Casinos over budget $30M

An interim report from the Office of Fiscal and Performance Review has some members of Congress questioning some of the procedures used in two Osage Casino expansion projects.

Speaking Tuesday afternoon before the Osage Nation Congress’ Commerce and Economic Development Committee, Kelly Corbin outlined OFPR’s initial findings on Osage Casinos’ expansions in Skiatook and Ponca City. The two projects went a combined $30 million over budget, raising a host of questions and concerns and leading the committee to consider drafting amendments to some of the tribe’s construction and commerce laws, including the Competitive Bidding Act.

“I think everyone’s affected by this, which is why I want everyone to participate,” Congressman William “Kugee” Supernaw said. “Everyone, take some notes and maybe we’ll eventually figure out what needs to be changed.”

Despite written and verbal reassurances to the Osage Nation Congress, including a letter from then-Chief Financial Officer Richard Lobdell, the OFPR investigation could not provide conclusive proof that the Competitive Bidding Act was followed to the letter during the construction at both sites.

Through a review of all documents held by the Osage Nation Gaming Commission, it was determined that many of the Skiatook and Ponca City casino projects bid out to subcontractors only received one bid. Rather than put those projects out for another round of bidding, calling area vendors to solicit quotes over the phone or just recommending a sole source contract, the bid was accepted after closed-door negotiations. No explanation was given for why additional bids were not sought.

“Reading through the contracts for each project, I could not find anywhere where the Competitive Bidding Act had to be followed when procuring a subcontractor,” Corbin said.

“We were constantly told that they were,” Supernaw replied.

Vendors also were not allowed to be present when the bids were opened. According to Corbin, at least one document reviewed during the OFPR investigation noted that the bids would not be a matter of public record.

“We can ask management all day if they’re following the law, but we need something in place to guarantee it,” Congresswoman Alice Buffalohead said. “We need to have checks and balances and it seems like we’ve been here before.”

Meanwhile, plans for a proposed renovation of the tribe’s flagship casino in Tulsa may be moving to the backburner.

Last year, then Osage Casino’s chief executive Neil Cornelius presented a multi-million dollar plan to Congress that included taking out an 11-year loan to help finance the project.

However, the tribe’s current gaming compact is set to expire on Jan. 1, 2020, and if the next compact features a greater revenue share going to state coffers – as was the case with the tobacco agreement signed in 2014 – the data used in Cornelius’ projection is no longer workable.

“If it is one with much greater terms for state, the numbers you’re looking at will be out the window,” Principal Chief Geoffrey Standing Bear said. “That creates difficulty for banks and bank lawyers to deal with any loan. About a seven-year term is all we can get right now.”

The committee also received a partial explanation in open session for the timing behind a lawsuit filed last month in Osage County District Court, along with a heads up that more litigation is on the horizon.

On May 29, Amanda Proctor filed a civil suit on behalf of the tribe against the former leadership of Osage LLC, citing fraud, negligent misrepresentation and breach of duty tied to a questionable business deal made in 2010 that wound up costing the tribe more than $1 million.

“The first suit was filed because the statute of limitations was running out,” Standing Bear said. “We had to file then or forever hold our peace.

“A second one is coming, as the statute of limitations expires in mid-July. Claims must be made to protect the Osage people’s right to recover their money that was stolen from them.”

 

by Lenzy Krehbiel-Burton

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