North Dakota Law

Updates from the University of North Dakota School of Law.

Professor Kathryn Rand is cited

How a SC Native American tribe came to operate an out-of-state casino

The Post and Courier

By Jessica Holdman

Sept 11, 2022

KINGS MOUNTAIN, N.C. — On a recent weekday at year-old Two Kings Casino, a steady afternoon crowd shuffled inside a series of temporary red modular buildings to try their luck at some of the 1,000 video slot machines and electronic table games.

Customers’ faces were lit by the bright color screens in row after row of slots. Some sat in front of stadium-style big screens playing virtual blackjack, roulette and craps. Sports betting is expected to join the offerings this fall.

Most license plates in the casino parking lot, located about 35 miles west of downtown Charlotte, came from North Carolina.

But being five minutes from the state line, a few South Carolina placards were sprinkled in.

Soon they could be visiting a permanent $300 million casino with 2,000 employees, 5,000 games and four restaurants inside a 29-story hotel that would feature a manmade river and waterfall.

The casino is owned by the Catawba Nation, a Rock Hill-based Native American tribe. It never had a chance of coming to South Carolina. The Catawbas are barred by a deal signed nearly three decades ago that holds them to state, not federal, gambling laws in South Carolina.

And though legislators are unlikely to lift that ban any time soon, it has not stopped some S.C. politicians and their families from aiding and reaping benefits from the casino 45 miles northwest of the tribe’s headquarters. Legislation sponsored by U.S. Sen. Lindsey Graham, a Seneca Republican, and Rep. Jim Clyburn, a Columbia Democrat, paved the way for the casino. Family members of Clyburn and former Republican Gov. Nikki Haley did work for the casino developer, receiving shares in gaming profits in return.

Seeing a casino developed by a South Carolina tribe in North Carolina irks some Palmetto State politicians who see gambling as a way to boost revenue for schools and roads.

“It is silly for South Carolina residents to go to North Carolina to give them more revenue instead of spending that money here,” said Rep. Todd Rutherford, D-Columbia, who has long been a proponent of allowing casinos in the state. “How tragic it is they weren’t able to stay in their home state to be successful and to share that success with the state.”

When the casino opened two years ago in its temporary facility, the tribe estimated it would be bringing in $150 million in annual revenue within five years. It was projected the state of North Carolina would eventually receive between $5 million and $10 million annually as part of the revenue-sharing agreement it struck with the tribe.

The Catawba casino also has drawn the ire of the Eastern Band of Cherokee tribe. The Cherokees operate a pair of casinos in western North Carolina and are worried the Catawba’s site, which sits between their casinos and Charlotte, will siphon revenue.

But the Catawba Nation’s luck is being tested.

Federal tribal gaming regulators are investigating the casino operations, according to a report by The Wall Street Journal, concerned outside investors are in line for too much of the casino’s gambling revenue that is supposed to go the tribes.

The Catawba tribe in a written statement called the regulatory review “standard.”

“The Catawba Nation continues to work closely with the National Indian Gaming Commission (NIGC) on its review of our casino project and necessary agreements, and we are working to follow its recommendations as required,” the tribe said.

The deal

The Catawba Nation has sought gaming rights since the early 2000s but was largely barred from doing so in South Carolina due to a $50 million settlement agreement it had signed roughly a decade earlier.

For decades before the federal Catawba Indian Land Claims Settlement Act of 1993, the small tribe lived in poverty on a 1-square-mile reservation in Rock Hill.

The tribe sued in the 1970s, seeking federal recognition and the grant support that came with such status. The tribe used the settlement money to expand its holdings to 1,000 acres, or roughly 1.5 square miles, and today boasts some 3,600 members.

The settlement came with a catch.

South Carolina lawmakers would only sign off on the payout and federal recognition if the Catawbas agreed to adhere to state gambling laws, rather than falling under the federal law that allows Native American tribes to operate casinos in states where that type of gambling is prohibited, like North Carolina.

At the time, about half of Catawba tribe members were Mormon and did not believe in gambling. Being able to receive federal funds for education and health care, along with settlement money to expand the reservation, was more important to many tribe members.

The Catawbas did have the ability to open two high-dollar bingo halls in the 1990s, following the settlement. A decade after opening a hall in Rock Hill, the tribe said it couldn’t turn a profit amid the state’s 10 percent tax on gross income and competition with the then-new statewide lottery.

In search of a new source of tribal revenue, the Catawbas began looking for a way around the settlement. What followed was nearly two decades of lawsuits and legislative gymnastics that would end up pulling in the who’s who of South Carolina politics into the pursuit.

Struggle for gaming

The Catawbas saw an opening in 2005, when the state started allowing municipalities to approve casino boat cruises into extraterritorial waters.

Over the course of a decade and two lawsuits, the Catawbas would take their fight all the way to the state Supreme Court, arguing they, too, should be allowed to open a casino.

While awaiting judicial rulings, the tribe also began to hedge its bets and look across state lines for a solution.

In 2009, the Catawbas sought a developer for a possible casino.

The tribe contracted with Greenville businessman Wallace Cheves, who made his fortune in video poker alongside Fred Collins, known as the “poker king” of South Carolina when the games were legal in the state along with sweepstakes contests.

Cheves, through his company Sky Boat Gaming and other subsidiaries, looked for sites, secured financing and hired design firms. In 2013, the tribe and Sky Boat met with Cleveland County officials at what would become the site of Two Kings Casino.

In 2018, the U.S. Department of the Interior rejected the Catawbas’ trust land request, thwarting the tribe’s efforts for a North Carolina casino.

So the tribe and developers turn to Congress. In 2019, Graham introduced legislation which, had it passed, would have permitted the tribe to conduct gambling across the border in the Tar Heel State.

Then, in 2020, the Interior Department reversed its decision and put the 17 acres near Kings Mountain into trust. The Eastern Band of Cherokee file suit challenging the move.

While the tribes were still locked in legal battle, a 2021 Clyburn-sponsored bill codified the Interior Department’s decision, allowing the Catawbas to operate a casino and essentially ending the Cherokees’ lawsuit. Attached as a rider to the annual U.S. Department of Defense spending bill, it is signed into law by President Joe Biden.

Money follows

Politicians from both sides of the aisle also received campaign donations that closely followed necessary approvals and legislation as the approval process stretched out over three presidential administrations.

Money from the tribe’s casino development partner surrounded each step of approvals for a total of $250,000 in political campaign donations to Clyburn, Graham and Trump, as well as nearly $88,000 to members of North Carolina’s congressional delegation.

Both Clyburn and Graham have previously said the donations did not influence their actions.

With a proposed casino location in hand, the tribe and its developer began the process with the U.S. Bureau of Indian Affairs and U.S. Department of the Interior to place the land into a federal trust, making it an extension of Catawba lands.

Seeking out aid in the project-approval process, the tribe’s development partner turned to high-powered lawyers, lobbyists and relatives of politicians with the influence to help make the casino a reality.

In its report, The Wall Street Journal found family members of high-ranking South Carolina politicians, including the brother of Clyburn, the No. 3 ranking House Democrat, and the husband of Haley, the former United Nations ambassador, did work for the tribe and received a stake in gambling profits from one of the casino vendors.

Both Clyburn and Haley told the Journal that their family’s involvement did nothing to impact their attitudes toward the casino.

Haley, a potential 2024 White House candidate, stressed she did nothing to advocate for the project that she had opposed when she was governor. She attended the opening as a guest of her husband.

A slot-machine leasing company with ties to the tribe’s casino development partners and the site’s previous land owner, called Kings Mountain Equipment Supply LLC, is one of two companies leasing machines to the casino. The company gets 20 cents of every $1 in profits the casino generates from its half of the machines, according to documents reviewed by the Journal.

Through a web of privately-held companies, the vendor doled out a portion of its profits to the power brokers the developer had tapped for work.

John Clyburn, the congressman’s brother, told the Journal he received a certificate for the shares in 2013 as he consulted on the casino project on and off over the past decade. He declined to answer questions about whether he would return the shares saying, “I do not want to comment. Please do not call me again.”

Also owning a share is Butch Bowers, a prominent Columbia attorney who represented South Carolina’s past three governors and who the Associated Press previously reported was the lead negotiator for the tribe’s management company as it sought to hammer out agreements with the state of North Carolina starting in 2013. Bowers briefly led a legal team defending President Donald Trump from his second impeachment vote. He did not return calls seeking comment.

Michael Haley, through a company he owns, consulted on security for the Catawba reservation and casino project in 2018 and was paid with a stake. Haley, through a spokesman, declined to say whether he would return the shares and made no further comment beyond what has already been reported.

The shares are small — less than 1 percent ownership, according to the Journal. But if the tribe’s gaming ambitions are fully realized, payments to shareholders could grow.

Under investigation

What is in question now is whether the Catawba casino operations meet the federal standards governing tribal gaming, including ensuring that the tribe is the primary beneficiary of its gaming operations.

The fees a tribe agrees to pay to outside contractors can’t be too high in comparison to the revenue it earns, even if those contractors are investing a lot of money into the casino, according to Kathryn Rand, University of North Dakota law professor and co-founder of the school’s Institute for the Study of Tribal Gaming Law and Policy.

Federal reviews of the agreements tribes strike with various vendors can often take a year or more, Rand said.

Work to widen the road and bridge near the site continues, as well as upgrades to sewer lines being paid for by the tribe. But other work toward a permanent building appears on pause as the federal review continues.

The tribe has not yet applied for permits for its larger building plans, according to Cleveland County Business Development Director Jason Falls.

The tribe, in a statement, said it is “continuing to work toward having a timetable for construction.”

“I think everybody wonders what effect (the investigation) will have on the project as a whole,” Kings Mountain Mayor Scott Neisler said.

Occasionally, casino-goers make their way to the three blocks that make up Kings Mountain’s downtown, wearing Two Kings T-shirts as they come to dine on burgers and steaks at 238 Cherokee Grill, the restaurant’s assistant general manager Max Dove said.

There was some opposition among Kings Mountain residents worried about crime when the casino was proposed, Neisler said.

“A lot of people thought the worst of the casino when it came,” Neisler said. “That doomsday prognosis never really happened.”

And Dove said the casino was a topic of discussion among patrons when the temporary site first opened.

“There was a lot of talk for a long time, but that died out when everyone realized what it was,” he said.

The casino, with its thousands of jobs, as well as the prospect for a lithium mine to reopen nearby, has led to the permitting of some 3,000 new housing units in the county with more expected.

With it, Neisler expects Kings Mountain will go from relative obscurity, known only for a battleground site that was the turning point of the Revolutionary War in the South, to a top resort town in the state.

“We were probably one of the slowest-growing corridors (to Charlotte),” Neisler said.

South Carolinians will need to travel across the state line to play the slot machines.

But State Rep. Russell Ott, D-St. Matthews, thinks the state’s political attitude toward gambling has changed in recent years with the advent of online betting.

“I think it makes sense to have a regulated process so the state of South Carolina can capture some of that (online betting) revenue and can use that revenue for good,” Ott said.

State Sen. Wes Climer, R-Rock Hill, also has noticed a shift in the conversation, given easy access to wagering on cellphone applications.

“But I don’t know if it’s evolved to the extent that the community would welcome that kind of business,” Climer said of a casino.

During recent annual meetings he holds with Catawba leaders, Climer said they have not mentioned renewing attempts to open a casino in South Carolina.

Read the original story