The house edge

The Cherokees are betting on a West Pointer with a law degree and MBA to make sure a major wager on their future pays off.
By Edward Martin
 

There. He points to a spot in the empty, green bottom along the Tuckasegee River. “It’s not much bigger than an exaggerated baseball mound anymore.” Russell Townsend has tawny skin and eyes dark as moonless nights here in the Great Smokies. Farm plows have leveled the terrain, but the learned — he among them — have probed the gentle rise in this field with radar and magnetometers that penetrate the earth. They show dark spots where posts formed walls, a gap in the circle is the entrance, and in the center the most hallowed spot, the fire pit. Generations ago — 10,000 years or more — Townsend’s people believe they were given an eternal flame here. It once burned in the hearths of Kituwah Mound, and it still glows in the hearts of the Cherokees. This is their birth- place. “Most folks don’t know where their Garden of Eden is,” the archaeologist says quietly. “We do.”

A few miles down the road, on the same sultry summer day, another man wades into the maelstrom of a modern construction site. He has exchanged the jacket of his pinstriped suit for a chartreuse safety vest and wears a hardhat, but his tie remains tightly knotted. Workers scurry as forklifts blare warnings. Drills chatter. A tower crane sweeps over a nearly completed 22-story hotel. Darold Londo, general manager of Harrah’s Cherokee Casino & Hotel, is headman here. He has Indian blood, but it’s from faraway Wisconsin, and that’s not why he’s here. His tribe is Harrah’s Entertainment Inc. — he’s also a senior vice president — and it is much larger than Townsend’s 13,500-member Eastern Band of Cherokee Indians. Las Vegas-based Harrah’s is a privately held, multinational company with more than $17 billion in market capitalization and 85,000 employees worldwide. Its eternal flame is money — it took in $10.1 billion in 2009.

Londo, 45, oversees not only daily operations of the casino, hotel and entertainment center but now an expansion that is one of the biggest in the nation’s hospitality industry. In North Carolina, it vies with an Apple Inc. data center in Maiden as one of the state’s two biggest private construction projects. Apple’s technology-heavy project will cost $1 billion over 10 years but will employ only 50 people. The Harrah’s Cherokee expansion will cost $633 million and employs more than 1,100 construction workers alone. When finished in 2012, it will boost casino and hotel employment, now about 1,600 and the most in western North Carolina, to more than 2,400.

Londo stops next to a five-story heating-and-cooling plant carved into a solid-rock mountainside and pumping air throughout the burgeoning complex. He dials an aide. “How much will we have under roof when we finish?” The reply comes quickly. “About 3 million square feet,” equivalent to three shopping malls, not mentioning the tribe’s new 18-hole Sequoyah National Golf Club, designed by Robert Trent Jones II.

As a business matter, the expansion is intended to transform this rugged enclave into a convention and tourism destination rather than an isolated gambling casino. That will accelerate the pace of life here and hedge the Cherokees’ bets against a day when luck or legislation might frown on the nation’s $26-billion-a-year tribal gaming industry. As much as concrete and mortar, though, what’s going on here is evidence of the enigmatic 13-year marriage of one of the nation’s most spiritual people with one of its most materialistic corporations. It’s an unlikely union, but both have benefited beyond either’s expectations. Now, Darold Londo, an outsider in Eden, plays an equally unlikely but pivotal role in remaking it for tomorrow.

 

He looks down, his hand on the cyclic — the joystick — piloting the UH-1H Huey, the workhorse helicopter of the U.S. Army. Below lay the rugged peaks and steep valleys of South Korea. This is for real, he reminds himself, not training. He was flying the demilitarized zone, in the late ’80s some of the most dangerous terrain on earth. “We were flying real missions, tactical stuff.” A graduate of the U.S. Military Academy, class of 1986, Londo’s goal wasn’t to run a casino or construction projects. A few years earlier, he hadn’t even imagined attending one of the world’s most esteemed military schools. When he was growing up, his parents ran restaurants and lounges in Milwaukee before moving to northern Wisconsin. There, at Lakeland High School, he excelled at football and baseball. His Indian blood didn’t seem to matter. “My great-grandmother’s marriage certificate lists her only as ‘Josephine, Ojibwa Indian.’ But I didn’t walk around saying I was Indian.”

His father is one of seven siblings, and he’s one of four brothers. “In a large family, you have a certain amount of getting along ingrained in you. You develop huge deference to institutions larger than the individual — church, family, the Army.” Or, he leaves unsaid, the tribe. But he wasn’t among classmates ardently jockeying for a military-academy berth. He just wanted a scholarship. “Lakeland had a record of sending people to the academies, but I was just going through the motions.” Then his attitude began to shift. “I was tired of the Midwest. I wanted to do something different, so the prospect of West Point became pretty cool. When I got there, I was taken aback by the emphasis on ‘duty, honor, country.’”

West Pointers typically follow military careers, many winning general’s stars. Londo was on track. A captain by the early ’90s and up for major, military success seemed assured. But his mission began to change around him. He was shifted from lift helicopters — those used to transport troops and equipment — to the Army’s Cobra attack helicopter. Then he was assigned to train other pilots during the first Iraq war in 1990 and 1991. They left for Iraq; he stayed behind. As military budgets withered after the war, his flight log sometimes dropped from 100 hours a month to as little as 15. He used his spare time to earn an MBA from Rensselaer Polytechnic Institute, in Troy, N.Y. — it had a campus where he was stationed with the 10th Mountain Division. Londo left the Army in 1992, earned a law degree from the University of Wisconsin and joined the large Madison-based law firm of Axley Brynelson LLP, handling business real-estate matters, mergers and acquisitions and municipal law.

In the ’90s, telecommunications consolidation was in full swing. “We were buying and selling telcos, Internet companies and so on.” He became chief operating officer of Chorus Communications Group, a publicly traded telephone and Internet company based in Madison. He was promoted to president of the Chorus Networks subsidiary, but it folded when the telecom boom segued into the dot-com bust. “I didn’t want to go back to the military, and one of my buddies from the Academy was general manager of Harrah’s in New Orleans. He said, ‘What about the gaming business?’ Londo went to work for Harrah’s in Atlantic City in 2002. He was fast-tracked. “I’d run a telecom company for about two years, so I had operational experience, and Harrah’s figured my Army experience was transferable.” By February 2006, when he was named general manager of Harrah’s Cherokee, he had progressed through marketing, overseeing games, customer service and other positions.

Londo walks briskly, navigating the dim Harrah’s Cherokee casino. The lights of hundreds of slot machines twinkle. Chuck Berry belts out “Roll Over, Beethoven,” and cigarette smoke — a nonsmoking section seems little used — hangs in the air. Hostesses balance trays of drinks as players cluster around gaming tables fingering chips. By state law, dealers hold no real cards, and “hands” appear on small computer screens. Walls are clockless. Hurried gamblers are anathema to a successful casino.

“This makes the military look like a Sunday-afternoon picnic,” Londo says without breaking stride. Daily operations that he oversees — expansion project aside — are staggering. Outside, shuttle buses hustle more than 3 million gamblers a year from remote lots — the expansion includes a deck that will park thousands more. On a peak day, close to $1 million might change hands here. Total gaming revenue in 2009, off about 6% from the previous year because of recession, was $228 million. It pours in through games — nickel slots are popular — that can be played for pocket change, or by way of table players willing to bet the farm.

Not only luck but temptation stalks the gaming floor, and part of Londo’s job is to manage that, too. He strides down a hallway the length of a football field — the new “back-of-the-house” operations center. “None of this was here 18 months ago.” In the back rooms are multiple layers of internal accounting, constantly under the shadow of tribal, state and federal audits. The digital integrity of the 3,400 electronic slot machines and games is constantly checked. That number will soar to 4,600 with the expansion. In a compartmentalized concept the Army would call “need to know,” an employee must have a reason to be in a particular area or to access data. Only Londo and the vice president of finance have full run of the casino.

Londo manages in part by relying on best practices from the collective experience of Harrah’s Entertainment’s more than 50 casinos — break a pattern, trigger an alarm. There have been few alarms in the casino’s 13-year history. The biggest was in 2008, his second year here, when a dealer and 11 gamblers were busted in a scam that had netted them $286,000 in false winnings. Walking through the casino, Londo stops. Overhead, high on the ceiling, sensitive cameras can, if directed, read the words on the West Point ring he wears. If a gambler insists he gave the dealer a $100 bill and the dealer says it was $20, cameras can record not just the denomination of a bill as it changed hands but the serial number. “Every time we interact with law enforcement, they appreciate that we can be very helpful,” Londo says.

In the merger of corporation and tribe, of chief executive and Indian chief, Londo, Harrah’s and the Eastern Band of Cherokee Indians play for high stakes. How high — and the payoff — emerges a mile from the casino on the banks of the Oconaluftee River, in a modest frame building that bears no resemblance to Russell Townsend’s Kituwah Mound.

 

This is the council house. At the end of a short hallway, his desk butted against a conference table, Michell Hicks sits under a mounted deer’s head and the framed picture of a wolf. On his desk is a family photograph, including five dark-haired children. He is a Cherokee who returned after a stint as a Wall Street accountant to be elected principal chief of the Eastern Band. Few know better the contradictions — the riddles — that color the relationships between Londo and the tribe. “The Cherokee people and our culture and traditions are who we are,” says Hicks, 45, a serious man with a smile as sparse as his crew cut. “Gaming is something we do.”

Harrah’s gets a management fee of about 5.5% of the profit for operating the casino, its hotels — the third tower, to open in December, gives Harrah’s Cherokee 1,150 rooms, the most of any hotel in the Carolinas — and, now, spa, golf course and a new, high-end 3,000-seat events center. Among new retail shops is a Paula Deen’s Kitchen restaurant and store, in partnership with the cooking celebrity’s Paula Deen Enterprises. Increasingly, around the gaming tables, sit Vietnamese, Chinese and Japanese visitors. The expansion includes a noodle bar. Londo runs it all, but the Cherokees own everything — the Tribal Casino Gaming Enterprise Board oversees operations — and they guard their primacy.

“Darold has brought professionalism,” Hicks says. “He’s an attorney by background, and he’s well respected. This isn’t a knock on other tribes, but with him our decisions are based on good data and good feasibility information, not keeping up with the Joneses.” In other words, the nation’s other 232 tribal casinos. What if he and Londo disagree? “I don’t think Darold has ever disagreed with me on anything.” Hicks smiles, but only fleetingly. “I say that jokingly.”

Underlying the relationship between Londo, Hicks and members of this ancient tribe is the knowledge that Cherokee and other Indians have fared miserably in dealings with the white man and his institutions. In the 1830s, the Cherokees were forced to move to Oklahoma, a death march known as the Trail of Tears. At the College of Charleston, Douglas Walker, a business-school professor and national expert on tribal gaming, says economic truisms trump tribal history. “The tribe has the status and the property, and Harrah’s has the expertise and management, so both parties benefit from the exchange. Normally, you wouldn’t expect them to even be friendly, much less business partners. But that’s how economic freedom works. We trade with other countries even if we don’t like each other.”

Londo straddles the fences of his own Indian heritage, allegiance to the Eastern Band and loyalty to Harrah’s. He lives in the tiny mountain town of Sylva, nearly 700 miles and a world away from the glitz of the Jersey shore, where he started his career. He’s still military, up at 5:30 for a workout and at work by 7:30. He and his wife have three children in school. He grew up Catholic, attends Sylva Methodist Church and has long since reconciled the morality of what he does. “My grandmothers were avid card players, and that was one of our regular activities, our family culture. I grew up not knowing anybody with a gambling problem. Same with alcohol. I just see gambling as another form of entertainment.” Harrah’s runs responsible-gambling programs — telephone numbers are posted prominently — including one in which problem players can, in moments of clarity, permanently exclude themselves from all Harrah’s casinos. Harrah’s will enforce their wishes. “Sometimes I feel remorse when I spend too much going to a Major League ball game or NASCAR event,” Londo says with a shrug. “We all have our budgets.”

He concedes, though, that reconciliation might be simpler for him than for the Cherokees. As he walks through the casino on a busy weekday, signs boast of the casino’s increasing sophistication, intended, like the expansion itself, to make Harrah’s Cherokee a destination for conventions, tourists and high rollers: “Now Serving Alcohol Throughout Our Entire Casino.” There is an undercurrent, barely detectable but rooted in history, of suspicion about Harrah’s, the root of their prosperity, and its agent, Londo, who learned the art of accommodation in a large family. “The Cherokees have always been very good at understanding the other side of the game and playing it well or better,” Townsend, the archeologist, says. After the American Revolution, “they changed their economy, growing cash crops, owning taverns, operating ferries. We understand this is a big corporation, and it represents a lot of the things people distrust about corporations, but we can benefit from them.” Still, some resist. One Eastern Band legend is of Tsali, a Cherokee farmer who resisted relocation. Now revered, he was executed by Cherokees who feared he would queer the deal they had struck with whites to leave — a pact they came to rue.

Some Eastern Band members refuse to accept per capita payments from gambling, and only last year did tribal members approve alcohol sales. The vote was 1,847 for, 1,301 against, though one traditionalist Cherokee clan — the Snowbirds, who live near Robbinsville — opposed it 115 to 109. Hicks recognizes that alcohol abuse remains disproportionately high among Indians. But few Cherokees drink this high-priced tourist liquor, he says. If they want it, booze is easily available elsewhere. Like Townsend, he sees a more basic conflict. “The corporate mentality is a lot of times driven by the dollar. That’s not the mentality we have as Cherokee people. But you have to operate a business, and you have to take care of family and community. We make that a priority, and we’ve made Darold and Harrah’s aware that it’s not going to change. It can be a tough balance.” When a casino worker wanted to wear her difficult-to-pronounce Cherokee name on her uniform name tag, Harrah’s said no. She appealed to Hicks, who appealed to Londo. A compromise was stuck. Now her tag shows both. “The culture outside of Cherokee doesn’t necessarily understand how we do things,” Hicks says. “You’ve got to live and breathe it to understand.” Londo apparently does.

 

This is what the casino has done here. On orientation day, Londo faces a group of new employees. How many of you lived here 15 years ago? Half the hands go up. Have you noticed the difference in the region, not just here in Cherokee? More hands. “Everybody,” Londo says, “benefits from the rising tide.” Cherokee — the place — is a boomtown. New buildings, construction barrels and road graders line streets. Across from the new hotel, Londo slides in among gritty concrete workers and orders lunch at Hard Hat Café, one of dozens of new businesses feeding the boom.

As the region’s biggest employer, Londo signs paychecks of employees who live not only on the Qualla Boundary — the tribal land — but Buncombe, Jackson, Haywood, Macon, Swain and other counties. Curiously, an aversion to family-disrupting shift work limits Cherokee numbers to fewer than 20% of Harrah’s employees. “It’s one thing to work for Harrah’s, a big, multinational corporation, and be satisfied at the end of the day that we hit our numbers and some stockholder somewhere is going to realize a return on his investment,” he says. “But there are more personal connections between me and what we’re doing here than that stockholder out there. When I see the positive effects, it’s gratifying.”

Those effects anchor the tightrope Londo walks. Since Harrah’s arrival, $2.1 billion — nearly $1 billion just since his arrival — has flooded a region that, until 1997, was among the state’s poorest. Before, Cherokees subsisted on the seasonal sale of rubber tomahawks and foreign-made trinkets — souvenir stands now boast that they sell only “American made” bullwhips and shot glasses — and overnight accommodations for visitors to the outdoor drama Unto These Hills, which chronicles Cherokee mistreatment by whites. Many lived up steep mountain roads, in drafty shanties, marooned by snow in the winter at the end of unpaved driveways.

Under Londo’s leadership, the casino last year alone pumped $228 million into the Eastern Band, divided, as from the beginning, evenly between the tribe’s general fund and individual members. Per capita payments were $8,046 for each adult and child. It’s wealth now, Londo says, that fosters the enigmas. The greatest is that it might help the Cherokee preserve their sovereignty, rather than destroying it, as many had feared.

Overlooking Kituwah Mound in a nearly 100-year-old farmhouse with creaky floorboards, Townsend heads a staff of six tribal preservationists who protect not only the Qualla Boundary but other Cherokee sites throughout the Southeast. Most tribes, he says, are lucky to have one staff member guarding their historic sites and culture. A Cherokee-language immersion school teaches youngsters a language once threatened with extinction. Londo cites a recent study by Duke University researchers that concluded Harrah’s wealth has lessened drug and alcohol abuse among youth. That, he says, might be attributable to hope that supplants despair. Cherokee youth can tap their trust funds at age 18, but more than ever stay in school and go to college. One reason: Sans high-school diploma, they collect nothing until they turn 21. None of which says, though, that Londo and the Cherokee don’t face tough challenges here.

Outside the casino, two men wait for shuttle buses. Strangers until moments ago, Ernest Bramlett, 72, and Elmer Davis, 82, rib each other with the familiarity of old friends. “Going in there and break ’em,” quips Davis, a World War II Navy veteran from Richmond, Ind. Bramlett says he’s here from Douglasville, Ga., only because his wife won a free night’s stay at the hotel. “If I can play a little while on $20, fine. If not, I get up and come out here. That’s why I’m out here. Lost my $20.” Londo appreciates such patrons but realizes they are a diminishing part of the casino’s future. Casual gamblers are vulnerable to recession, and revenue was flat this year through midsummer. But without the live dealers barred by the state, the casino will find it hard to attract high rollers. A spokeswoman for Gov. Beverly Perdue says there’s no plan to restart stalled negotiations.

Walker, the tribal gaming scholar, calls the prohibition on live dealing “kind of silly since the state benefits from the casino, and that makes it less competitive with other casinos.” But other factors color Londo’s projections. One is that refocusing Harrah’s Cherokee as a convention-and-tourism resort is not unique among tribal casinos. “That’s typical of the industry,” Walker says. “In the old days, pre-early ’90s, most casinos were focused on gambling, and that’s where they got most of their revenues. Now most are destination resorts and most of the revenue nongambling.”

At the end of the day, Londo’s tie is still tightly knotted, his shirt still stiffly starched. He seems corporate to the core. He pauses for self reflection. “One thing I do well is to look to tomorrow, to determine where opportunities might be, to determine what our value propositions are, what we can do better. I like to execute. That’s my Army aviation background — everything has its place and everything in its place.”

He laughs at himself. He has, he says, the neatest garage in Sylva. Outside, a summer storm breaks. Thunder rumbles. Lights flicker. “Emergency generators,” Londo says, nonplussed. In the casino, gambling goes on unabated. So does construction. His strong traits, he says, are his energy and optimism. “When you’ve dug foxholes for a living, anything else is better.” There are no foxholes in Eden, but his tenure here might nevertheless be limited. He might move up to manage a larger Harrah’s casino overseas. Ojibwa blood or not, big corporations work that way. But he’ll be here at least until 2012, when the expansion is complete. By then, he figures the Cherokees and their casino and resort will be ready for the next generation of change in a land where change comes slowly — the lesson of Kituwah Mound.