By just about any measure, the Puyallup Tribe of Indians’ gambling enterprise has been an overwhelming success.

The tribe’s two Emerald Queen casinos, across Interstate 5 from each other in Fife and Tacoma, have been reliable money machines, consistently churning out $125 million or more in net profit in recent years.

The flow of casino cash has swept the tribe from poverty to affluence in just 12 years. Each of the tribe’s 3,500 members receives a $2,000 share of profits every month.

With about 2,000 employees, the gaming operation is the fourth-largest private sector employer in Pierce County. The casinos have turned the tribe into a powerful political force and a generous benefactor of local nonprofits, ranging from the Point Defiance Zoo & Aquarium to the Daffodil Festival.

But lately, the casino picture has not been so pretty.

The recession has reduced profits, tribal leaders say, and a recent analysis by a national consulting firm delivered scathing criticism.

According to a confidential analysis by Lamar Associates, a security investigative firm based in Washington, D.C., the Emerald Queen casinos are wracked with mismanagement, poor morale, inadequate security and dismal ambiance.

Problems are so severe, the report said, that the casinos essentially throw away millions of dollars each year in potential profits.

“The Emerald Queen Casino is leaving approximately $40 million a year in revenue on the table,” the Lamar report concluded. “Immediate changes are necessary to protect the tribe’s gaming assets and to ensure that maximum revenue is generated.”

FINAL REPORT LEAKED

The Lamar investigation, commissioned last summer by the tribal council, was headed by Joe Manno, a former senior vice president at Caesar’s World and manager of Las Vegas’ Bally Casino.

Manno and six other investigators spent four days at the casinos last summer and several subsequent weeks poring through casino records.

Their findings were supposed to be confidential, but a frustrated casino employee leaked a copy of the final report to The News Tribune earlier this month.

Tribal council members declined to comment directly on the report, instead directing inquiries to tribal spokesman John Weymer. He said Friday he was unable to make a statement because a quorum of the council was unavailable to coordinate a response.

The Lamar report does not mention the casinos’ general manager, Frank Wright, by name, but he ultimately is responsible for their operation. When contacted last week, he said the tribal council had not authorized him to speak to the media and therefore he could make no comment.

Some of his supporters spoke up in his defense, though none wanted to be publicly identified.

Wright is an effective businessman who has the best interests of the tribe at heart, they said, suggesting he was unfairly criticized by out-of-state investigators who do not understand the local gambling market.

His critics in the tribe include some involved in the group Full Circle, which has tried to bring increased openness and checks and balances to tribal government.

They say Wright’s management style relies on secrecy and a pattern of favoritism and opportunism that no longer fits with the new, more transparent style of tribal government they are trying to create.

INTERNAL SECURITY LAX

The Lamar group’s strongest criticisms concerned internal security. Various lapses make the casinos vulnerable to theft and scams, the report said, citing as one example, a 2003 fraud by Phuong Quoc Truong, or “Pai Gow” John.

Truong operated in the Emerald Queen casinos for six or seven months, perpetrating scams reportedly capable of stealing upward of $800,000 in less than two hours, the report said, yet his activity went undetected.

Truong pleaded guilty to racketeering and theft in federal court in April 2008.

The Emerald Queen noted financial discrepancies during the time the fraud was taking place, the report said, yet never investigated them.

The report criticized the casinos’ roulette operation as being “very favorable to … cheats and/or scammers,” identifying a problem that resulted in federal charges against roulette scammers operating at several Northwest casinos just weeks later.

Part of the problem, the Lamar investigators concluded, is that the tribe’s two internal gambling regulatory offices do not have sufficient autonomy to protect the integrity of gaming operations and appear to be subject to influence by tribal and family politics.

“Gaming agents have been essentially relegated to plainclothes security and reportedly have not been provided internal controls updates or addendums since 2004,” the report said.

The auditors recommended that the tribal council create an autonomous regulatory body “without the appearance of undue influence from the council or gaming operations.” The new body should have five members, the auditors said, at least two of whom should be nontribal members with significant gaming experience.

“This regulatory agency must remain free of political interference and its members have a background and character that is beyond reproach,” the report said. “When millions of dollars are being generated and managed, stringent regulation is not an option – it is a necessity.”

The report also harshly criticized the casinos’ ambiance and marketing.

“It is the unanimous opinion of the team that the physical atmosphere in both properties needs adjustment,” the report said. “There is sterile and unusual dimness throughout both properties which, compared to competitor properties, is boring and unattractive.”

AN ATMOSPHERE OF FEAR

The Lamar report said Emerald Queen workers are unhappy and that their discontent is obvious and off-putting to customers.

“During the review it was noted that only approximately 25 percent of the employees smiled when interacting with the guests,” the report said, “while 75 percent gave the impression they were unhappy in their jobs.”

A big reason for the discontent, according to the investigators, was a perception of favoritism shown to employees who are members of the Puyallup tribe.

“A general consensus among employees interviewed is that favoritism went far beyond native preference in regards to employment,” according to the report.

Workers complained that tribal members got preference on shift assignments and leave.

Tribal members regularly are promoted beyond their level of expertise, workers said, skipping position levels and sometimes starting employment as supervisors regardless of their background and work experience.

The auditors discovered at least 12 and perhaps as many as 20 “ghost employees” – tribal members who collect paychecks but rarely or never show up at work.

“It is commendable to exercise compassion for tribal-member casino employees,” the report said. “However, the casino is a business and must be operated like a business, using accepted and approved employee policies and procedures.”

Reviewers said they were struck by the fear evident in the majority of the tribal gaming employees they encountered.

“So deep was the level of fear, that many employees team members spoke with were physically shaking and reluctant to answer the simplest of questions in anticipation of some form of retaliation,” the report said.

“Most indicated they believed they would lose their job if it were discovered they spoke up – and others even indicated they were just afraid of what could happen. A number of employees asked to be interviewed away from the casino and then only with a guarantee of anonymity.”

Auditors said they believed the reason for the atmosphere of fear was the lack of an independent and objective body to ensure fair treatment of the employees.

The shortcomings cut deeply into potential profits, the report concluded,

The casinos have access to a population base of more than 2.7 million in a 50-mile radius, the examiners noted. Based on industry standards, they said, that population base typically produces a total gaming market of about $1.3 billion.

With 3,892 gaming positions, the Puyallups own 28 percent of the gaming opportunities in the area, examiners said, but they are not getting a similar percentage of the take.

The Emerald Queen casinos’ gross gaming revenue in 2007 was $275.5 million, according to the report. That was $79.5 million less than what the auditors considered to be its fair share. The tribe’s net profit should be $40 million higher, they said.

As troubling as the report is, one high-ranking Puyallup tribal administrator with close knowledge of the situation said, the reaction of the tribal council has been even more troubling.

Differences of opinion on the council resulted in no action being taken.

“They pretty much just threw it in the garbage,” the administrator said. “They didn’t make a single one of the changes.”

Rob Carson: 253-597-8693

rob.carson@thenewstribune.com