March 22, 1996
The following was taken from the Detroit Free Press -
Written by Tina Lam
The following is copyrighted material, please contact the Detroit Free Press for permission to copy.

The Indian casino business has been good to Fred Dakota.

Since the Kewenaw Bay Indian Community opened a casino in 1986 he's bought land, a small lakefront house, an expensive gun collection and a gas station. He's often seen driving an expensive Dodge Viper.

But his tribe's two casinos and their 850 slot machines that helped create his good fortune ultimately may be his undoing.

Dakota, the tribe's 58 year old chairman told the Free Press in a recent interview that he received money in 1991-93 from a company that was indicted last year for supplying slot machines to Michigan's Indian casinos before they were legal in the state. In exchange the company, International Gaming Management, got a share of the money that gamblers lost in the slot machines.

Federal agents have been probing Dakota's links to IGM, including why he was paid and what he did with the money, said people familiar with the investigation. Investigators from at least six federal agencies allege that IGM had ties to the Genovese and Gambino organized crime family in New York.

Dakota said he was not aware of that. Charges in a federal indictment of IGM last September include conspiracy, shipping illegal machines, money laundering, mail and securities fraud.

People close to the investigation said Dakota, while he was the tribe's chairman was paid at least $40,000.00 by IGM in 1991-93. Dakota won't say how much he got, but he told the Free Press that he was paid as a consultant.

"You bet I'm scared, Dakota said of the federal probe. "I don't think I've done anything wrong. But if Uncle wants to get you, Uncle will get you."

In a personal journal, Joseph O'Leary, the tribe's lawyer, warns Dakota to disclose the payments to his own and other tribes who were leasing machines from IGM. A former tribal council president said Dakota never told the council about the leasing arrangement.

Dakota's 1991 deal with IGM for illegal slot machines gave IGM a high profit margin - 35 percent - than the other tribes that had similar arrangements, according to documents IGM filed with the federal Securities and Exchange Commission.

Meanwhile, the 2,400 members of Dakota's tribe have not enjoyed casino profits as many other Michigan Indians have. The tribe does not pay out profit shares to adult members, nor has it invested heavily in benefits such as health clinics and tribal schools.

Slot machines are central to Dakota's troubles but far from his only ones.

One night last August, a group of dissidents crept into tribal headquarters over looking Lake Superior's Assinins Bay and seized the building to protest tribal election irregularities. The standoff is now in its seventh month, with protestors - who claim the support of about 300 tribal members - camped out in the building without heat or water. (Personal note: there are about 500 adult members living on the Res.)

The Keweenaw deadlock has been marked by death threats, gunfire and attempts by federal officials to break the stalemate. Both sides say there is no end in sight. The protest group, Fight For Justice, charges that under Dakota's leadership, the tribal council voided the results of a 1994 election in which Fight for Justice leader Jerry Curtis won a council seat. Then, the council purged 200 people from the tribal voting rolls and held a new election. Curtis lost.

The council also voided a race in which Dakota's son, Bradley, the tribal judge, tied with a Fight for Justice member. In the post purge election, Dakota's son won easily.

Fight for Justice members say Dakota is a dictator who controls tribal business, jobs and police, threatening dissidents with arrest and filing libel suits in tribal court to intimidate them.

They believe Dakota has used his office to benefit himself, not the tribe. Curtis said his group took over the tribal headquarters because it felt there was no alternative. The U.S. Bureau of Indian Affairs had declined to get involved in the voting dispute, and within the tribe the only place to turn is tribal court, where Dakota's son is chief judge.

Dakota denied that the tribe improperly took people off the voting rolls, and accused the group of stealing documents, including the lawyer's journal, from tribal headquarters.

"This dictator has to be elected," he said sarcastically. He was reelected to a three- year term on the 12-member council this month, and has been chosen chairman by the council for 21 of his 28 years of membership.

He said of his critics, "I think ultimately their goal is to take over the casino.

Dakota offered last fall. to give the protesters $1 million to start their own tribe.

Now, he said, he intends to see the dissidents sent to jail through the tribal courts.

"They can stay until hell freezes over but somebody's going to have to pay," he said. Meanwhile, the tribe has set up new offices nearby, although the protesters have the tribe's computers and files.

Some tribal casino officials testified before a federal grand jury in Marquette in December, according to tribal members who requested anonymity. That investigation is a spinoff of the

Minnesota federal probe that led to the IGM indictments. Assistant U.S. Attorney Judd Spray in Marquette said he could neither confirm nor deny the existence of a grand-jury investigation. Legal trouble

The International Gaming Management case, which has not yet gone to trial in Minnesota, is a complicated web involving the publicly traded company, Michigan's tribes and New York mobsters, according to federal court records.

In 1988, Congress passed the Indian Gaming Regulatory Act, allowing tribes to have casinos, including slot machines, if they negotiated agreements, called compacts, with their state governors. Both Gov. James Blanchard and his successor, John Engler, refused to sign com- pacts that allowed slot machines, the most lucrative part of any casino. In the late 1980's, all but one of the tribes operating Michigan casinos installed the machines anyway, but, after a threat from the state to shut them down, removed them.

In January 1991, according to lawyer O'Leary's journal, Dakota worked out the deal with IGM to put slots back in his tribe's casino and others in Michigan, and get a cut for himself. Federal court documents, securities records and interviews with people familiar with the investigations paint the following picture:

In early 1991, Jerrold Polinsky of New Jersey, three of his sons and other key shareholders of IGM set up subsidiary companies and contracts among themselves to receive shares of the Indian slot machine profits. They also paid themselves consulting fees up to $20,000 per month.

Those arrangements prevented IGM from showing a profit despite the $6.6 million in slot machine revenues for three years. Instead, the money went to various companies the Polinskys and reputed organized-crime figures controlled. One of IGM's shareholders was Gary Danzo, who was indicted in 1984 along with members of the Genovese and Gambino crime families in New York for running an illegal gambling operation. He was convicted of a misdemeanor in the case.

Polinsky told attorneys in a deposition that he and Danzo had been friends for 20 years and did business together starting in 1991. Other federal documents say their business relationship went back further, and that Polinsky gave Danzo 35,000 shares of IGM stock in 1988 and another 3,000 in 1992.

A federal informant said Danzo was Polinsky's mob "handler," the person who told him what to do.

By June 1991, the first shipments of slot machines arrived at four Michigan Indian casinos, including Dakota's. IGM had told manufacturers the machines were headed to states where slots were legal.

By August 1991, IGM had 175 machines in Michigan casinos; by 1993, there were nearly 700. The company continued to ship machines to Michigan through August 1993, the indictment against IGM claims. The tribes paid IGM from 20 to 35 percent of their slot machine revenues in exchange for use of the slots.

In August 1993, Engler finally signed a compact with the tribes allowing them to have legal slot machines. The deal was final in November. At that point, Michigan tribes were allowed to buy slot machines from legally licensed distributors in Nevada and New Jersey. At that point, at least two tribes, including Dakota's, bought machines from IGM.

IGM, through a subsidiary it controlled in Louisiana, used the tribes' money to set up slot machines in truck stops in Louisiana. The Louisiana firm bought its slot machines from Worldwide Gaming, a Louisiana company federal investigators say was a front for the Genovese and Gambino crime families of New York and the Marcello family of New Orleans.

Polinsky testified in a 1994 deposition that it was Gary Danzo who introduced him to officials of Worldwide.

Eighteen people associated with Worldwide were convicted of racketeering and other charges late last year, accused of skimming profits from Worldwide for mob bosses. Most were sentenced March 6 to prison terms; the rest will be sentenced in April.

None of the Michigan tribes has been indicted in the scheme, and the tribes say they did not know

IGM had ties to organized crime.

But the tribes knew it was illegal to ship machines to Michigan. Although Dakota insists he did nothing wrong in taking money from IGM, the tribe's attorney warned him against it.

Notes from attorney O'Leary describe Dakota's efforts to sell IGM equipment to other tribes in early 1991 and the warnings O'Leary issued. On Jan. 16, 1991, O'Leary wrote in his daily journal: "Spoke with Fred about problems with his arrangement with IGM to get a cut; he really doesn't care. Said he's entitled to a share and that he will be fully open with everyone about it! Also does not feel that he is misusing his office since he's also selling this game to other tribes in the state. What's an attorney to do!"

On Jan. 25, O'Leary wrote: "Spoke with Fred about the ... machines. I stressed strongly to him that he MUST inform council fully. He promised he would, but he wanted to wait until there were no reporters around and until the deal was closer to being finalized."

On Feb. 14, O'Leary again warned Dakota. "I told him to tell council about his deal with IGM. He again promised he would, when the time was right."

In a formal response to a grievance the protesters filed against him with the State Bar of Wisconsin, O'Leary said some of the notes were taken out of context and said he did not know whether Dakota ever took IGM money

Myrtle Tolonen, a former council chairman and member of the council for more than 20 years, said Dakota never told the council that IGM was paying him. Several other tribes that leased machines from IGM also said they were unaware Dakota was getting money from IGM.

IGM and the Keweenaw Bay tribe did other business together. Among the documents seized by protesters from tribal headquarters is a 1993 letter to Dakota from IGM quoting cigarette prices and delivery times.

The letter, signed by Jerrold Polinsky's son Gary, said the younger Polinsky was also working on new signs for the casino. He closed by sending his regards to Dakota's wife, Doris, and "the rest of my friends in Baraga."

It was signed: "Your friend, Gary."

Members of the dissident Fight for Justice also have turned over to investigators receipts they found for $7,000 worth of tax exempt gasoline Dakota had shipped to his gas station, saying it was for the tribe.

Dakota acknowledges, too, that he tried to convince members to set up a corporation which would own the slot machines in the tribe's two casinos. The machines are now owned by the tribe itself. Under his plan, tribal members would buy shares and get a split of the profits based on the number of shares they owned.

Curtis, of Fight for Justice, said the plan so outraged him that he ran for tribal council. Not only would something that now benefits the whole tribe pass into the hands of a few who could afford to buy in, but Dakota would appoint the corporation board, Curtis said. "It's ludicrous."

Dakota said he thinks tribal members are just jealous of his success. "Anything I've done, anybody else can do," he said. "Ijust wish they'd come up with their own ideas once in awhile.

Close to midnight on a frigid February night, a group of Fight for Justice members gathers around the kitchen table in the local priest's house near the occupied tribal headquarters. They are smoking cigarettes and eating homemade pasties.

Several say they can't leave the compound because there are tribal arrest warrants for them related to the takeover. Tribal police, many related to Fight for Justice members, have refused to serve the warrants so far.

Nearly 40 members of the group have lost their jobs with the casino or tribal government since the standoff began, they say.

The home of one Fight for justice member was peppered with gunfire shortly after the takeover started, when no one was home. A member of the American Indian Movement who has joined the takeover is accused of hitting a Dakota supporter with a crowbar when the man leaped in his truck.

"We want Fred gone," said Curtis, whose father was tribal chairman in the 1970s.

"Every agency tells us they won't get involved in tribal disputes and we have to settle it ourselves. That's what we're doing." A few miles down the road, Dakota sits in his kitchen, protected by a security camera and a guard who patrols outside. Two semiautomatic guns are in a cabinet nearby. He sees himself as a force of stability, keeping the insurgents at bay.

"They're criminals," he said of the dissidents. "I'm getting tired, but I'll be here as long as the people want me. I can't step down now.

By his own admission Fred Dakota pushes the rules as far as can, or creates new ones. He says that's the only way he can keep his tribe from disappearing and melting into the rest of the culture.

Dakota's guiding rule is this: The Keweenaw Bay Indian Community is a sovereign nation where federal, state and local laws don't apply.

"People use sovereignty as a word a term," he said. "I say it means nothing unless you exercise it. "I don't want to be just another race living here. I want to be an American Indian who once owned this country I don't want people to forget about that."

Chairman of the Keweenaw Bay Indian Community for 21 years, Dakata, 58, wields great power in his tribe He also has strong support he was re-elected to the tribal council this month despite serious allegations by tribal critics.

A flamboyant figure,Dakata is married to his third wife, a blond non-Indian, and lives behind his gas station .He owns 42 acres on the nearby Sturgeon River, 60 acres behind the tribe's casino, and a small lakefront house he's remodeling. He's proud of his 1960's classic cars, his 60-inch television and his gun collection.

A former lumberjack and U.S. marine, he was pressured to leavce the reservation and move to Chicago in the early 19608 as part an effort by the Bureau of Indian Affairs to get Indians to assimilate. Finally, homesick, he returned to the reservation "It wasn't a good thing for Indian people," he said the federal program to push assimilation.

That may have shaped his attitude,he said. Dakota believes' Indian tribes should have their own representatives in Congress. He believes tribes should be able to operate casinos wherever and however they please. It bothers him that by taking federal money for some tribal programs,such as housing and healthcare, his tribe has to follow federal regulations. "We should be able to tell the feds to get off our back," he said.

His is the only tribe Michigan that has its own license plates, bearing the tribal symbol, a fierce-looking flying eagle in red.

Dakota is the only tribal leader in the state who operates his own business on the reservation -- a gas station, convenience store, and furniture and carpet outlet under one roof He also owns land inside the reseveration with a non-Indian partner, where he has talked of opening a distillery.

In other tribes, the tribe itself owns businesses such as gas station, and profits go to the tribe. Most other tribes have also used their casino profits to start health clinics, tribal schools, senior citizens homes and other programs Two tribes pay a percentage of the casino profits to their members.

"We don't have any of that," said Georgianna Emery, a Dakota critic and one of the people involved in a takover of tribal headquarters. The tribe doesn't even hire Indians for many key jobs at its casino, she said.

Fred is more oriented towards himself than toward the tribe, said Chuck Loonsfoot,former council member.

The tribe has purchased one business, a bathtub and shower manufacturing firm, with casino profits and money from a federal economic development program. Dakota said the company has yet to show a profit.

Dakota said his tribe has put casino money into progams that benefit members. The tribe recently set up a 3-mlllion trust which pays senior citizens $175 per month, has a fund That helps pay college students' expenses and has an emergency-needsfunds for members. The tribal council decides who gets the money.

Dakota said "the possibilities are endless," if tribes push to use their sovereign nation statue' for business puposes

The reservation could be a duty-free zone with the powor to import raw materials assemble than into finished products and sell tham he said Reserverations could house banks not subject to federal regulatlion such as reporting large cash deposits, or medical schools, like those on Caibbean islands, without permission from the American Medical Association. All these are ideas Dakota has pursued, although none has come to fruition yet.

"We've had so much internal strife I've had no time to do a lot of things," he said "We should be able to do Whatever we want, and not have to ask your permission to do it."

He's done his beat to live up to that philosophy. In 1984, he opened Michigan's first casino, a blackjack parlor in his garage. A federal judge ordered it closed in 1985, saying only tribes, not individuals, could run casinos, but in the meantime Dakota made $2,000 a day, according to documents in that case.

In 1994, his tribe opened its second casino on tribal land near Marquette, although state and federal officials said the casino was illegal becausee under federal law the tribe needed permission from tbe governor for an official reservation casino Dakota sued to prevent the federal goverment from moving to shut down the casino. In February, a federal judge aided with him, saying tbe federal law didn't apply.

Last fall, during the intense first few weeks of the takeover of his tribe'sheadquarters by proesters, he threatened to barricade U.S. Highway 41, which runs through the reservation. next to the takeover site, because state and federal police wouldn't get the proesters out.

He rationalizes having had illegal slot machines in Michigan reservation casino before a 1993 agreement that legalized them.

"The machines were being delivered to a sovereign nation, not Michigan," he said "You have to do what you have to do."