Nebraska’s Winnebago tribe feuding over $100 million business

By Anna Jo Bratton
Winnebago, Nebraska (AP) 11-07

Members of the Winnebago Tribe of Nebraska are demanding to know who’s benefiting from the tribe’s $100 million business, Ho-Chunk Inc., which includes some 16 subsidiaries in six states, Mexico, Iraq and Afghanistan.

With nearly 600 employees, Ho-Chunk often is lauded as an example of a tribe diversifying its business efforts beyond casinos.

Ho-Chunk posted revenues of $113 million in 2006, up from $22.9 million in 2000, while assets have grown to $42 million from $8 million.

But the company recorded just $660,000 in net profits in 2006 and returned about $86,000 to the tribe, and critics question why more profits aren’t flowing in.

“It’s always, ‘They’re doing such a wonderful job down there, this reservation that was once a dust bowl is making millions of dollars,”’ said Tim Bayer, a Winnebago who lives in St. Paul, Minn. “Well, where is it?”

The tribal council has contracted an outside firm to review the tribe’s finances, including Ho-Chunk.

But a California attorney hired by the tribe said Ho-Chunk officials, led by CEO Lance Morgan, refused to cooperate or provide requested documents or information for the review, according to a Sept. 12 letter sent to the tribal council and provided to The Associated Press.

Morgan said he had concerns about the motivation for the review and wanted questions answered about its scope – and whether it was, in fact, a fraud investigation.

The tribe hasn’t dealt with financial adversity for a long time, Morgan said.

“It’s easy to point the finger at Ho-Chunk Inc. and say, ‘There’s who to blame. They’re not doing enough for us,”’ Morgan said. “It’s easier to blame an amorphous corporation and an evil CEO.”

The tribe has fallen on tough times, with ever-decreasing revenue from its casino, which is situated in Sloan, Iowa. Casino revenues used to fund a yearly payment of $599 to enrolled members, but the last payment was in 2004, when the tribal council took out a $2.5 million loan to give members the money.

The financial troubles have led to greater scrutiny of how much money Ho-Chunk is making or could be making.

Also of concern to many Winnebagos is the company’s debt – about $13 million.

“I think (the CEO) is running it a little bit risky,” said Burch Kealey, an accounting professor at the University of Nebraska at Omaha, after looking at the company’s financial statements. “If they have any stumble it’s going to hurt.”

The company doesn’t turn out a lot of cash, Kealey said; however, its financial statements don’t show improprieties, and “a lot of times, taking risks means big payoffs.”

Tribal chairman Matthew Pilcher said the financial review by Deloitte Financial Advisory Services will help the council get an accurate picture of Ho-Chunk. Results are expected in the next few weeks.

“It’s not that the tribal council doesn’t support what (Ho-Chunk is) doing, they just want information,” said Ramona Wolfe, a longtime council member. “As a tribe that invested $10 million in the company, we need to know how it’s doing.”

Morgan, a 38-year-old Harvard graduate and tribal member, returned to the reservation in 1994 to help build the corporation with $9.7 million in casino money.

“All of Indian country was watching to see what happened,” tribal council member Kenny Mallory said. “They wanted to see if Ho-Chunk would survive tribal politics, and it did.”

Ho-Chunk has succeeded, Morgan said, because its governance is separate from the tribe, keeping politics out of the equation. He said no company can be expected to operate with its investors constantly checking every move of its subsidiaries.

And he says the company isn’t just about monetary profits, but about providing jobs for tribal members and creating a better way of life. The debt is high, but “we have never missed a debt payment. It’s within our ratios for sustainability,” Morgan said.

Ho-Chunk also takes advantage of the Bureau of Indian Affairs Guaranteed Loan Program, which backs up to 90 percent of some loans, so even if the company did find itself in trouble, there’s another layer of protection.

But Morgan’s dismissal of the concerns infuriates some tribal members, including Darren Snake, a Winnebago who lives in Arkansas and has been hired by the tribe to create a 10-year plan for its future.

“He’s trying to be the government,” Snake said of Morgan. “It’s not even about him, really. It’s about the tribe and the future of the tribe. What are we going to leave our kids? Are we going to leave them that debt?”

Tensions came to a head in August, when the Ho-Chunk board suspended Morgan and chief financial officer Annette Hamilton, then reinstated them eight days later. The suspension was for Morgan’s refusal to provide information – he says the questions were about a federal defense contract.

And the board made a point.

“They could remove me any day,” Morgan said.

But Morgan said tribal members made their own point in October, voting to remove the entire Ho-Chunk board. The tribal council will select a new board.

The tribe has about 4,350 enrolled members, with some 1,400 living on the reservation. Ho-Chunk has about 135 American Indian employees – company officials say they hope to keep hiring more, but can’t always find tribal members with the appropriate skills.

In the city of Winnebago, median household income is around $20,000 and more than 40 percent of its residents don’t make enough to live above the federal poverty line.

Meanwhile, Morgan’s supporters share hopes that profits will improve.

“I also would like to see Ho-Chunk slow down and start realizing the profits on (the company’s) $113 million of business a year, $669K profit is just not acceptable in the business world and shouldn’t be acceptable with (Ho-Chunk),” Mallory wrote in the Oct. 27 issue of the Winnebago Indian News.

Morgan expects the controversy will blow over, but tribal members say they won’t stop asking questions.

“How much time does he need?” Snake asked. “How much of the tribe’s money does he need? When are we going to start seeing our own people working? When are we going to see unemployment go down?”

On the Net:
Ho-Chunk Inc.: www.hochunkinc.com

Winnebago Tribe of Nebraska: www.winnebagotribe.com

 

A look at the holdings of Ho-Chunk Inc.
By the Associated Press

Companies owned by Ho-Chunk Inc., the economic development arm of the Winnebago Tribe of Nebraska:

– All Native Systems, a telecommunications, computer and networking firm with a mix of government and private contracts. Based in Winnebago with offices in Bellevue, Neb., and Washington, D.C.

– All Native Services is an information technology and managed services provider serving tribal, federal government and private industry markets.

– HCI Distribution Co., based in Winnebago, which blends and sells gasoline and sells American Indian tobacco products. A division, HCI Logistics, is a transportation services provider. Another division, Flatwater Trading Co., sells Nebraska beef and pork to the United States military.

– An online American Indian catalog gift shop, AllNative.com.

– A firm that markets office products and office furniture, AllNative Office.

– AllNative Solutions, which markets computer hardware, software and other products throughout the United States,

– Indianz.com, an American Indian news and information site on the Internet that gets about 9 million hits per month.

– Dynamic Homes, a Detroit Lakes, Minn.-based prefabricated housing manufacturer.

– A general contracting firm, HCI Construction Co., based in Winnebago with offices in South Sioux City, Neb.

– Ho-Chunk Builders, an electrical services and construction management company with offices in Winnebago and Bellevue.

– AllNative Resources, which operates a variety of business services including interior design services, warehousing, marketing and public relations

– Native Plains Pharmacy, a national distributor of pharmaceuticals based in Winnebago.

– A marketing and advertising agency, Blue Earth Marketing.

– Rez Cars, a car dealer with locations in Winnebago and South Sioux City.

– WinnaVegas Inn, situated near the tribe’s WinnaVegas Casino.

– Seven gasoline and convenience stores in Nebraska and Iowa, including two in Winnebago and one each in Walthill, South Sioux City, Lincoln, Emerson, Wayne, Sioux City, Iowa, and Sloan, Iowa.

Ho-Chunk also has investments in more than 50 hotels and 5,000 apartments in more than a dozen states.
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