month, two congressmen demanded an official inquiry into the National Indian Gaming Commission's handling of the deals between Trading Cove and the Mohegans, a group first recognized as a tribe in 1994.
Meanwhile, a growing number of observers, including some Native Americans, are criticizing loopholes in the federal gaming law that allow non-Indians to claim large percentages of gaming profits.
''The concerns being raised about Mohegan Sun's financial backers reiterate the need to thoroughly investigate the federal recognition process and ensure it is transparent, fair, and not subject to political influence,'' Representative Christoper Shays, a Connecticut Republican, said after learning of the salaries paid to Mohegan leaders. ''The promise of casino gambling for recognized tribes brings large amounts of money - and the strings attached - into the decision-making process.''
Shays and others have expressed concern over a 1994 contract that gave Trading Cove exclusive rights to develop and manage a hotel on the casino grounds for 14 years - double the time outsiders can legally remain as Indian casino managers.
Fowler said he, as Mohegan treasurer, raised red flags about that deal in tribal circles when he learned about it after Harris brought it to the attention of the tribal council in 1995.
''We never saw the hotel agreement,'' Fowler said, until it was presented to the council a done deal. ''Ralph did that on his own.''
''They wanted the hotel and they wanted to be involved with it for 14 years,'' he added. ''It was too long, 14 years. We said that, that it's too long, but it was in a contract already signed by Ralph. That's why we went along with it.''
Fowler said Sturges negotiated that contract with Len Wolman, a South African native and Trading Cove partner who first began dealing with Sturges in late 1992, after the newly opened Foxwoods Casino showed how lucrative Indian gaming could be.
Soon after, Sturges designated Trading Cove as the Mohegans' casino developer and Wolman began covering the tribe's costs, eventually including a salary for Sturges, a 75-year-old former public relations official for the Salvation Army, according to Fowler and other tribal council members.
Sturges and Harris declined to be interviewed. Wolman confirmed that Trading Cove funded tribal costs, but said it was left up to the tribe how to spend its alotted budget. In all, Trading Cove gave about $9 million to the tribe in the years before the casino opened, all of which was later repaid from casino profits.
Trading Cove, meanwhile, got the right to manage the casino and, in addition, the exclusive right to develop any hotels on the site. The hotel deal is now under scrutiny because it appeared to skirt the restrictions on outside operators laid down in the 1988 Indian Gaming Regulatory Act.
Congress passed the act in an attempt to spur economic development on blighted reservations. Wary of outsiders using tribes as ''fronts'' for their own profits, Congress said operators helping to set up Indian-owned casinos could take no more than 40 percent of gaming profits, and for no more than seven years.
US lawmakers expected outsiders to get limited compensation for the initial know-how, and then step aside so the tribes had full control and all profits.
But by virtue of its hotel deal, Trading Cove will get at least $430 million above the amount Congress deemed appropriate, according to interviews and documents examined by the Globe.
Back in 1994, Trading Cove treated the casino and the hotel development as one undertaking and agreed to develop both for 40 percent of net gaming and net hotel revenues.
But before receiving regulatory approval, Trading Cove withdrew the hotel plans. And the Gaming Commission chairman approved the casino deal without knowing of the hotel agreement, even though two associate commissioners had filed vehement dissents, saying even the casino deal alone was too generous to Trading Cove. Trading Cove retained the hotel rights for a later date.
Within two years of Mohegan Sun's opening in 1996, however, Harris, who had replaced Sturges as chairman, began to chafe at the casino's lack of a hotel, especially since the tribe's rivals, the Mashantucket Pequot tribe, had erected a hotel at Foxwoods.
But Trading Cove refused to build a hotel and would not cede its hotel rights to the tribe without a lucrative buyout. In 1998, the two sides reached a deal whereby the Mohegans would buy back the hotel rights for $430 million. Apparently determined to avoid any delay in expanding the casino, the tribe paid for the rights even though it had grounds for treating the hotel contract as invalid because it was never reviewed by the Gaming Commission.
Once the tribe bought out Trading Cove's casino management contract, it forfeited its right to have the Gaming Commission enforce the rules designed by Congress because the commission's jurisdiction lasts only while a casino management contract is in effect.
When the commission looked at the 1998 buyout, it ruled it had no authority over it, because Trading Cove was ending its casino management. Still, in a letter to the tribe, Barry Brandon, who was then general counsel of the Gaming Commission, wrote: ''Despite the lack of NIGC authority over the agreements, we are concerned about the large sums of money to be paid to Trading Cove over a 15-year period. In short, our view is that the tribe might be paying too much to terminate its relationship with Trading Cove. Nonetheless, we respect the tribe's autonomy in this matter.''
Sean P. Murphy's email address is [email protected].
