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$1 million suit says gambling petition effort cheated tribe
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$1 million suit says gambling petition effort cheated tribe

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Like any good gambler, a major player in a push to develop casinos in Nebraska is seeking to offset its losses.

Ho-Chunk Inc. — the economic development arm of the Winnebago Tribe of Nebraska — has filed a $1 million-plus lawsuit against an Omaha polling and campaign management company over failed efforts to put expanded gambling on the Nebraska ballot in November.

The lawsuit blames Omaha-based Northstar Campaign Systems for failing to garner enough signatures to place expanded gambling on the ballot.

Northstar says it did nothing wrong and will fight the lawsuit.

The lawsuit gives a peek into the high-stakes fight to put casinos in Nebraska — including allegations that the signature-gathering operation was slipshod and that petitions ended up in a dumpster in downtown Omaha.

Ho-Chunk, which runs a casino near Sloan, Iowa, says it paid more than $1.29 million to Northstar to run a petition effort to get a constitutional amendment on the ballot to allow casino gambling in Nebraska.

Had those efforts succeeded — and the measure passed — Ho-Chunk said it had an agreement with Nebraska horse-racing industry leaders that Ho-Chunk would be able to operate casinos at licensed racetracks in Omaha, Lincoln and elsewhere in Nebraska.

Ho-Chunk — using a suborganization called Keep the Money in Nebraska — said it put its faith in Northstar based on this premise: The Omaha company had conducted a survey that found that 57 percent of likely voters "would either vote for, or lean towards voting for, expanded gambling."

In the end, voters never got a chance: The petition effort led by Northstar fell far short of getting the required 117,000 signatures, in part because more than 41,000 signatures were disqualified because they were either duplicates or the petition signers weren't registered voters in the county listed.

Lance Morgan, head of HoChunk, has called that error rate "ridiculously high."

The lawsuit says Northstar should have to repay Ho-Chunk "out of fairness and justice."

"But for (Northstar's) false overstatements to (Ho-Chunk) of the number of signatures gathered and the validation rate of said signatures, (Ho-Chunk) would have terminated the service agreement and would not have continued to make ... payments to Northstar," Ho-Chunk attorney Conly Schulte wrote in the lawsuit.

Scott Lautenbaugh, an attorney and spokesman for Northstar, said the Omaha company will fight the lawsuit — and stands by its efforts to put gambling on the ballot.

"We think we'll be vindicated," he said.

Lautenbaugh noted that the company has run several successful political campaigns as well as bond-issue campaigns for area school districts. Lautenbaugh said the survey used to measure Nebraskans' gambling appetite was conducted by the book.

But like any polling, it doesn't come with guarantees.

"Ask Hillary Clinton about that," Lautenbaugh said.

Ho-Chunk's lawsuit alleges major problems with Northstar's signature-gathering efforts:

The number of invalid signatures was high — about 35 percent. Some have questioned whether that was because petition circulators were paid per signature, giving ground-level circulators motive to elicit duplicate or questionable signatures. Nebraska Secretary of State John Gale called the error rate "quite stunning."

Along the way, the lawsuit alleges, Northstar founder Jeremy Northwall "and Northstar falsely over-reported the number of signatures gathered and the validation rate of said signatures for the purpose of inducing Ho-Chunk to continue making payments to Northstar."

In June, Northstar sent a request for more money. When HoChunk asked if they would get enough signatures, Northwall "confirmed that Northstar would gather the required signatures if the additional amount demanded by defendants was paid."

Lautenbaugh said any requests for payments were based on services rendered. And, Lautenbaugh said, Northwall and Northstar never made any guarantees.

"That didn't happen," Lautenbaugh said. "How could anyone (guarantee a result)? If you could say for certain, you'd be able to predict the future, for God's sakes."

Copies of petitions, perhaps dozens, were found in the dumpster of a condominium community in downtown Omaha.

"Upon information and belief, a Northstar representative deliberately discarded or mishandled thousands of original and duplicate petition signatures — and failed to deliver all of the original and duplicate petition signatures to (Ho-Chunk) andor the Nebraska secretary of state," the lawsuit says.

Not so, Lautenbaugh said. All of the papers found in the dumpster were yellow copies — reprinted on yellow paper to distinguish them from the original white petitions.

Further, he said, Northstar has no idea how the copies got in the dumpster, which sits in a private parking garage. No Northstar employees live in that condominium complex.

And Lautenbaugh noted that the dumped petitions were discovered in late September — two months after Northstar had turned in the petitions to the state and the copies to HoChunk.

Lautenbaugh said there are tangible reasons why the petition effort failed. One problem: The effort required people to sign three petitions — one to expand gambling, one to set up a regulatory commission and one to tax gambling operations.

Another: It took awhile for pro-gambling groups to finalize the petition language, so petition organizers didn't get started circulating petitions until after Oct. 15, 2015.

"We had missed most of the Husker home games and the State Fair and everything else," Lautenbaugh said. "And we decided to get three petitions signed instead of one, which is much harder to do."

Anti-gambling groups have cited another reason for the petition effort's failure: a lack of appetite for expanded gambling in Nebraska. In contrast to the failed, nine-month-long gambling petition effort, a 2015 petition effort to reinstate Nebraska's death penalty took just two months to garner 114,000 required signatures, roughly the same amount that pro-gambling groups needed.

Ho-Chunk thinks Nebraska is ready for an expansion of gambling. Since the petition effort failed, the economic development company has had to go back to the drawing board on its $30 million to $40 million plan to renovate the former Atokad racetrack in South Sioux City, Nebraska, into a casino complex.

"The proposed gambling initiative would have been a boon for our local economy and local residents due to the increased tax revenue," Ho-Chunk said in a statement. "Our efforts to promote our gambling initiative and generate revenue for Nebraska were unduly harmed by Northstar."

The lawsuit names Northstar and founder Northwall as defendants. Both have 30 days to file formal responses. The case then will proceed to pretrial hearings.

todd.cooper@owh.com, 402-444-1275

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