Cabazon Indian Casino

The Cabazon Indian Casino was an unincorporated card parlor, restaurant and bar on the Cabazon Indian Reservation near Indio, California. The Cabazon Band of Mission Indians established it in October 1980.¹ It filed for reorganization under Chapter 11 of the Bankruptcy Code on December 10, 1981.² Its operation was the subject of California v. Cabazon Band of Mission Indians, decided by the Supreme Court of the United States in 1987.³

Agreement with PN Associates and Opening

On or about September 25, 1980, Rocco Zangari entered into an agreement to manage the cardroom. The Bankruptcy Appellate Panel for the Ninth Circuit stated in 1983 that the agreement "appears to have been only between Zangari and PN Associates, Inc., a Delaware corporation," and that Arthur Welmas, Chairman of the Cabazon Band, also signed it. The panel noted that the trial court had assumed, without making a finding, that the agreement was also between Zangari and the casino.² The Band's Tribal Ordinance No. 5.7, enacted May 24, 1980, authorized and regulated the card games of draw poker, lowball draw poker and panguingue and provided for one or more card clubs on the reservation.⁴

A 1986 opinion of the same panel describes the Band establishing the casino "in October of 1980" as an unincorporated company on tribal trust land, with approximately 75 employees paid from casino revenues.¹ A dissenting member of the panel described it as "established and solely owned by the Cabazon Band of Mission Indians."¹ Wayne Reeder, a real estate developer, told FBI agents on October 5, 1992 that he had built the casino for the Cabazon Indians and had received a percentage under an agreement made when he built it.⁵ The Press-Enterprise reported in March 1988 that the existing 7,000-square-foot cardroom had been built originally as the Cabazons' discount cigarette business in the late 1970s.⁶ The Bua report describes the casino building as the only building on the reservation in the early 1980s, with a mobile trailer behind it used as a small office for the Cabazons and the casino operation.⁷

Raids, the City of Indio and the County

Indio Chief of Police C. Samuel Cross and several members of the Indio Police Department entered the card club on October 18, 1980 and issued citations to more than 100 members, employees and non-members of the Band for violating the Indio City Code. The Band sued the same month for declaratory and injunctive relief. The district court denied a temporary restraining order and granted a preliminary injunction, then granted summary judgment to the City of Indio and dissolved the injunction, and later restored the injunction pending appeal. On December 14, 1982 the Ninth Circuit Court of Appeals reversed in Cabazon Band of Mission Indians v. City of Indio, 694 F.2d 634, holding that the city's 1970 annexation proceedings, conducted without the consent of the United States or the Band, were void ab initio.⁴

Dr. John Philip Nichols told Los Angeles Magazine in September 1983 that on the night the casino opened "the city police came out in force," that "They had riot guns, helmets," and that they arrested 118 people. The same article states that the casino "has been raided and closed four times by police, but on each occasion a federal restraining order has put it back in business."⁸ A 1984 trade article in Gaming & Wagering Business describes the casino as the "subject of three raids" and reports that the Cabazons claimed the city had encroached upon reservation territory and illegally annexed part of it in 1970. According to that article, two separate hearings before Laughlin Waters of the federal district court in Los Angeles determined that the 1970 annexation was not legal and that city laws did not apply on Indian territory.⁹

An editorial in the Indio Daily News, dated January 29, 1985 in the FBI's transmittal, stated that the casino was raided by Indio police within days of its opening, was reopened by court injunction shortly afterward, and that the city "eventually lost its bid to shut down the casino for good when a federal judge ruled that the reservation was not within the city limits."¹⁰ An FBI Los Angeles memorandum of November 5, 1986 states that the card parlor "was raided and closed by the Indio Police Department but reopened by virtue of a restraining order against the City of Indio by a Federal District Judge in Los Angeles, California," an order "later reaffirmed by the Ninth Circuit Court of Appeals," and describes the parlor as on reservation land "which lies within the City limits of Indio, California." The memorandum dates the expansion to include bingo to 1982.¹¹ The editorial dates a bingo parlor to 1983.¹⁰

In a letter of May 6, 1985 to the Daily News, John W. Fritz, Deputy Assistant Secretary for Indian Affairs at the Department of the Interior, wrote that California is a Public Law 280 state and that the Bureau of Indian Affairs was "without authority to act on the matters described in your editorial which are of a criminal nature," and referred the correspondence to the FBI.¹²

The trade article reports that Riverside County, California then claimed, as an arm of the state, the right to regulate the cardrooms, and that two days before the Bingo Palace was to open the county staged its own raid. The Band obtained a temporary restraining order and then a preliminary injunction against the county. The state of California joined the county's suit, and the Band countersued Riverside County for $12.5 million in civil rights damages.⁹ A 1989 Senate record reports that the Riverside County Sheriff's Department had attempted to shut down the Cabazon and Morongo gaming operations after declaring them illegal, and that the operations were reopened after a court ruling.¹³

Zangari and the First Management Contract

Dr. John Philip Nichols told Los Angeles Magazine in September 1983 that the tribe had hired the baseball manager Leo Durocher as a consultant to set up the cardroom and that Durocher "brought in a guy named Rocco Zangari."⁸ The Press-Enterprise reported on March 20, 1988: "Nichols said incompetent management caused the downfall of the poker business and he has admitted a mistake in his hiring of Rocco Zangari as the first manager." The article had earlier quoted John Paul Nichols as the Cabazon tribal administrator. It reports that Zangari "was fired Nov. 15, 1981" and sued for breach of contract, claiming he was owed $260,000, and that in court papers Zangari and Nichols accused each other of mishandling casino funds for personal profit at the tribe's expense.⁶ The Bankruptcy Appellate Panel gives the discharge date as November 5, 1981, after "legal difficulties between the Casino and the City of Indio."²

Zangari filed a complaint on January 28, 1982 objecting to the general discharge of the casino and to the discharge of any amounts owed him under the September 25, 1980 agreement. The casino counterclaimed for damages. On September 22, 1982 the casino moved for summary judgment on two grounds: that the agreement was only with PN Associates, and that it was void under 25 U.S.C. § 81. The trial court granted summary judgment for the defendants. On appeal, the panel reversed on December 29, 1983 and found that "a material question of fact exists in this case concerning the nature of the debtor and its relationship with the Cabazon Band of Mission Indians."²

The panel also wrote that "the rights and defenses available to individual partners are not automatically transferred to the partnership or to its other members," in a passage addressed to whether the casino was a partnership with members outside the protection of 25 U.S.C. § 81. The petition itself describes the casino as "a co-partnership consisting of" tribal members and Nichols, a non-Indian.²

A July 19, 1983 airtel from the FBI Los Angeles office to the Director describes a bookmaker placed as manager of the card parlor, who was fired and afterwards won an $80,000 civil suit for breach of contract.¹⁴ The FBI memorandum of November 5, 1986 describes a manager who was fired by Nichols and filed a breach of contract suit "which he won," and states that Nichols maintained the loan had been repaid in full.¹¹ Neither document names the manager. The Press-Enterprise article of March 20, 1988 states: "Ultimately, Zangari's claim was dismissed and he received no money, according to Bankruptcy Court records."⁶

Cheri Seymour wrote that Zangari was a former bookie.¹⁵ In 1988 Zangari pleaded guilty to federal racketeering charges in Los Angeles. The Press-Enterprise of February 9, 1989 reports a sentence of five years' probation and a $2,000 fine, and an indictment that identified him as an associate of Peter Milano.¹⁶ The California Attorney General's office paper submitted to the Senate in February 1989 describes the 1988 charge as "extortion," and states that Zangari was "fired by the Tribe for alleged wrong doings in financial dealings."¹³

The Special Committee on Investigations of the Select Committee on Indian Affairs heard a witness listed under the name "Marty" on February 8, 1989. According to the Press-Enterprise, the witness described a bingo casino in the western United States skimming for a crime family and gave no specifics on Cabazon.¹⁶ Welmas replied in writing that the testimony was unsubstantiated hearsay.¹⁷

A Las Vegas Sun article of February 3, 1998 names a Rocco Zangari, 65, among four defendants in a Los Angeles indictment that included Carmen Milano, described in the article as a La Cosa Nostra underboss.¹⁸ A Las Vegas Sun article of March 13, 2000 reports that Zangari pleaded guilty on March 10, 2000 to supervising other members while they sold $75,000 in counterfeit checks.¹⁹ The records found do not establish whether this is the same Rocco Zangari who managed the Cabazon cardroom.

Nichols Management

The Bankruptcy Appellate Panel describes John Paul Nichols as signing the petition as "Project Manager," and as a non-Indian who was ostensibly not a member of the Band.² The 1993 report of Judge Nicholas J. Bua describes Dr. John Philip Nichols as "a non-Indian man" who "was the Tribal Administrator and managed the business affairs of the tribe."⁷ The FBI memorandum of November 5, 1986 states that Nichols, his wife and three sons were hired as the management personnel by the Band.¹¹ Los Angeles Magazine of September 1983 reports that Mark Nichols was present while his father, Dr. Nichols, related the story of hiring Zangari.⁸ Gaming & Wagering Business of October 1984 names Mark Nichols as the bingo parlor manager.⁹

The editorial of January 1985 states that a group of dissident tribal members filed a complaint in the bankruptcy case alleging that non-Indians running the cardroom were reaping most of the profits. It also states that "Despite the two bankruptcies," Nichols and the tribe built a skeet-shooting range in 1982 and a bingo parlor in 1983.¹⁰

The Senate paper of February 1989 states that Dr. Nichols pleaded no contest in May 1985 to two counts of solicitation for murder.¹³ In July 1989 Mark Nichols was chief executive officer for the Cabazons.²⁰

Bankruptcy

The tribe filed the bankruptcy case on December 10, 1981, citing casino debts of $567,577 owed to 45 creditors and assets of $123,859, according to the Press-Enterprise of March 20, 1988.⁶ In 1986 the casino appeared before the Bankruptcy Appellate Panel as a Chapter 11 debtor-in-possession.¹

The tax dispute reached the panel in the same year. The casino claimed exemption from federal unemployment tax and the employer's share of Social Security tax as an Indian tribe. The trial court held that it was not exempt. The panel affirmed on February 5, 1986, over a dissent, and stated: "we adopt the reasoning of these two courts to hold that the income generated by the Casino is not directly derived from the land." The Internal Revenue Service claim, filed February 4, 1983, was for 1981 employment taxes of $181,530.24 (FICA) and $5,614.11 (FUTA).¹

The Press-Enterprise of March 20, 1988 reports that settlement of the case depended on a $200,000 loan from Southwest Gaming Inc. to the tribe. It reports Nichols's statement that the Internal Revenue Service had been paid the $62,500 claimed in back taxes, that the original IRS debt was $160,000 and had been trimmed by payments over four years, that the state Employment Development Department had claimed $37,000, and that trade creditors would receive 70 percent of what they were owed under the proposed settlement. The article states that the proposed settlement was to be considered by the bankruptcy court in San Bernardino that Friday.⁶ Southwest Gaming lifted the tribe out of bankruptcy court in March 1988 by providing a loan to pay off creditors.²⁰

Desert Oasis and Southwest Gaming

Don Speer, who had a background in casino management and marketing in Las Vegas, entered into a contract with the Cabazons in July 1986 and renamed the poker club the Desert Oasis Indian Casino to avoid confusing its location with the town of Cabazon. The Press-Enterprise reports that, according to court papers, the contract was approved by the Bureau of Indian Affairs and Speer's background was cleared by the FBI before he joined the venture. It describes a five-year management contract under which the tribe was initially guaranteed $225,000 a year, and states that the terms of the renegotiated contract in the reorganization plan filed with the bankruptcy court guaranteed the Cabazons $765,000 on the first $3,656,000 or less of gross revenues in the first year, with a $65,000 annual fee for cashier services.⁶ Speer, president of Southwest Gaming of Las Vegas, planned to spend at least $3 million to convert the cardroom into a nightclub with live entertainment and gourmet dining.⁶

At his arraignment on July 20, 1989, Speer pleaded innocent in Los Angeles County to charges of conspiracy to commit grand theft, grand theft and attempted grand theft in connection with operations at the California Bell Club in southeast Los Angeles County, which Southwest Gaming also managed.²⁰ Mark Nichols said: "We are of a mind to see his innocence, however."²⁰ The Press-Enterprise of September 20, 1989 reports that charges against Speer and Southwest Gaming vice president Michael Riordan were to be dismissed on September 28 when they repaid around $70,000 they had been accused of embezzling from the club, under a civil compromise that included no admission of wrongdoing. Los Angeles County Deputy District Attorney Pamela Ferrero said the evidence was weak that Speer and Riordan had criminal intent, and Mark Nichols said: "We're glad (Speer) is not going to jail or be sentenced."²¹

Cabazon Band v. County of Riverside, Ninth Circuit

The Band, the state and the county litigated whether state and county gambling laws applied on the reservations. On November 5, 1984, Judge Laughlin Waters ruled in Los Angeles for the Cabazon and Morongo bands, and the state's deputy attorneys general said they would appeal; the Press-Enterprise quoted Waters as saying that he did not agree with arguments that Indians' historic rights of sovereignty over reservation lands applied to gambling, and as saying "Indians are no different from anybody else" and "They've shown that, if they have the opportunity to make a buck, they'll act on it."²² The district court granted the Band's motion for summary judgment and issued a permanent injunction restraining the state and the county from applying their gambling laws on the reservations. The Ninth Circuit affirmed in Cabazon Band of Mission Indians v. County of Riverside, 783 F.2d 900 (9th Cir. 1986).²³

The panel held that "the gambling activities of the Tribes on the Indian reservation do not violate California public policy," and that California's bingo statute "is civil/regulatory in nature and does not apply, under Public Law 280, on the Indian reservations." On tribal interests, the court wrote that "the games are the major source of employment for the reservation Indians and the sole source of revenue for operating their tribal governments." The court extended its reasoning to the card parlor: "We find no basis upon which to distinguish the Tribe's bingo activities from the Tribes' card parlor games."²³

California v. Cabazon Band of Mission Indians, 1987

The Court heard the state's appeal from judgments in favor of both the Cabazon Band and the Morongo Band of Mission Indians. The opinion of the Court, by Justice Byron White and joined by Chief Justice William Rehnquist, Harry Blackmun, Lewis Powell, Thurgood Marshall and William Brennan, states that the Cabazon Band "has also opened a card club at which draw poker and other card games are played." The Court held that Congress had not consented to the application of state gambling law through Public Law 280 or the Organized Crime Control Act of 1970.³

The Court found that California "regulates rather than prohibits gambling in general and bingo in particular," and characterized the bingo statute as civil/regulatory rather than criminal/prohibitory. The majority wrote: "California does not allege any present criminal involvement in the Cabazon and Morongo enterprises, and the Ninth Circuit discerned none." It found that "the tribal games provide the sole source of revenues for the operation of the tribal governments and are the major sources of employment for tribal members."³

The majority rejected the state's stated interest in keeping organized crime out of tribal games: "We conclude that the State's interest in preventing the infiltration of the tribal bingo enterprises by organized crime does not justify state regulation of the tribal bingo enterprises in light of the compelling federal and tribal interests supporting them." It added that "State regulation would impermissibly infringe on tribal government, and this conclusion applies equally to the county's attempted regulation of the Cabazon card club."³

Justice John Paul Stevens, joined by Justices Sandra Day O'Connor and Antonin Scalia, dissented. Stevens wrote: "Unless and until Congress exempts Indian-managed gambling from state law and subjects it to federal supervision, I believe that a State may enforce its laws prohibiting high-stakes gambling on Indian reservations within its borders." The dissent also describes the Cabazon Tribe as having "only 25 enrolled members."³ The Bua report gives approximately 30 voting members of the tribe as of 1981.⁷

The Court affirmed the Ninth Circuit judgment and remanded the case for further proceedings on February 25, 1987.³

Indian Gaming Regulatory Act, 1988

The Indian Gaming Regulatory Act was enacted on October 17, 1988, as Public Law 100-497, nearly twenty months after the Supreme Court decision. Its first finding states that "numerous Indian tribes have become engaged in or have licensed gaming activities on Indian lands as a means of generating tribal governmental revenue." Its fifth finding states that "Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by Federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity."²⁴

Joint Venture with Wackenhut Corporation

Bua's report describes the Cabazons forming Cabazon Security Corporation in early 1981. A. Robert Frye, then president of Wackenhut Services, Inc., a subsidiary of Wackenhut Corporation, responded to the request for capabilities statements. The report states that Wackenhut was interested because the corporation, as a qualified minority contractor, would be eligible for government contract work under set-aside programs. In April 1981 Wackenhut and Cabazon Security Corporation signed a joint venture agreement, signed by Frye for Wackenhut and by Tribal Chairman Welmas for the corporation. The report states that the agreement gives as the primary purpose of the venture to "qualify for, bid on, and obtain government guard service contracts," and that the joint venture bid on two government security contracts that it did not receive.⁷

The report states that Wackenhut's files contain documents showing Nichols's efforts to market night-vision goggles and rifle scopes to individuals identified as representatives of the governments of Guatemala and Honduras, and that "It was Nichols' view that the Cabazon's, as a sovereign nation, were not subject to the usual export and import controls." It states that the files also contain internal Wackenhut memoranda expressing the opinion that any such sales would require State Department approval, and preliminary applications Wackenhut filed with the State Department, and that "As far as we could tell, no sales were ever made."⁷

The report places a night-vision demonstration on the evening of September 10, 1981 at the Lake Cahuilla gun range in Indio.⁷ A Riverside County District Attorney's Office report dated October 10, 1991 carries a title naming Earl Brian: "Nicaraguans and Earl Brian at Lake Cahuilla-9/10/81."²⁵ The FBI FD-302 of an interview with Wayne Reeder places the demonstration at the Indio Police Department range, as do the FD-302s of interviews with Sam Cross, the Indio police chief in 1981, and Sergeant Dave Baird.⁵²⁶ Cross told agents that he assigned four or five officers to attend the demonstration and that, if automatic weapons were present, they were expected to arrest Nichols.²⁶ Peter Zokosky told agents that those present included a "Mr. VANDERWORKER," and that Jim Hughes acted as interpreter for three Spanish-speaking males described as the customers.²⁷ The records found do not establish whether the Mr. Vanderworker named by Zokosky is the former CIA officer John Vandewerker.

Michael Riconosciuto executed an affidavit on March 21, 1991 in which, as the Bua report summarizes it, he claimed to have been Director of Research for a joint venture between Wackenhut Corporation and the Cabazon Indians. He described the venture as engaged in the development and manufacture of certain military type materials intended for sale to foreign governments and forces. The affidavit went on to describe the role that Peter Videnieks and Brian played in converting and distributing stolen Inslaw software, and described Videnieks as a frequent visitor to the reservation and a "close associate" of Brian.⁷

The report states that "the joint venture had no employees at any time" and that "The only individual employed by Wackenhut was Frye." Of Riconosciuto's claim about Brian, it states: "We found no evidence to support Riconosciuto's claim that he and Earl Brian were employed by Wackenhut or by the joint venture."⁷

The 1992 House Report on the INSLAW affair states that the committee "is not in a position to make findings of fact on Dr. Brian's role."²⁸ The report quotes Welmas in the Washington Business Journal of March 30, 1992 as saying that "Brian must have been involved."²⁸

Fred Alvarez

Fred Alvarez was the tribe's vice chairman and security chief at the cardroom.¹³ The Senate paper states that in about May 1981 he publicly criticized the Cabazon management, told local newspapers his life was in danger, and was removed as vice chairman. According to the paper, Alvarez and two other men decided to consult a lawyer about a suit to open the casino's books.¹³

The same paper states that on July 2, 1981 Alvarez and two non-Indians were found dead, and that the three had been shot in the head with a .38 caliber revolver the evening before. The paper states the case has never been solved.¹³ Seymour wrote that the killings occurred on June 29, 1981.¹⁵ An undated newspaper clipping reproduced in the FBI file gives Alvarez's age as 32 and reports that shortly before his death he had told the Indio Daily News that he feared for his life.²⁹ The Daily News editorial of January 1985 states that he walked into the newspaper's editorial offices almost four years earlier, that a month later, shortly after the fifth in a series of meetings with editors, he and two other persons were murdered in the back yard of his home, and that no one had been charged.¹⁰

Gene Gilbert, an investigator for the Riverside County District Attorney's Office, told FBI agents on October 7, 1992 that he was investigating the murder of Alvarez in 1991 when he came in contact with Riconosciuto, and that he interviewed Riconosciuto in prison in Springfield, Missouri and again in Spokane, Washington.²⁵

Casolaro and the INSLAW Context

Seymour wrote that Danny Casolaro was investigating the Cabazon and Wackenhut projects as part of his investigation of The Octopus when he was found dead in a West Virginia motel room in 1991.¹⁵

The Bua report states that the West Virginia State Police Crime Laboratory found a folded piece of paper inside Casolaro's left shoe, indented as if something had been written on a page on top of it, and reproduced the impressions. The report states that the writing was Casolaro's and gives the text, which includes the lines "Outline Chapter on 1980," "John Philip Nichols after arrival Indian Reservation," "Fred Alvarez" and "Finish up chapter w/ Paul M. & Fred A." The report states that there is no indication when Casolaro wrote the words or why he placed the paper in his shoe.⁷ The House Report cites the Riverside County District Attorney's Office Special Operations Report of October 10, 1991, pages 2 to 4, in note 221.²⁸

Later Operations

The Cabazon Band's corporation Cabazon Bingo, Inc. operated Fantasy Springs Casino on tribal land; a California appellate opinion records bingo being played there on or about September 17, 1995.³⁰ Indian Country Today described Fantasy Springs Resort Casino at Indio as the Band's casino in 2008.³¹ Southwest Gaming managed the Desert Oasis Indian Casino under the 1986 contract as of July 1989.²⁰