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The Game Has Changed

By Elrod Bowers
Although the Seminole Tribe led Indian Country into the gaming industry in the late 1970’s, in the last decade it has fallen well behind its competitors.

In the 23 years since the Tribe opened the Hollywood Seminole Bingo, the Miccosukee tribe opened a resort and casino down south, and the Mohegan and Pequot tribes opened sprawling casinos up north.

Although Seminole gaming has expanded over the years to include casinos on the Brighton, Tampa, and Immokalee reservations, and the city of Coconut Creek, none approach the sophistication and popularity of the “destination” resort and casinos of the aforementioned.

Further hampering the Tribe’s success were a long line of management issues, resulting in the Tribe being slapped with millions in federal penalties for illegal management contracts at the Hollywood and Immokalee casinos.

A few months before the political upheaval of early 2001, which resulted in the firings of numerous Tribal employees and the suspension of Chairman James Billie, the Tribal Council and Legal Department had begun to critically examine the contracts, procedures and personnel of the Seminole Gaming Department.

The conclusion was that the Seminole Tribe had to seek employees with gaming experience, overhaul Seminole Gaming policies and procedures, and revisit many of the contracts that had been negotiated in the Tribe’s name.

The Seminole Gaming Department, as it existed, was not able to handle the massive demands of the Hard Rock projects.

Hard Rock Re-Negotiations

First, the Tribal Council approached the developer, Power Plant Entertainment, LLC to renegotiate the original business deal that was conducted by former Executive Administrator Tim Cox.

When the original negotiations, which began in May 2000, were completed, Tribal attorney Eric Dorsky was asked to smooth out the legal issues, and specifically told not to touch the business terms.

In the original deal, the developer was to receive:

a financing fee (3% of the amount financed), a development fee (4% of the development cost), a Financial Services Advisory Fee equal to 17% of the adjusted gross revenues from the Hard Rock projects for 15 years.

The adjusted gross revenue is the gross revenues from all sources of the projects, minus the amounts paid out for gaming prizes and interest.

In essence, “the [Tribe] could be losing money, but [the developer] would still get paid,” said Dorsky. In fact, not only would the developer get paid, but receiving a piece of the gross revenues meant they would always get paid first.

According to Dorsky, the developer was “very fair and willing to revisit the terms” and, by September 2001, an amended agreement emerged with major changes to the original terms.

The amended deal includes:

the Financial Services Advisory Fee adjusted to 30% of net gaming revenues for 10 years, with the tribe retaining the right to buy out the last three years at a discount. The net revenue is revenue minus all operating expenses, capital items, interest and principal.

the term for the Financial Services Advisory Fee for non-gaming activity was increased to 25 years.

the developer’s guarantee that the interest rate paid on the financings will not exceed a weighted average of 11%. Any amount above 11% will be paid from the developer’s fee.

the Tribe will receive the first $18.2 million of monthly net revenues.

The last point is the key piece of the contract. In the original deal, the Tribe’s current income stream was not protected.

The Tribal Council designated $18.2 million, the amount of monthly net revenues it currently is receiving from the Hollywood and Tampa casinos, as the amount which would be paid immediately to the tribe before the developer receives its 30% fee.
“If nothing else, this is fundamental,” said Dorsky, “Before we start paying the developer’s 30%, we must get what we’re making right now.”

“This makes sure the Tribe has a steady stream of income always coming in.”
The change from 17% of gross revenues to 30% of net revenues would work out the same under some calculations, the biggest benefit is that both the Tribe and the developer would get paid after the projects make money.

In exchange for reducing the gaming term down to 10 years, the non-gaming (which includes resort and retail, etc.) term was increased to 25 years.

In the original contract, the developer received 17% of gross revenues from all sources, gaming and non-gaming, related to the project: gaming, resort, retail, etc.
Also, in the original contract, the Seminole Tribe would be paid 7% of any net income the developer received from any projects with another Indian tribe. This number was renegotiated to 20% of net income.

According to Dorsky, there are some more terms still under negotiation that are even more beneficial to the tribe.

Hiring of Gaming Industry Veterans

In April 2002, the Tribe approved the contracts of two key employees, Edward Jenkins, as the Director of the Compliance and Regulation department, and Jim Allen, as the Executive Operating Officer of Seminole Gaming Operations.

Edward Jenkins, a 30-year FBI veteran, was originally hired in Dec. 2001 as a consultant with T & M Protection Resources to evaluate how the Tribal Gaming Commission handled compliance and regulation, and other issues relating to compliance, in preparation for the Hard Rock projects.

Jenkins began working for the FBI out of high school in north New Jersey. He attended Seton Hall University and, at 21, became the youngest agent in the history of the FBI.

During his career, Jenkins was stationed in Louisville (Kentucky), Gary (Indiana), Detroit (Michigan), and Washington, D.C. He eventually landed in Las Vegas as second in charge of the state, ran the state for a time and retired.

He then worked as Vice President of Corporate Security for Caesars World, the parent company for Caesars, where he had regulatory oversight for Caesars Atlantic City, Caesar Tahoe, Caesars Palace in Las Vegas.

After Caesars was sold, Jenkins moved onto become Vice President of Corporate Security for MGM, which was a new company at that time.

“I took the policies and procedures that were in place at Caesars and implemented them at MGM, and that is basically the same thing that I’m doing down here,” said Jenkins, “The policies work and that has been my main focus since I’ve been down here.”

According to Jenkins, there aren’t many differences coming from a Class III environment to an Indian gaming operation.

“The concept is the same, you want to make sure that the operations are run honestly,” said Jenkins, “Nevada and New Jersey are regulated by the state, where I would work for the state authorities, but I would have the responsibility to make sure that the operations would be run honestly, that background investigations were done, vendor checks were done, conduct internal investigations involving theft and employee misconduct. If we did find something that was out of line we would report it to the state authorities and seek prosecution.”

“One of the differences is that, since there is no compact with the state, I look at my position as Director of Compliance and Regulation as the same as the Vice President position at the MGM and Caesars, but rather than reporting to the state, I report to the Seminole Tribal Gaming Commission.”

When Jenkins was first hired, it called for a change in the way the Gaming Department is viewed. “From Las Vegas, or anybody from Class III gaming, ‘gaming’ is really Operations,” said Jenkins, “I was hired as Director of Gaming-Compliance and Regulations, I think that is the proper label for the department.”

Within the Compliance and Regulations department is Surveillance, the Background and Licensing Unit, and the Gaming Commission Officers.

Jenkins recently hired Jack Keenan, a former Department of Gaming Enforcement regulator for the state of New Jersey with over 20 years of experience. Keenan oversees all of Surveillance Operations, and is directly involved in setting up, with Senior Security Officer Thomas Sparks and an outside consultant, the surveillance systems for the Hard Rock projects.

Backgrounds is headed by Barbara Calisanti, who has a number of investigators and also supervises the Gaming Clerks at each of the casinos.

The Gaming Commission Officers, who are located at each of the Tribe’s casinos, are headed by Commission Manager David Motlow.

After his hiring, Jenkins restructured the department. “It was really like a paramilitary operation in which no one was allowed to make a decision. All of the decisions were made at the top,” said Jenkins, “I’m trying to push the decision-making process back down as a training tool, have the managers make the decision, and I’ll have the final review on the decisions.”

Since his hiring, Jenkins has been researching the history of the Gaming Department because he has found that most of the practices that were in place had never been documented. He also has been writing new policies and procedures, the Tribal Gaming Commission recently approved a Vendor Policy, which will be utilized for background checks of potential vendors for the Hard Rock projects.

Another problem was target staffing level: it has never been established. Jenkins has set levels for Surveillance Operations and Commission Officers for each of the casino locations.

“Overstaffing will have a negative financial impact on the overall operation,” said Jenkins, “and they will be evaluated on a yearly basis to see if they need to be reduced or increased.”

Another area was speeding up the turnaround for background investigations, which called for automation of the background process. Now, investigations that used to take up to six months now take five days.

“It’s important to have these building blocks in place,” said Jenkins, “Now, Jim Allen has his Human Resource person in place, Kathleen Rybar, who comes from Class III gaming.”

“I’ve been working with her to develop parallel procedures to make sure that, once the mass hiring starts, we’ll be able to support the background and licensing end of it so that the employees are put on board at the right time frame rather than holding up Operations.”

Jenkins and Director of Gaming Operations Jim Allen also played a critical part in securing Tribe’s $315 million bond deal for the first phase of construction of the Hard Rock projects.

Both, along with other Tribal representatives, made several trips to New York City and Boston, meeting companies and brokerage houses who would put the bonds on the market.

Jenkins and Allen, who were still consultants at the time, gave their backgrounds as well as their expectations of the project’s success.

“There were a lot of questions: Are we going to be here for the process? Are we going to be on board when the building started? What’s our future with the tribe?” said Jenkins.

“Of course, at that time I was still a consultant, so when it came down to the wire, I was offered a position to come on board with the tribe.

“What the actual comments were back and forth, I don’t know, but what it came down to is that they wanted assurances that we were going to be here and in place and make sure that everything goes forward correctly.”

According to Jenkins, it is a great opportunity to work with the Tribe at the start of a new era for Seminole Gaming. “We’re building a program from ground zero,” said Jenkins, “I realize that the department has been around for awhile, but now with the Hard Rock, there have been so many more demands placed on everybody.”

“It’s real good opportunity to have original thought and original input, and set up a long-lasting, documented in writing, regulatory department and procedures that will live on.

“It’s important that everyone understands what those procedures are, so that there’s no gray area. Because we come from a highly, highly regulated Class III environment, we want to put the highest standards in place for the Seminole Tribe of Florida from a regulatory standpoint.”

Next Issue: Director of Gaming Operations Jim Allen and the latest details on the Hollywood and Tampa Projects.

Allen, who reports to the Tribal Council, brings over 20 years of gaming experience to the tribe and, more importantly, has experience in “opening” casinos. Allen supervised the openings of the Mohegan Sun in Connecticut and Atlantis in Paradise Island, Bahamas.

Allen originally came to the tribe from the Cordish Company, with whom he was responsible for the coordination of the design of the Seminole Hard Rock projects.
To help with the Hard Rock projects, as well as overhaul and standardize operations at the tribe’s other casinos in Hollywood, Tampa, Coconut Creek, Immokalee and Brighton, Allen hired Brad Buchanan, Senior Financial Officer; Kathleen L. Rybar, Senior Human Resources Officer; Lyle Bell, Senior Information Technology Officer; Thomas W. Sparks, Senior Officer for Security, Transportation and Administration; Charles Lombardo, Senior Gaming Officer; and Jeanine Repa, Marketing Officer.
Allen immediately focused on the types of games that are offered in the Seminole casinos. The consensus was to offer casino patrons exciting and, more importantly, familiar, games. The new Seminole Hard Rock Casinos will offer class II versions of popular slots seen in Las Vegas such as Double Diamonds, Triple Sevens, etc.
The Tribe has worked with IGT, which offers the games, and received three opinions from the law firms of Hobbs, Straus, Dean & Walker, to ensure that the games are safely within Class II status.

49 of the new games are presently being offered in the Coconut Creek Casino.

In their respective fields, all of the new employees are preparing for the opening of the Seminole Hard Rock projects, which is expected to create about 2,500 construction jobs and 5,000 permanent jobs.

Seminole Tribal Gaming Commission

The Tribal Council also took steps to de-politicize the Seminole Tribal Gaming Commission. In the past, the STGC has consisted only of the members of the Tribal Council. In June 2002, the Council voted to add five more members to the STGC who are not elected officials. The addition of the new members helps to ensure that the Commission meetings have a legal quorum every month during the crucial period of the construction of the Seminole Hard Rock projects and beyond.

These members, who include STGC President Allen Huff, Vice-President Elrod Bowers, Eteau Osceola, Dale Grasshopper and Billy L. Cypress, were appointed to initial three-year terms in order to provide continuity throughout the construction and completion of the Seminole Hard Rock projects.

After the three-year terms are over, the terms will then be staggered and a training program for new Commission members set up, in order to provide stability and continuity to the STGC.

The Seminole Hard Rock Projects

On May 15, the Seminole Tribe secured $315 million in bond financing for the first phase of construction for the Hollywood and Tampa Seminole Hard Rock Hotel & Casino projects.

The Seminole Tribe of Florida will own and operate the Tampa and Hollywood Seminole Hard Rock Hotel and Casinos, according to the licensing agreement with Hard Rock Café International.

The Hollywood Seminole Hard Rock will be located on 86 acres north of Stirling Road, between State Road 7 and the Florida Turnpike.

The destination resort and casino will consist of a 115,000 square foot casino in a 339,000 square foot building. There will also be a 15-story Mediterranean-style hotel tower and an enclosed 1,700 space parking facility, as well 1,700 surface parking spaces.

The hotel will have 500 guestrooms, including 64 suites with the latest in amenities and security features, and over 40,000 square feet of meeting space.

The casino will have over 2,000 electronic gaming machines, 65 poker tables and a bingo gallery that will be able to seat 800 people.

There will also be a lagoon-style pool area that will feature a pool bar nestled in a rock mountain, waterslide, elevated spa, shallow kiddie pool with play features, beach volleyball area and poolside cabanas.

Dining and entertainment will include a Hard Rock Café, hotel restaurant, Coffee Bar, Pool Bar, Casino Center Bar, and a 250 seat Food Court. There were be additional restaurants in the nearby retail center.

There will be shopping throughout the resort including a gift shop that will market Seminole art and crafts. Phase II of construction will feature an adjacent retail and entertainment complex that will have specialty stores, restaurants and a multi-use venue.

The hotel is 10 minutes from the Hollywood International Airport and 30 minutes from the Miami International Airport.

Under construction since the middle of 2002, the Hollywood Seminole Hard Rock is scheduled to open in the spring of 2004.

The Tampa Seminole Hard Rock is located on the 37 acres west of North Orient Road, between I-4 and Hillsborough Avenue.

It will have a 90,000 square foot casino within a 210,000 square foot building, 10-story hotel tower and an enclosed 1,600 space parking facility, as well as 1,000 surface parking spaces.

The hotel will have 250 guestrooms, including 46 suites. There will also be 10,000 square feet of meeting space.

Guests can also visit the Spa, which will offer wet and dry treatments, exercise room, private outdoor garden, and separate men’s and women’s changing areas with steam, hydrotherapy pools and showers.

Outside, the pool area will have cabanas equipped with televisions and refrigerators and areas designed for beach volleyball, horseshoes and table tennis.

The casino will have over 1,500 electronic gaming machines, 55 poker tables and a bingo gallery for 800 people.

Dining and entertainment will include a 24-hour restaurant, Casino Center Bar, Sports Bar, Lobby Bar, 250-seat Food Court, and a specialty restaurant that includes staging for live performers and a DJ booth.

There will also be shopping opportunities throughout the resort and a Hard Rock retail store.

Under construction since 2002, The Casino is set to open in the spring of 2003, and the hotel in the spring of 2004.

The project developer is The Cordish Company of Baltimore, Maryland. In addition to the Seminole Hard Rock projects, Cordish is developing three other projects, the Atlantic City Walk, Power Plant Live and Capital Centre.

The Atlantic City Walk is a $100 million retail and entertainment district connecting the Atlantic City Boardwalk and the City’s Convention Center.

In a public-private partnership with the City of Baltimore, Cordish is developing a 400,000 square foot entertainment and office development, which will be the only pure entertainment district in Baltimore.

Capital Centre is Cordish’s redevelopment of the former USAir Arena in Washington. DC in conjunction with the ownership of the NBA Wizards and the NHL Capitals.
The Seminole Hard Rock architect is Klai Juba of Las Vegas Nevada. The construction company is Perini/Suitt A Joint Venture from Tampa, Florida.