Wednesday, December 06, 2006

In the 17th century, ancestors of the Pequot Tribal Nation lost their
position as the dominant culture along New England's Atlantic Coast. Today,
the Pequots - now owners of the world's largest casino - aim to secure a
position along Philadelphia's Delaware riverfront to build a $560 million
slots palace. If Foxwoods Development Co. wins a license Dec. 20 to build on
the 161/2-acre site on South Columbus Boulevard in South Philadelphia, its
Foxwoods Casino Philadelphia will be the tribe's first gambling venture
outside Connecticut - confirming it as a major player in the casino
industry. "It's certainly the next step for this tribe," Foxwoods chief
executive officer William Sherlock said in an interview in his office next
to the sprawling casino in Connecticut. "Philadelphia could be that first
step for a plethora of projects throughout the United States." But
Philadelphia presents some special challenges. Five companies are competing
for two casino licenses in the city. And Foxwoods' plans are opposed by
community groups fearing the impact of the big slots parlor on South
Philadelphia. For Foxwoods, the stakes are enormous. The tribe was made
wealthy by its Foxwoods Resort Casino - a 5-million-square-foot gambling
destination on a 1,200-acre reservation in southeastern Connecticut. The
casino, which started as a high-stakes bingo hall, is now a $1.2 billion
enterprise contributing 25 percent of its slots revenue to the state. The
tribe established the Foxwoods Development Co. in 2003 to oversee expansion
of its Foxwoods brand. It has its eye on Las Vegas, Atlantic City and
Biloxi, Miss. It's also building partnerships with other gambling companies,
including MGM Mirage. And it assists other Indian tribes. In June, Foxwoods
Development signed a seven-year management contract with the Pauma Band of
Mission Indians to manage its $300 million casino north of San Diego. Last
year it had a consulting contract with the Picayune Rancheria of the
Chukchansi Indians, a tribe that runs a central California casino. "They've
blazed the trail in a new arena for gaming in this country," said Howard
Dickstein, an attorney who represents large tribes with casinos in
California. "They've earned the respect of other tribes." In Connecticut,
Foxwoods averages 40,000 visitors per weekday, and up to 55,000 on weekends.
About 1.3 million arrive on buses each year. It employs 10,300 in three
hotels, 30 restaurants, numerous retail shops, entertainment venues and two
golf courses.

The Pequots and other tribes began gambling operations on reservation land
under the 1988 Indian Gaming Rights Act. In Connecticut, the tribe was
permitted to offer bingo and table games, such as poker and blackjack, which
were legal in the state. Slot machines were not, so the Pequots opened a
table games casino in 1992 by expanding the original bingo hall. The tribe
entered into the slots revenue sharing agreement a year later in exchange
for also being allowed to offer slot machines.

For the 12 months ending June 30, Connecticut took in $204.5 million from
Foxwoods, according to the state Division of Special Revenue, the agency
that tracks all forms of gambling in Connecticut. It received an additional
$224 million from nearby Mohegan Sun - another casino operated by the
state's Mohegan Tribe - under a similar compact.

Foxwoods now has 390 game tables and 7,400 slot machines - the most of any
U.S. casino. It will soon add 1,500 slots with its eighth expansion, and a
hotel tower featuring a 4,000-seat theater and 824 rooms with MGM Mirage.
The MGM Grand hotel, set to open in spring 2008, will allow the resort to
compete with Las Vegas for conventions and top concert acts.

"In the early days, it was more about 'just build it and they will come,' "
Foxwoods Casino president John O'Brien said. "Today, it's much more
strategic."

The bingo hall, now the world's biggest with 3,500 seats, attracts devotees
such as Maria Marcinko, 51, a state government worker from Harrisburg.
Marcinko makes the 51/2-hour trip to Foxwoods at least four times a year to
take part in the big tournaments.

"Yes, I'll go to the slots parks in Pennsylvania," Marcinko said as she
marked her game sheet with a lavender dauber on a recent Saturday. "But I
won't stop coming here - because of this bingo hall. There's nothing like it
anywhere."

Foxwoods, which draws clientele mainly from New York, Massachusetts and
Connecticut, does not report its earnings. But industry experts say the
casino is one of the most profitable in the business.

Andrew Zarnett, an analyst with Deutsche Bank AG, estimates the tribe has
generated about $350 million in cash flow - money left over after operating
expenses but before taxes - per year. "They clearly have the ability to
expand beyond Connecticut, and have been aggressively looking for
opportunities in the last two or three years," he said.

Their golden ticket

The Pequots became one of the most powerful American Indian cultures in
southern New England in the early 1600s, controlling much of the region's
coastline and currency - the Wampum, a bead made from a hardshell clam. But
a series of conflicts with European settlers reduced their population to
about 2,500 from 4,000, according to historians.

Income from their casino has helped the Pequots to rebuild their community,
create jobs, and provide health care, education and other services for the
members, who now number about 900, according to tribal chairman Michael J.
Thomas. Gambling has paid for a community center, a fire and police
department, and new housing. It also financed the $250 million Mashantucket
Pequot Museum and Research Center, which documents the tribe's history.

The money has also helped the Pequots to build political and casino industry
allies. Since 1995, the Pequots have given $3.1 million to Democrats and
Republicans - from individual donors and through the tribe's political
action committee.

"The world has clearly changed, and we certainly need every ally we can get
today," Thomas said. "We've returned to this position of influence, and we
hope to keep it alive for a long, long time."

Sherlock, the Foxwoods chief executive officer, said Foxwoods Development
began looking at Pennsylvania in summer 2003 - a year before the legislature
approved slot-machine gambling.

Under the casino's ownership structure, local investors would own 70
percent, and Foxwoods Development would own 30 percent and manage the
casino.

Sherlock said Foxwoods fielded more than one offer to partner with a
Pennsylvania slots license applicant, but found the group including
Comcast-Spectacor chairman Edward Snider, developer Ronald Rubin, and Lou
Katz's daughter, Melissa Silver, to be the best fit.

Snider said that his family is close with the Rubins and the Katzes. He said
the three families agreed to become involved with a casino development when
the legislature first considered legalizing slots.

"We decided that if this was going to happen... we could step in and invest
in one of them, and give back to the community," Snider said. "That's what
motivated us."

Snider said 42 percent of profits would benefit underprivileged children in
Philadelphia and South Jersey through trusts established by the investors.

Foxwoods backers hoped that would sway community groups.

Still, of the five applicants for a city license, Foxwoods has generated the
most controversy and community opposition.