$potting the...
GAME BIRDS
"Gambling has more of a history of corruption
than any other industry."
Former Illinois Sen. Paul Simon - June 1997
Sightings from The Catbird Seat
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December 25, 1995
THE GOOD, THE BAD, AND
THE UNSPEAKABLE
In 1995, many ate caviar, some ate crow, and
a few had to settle for humble pie
Up and up and up it goes; when it'll stop, nobody knows. In this kind of market, which was powered along by Internet and pharmaceuticals plays, it's hard to believe there even were losers in '95. The unhappiest investors were those who picked trendy retailers, riverboat gaming, and oil companies. Below, we sketch the extreme ends of the spectrum, all of which kicked off the year at a share price of $5 or better....
WORST AMEX STOCK: Resort Income Investors Inc. was designed as a 12-year self-liquidating real estate investment trust (REIT). Liquidate it did, and how.
The mortgage REIT invests in loans that are secured by property acquired to develop luxury resorts. Most of the stock is owned by the company's directors, Chris and Mark Hemmeter, a father-and-son team who made big bets on riverboat gaming in New Orleans only to see their grand plans run aground in the Mississippi mud (BW--Oct. 16, 1995).
Even worse, the Securities & Exchange Commission began an investigation and the Hemmeters, who resigned in August, were accused in court complaints of squandering company assets. The stock was recently trading at 1 1/8, down from its 52-week high of 10 1/2.
www.businessweek.com/1995/52/b345674.htm
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THE RIVERGATE
Chapter 6
Gambling: the social milieu that tore the rivergate down
by c.b. forgotston
I. Gambling In Louisiana, It's A Tradition!
Louisiana has a long history of gambling.
In south Louisiana where most of the voters are located, gambling is no longer a big moral or religious issue. Louisiana is the first state after Nevada and New Jersey where the governor said he was interested in bringing Las Vegas-style casinos into the State. This excludes gambling casinos on Indian reservations which exist all over the United States. Gov. Edwin Edwards quietly talked about casino gambling during his first term, 1972-1976. On 6 January 1986, during his third term, Gov. Edwards launched a campaign to allow ten to fifteen Las Vegas-style casinos in New Orleans.
Politically it is easy to sell gambling in New Orleans because legislators outside of New Orleans have the attitude that New Orleans is "Sin City." There is nothing you can do to make New Orleans any worse. Dump on New Orleans; it can't hurt. Land-based casino gambling and riverboat casinos in New Orleans did not bother the people in the Bible Belt in northeast Louisiana just so long as it did not cost a lot of state money. This was the mind-set of the State on the eve of the proliferation of gambling in 1986.
To understand the demise of the Rivergate, one must know the players and the chronology of events.
The story hangs on a framework of two governors of Louisiana (Edwards and Roemer) and a mayor of New Orleans (Barthelemy)...
Prior to the 1991 fall elections, under then-Gov. Roemer (1988-1992), the legislature enacted three forms of gambling: lottery, video poker, and riverboat casinos. In 1990, the lottery passed for the first time since the 1890s; in 1991, video poker and riverboat casino gambling were legalized. These were the political tests for casino gambling that sent a message to the politicians; all of the legislators who voted for gambling made it through the 1991 elections without any serious political damage. The fear that the public would vote against the legislator who voted for gambling had kept the proliferation of gambling in check. (Before the 1990s gambling surge, pari-mutuel horse racing, off track betting, and charitable bingo were all legal.)
During then-Gov. Edwards' third term (1984-1988), conservative legislators in the metro New Orleans area -- Orleans and Jefferson Parishes -- could have comfortably voted for the lottery because the public opinion polls showed 75 percent in favor. However, they killed it under then-Gov. Edwards.
At the time there was a concern among some legislators that any such operations in an Edwards administration would be fraught with political problems.
Lottery (1990)
Gov. Buddy Roemer, who came to office in 1988, had a reform image. He ran a campaign opposed to gambling and promised to be anti-gambling. But this promise, like a lot of promises Roemer made, was not fulfilled.
Roemer's efforts at fiscal reform did not succeed. Louisiana still had not pulled out of the oil and gas bust that began in the early 1980s. The lottery was again proposed as a solution to Louisiana's fiscal woes. Conservative legislators who had always opposed the lottery because of Edwin Edwards, not because of gambling, got on board. Roemer rationalized that he did not have to sign or veto the lottery since it was a constitutional amendment. He was merely letting the people decide. A typical political cop-out. By this time, because of his failed fiscal reform effort, Roemer was politically weakened and had lost some of his characteristic cockiness and arrogance. Further, he was plagued by the fact that he had not been elected by a majority of the people. In 1990, the lottery passed with an overwhelming 75 percent popular vote, and general happiness prevailed. The barrier to gambling was broken by the lottery. It appeared clear to the politicians that the public was not opposed to gambling.
Riverboat Casino Gambling (1991)
The people who had been pushing riverboat casino gambling for years and had not gotten anywhere took advantage of the softened attitude toward gambling and presented it as an adjunct tourist attraction. The big players were New Orleanians Warren Reuther, Pres Kabacoff, and Jim Smith. Riverboat casino gambling began as a New Orleans concept but soon became a statewide concept due to political wheeling and dealing.
By a small margin, riverboat casino gambling passed in the legislature, and the anti-gambling governor, Roemer, signed it!
Video Poker (1991)
Representative Peppi Bruneau (Republican, New Orleans) had for years been trying to pass legislation to outlaw "gray market" video poker machines. Bruneau concluded that if we cannot outlaw these machines, then we should regulate and tax them. This is an excellent argument for prostitution, too. Following the approval of the lottery and riverboat casino gambling, video poker squeezed through the legislature. Roemer allowed it to become law without his signature. In retrospect, Roemer has stated that he considers this one of the biggest mistakes of his career as governor.
III. Stage Set For Las Vegas-style Casino Gambling
In 1991, Edwin Edwards defeated his opponent, David Duke, the one-time Ku Klux Klan Grand Wizard. The stage was set for Las Vegas-style casino gambling.
Then-Gov. Edwin Edwards had a well known, well deserved reputation as a gambler. He went to Las Vegas regularly, and he knew all the players there. Since the governor of Louisiana is such a strong force in state politics, when Edwards declared he wanted Las Vegas-style gambling, Louisiana became the focus of the expansion of gambling in the United States. Additionally, the mayor of New Orleans, Sidney Barthelemy, was the only mayor of a major city in the country who indicated a desire to have casino gambling. New Orleans was still in the doldrums, and Barthelemy did not know what else to do to create jobs, nor would he listen to other viable options, such as the Louisiana State University-Tulane University-Charity Hospital Medical Complex in downtown New Orleans, the Port expansion, and the proposed (now developing) research park at the University of New Orleans on the lakefront.
By 1991, the lottery was up and running. There were no major scandals, but it had only been in operation for a year. Not a single riverboat casino had been built. And video poker had not come on line. The state's economy was still down. Louisiana had a governor sympathetic to gambling (Edwards was elected to an unprecedented fourth term, 1992-1996), and New Orleans had a lame duck mayor who had nothing to lose (City Charter limits the mayor to two terms).
In February 1992, Steve Wynn, owner of the Mirage and other casinos in Nevada, came to New Orleans. Wynn, reputed to be the golden-boy of the casino gambling business, quickly pointed out that there had never been a successful "free-standing" (no hotel or restaurants included) casino. He hired people to study the New Orleans market as a gambling center, spent several million dollars, and walked away from it. Wynn said his preference, if he were going to move out of the traditional gambling venue of Nevada, would be a city like Atlanta rather than New Orleans. Atlanta has a much larger population, a stronger economic base, and is an airline hub, which is extremely important in bringing in gamblers from out-of-state. All of his sound reasons have proved why Las Vegas-style casinos won't work in New Orleans.
IV. Daniel Robinowitz, Father Of Land-based Casino Gambling In New Orleans
New Orleans native Daniel Robinowitz, a real estate developer who lives in Dallas, was the father of the casino at the Rivergate site. He had done projects in the New Orleans area (the Uptown Square and the Galleria), which were financial successes for him but disasters for the region. When Edwards started his fourth term (1992), Robinowitz, knowing Edwards' gambling background, had a vision that the time was right to bring Las Vegas-style casino gambling to New Orleans. He conceived the idea of a "free-standing" casino.
Robinowitz needed a big name developer and approached Steve Wynn. Probably because Wynn's appraisal did not fit with what Robinowitz knew he could sell in New Orleans, Robinowitz had only a brief flirtation with Wynn. Robinowitz did not want to get into a fight with the hotel and restaurant people. Within a matter of weeks Robinowitz aligned himself with Chris Hemmeter, an Hawaiian developer.
Chris Hemmeter was reputed to be a very wealthy man. The hotels that he developed in Hawaii received mixed reviews about their success. He was a developer much like Robinowitz -- he got his money off the top and left it to somebody else to manage. Like Robinowtiz, some of his deals went into bankruptcy.
Everything Hemmeter attempted in Hawaii was to be the biggest and the best. He had a reputation for rarely letting the financial consequences affect his development decisions. Robinowitz was probably more comfortable with Chris Hemmeter than Steve Wynn who was more bottom-line oriented.
Prior to New Orleans, Hemmeter had never been involved in gambling developments, another Robinowitz mistake. Once Hemmeter got into the gambling business, he saw money everywhere! Hemmeter's escapades with riverboat casino gambling in New Orleans and in other states and land-based casino gambling in Colorado (all carried out during the time of the New Orleans casino operations) were all financially unsuccessful.
V. Snake Oil And Fairy Dust
A dapper, smooth talking promoter, Hemmeter painted a picture of revitalizing the riverfront and the decaying downtown New Orleans. A billion dollar development! No one in New Orleans had ever done a billion dollar construction project before. Hemmeter said if the legislature legalized gambling in the coming session, he "might" consider a casino in his plan. City Hall and some of the traditional business and civic leadership of the city, lured by revitalization and the number of jobs it was supposed to create, lost sight of the possibility that it could have been a scam. The super snake oil salesman sprinkling fairy dust fooled a lot of people, including some very bright, successful business people.
Two City Councils did not require a financial statement from Hemmeter (it was considered an invasion of privacy). Nor did they require a performance bond.
The Times-Picayune sent reporters to Hawaii to investigate Hemmeter, but they did not turn up anything of significance. Just by luck, I became acquainted with an Honolulu investment banker with some New Orleans connections who knew Hemmeter well. He speculated that Hemmeter did not have great wealth and might even have a negative net worth. He said unless Hemmeter went into bankruptcy, we would never see his financial statement.
VI. The Rivergate Gambled Away
HB-2010
The bill to authorize a land-based casino in New Orleans, HB-2010 (Act 384 of the 1992 Regular Session), may have been the most controversial vote ever taken in the Louisiana House of Representatives. John Alario, then speaker of the House and an ally of Gov. Edwards, demonstrated the power of his position as well as the power of Edwards when he maneuvered the casino bill through the House on Wednesday 10 June 1992. The previous Thursday a similar bill had fallen seven votes shy of the needed 53-vote majority to pass. It was returned to the calendar. On 10 July, HB-2010 did not appear on the regular order of the day (agenda); instead it was taken out of order and was ready for a vote sending a surprise wave over members of the House. Then-Speaker Alario ordered the electronic vote count to begin. At the electronic count of 53, he ordered the vote halted without the customary few seconds lag between the vote count and freezing the vote, which allows for a little gamesmanship (Maginnis 1995, 30).
The legislation specifically defined the location of the land-based casino -- the Rivergate site at the foot of Canal Street. The law did not require the Rivergate to be torn down, and it did not require a new casino to be built. Once the determination was made that Hemmeter's grandiose casino was going to be built, the destruction of the Rivergate was a fait accompli.
The passage of HB-2010 was the formal beginning of the casino and the end of the Rivergate. The City Council, apparently pressured by Mayor Barthelemy, awarded to Chris Hemmeter the lease of the city-owned Rivergate site. Subsequently, the Casino Board awarded Harrah's Jazz the casino operator's license. Harrah's Jazz was a partner of Harrah's and the Jazzville group (all local investors) who came together because they thought they had the best chance of getting the votes on the Casino Board to win the license over Hemmeter. They'd worry later whether they could get along.
Shotgun Marriage
From a practical standpoint the lease-holder (Hemmeter) and the license-holder (Harrah's Jazz) needed each other. There had been such fierce competition for the operator's license that to "marry" the two entities became a significant hurdle. A shotgun marriage was brokered in the governor's mansion! In typical Edwin Edwards fashion, the three factions -- Harrah's, Jazzville, and Hemmeter -- were ordered by Edwards to quickly work it out themselves. The logical thing to do was for Harrah's Jazz to buy out Hemmeter, but he wouldn't budge. All elements felt that each had the political clout to win the land-based casino operator's license. Gov. Edwards had friends representing both Harrah's and Hemmeter, and everyone of the Jazzville group was a friend and political supporter of his. As long as Edwards had friends in each camp, compromise was in his best interest. The gamblers were so hellbent on getting rich quick that they split the pot of gold three ways. Gov. Edwards performed the shotgun marriage and gave them his blessings. Now the three would worry later whether they could get along.
Point Of No Return For The Rivergate
The partnership of Harrah's and the Jazzville group was the point of no return for the Rivergate. It had been reported that Harrah's had an arrangement with the labor unions for exclusive union labor on their next casino that would be constructed. An adaptive reuse project such as the Jazzville group proposed to the Casino Board would not satisfy the unions. Peter Babin, local labor leader, publicly promoted tearing down the Rivergate for the sole purpose to create jobs. This gave further cover for the politicians.
The second fatal blow to the Rivergate came when Hemmeter "married" the Harrah's Jazz partnership. To put the entire Grand Deal together politically, it was necessary to make a lot of smaller deals. In reality, it was constructing a giant building on Louisiana political quicksand!
VII. $825 Million Casino Bankruptcy, Where Did All The Money Go?
A lot of money went to reimburse Hemmeter for pieces of land in the vicinity of the Rivergate that he optioned at exorbitant prices. He seemed to buy into his own snake oil and fairy dust and to believe that the casino was going to be so successful that everything for blocks around would become very valuable. Hemmeter operated on "other people's money." Some of his deals were very cash thin: he might put up $1000 cash for a piece of property that he optioned at $1 million. When the financial deal was closed, the options were exercised with the proceeds from the sale of junk bonds. The inflated land prices took a big chunk of the money. Some of the money was probably spent on "political overhead." It is my understanding that when the junk bonds were sold, all of the parties were made whole for their prior out-of-pocket expenses. The interest rate on the over $400 million in junk bonds was approximately the equivalent of 18 percent. This added substantially to the financial debacle.
Although the entire land-based casino project was estimated at $825 million, the unfinished building on the Rivergate site at the foot of Canal Street represents only approximately $200 million including parking garages. Thus, it appears that of the $825 million total project almost $600 million went to "political overhead." As of the filing of bankruptcy in November 1995, approximately $150 million more was needed to complete the facility.
Included in the "political overhead" was the renovation of the City's Municipal Auditorium (built 1930) for Harrah's temporary casino. It was to be used for only one year; the cost of renovation was $45 million. The temporary casino actually was in operation for less than seven months. Apparently, cost was no object.
In the gambling industry, gross win is determined by the amount of square footage in a casino's gambling area. In Nevada, the average is $2,000 per square foot. In Atlantic City, the win is approximately $3,200 per square foot. On the Mississippi Gulf Coast, it's around $1,270 per square foot. The Municipal Auditorium was renovated on the basis of an $8,000 per square foot win. The casino at the Rivergate site was projected to average $4,000-$5,000 per square foot win.
The latest projections for the bankrupt casino, should it ever be up and running at the Rivergate site, would require 15,500 patrons who lose an average of $70 each, 365 days a year to merely break even. The casino would have to draw annually more patrons than did the Aquarium of the Americas, the Louisiana Superdome, the Flamingo (riverboat casino near the Rivergate site), plus all of the convention delegates who went to the Ernest N. Morial Convention Center in 1996 combined! [On 1 October 1997, the Flamingo ceased operation in New Orleans.]
VIII. Harrah's Jazz Casino, The Chernobyl Of Casino Gambling!
What went wrong with the New Orleans land-based casino will likely go down as one of the all time great business disasters that will be analyzed by students at the great business schools in America. As with most business fiascos, there tends to be something simple that has been over looked. In this case the gambling promoters failed to do a market study. They appeared to have operated under the philosophy "build it and they will come!" Unfortunately for them that works only in the movies.
The demographics of the ten million annual convention and tourist visitors who come to New Orleans were never analyzed by the gambling promoters. The conventioneers (vast majority of these visitors) represent the cream of the crop of the hospitality market. They tend to be well educated and financially well off, the higher socio-economic level. Such individuals tend not to gamble. What draws them to New Orleans is the Vieux Carré, the food, the music, the architecture, and the general ambience of this historic city.
The white elephant building now on the Rivergate site was started in January 1995. The temporary casino at the Municipal Auditorium opened in May 1995, and the whole $825 million project went bust in November 1995. Unfinished and boarded up, Harrah's Jazz Casino is a monument to greed and corruption. The city was left with approximately a $23-million hole in its budget, the state with a $100 million in unrealized revenues, and unsecured creditors owed over $50 million; New Orleans has another political architectural folly!
http://www.tulane.edu/~rivgate/chapter6_text.html
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Edwin Washington Edwards (born August 7, 1927) served as the Democratic governor of Louisiana for four terms (1972–1980, 1984–1988, and 1992 –1996), twice as many terms as any other Louisiana governor has served. Edwards was also Louisiana's first Catholic governor in the twentieth century and perhaps with the exception of Huey P. Long, was Louisiana's most popular governor. A colorful, powerful and legendary figure in Louisiana politics, Edwards was long dogged by charges of corruption.
In 2001 he was sentenced to ten years in prison on racketeering charges. Edwards began serving his sentence in October 2002 in Ft. Worth Texas, and was later transferred to an Oakdale, Louisiana, facility.
Two men whom Edwards defeated in Louisiana elections, David C. Treen and J. Bennett Johnston, Jr., and a third who was Edwards' protege, John B. Breaux, confirmed in July 2007 that they intend to approach U.S. President George W. Bush about procuring a pardon or commutation for Edwards, who celebrated his 80th birthday in prison in August 2007.
http://en.wikipedia.org/wiki/Edwin_Edwards
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October 10, 2003
Hemmeter
still fighting
The one-time Hawaii resort
developer has come back
to town to see friends
and speak his piece
By Russ Lynch, Star-Bulletin
Former Hawaii developer Chris Hemmeter has battled prostate cancer and Parkinson's disease and is now dealing with a killer cancer affecting the bile duct. For Hemmeter, it's a liver transplant or death and his doctors told him he wouldn't make his 64th birthday.
But in a visit with friends in Honolulu this week, which included a party for that birthday, Hemmeter said his biggest trial was dealing with corrupt politicians in New Orleans.
Hemmeter -- who developed King's Alley and the twin-tower Hyatt Regency Waikiki, [on land leased from Kamehameha Schools/Bishop Estate] as well as luxury resorts such as the Hyatt Regency Waikoloa on the Big Island, now the Hilton Waikoloa Village, and the Westin Maui -- said in an interview that he was upset about the way Louisiana reporters picked on him over his grand plan for a $1 billion casino in New Orleans.
The bottom line to Hemmeter is that while the casino plan failed, it also put Louisiana Gov. Edwin Edwards in federal prison a year ago, to serve a 10-year term for extortion.
And Hemmeter said the luxury resorts he built in Hawaii made real money for him and his family and are now doing well again, despite setbacks under mostly Japanese owners following the burst of the late 1980s Japanese investment bubble.
Hemmeter sold those resorts at big profits, but when he stepped into the murky waters of Mississippi politics he ran aground, leading to the filing of personal bankruptcy by Hemmeter and his wife Patsy in 1997.
It began with the award to the Hemmeter group 10 years ago of a lease for a property designated to house the city's first land-based casino. The 60-year ground lease, worth hundreds of millions of dollars, was awarded because "we had the best plan," Hemmeter said.
Enter Edwards, a keen gambler and, according to Hemmeter and other critics, a corrupt politician. Edwards wanted a piece of the action for himself and his cronies and relatives, Hemmeter said. "He let me know in no uncertain terms that he expected his boys cut in on the deal. We said, no way we could do business like that," Hemmeter said. That's when the rot set in, ending with Edwards ignoring the law that said the land owner, in this case Hemmeter's company, would choose the gaming operator and simply telling Hemmeter that his choice of Caesar's as an operator was not going to be approved.
In the end, Edwards forced through a deal with three companies sharing the business, leaving Hemmeter with about a third of it.
"I ended up as a minority investor and watched my investment go down, down, down," Hemmeter said.
Hemmeter, who had kept his Hawaii developments as individual entities, ended up breaking that rule in New Orleans and consolidating several of his companies and pledging several multimillion-dollar homes as collateral for loans. The first casino, on a temporary location intended to get the business started while a new one was built, closed a few months after it opened in 1995, with Edwards' pick Harrah's going bankrupt and bond-holders unable to recover the $400 million they had invested.
That was about the end of the saga, except for the corruption and extortion federal case against Edwards.
During the selection process, Hemmeter paid for Edwards and other Louisiana officials to make luxury trips to Hawaii.
Hemmeter maintains that was all part of the shakedown and said he was vindicated when it was revealed that federal investigators had bugged his phones for 2 1/2 years and in "tens of hours" of tapes and they were unable to show one incident in which Hemmeter did anything wrong. The experience certainly soured him on the location. "I've never set foot in New Orleans, even to change planes, since 1995," he said.
For now, Hemmeter is looking after his health. He hopes for a liver transplant in the next month or so. He and his family have embarked on a new business, a Western-style restaurant called Saddle Ranch Chop House. The first unit is up and running next to the Universal Studios theme park in Los Angeles and is doing well, particularly late at night when the mechanical-bull rides, music and bands are in full swing, he said.
"We're doing just under $1 million a month in revenues" and that works out to about $250,000 in profits. Planning for four more restaurants in the next two years, Hemmeter said he hopes for eventual profits of more than $10 million a year and a number of potential buyers are paying attention.
"We should be able to get 10-12 times earnings when we sell," he said. The restaurant business is headed by Hemmeter's oldest son, Mark.
Hemmeter is also working on a golf project on the mainland. He said his family businesses have lined up some 400 pay-for-play golf courses that are interested. The idea is to have a couple of holes at each golf course wired for video with half a dozen cameras at each hole. Golfers can turn it on by dropping a $2 token in a slot and later they can go to a Web site and watch the video along with an analysis of their swings.
There will also be a $10,000 prize for a hole in one and the cameras won't let anyone cheat, he said.
Meanwhile, Chris and Patsy Hemmeter are living in a gated community near Bel Air, outside Los Angeles. Second son Chris graduated from Harvard business school and went into a dot-com business. When that failed, he got into the food and beverage distribution business and started a credit card for restaurants, but he wants to get a doctorate and may end up teaching.
Daughter Katie is doing well as an actress and playwright and makes money buying and selling residential real estate, Hemmeter said.
The Hemmeters had a "reverse surprise birthday party" at the Kahala Avenue home of lingerie multilevel marketing moguls Walter and Tiffany James Wednesday night, with a short but elite list of guests invited for what they thought was going to be a video-conference with Hemmeter speaking from the mainland.
Present were three former governors -- George Ariyoshi, John Waihee and Ben Cayetano -- former Mayor Frank Fasi and an array of other Hemmeter friends representing much of the long-time business leadership in the islands.
Guests were delighted when Walter James, who runs UndercoverWear with his wife, confessed that Chris and Patsy Hemmeter were in the house. Hemmeter was welcomed warmly and he said doctors had told him and Patsy that they should not expect him to be around for a 64th birthday party.
One who was completely taken by surprise was Larry Johnson, former chief executive officer of Bank of Hawaii, who had arrived only half an hour earlier on a flight from New York. Johnson said he hadn't showered but his wife Claire told him not to worry because the video link would not detect any body odor.
Thos Rohr, who headed the group that developed the Waikoloa Resort, said the best thing about Hemmeter was that he started at the bottom, as a trainee with Sheraton Hotels here in the early 1960s, and rose to the top, handling deals with hundreds of millions of dollars in the same gracious way he always acted.
Tim Guard, a longtime Hemmeter friend and president of the stevedoring company McCabe, Hamilton & Renny, called the reunion "an evening of smiles."
www.starbulletin.com/2003/10/10/business/story2.html
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November 28, 2003
Developer Christopher Hemmeter
dies at age 64
Pacific Business News (Honolulu)
Christopher B. Hemmeter, a prolific developer who built some of Hawaii's most notable hotels and resorts, died Thursday at his Los Angeles home. He was 64.
Eight months ago he was diagnosed with severe liver cancer. He also had been coping with Parkinson's disease. This was his second bout with cancer.
Sharing memories of his father, son Mark Hemmeter told PBN from Los Angeles, "Thanksgiving was his favorite holiday because it was all about just family. Our whole family was with him yesterday, and it was very peaceful."
Hemmeter came to Hawaii in the 1960s and became a noted developer while still in his 20s, along with partners Henry Shigekane and Diane Plotts. Many credit Hemmeter with creating the concept of a destination resort. He moved to the mainland in 1991 and became a casino developer in Colorado and New Orleans. His most recent venture was a successful restaurant near Universal Studios.
Former President Jimmy Carter, Hemmeter's close friend, told PBN for an October profile: "Chris has the uncanny ability to dream ... then put his concepts into practice for the enjoyment of countless others."
"We are extremely saddened by his passing, but we also rejoice as we reflect upon his life," the family said in a statement Friday. "He stood for all that was good in us and gave unselfishly of his time and energy. He will be greatly missed. His affection and caring for others, his charisma, and his professional accomplishments lead many people to pronounce that he was truly 'larger than life.'"
For his accomplishments, Hemmeter has received numerous awards including being named twice as the Businessman of the Year, Salesperson of the Year, Marketing Man of the Year and Islander of the Year in Hawaii. He was inducted into the American Academy of Achievement in 1979. In 1991 Hemmeter was selected the Independent Hotelier of the World.
Hemmeter's activities went beyond the hotel industry. He was the founder and chairman of the Bank of Honolulu, a director of the First Hawaiian Bank, a director of the National Symphony Orchestra in Washington D.C., a trustee of Punahou School in Honolulu, a member of the Young Presidents Organization, a director of the Carter Center, a director of Morrison Knudsen, a director of Resort Income Investors, and a Trustee Fellow of Cornell University where he received the prestigious Entrepreneur of the Year award granted to Cornell University graduates.
"Hawaii needs to appreciate his contributions to the visitor industry and the state," close Hemmeter friend and retired Bank of Hawaii CEO Larry Johnson told PBN previously. "His legacy will live here forever."
He is survived by his wife of 25 years, Patricia; children Mark and daughter-in-law Lisa, Chris and fiancée Debi, Katie and husband Cully; stepchildren Kelley, Shane, Brendan and wife Brook, and Holli; sister Sally Younge and husband Eric; brother Dr. Mead Hemmeter and wife Mari-Jo; sister-in-law Karen Cook; and six grandchildren, Taylor, Maddy, Annabelle, Austin, Ryan and Quinn.
Private services will be held Sunday in Los Angeles. In lieu of flowers, donations can be sent to the new Christopher B. and Patricia K. Hemmeter Kahaola Hospice Foundation at 1164 Bishop St., Suite 800, Honolulu, HI 96813.
http://pacific.bizjournals.com/pacific/stories/2003/11/24/daily58.html
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December 08, 2002
Dirty Dealing
Indian casinos are making millions for their investors
and providing little to the poor
By DONALD L. BARLETT AND JAMES B. STEELE, Time Magazine
Imagine, if you will, Congress passing a bill to make Indian tribes more self-sufficient that gives billions of dollars to the white backers of Indian businesses - and nothing to hundreds of thousands of Native Americans living in poverty.
Or a bill that gives hundreds of millions of dollars to one Indian tribe with a few dozen members - and not a penny to a tribe with hundreds of thousands of members.
Or a bill that allows select Indian tribes to create businesses that reap millions of dollars in profits and pay no federal income tax - at the same time that the tribes collect millions in aid from American taxpayers.
Can't imagine Congress passing such a bill? It did.
Here's how it happened - and what it means.
Maryann Martin presides over America's smallest tribe. Raised in Los Angeles in an African-American family, she knew little of her Indian ancestry until 1986, when at age 22 she learned that her mother had been the last surviving member of the Augustine Band of Cahuilla Mission Indians.
In 1991, the Bureau of Indian Affairs (BIA) certified Martin and her two younger brothers as members of the tribe. Federal recognition of tribal status opened the door for Martin and her siblings to qualify for certain types of government aid. And with it, a far more lucrative lure beckoned: the right to operate casinos on an Indian reservation.
As Indian casinos popped up like new housing developments across Southern California, Martin moved a trailer onto the long-abandoned Augustine reservation in Coachella, a 500-acre desert tract then littered with garbage, discarded household appliances and junk cars, about 25 miles southeast of Palm Springs. There she lived with her three children and African-American husband William Ray Vance. In 1994, membership in the tiny tribe dwindled from three adults to one when Martin's two brothers were killed during separate street shootings in Banning, Calif. Police said both men were involved in drug deals and were members of a violent Los Angeles street gang.
Subsequently, Martin negotiated a deal with Paragon Gaming, a Las Vegas company, to develop and manage a casino. Paragon is headed by Diana Bennett, a gaming executive and daughter of Vegas veteran and co-founder of the Circus Circus Casino William Bennett. Martin's Augustine Casino opened last July. With 349 slot machines and 10 gaming tables, it's the fifth and by far the most modest casino in the Palm Springs area.
But it stands to make a lot of non-Indian investors - and one Indian adult - rich.
And get this: Martin still qualifies for federal aid, in amounts far greater than what many needy Native Americans could even dream of getting. In 1999 and 2000 alone, government audit reports show, she pulled in more than $1 million from Washington - $476,000 for housing, $400,000 for tribal government and $146,000 for environmental programs.
It wasn't supposed to be this way.
At the end of the 1980s, in a frenzy of cost cutting and privatization, Washington perceived gaming on reservations as a cheap way to wean tribes from government handouts, encourage economic development and promote tribal self-sufficiency. After policy initiatives by the Reagan Administration and two U.S. Supreme Court rulings that approved gambling on Indian reservations, Congress enacted the Indian Gaming Regulatory Act in 1988. It was so riddled with loopholes, so poorly written, so discriminatory and subject to such conflicting interpretations that 14 years later, armies of high-priced lawyers are still debating the definition of a slot machine.
Instead of regulating Indian gambling, the act has created chaos and a system tailor-made for abuse. It set up a powerless and underfunded watchdog and dispersed oversight responsibilities among a hopelessly conflicting hierarchy of local, state and federal agencies. It created a system so skewed, only a few small tribes and their backers are getting rich, that it has changed the face of Indian country. Some long-dispersed tribes, aided by new, non-Indian financial godfathers, are regrouping to benefit from the gaming windfall. Others are seeking new reservations, some in areas where they never lived, occasionally even in other states, solely to build a casino. And leaders of small, newly wealthy tribes now have so much unregulated cash and political clout that they can ride roughshod over neighboring communities, poorer tribes and even their own members.
The amount of money involved is staggering. Last year 290 Indian casinos in 28 states pulled in at least $12.7 billion in revenue. Of that sum, TIME estimates, the casinos kept more than $5 billion as profit.
That would place overall Indian gaming among Fortune magazine's 20 most profitable U.S. corporations, with earnings exceeding those of J.P. Morgan Chase & Co., Merrill Lynch, American Express and Lehman Bros. Holdings combined.
But who, exactly, is benefiting?
Certainly Indians in a few tribes have prospered. In California, Christmas came early this year for the 100 members of the Table Mountain Rancheria, who over Thanksgiving picked up bonus checks of $200,000 each as their share of the Table Mountain Casino's profits. That was in addition to the monthly stipend of $15,000 each member receives. But even those amounts pale beside the fortunes made by the behind-the-scenes investors who bankroll the gaming palaces. They walk away with up to hundreds of millions of dollars.
Meanwhile, the overwhelming majority of Indians get nothing. Only half of all tribes, which have a total of 1.8 million members, have casinos. Some large tribes like the Navajo oppose gambling for religious reasons. Dozens of casinos do little better than break even because they are too small or located too far from population centers.
The upshot is that a small number of gaming operations are making most of the money. Last year just 39 casinos generated $8.4 billion. In short, 13% of the casinos accounted for 66% of the take. All of which helps explain why Indian gaming has failed to raise most Native Americans out of poverty. What has happened instead is this:
A LOSING HAND.
Revenue from gaming is so lopsided that Indian casinos in five states with almost half the Native American population-Montana, Nevada, North Dakota, Oklahoma and South Dakota-account for less than 3% of all casino proceeds. On average, they produce the equivalent of about $400 in revenue per Indian.
Meanwhile, casinos in California, Connecticut and Florida, states with only 3% of the Indian population, haul in 44% of all revenue, an average of $100,000 per Indian. In California, the casino run by the San Manuel Band of Mission Indians pulls in well over $100 million a year. That's about $900,000 per member.
THE RICH GET RICHER.
While federal recognition entitles tribes to a broad range of government benefits, there is no means testing. In 2001, aid to Indians amounted to $9.4 billion, but in many cases more money went to wealthy members of tribes with lucrative casinos than to destitute Indians. From 1995 to 2001, the Indian Health Service, the agency responsible for looking after the medical needs of Native Americans, spent an average of $2,100 a year on each of the 2,800 members of the Seminole tribe in Florida. The Seminoles' multiple casinos generated $216 million in profits last year, and each tribe member collected $35,000 in casino dividends. During the same six years, the health service spent an annual average of just $470 on each of the 52,000 members of the Muscogee (Creek) Nation in Oklahoma, whose tiny casinos do little more than break even.
BUYING POLITICIANS.
Wealthy Indian gaming tribes suddenly are pouring millions of dollars into political campaigns at both state and federal levels. They are also influencing gaming and other policies affecting Native Americans by handing out large sums to influential lobbying firms. In 2000 alone, tribes spent $9.5 million on Washington lobbying. Altogether they spend more to influence legislation than such longtime heavyweights as General Motors, Boeing, AT&T, or even Enron in its heyday.
GAMING TRIBES AS EXCLUSIVE CLUBS.
Tribal leaders are free to set their own whimsical rules for admission, without regard to Indian heritage. They may exclude rivals, potential whistle-blowers and other legitimate claimants. The fewer tribe members, the larger the cut for the rest. Some tribes are booting out members, while others are limiting membership. Among them: the Pechanga Band of Mission Indians in Riverside County, Calif., whose new Las Vegas-style gaming palace, the Pechanga Resort & Casino, is expected to produce well over $100 million in revenue.
GOLD RUSH.
Since only a federally recognized tribe can open a casino, scores of groups-including long-defunct tribes and extended families-have flocked to the BIA or Congress seeking certification. Since 1979, as gambling has boomed, the number of recognized tribes on the U.S. mainland has spiked 23%, to a total of 337. About 200 additional groups have petitioned the bureau for recognition.
Perhaps the most notorious example of tribal resurrection: the Mashantucket Pequots of Connecticut, proud owners of the world's largest casino, Foxwoods. The now billion-dollar tribe had ceased to exist until Congress re-created it in 1983. The current tribe members had never lived together on a reservation. Many of them would not even qualify for government assistance as Indians.
THE IMPOTENT ENFORCER.
Congress created the National Indian Gaming Commission (NIGC) to be the Federal Government's principal oversight-and-enforcement agency for Indian gaming?and then guaranteed that it could do neither. With a budget capped at $8 million, the agency has 63 employees to monitor the $12.7 billion all-cash business in more than 300 casinos and small gaming establishments nationwide.
The New Jersey Casino Control Commission, by contrast, has a $59 million budget and a staff of 720 to monitor 12 casinos in Atlantic City that produce one-third the revenue. The NIGC has yet to discover a single major case of corruption-despite numerous complaints from tribe members.
THE WHITE MAN WINS AGAIN.
While most Indians continue to live in poverty, many non-Indian investors are extracting hundreds of millions of dollars-sometimes in violation of legal limits-from casinos they helped establish, either by taking advantage of regulatory loopholes or cutting backroom deals. More than 90% of the contracts between tribes and outside gaming-management companies operate with no oversight. That means investors' identities are often secret, as are their financial arrangements and their share of the revenue.
Whatever else Congress had in mind when it passed the regulatory act, presumably the idea was not to line the pockets of a Malaysian gambling magnate, a South African millionaire or a Minnesota leather-apparel king.
FRAUD, CORRUPTION, INTIMIDATION.
The tribes' secrecy about financial affairs-and the complicity of government oversight agencies-has guaranteed that abuses in Indian country growing out of the surge in gaming riches go undetected, unreported and unprosecuted. Tribal leaders sometimes rule with an iron fist. Dissent is crushed. Cronyism flourishes.
Those who question how much the casinos really make, where the money goes or even tribal operations in general may be banished. Indians who challenge the system are often intimidated, harassed and threatened with reprisals or physical harm. They risk the loss of their jobs, homes and income.
Margarite Faras, a member of the San Carlos Apache tribe, which owns the Apache Gold Casino in San Carlos, Ariz., was ousted from the tribal council after exposing corruption that led to the imprisonment of a former tribal leader. For three years, Faras says, those in control mounted nighttime demonstrations at her home, complete with loudspeakers. They initiated a boycott of her taco business, telling everyone she used cat meat. They telephoned her with death threats.
Says Faras: "I don't know what else to say, other than it's been a nightmare."
Copyright © 2002 Time Inc. All rights reserved
December 15, 2002
TIME Special Investigation:
INDIAN CASINOS, Part 2
TIME Discloses 'Staggering' Expenditures
by Tribes Seeking Political Favors
TIME's DONALD BARLETT and JAMES STEELE have uncovered 'a financial-political scandal of stunning proportions,' Columnist William Safire Wrote in The New York Times
New York - Washington often ignores the needs of poor Native Americans while assisting newly-wealthy tribes who dump staggering amounts of money into political campaigns, lobbying and state ballot initiatives, TIME charges in a major investigation of Indian casinos.
This week, TIME publishes the second and final report after a year-long investigation by the Pulitzer prize winning team of TIME Editors-at-Large Donald Barlett and James Steele.
Indian political power is greatest in California, where Indian gaming revenue-$4 billion and growing - is set to surpass all the casinos in Las Vegas, TIME reports. "As the profitability and size of Indian casinos has grown, so has friction between the gaming ventures and surrounding communities," Barlett and Steele conclude. Also, "Washington often rewards rich tribes and penalizes poor ones by distributing funds based on historical practices rather than need. A tribe with a profitable casino often gets more money per capita than a tribe without one."
TIME discloses "staggering" expenditures to secure political favors, while Congress has slashed the Bureau of Indian Affairs to the point that the General Accounting Office calls it understaffed without coherent guidelines. TIME reports:
--Federal funding of Native American programs climbed from $5.3 billion to $9.4 billion, a 77% increase, from 1993-2001, according to an Office of Management and Budget report.
--Indian tribes have contributed $8.6 million to federal candidates since 1993.
--In 1996, during President Clinton's second run for office, 86% of $1.9 million went to Democrats.
--In 2002, with President George W. Bush in the White House, 56% of $1.4 million has gone to Republicans.
--In 2000-2001, tribes spent $20 million lobbying Congress on such issues as preserving the tax-free status of casinos. Sovereign tribes pay no state or local taxes.
TIME's cover story last week, "Wheel of Misfortune: Look Who's Cashing In at Indian Casinos," presented part one. William Safire devoted his Thursday column in The New York Times to TIME's investigation: "The poorest of our aboriginal Americans are getting poorer, while non-Indians get rich hiring lobbyists to get federal recognition of a tribal front for the sole purpose of buying land to build a casino," Safire wrote.
"It is a financial-political scandal of stunning proportions," Safire concluded.
"Under the cover of helping the 28% of Indians now mired in poverty, financial vultures and highly paid, revolving-door lobbyists are ripping off the U.S. taxpayer."
In part two, TIME focuses on tribes wielding political influence. "At the state level small Indian tribes with immensely profitable casinos are exerting an even more disproportionate clout" than in Washington, report Barlett and Steele. TIME's examples include:
--CALIFORNIA's Casinos Contribute Less Towards the Cost of Local Government Services Than in Connecticut: In this year's re-election campaign, Gov. Gray Davis picked up more than $1.8 million from California tribes, which operate 48 casinos in the state -- with perhaps two-dozen more on the way. Davis has negotiated compacts that provide for voluntary tribal contributions to a fund to help local communities defray the cost of government services near casinos. California officials estimate the tribes will pay about $100 million a year into the fund. By contrast, Connecticut collected $332 million last year from its two Indian casinos, Foxwoods and the Monhegan Sun. If California tribes were paying at the same rate-25% of slot revenue-the state would collect between $800 million and $1 billion.
TIME's story also covers casinos operated in California by tribes such as the Rumsey Band of Wintun Indians and its Cache Creek Indian Bingo & Casino. While the casino will take in an estimated $150 million this year, the 44-member tribe also will receive approximately $4,457 from the BIA's tribal priority allocations (TPA).
– CONNECTICUT's Eastern Pequots Used a Lobbyist Related to the White House Chief of Staff: Last June, Bush appointees in the Bureau of Indian Affairs recognized the Eastern Pequots, a southeastern Connecticut tribe with casino hopes. The tribe and its investors paid $525,000 to Ronald Kaufman, a Republican lobbyist who is the brother-in-law of White House chief of staff Andrew Card. "The BIA's recognition came amid widespread opposition," TIME reports, and questions about the tribe's authenticity.