Is Native American Sovereignty Drunk With Power?

Earlier this year, the Lakota, the same tribe that killed General Custer, started a different kind of war. These Native Americans filed a lawsuit against four stores in Whiteclay, Neb., which the Lakota claim were selling inordinate amounts of beer to its tribal members, who live across the state line on the supposedly dry Pine Ridge reservation in South Dakota.

According to the complaint, the stores sold a lot of beer to tribal members. "...in 2004, 433,993 gallons... in 2005, 421,470 gallons... in 2006, 412,140 gallons... in 2007, 399,466 gallons... in 2008, 426,586 gallons... in 2009, 431,207 gallons; in 2010, the total was 465,092 gallons..."

But the lawsuit went further than the 12-resident border town of Whiteclay. The Lakota, which is the Native American word for Sioux and means "friend," also sued the beer distributors who serviced Whiteclay, as well as the biggest beer brewers: Budweiser (NYSE: BUD), Coors (NYSE: TAP), and SAB Miller (OTC: SBMRY). The suit is seeking $500 million in damages.

Sympathetic media immediately took up the cause, calling it "The Battle of Whiteclay" and telling tales of tragedies like "Poor Bear's," which highlighted the negative effects of alcoholism: murders, marital abuse, and auto accidents that occurred while driving back to the reservation.

Conveniently forgotten, or ignored, are the economic woes which tribes like the Lakota inflict on this nation. Native American tribes signed treaties with the federal government making their reservations independent sovereign nations that can't be touched or taxed, and both state and local authority ends at their borders.

So they live by different, and more liberal rules than the rest of us. And when it comes to booze, tobacco, and gambling, they seldom let a marketing opportunity get away. They are distressed by the ramshackle storefronts in Whiteclay, but have no compunction about owning and reaping huge profits from opulent casinos in states such as Connecticut, Florida, and New Mexico.

Those who want untaxed liquor, and not just beer, need only bring their credit card. New Yorkers dismayed at paying $11 for a pack of cigarettes can visit the online Native American store for a cheaper price.

What Native Americans do on their tribal lands is sacrosanct, but in search of even bigger profits, some tribes have been wheeling and dealing in the shady market of paycheck lending, according to state regulators. It's done on a national scale through TV ads set to the beat of a tribal drum played against the backdrop of a lovely western sunset.

According to those ensnared by this kind of lending, the reality is quite different. Paycheck lending typically involves small amounts of cash lent at high rates of interest. The problem is that when you compound the monthly service fees on the loan with the principal amount, the principal never gets smaller -- and larger amounts are automatically deducted from your bank account each month.

Payday Financial, a "privately owned Native American business operating within the exterior boundaries of the Cheyenne River Sioux Reservation, a sovereign nation located within the United States of America," which does business as Lakota Cash, is the subject of numerous complaints.

"I owe more with every deduction," someone named Marcus of Bella Vista, Arizona noted in an online complaint. Marcus claims he borrowed $200, but that Lakota Cash adds a $52 service fee each month "that prevents payoff."

But Lakota Cash is not unique. There are numerous tribal payday lenders. And stories of abusive lending abound. One borrower claims the Miami Nation of Oklahoma charged her 521% interest. Even J.P. Morgan Chase couldn't pull that off!

Borrowers complain that they have little recourse, because it is difficult to take the Lakota, or any other tribe, to state or local court. The only way to get justice is to go to the reservation and appeal to the tribal council. Have fun.

When Colorado and California regulators tried to get justice for residents who felt they had been ripped off, they bumped up against the sacred tribal sovereignty of the Santee Sioux and the Miami Nation. A judge rejected their suit. Clearly, for Native Americans, sovereignty is a one-way street. We can sue you. You can't sue us.

In killing the states' lawsuits, however, the state courts did leave one door open, stating it wasn't clear that these Native American lending operations were actually run by Native Americans or whether these tribes were pimping out their sovereignty to loan sharks.

The Miami Nation gave a touching plea: The tribes had been "stripped of their economic vitality" and the profits they siphoned off from paycheck lending went to poverty assistance, school supplies, and elder care.

But a staff writer for the Center for Public Integrity who went looking for the loan offices on the reservation found an empty warehouse, a locked door at their business headquarters, and no one who had ever heard of the loan company.

California regulators found a whistleblower who had worked for one of these loan companies, who said that the lending operations were run out of a high-tech ultra-secret building in Kansas City and that the only thing on the reservation was a few dusty mailboxes. Consumer advocates have described the arrangement as "Rent-a-Tribe."

Let's let real estate magnate and former Atlantic City casino owner Donald Trump have the final word, and it's not "you're fired." Describing his competitors in the casino business, he once said: "They don't look like Indians to me."