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IN TRUST WE TRUST. To appreciate how frenetic investor activity has become, take a look at the action swirling around an otherwise unremarkable tract of land across the Sacramento River from the California state capital. The Upper Lake Band of Pomo Indians, a 150-member tribe, says in court papers that its ancestral homeland, two hours' drive from Sacramento, has "little economic value." So it wants to develop a casino on the river site, even though it neither owns the land nor has the money to buy it.
But the tribe does have friends with clout and deep pockets. A group of wealthy investors headed by Roy Palmer, a feisty onetime Chicago lawyer, has optioned the 67-acre tract in West Sacramento on behalf of the tribe and is footing the bill for trying to secure government approval for a reservation and casino. Palmer and two fellow Floridians, Robert Roskamp and Philip Kaltenbacher, onetime chairman of the New Jersey State Republican Party, formed a company called SRQ Inc. to develop and manage the casino. They envision it as a glitzy Las Vegas--style resort complex designed to replicate the state capitol building. If the BIA approves the plan and takes the land into trust, Palmer's group would convey the property to the Upper Lake Band. In return, SRQ would manage the casino for seven years and take 30% of its annual net profits.
For Palmer, who favors bow ties and loud sport coats, it could mean a replay of one of the most profitable chapters in his career. In the early 1990s, when Indian gaming was in its infancy, Palmer and a partner formed Buffalo Brothers Management Inc. to develop and manage two casinos for the St. Croix Chippewa Indians in Wisconsin. The company negotiated an agreement to collect 40% of the casinos' total net revenue for running the operations. Then it recommended that the tribe lease slot machines from Interstate Gaming Services Inc., a company that Palmer and his associate happened to own. The fee: 30% of the gross take from each machine. Since slots account for most of the gaming revenue in Indian casinos, Buffalo Brothers was poised to take 70% of the profits--far in excess of the 40% maximum permitted by law. In one year alone, 1992, the two companies collected $14 million.
Although the BIA had approved the St. Croix arrangements, some tribe members felt they were being gouged. Following an investigation, Michael Liethen, the director of the Office of Indian Gaming for the Wisconsin Gaming Commission, recommended in 1993 that the state revoke Buffalo Brothers' license. Instead, the state fired the director. (Some years later, the state paid him $290,000 to settle a lawsuit over the dismissal.) The disgruntled tribe members sued Buffalo Brothers, and by 1994, amid the rancor, the St. Croix Band bought out its contract, reportedly for more than $30 million. Palmer and his partner exited the state very wealthy men. "I was in the right place at the right time," he later told Sarasota magazine.
Palmer disputes the notion that he took advantage of the tribe and says he was the victim of tribal politics: "We did not do one thing wrong. They lost the case at every level, in every jurisdiction. It was just a smear job." As for the 30% his company received for supplying the slots, he says, "We used all that to pay for the slot machines."