A new reality for tribal voters
By David Collins Published on 8/28/2009
Dear Mashantucket Pequot members:
As you certainly know by now, it's election season on the reservation, and Chairman Michael Thomas appears to making the run of his life.
Thomas, who recklessly ran his own financial ship aground, borrowing $5 million from Sovereign Bank and then refusing to pay it back, has also been busy during his tenure as chairman putting the tribe in financial peril.
Now it's true that Thomas inherited what his advisers have cleverly dubbed “legacy debt,” leftover from the big spending era of Chairman Richard “Skip” Hayward, who built, among other things, a money-losing museum and a shipyard that launched only two boats before it went out of business.
And it was Hayward who signed the sketchy loan deal with Malaysian investors that put up the original millions for Foxwoods but saddled the tribe with an ongoing obligation that is surely contributing to the current financial quagmire.
In return for the startup money, the Malaysians secured 9.9 percent of the casino's adjusted gross revenue through 2016. It's was the sweet deal that just keeps on giving.
The deal with the Malaysians was brokered by Hayward's friend, G. Michael Brown, a lawyer who at different times represented both the Malaysians and the Mashantuckets.
Brown is still working with the Malaysians and their company, Kien Haut Realty, most recently in an investment in the Monticello Casino & Raceway in New York, 90 miles from midtown Manhattan, just one of the new venues putting future earnings at Foxwoods at risk.
Brown led a search for lenders at the time of the start of the Pequots' casino project and chose his own clients after reporting that he could find no American banks that would lend the money.
This was a little like when Dick Cheney led the search for George Bush's vice president, and then picked himself.
But can Michael Thomas blame all the tribe's financial woes on Skip Hayward, who retired more than five years ago? Of course not.
Thomas has proven to be perhaps an even bigger spender. One could argue that at least the casino expansions that Hayward engineered captured a growing segment of the market and made sense.
Thomas, on the other hand, was the principal author of the MGM Grand at Foxwoods project, a $1 billion flop that has failed to ring up even one new dollar in slot machine revenue.
Thomas also presided over the building of a $67 million highway to nowhere out in front of Foxwoods, an elaborate widening of Route 2 that even highway-hungry state traffic planners were ambivalent about building.
Then there was the careless spending, like the Quixotic venture to open a Philadelphia casino or the $12 million the tribe donated to the Lahey Clinic in Massachusetts, to name a part of the facility after Thomas' grandmother.
What should worry you most, though, is the chairman's apparent disregard for either his own or the tribe's credibility in the credit markets.
One of his answers to the continuing collection lawsuit against him brought by Sovereign Bank was the incredible assertion that the money they lent him was a bribe, because they wanted tribal business, and therefore he doesn't have to pay it back.
Now apparently he is prepared to tell the tribe's lenders that he's not going to pay them back all the money they're owed either, presumably because it is more important, in this election year, that he promise you that your incentive checks won't be cut.
Thomas is a reformed drug dealer who in recent years has been associating in his private deals with some of Connecticut's biggest marquee criminals, people who have served substantial jail time in elaborate white collar crimes. Now he seems to be practicing thug business management.
Not only is Thomas' pledge to you shortsighted, but it's a promise that can't hold water much beyond an election.
The lenders will unlikely sit by and take less than they are owed while handsome dividends are paid out to shareholders, even if the bank's only resort is to turn to some sort of tortured bankruptcy.
Now is the time to accept the new reality that all tribal members are going to have to make sacrifices to save the long-term viability of the business and its ability to borrow money and reinvest in its future.
Vote no to deadbeat politics.
This is the opinion of David Collins.
EDITORIAL FOOTNOTE: The Mashantuckets made a bad deal with their investors, just like the Mohegan Tribal Government made a bad deal with their original investors.
Maybe the current Mohegan Tribal Council didn't make the deal, but have they done anything to pay down the tribe's debt? Could the problems that are happening to the Mashantucket Pequots happen to the Mohegans?
Will David Collins, talk about the Tribal Council and the Council of Elders of the Mohegan Tribe using the legal tactic of Superintending? Did the Mohegan Tribal Government abuse it's authority? What do you think?