Catawba casino developer has long ties to video poker industry
02/08/2014 7:56 PM
02/09/2014 9:33 AM
A South Carolina businessman with long ties to the video poker industry is at the center of the Catawba tribe’s effort to build a casino in North Carolina.
The Catawba Indian Nation in September unveiled plans for a casino that could bring 4,000 jobs to a site off Interstate 85 near Kings Mountain, about 30 miles northwest of their reservation in Rock Hill. But the project has faced a backlash from a bipartisan group of elected officials who say they don’t want the casino in North Carolina.
Until now, little has been known about the financial interests behind the $339 million project. But interviews and documents show that a company called Sky Boat LLC, led by Wallace Cheves of Greenville, S.C., is the developer working with the Catawbas.
The project is in a holding pattern as the tribe waits for the U.S. Bureau of Indian Affairs to decide whether to place the casino property in trust. But activity continues behind the scenes. Cheves said he has done much of the prep work needed. Sky Boat also has hired lobbyists in Raleigh in an effort to navigate the political opposition.
Cheves spent his early career working in the video poker business before expanding into other gaming ventures, including riverboat gambling. In an interview, he said he has broad gaming experience and a background working with other tribes.
The 40-year-old said he assembled a group of entrepreneurs in 2009 to work with the Catawbas after they put out bids for potential operators. He sees the project as a positive for the tribe and Cleveland County.
“It’s been a team effort all the way,” Cheves said Friday. “We’ve really felt at home here.”
For more than a year, Cheves has been lining up the site, securing financing from former Merrill Lynch bankers, hiring design firms and garnering local support. He said he has other partners but cannot disclose their names because of confidentiality agreements.
The Catawbas’ effort to build in North Carolina comes after laws in South Carolina blocked the tribe’s attempts to build a casino in its home state. The tribe continues to challenge the laws, appearing before the S.C. Supreme Court last month.
Catawba Chief Bill Harris said Friday the tribe chose Cheves’ group after a careful selection process. The hire contrasts with the Eastern Band of Cherokee, which uses a major gaming player, Harrah’s, to operate its casino in western North Carolina.
Harris said the tribe has been surprised by the backlash from Raleigh, where lawmakers have said they don’t want an out-of-state tribe running a casino. The Catawbas, however, point to their aboriginal roots in the state and their tribal service area, which extends into six North Carolina counties.
“Their quick opposition, I think, is what shocked the people in this community,” Harris said. “Someone is coming in and going to place 4,000 jobs in the area.”
The first step needed for the project is for the federal government to place the Catawbas’ casino land into trust. Once that’s completed, Harris said the development team could open the casino’s first phase in six to eight months.
The tribe would like to offer Class III gaming – the highest level – through a compact with the governor of North Carolina, mimicking the rules followed by the Eastern Band of Cherokee. Without state approval, Harris said the tribe could still offer Class II gaming, which includes slot machines and some table games.
But the move to expand gambling is controversial. Republican Gov. Pat McCrory opposes entering into a compact, with his office saying he “remains unconvinced that any new casino proposal is in the best interest of North Carolina.” With a compact, the state would receive a portion of the gaming revenue.
Sky Boat has won backing from county officials, who see the project as an economic boost for an area still wrestling with the loss of textile jobs. Supporters call it “Project 4,000” after the number of jobs it would bring.
But in the state capital, the casino’s ties to video poker and its successor, the sweepstakes industry, are only raising more concerns.
“Video poker has been a source of corruption and a challenge for law enforcement in North Carolina, and it’s troubling that this industry keeps looking for ways to expand its presence here,” Attorney General Roy Cooper, a Democrat, said in a statement.
John Rustin, the president of the N.C. Family Policy Council, a leading critic of the project and gambling, said the video poker ties “certainly lend an additional element of great concern about what kind of operation this would be.”
The project has also created tension with the Eastern Band of Cherokee. “We are greatly concerned that this development will negatively impact job growth and revenue at Harrah’s Cherokee Casino and for the western region of North Carolina,” Principal Chief Michell Hicks said last year.
Cheves defended his background and the qualifications of his group to work with the Catawbas in a legal gaming business.
“Our background is not just video poker,” Cheves said. “It’s gaming. We have a lot of political background and have done a lot of consulting with other tribes. That’s why (the Catawbas) chose our consortium of entrepreneurs, just as Harrah’s was chosen by (the Eastern Band of Cherokee) because of their gaming background.”
Working with ‘poker king’
Cheves said he started working in the gaming industry after graduating from Wofford College with a degree in government in 1995.
In his first job, he worked for the late Fred Collins, known as the “poker king” of South Carolina, before starting his own video poker company, First Class Games.
Cheves said he helped lead a campaign to hold a statewide referendum on video poker, but eventually the games were outlawed in 2000.
Around the same time, Cheves said he ran a company called First Link, which helped pioneer the software for sweepstakes games. Legal challenges loomed in South Carolina, so he moved ahead with another venture: riverboat gambling.
His plans for Georgetown and Colleton counties, however, ran into local opposition. His lawyers prevailed in two state Supreme Court cases before a 2005 law allowed local communities to determine whether they wanted riverboat gambling. Cheves gave up on those locations but now hopes to open riverboat operations in the Charleston area late this year.
Court records show two of his companies paying sizable judgments. In 2007, First Class Games satisfied a $5 million judgment. In another case, a real estate company, Adams Mill Associates, had a $1.3 million judgment entered against it last year, according to court records.
“We live in a litigious society,” Cheves said, adding that the two cases have been settled.
Cheves is also a partner in a company called Segway Gaming Systems of Alabama that provides electronic bingo games. In 2012, Alabama officials confiscated Segway software as well as equipment from other major gaming companies as part of a raid on a bingo hall.
Cheves said Segway was caught up in a broader campaign by Alabama officials against the gaming industry. Segway has no connection to the Catawbas’ casino, he said.
Sky Boat began examining sites for the casino in 2012, including an undisclosed location in Mecklenburg, Cheves said.
Cheves and Harris, the Catawba chief, first met with Cleveland officials on the proposed site about a year ago. They immediately found support, including from County Manager David Dear and commissioner Eddie Holbrook, who said they see the project spurring additional development.
For a project that could ultimately cost as much as $800 million, the developers have a financing commitment from a firm called Stuyvesant Square Advisors, Cheves said. The firm is led by two former Merrill Lynch bankers with extensive experience in the gaming industry, said one of the partners, Frank King.
The firm has worked with tribes from Florida to California and will provide debt financing in phases, King said. When it comes to Indian gaming, he said, tribes more often work with entrepreneurs such as Cheves rather than large gaming companies.
Lobbyists on board
Days after the tribe announced its casino plans, three lobbyists registered in Raleigh to represent a company called Sky Boat NC, an apparent move to take the temperature of lawmakers, even though more than 100 House members had signed a letter of opposition.
The lobbyists: Scott Laster, the former executive director of the state Republican Party; his wife, Kristen Laster; and Jason Deans, former chief of staff to Republican U.S. Rep. Patrick McHenry. McCrory’s former legislative liaison, Morgan Beam, has also worked for Sky Boat.
The lobbyists’ contracts expired at the end of 2013, but Cheves said he will hire them again this year.
It’s another move that concerns critics. “Clearly, it shows how interested they are in this project,” said Rustin of the Family Policy Council.
In the meantime, the casino site remains a gravel parking lot surrounded by grass and pine trees. Even so, local resident Peter Wellman drove up Friday when he saw people gathered at the site and asked when he’d be able to start playing. Harris told Wellman he should tell his local lawmakers to support the project.
Cheves believes there is room in North Carolina for another gambling operation. He notes there are more than 5 million adults in the 100-mile ring around the Kings Mountain site.
“Active players like to go to different properties,” he said. “Competition makes us better.”
Just up I-85, there is a Harrah’s billboard beckoning gamblers farther west.
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