Disenrollment Is Bad For The Bottom Line: Redux

Tribal governments that disenroll members do it for the money. Or at least it appears that way in many cases. Tribal councils who engage in disenrollment turn their members into non-Indians in exchange for a bigger slice of tribal gaming profits.

Ironically, while some tribal members may benefit from larger per capita payments, at least temporarily, political strife caused by disenrollment controversies can eviscerate tribal economies, shrinking the pie itself.

This idea isn’t new, of course. We wrote about it in an Indian Country Today Media Network piece in 2013 called “Disenrollment is Bad for the Bottom Line.”

The difference now is that we have better examples of how disenrollment destroys tribal businesses and harms communities. The damage seems to happen chiefly in four ways.

First, disenrollment harms existing businesses. In Washington, a small faction of the Nooksack Tribe has unsuccessfully tried to disenroll a group of members known as the “Nooksack 306,” since late 2012. The nearly three years of upheaval has brought the Nooksack government’s operations to a screeching halt, and impaired all of the Tribe’s businesses.

In 2013, the faction fired dozens of disenrollees who, over the last decade, had helped build the Tribe’s two casinos and keep Nooksack gaming operations in the black. Within months, the Nooksack Tribal Chairman announced that the Nooksack River Casino might close because of a judgment against the casino of more than $20 million for unpaid debt. As reported by the Bellingham Herald, “the tribal council was too preoccupied with a controversial effort to disenroll hundreds of tribal members” to properly run the Tribe or its enterprises.

The Picayune Rancheria of Chukchansi Indians, which “has been disenrolling members for decades” for sake of larger Indian gaming revenue per-capita distributions to remaining tribal members, is in the same financial purgatory. Last year a federal judge shuttered its once lucrative casino, causing a catastrophic default on the Tribe’s $250 million bond issuance through Wells Fargo Bank.

Not only are both the enrolled and disenrolled Chukchansi Indians now suffering financially—the latter far more harshly than the former—but so are the bondholders and various other stakeholders—with the singular exception of the lawyers. Indeed, “the casino closure has significantly affected Madera County’s economy and the nearby communities.” In short, disenrollment bankrupts.

Second, disenrollment seems to attract entrepreneurs of chaos: investors, lawyers, and consultants willing to do business with regimes that terminate their own members for profit. Self-styled “enrollment auditors” will examine a Tribe’s membership records, for a price. Ask the Eastern Band of Cherokee Indians, which expended $900,000 for an enrollment audit and in turn put over 300 members on the disenrollment chopping block.

Tribal leaders can also now attend conferences organized by those auditors and consultants, where they “teach” lessons on “Removal from reservation” and “What you’ll face after disenrolling a member.” But it will cost you $865 to attend.

Even worse, the Alturas Rancheria in Northern California has been dogged by business problems related to disenrollment and the adoption of non-Indians offering grandiose development plans. There, non-Indian adoptees first offered a new casino and a cigarette-manufacturing venture, both of which failed. In July, a federal drug task force raided Alturas Rancheria land to shut down a massive marijuana growing operation—apparently a failed attempt to grow pot in accordance with the U.S. Department of Justice’s guidance relating to marijuana cultivation on tribal lands.

The exact same dynamics—disenrollment, shady business dealings, and law enforcement raids—have befallen the Pinoleville of Pomo Nation.

Third, disenrollment sends the wrong message to investors, especially as Indian public opinion against the practice increases. Just last week the Association of American Indian Physicians publically called attention to the health care consequences of disenrollment. In April, the National Native American Bar Association called out tribal leaders and lawyers for human rights violations related to disenrollment. As non-Indians begin to better understand the harm caused by disenrollment, outside investors may balk at providing capital to tribes known for cutting branches off their family trees—especially because tribal deal lawyers are hard-pressed to draft documents that prevent that insanity.

More generally, in this lending environment—especially after Nooksack and Picayune—what reputable bank would finance projects by a tribe who is unable to sustainably govern itself or its membership?

Finally, ugly disenrollment proceedings can hobble efforts by tribes to invest gaming dollars outside of Indian Country. An October column in The Wall Street Journal noted that tribes looking to diversify gaming revenue by entering in the investment market already face many hurdles. What reputable potential business partner would choose the chaos of a dismembering Tribe when an alternative option exists?

Locally, bad press from ugly political fights can undermine tribes’ efforts to diversify by investing in local businesses or to partner with neighboring governments. Non-Indians may simply choose to expend their financial and political capital elsewhere, rather than support authoritarian governments harming their own members.

Tribes looking to cut members should take the long view. What may be increased per capita payments today, will be the crippling or bankrupting political chaos of tomorrow. The expedient dismemberment of tribes is not worth it.

Anthony Broadman is a partner and Jared Miller is an associate with Galanda Broadman PLLC, www.galandabroadman.com.

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Disenrollment Is Bad For The Bottom Line: Redux

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