‘US Treasury has no authority to regulate casinos in CNMI’

The owner of Tinian Dynasty Hotel and Casino has insisted that U.S. Congress has not given U.S. Department of the Treasury Secretary the authority to regulate casinos in the CNMI.

Attorney Bruce Berline, counsel for Hong Kong Entertainment (Overseas) Investment Ltd., asked the federal court to reconsider its determination that the definition of the term “United States” set forth in the statute presents a basis for the Department of Treasury’s rule-making extending the definition of the term “casino” to apply not only to casinos licensed by a “State” but also to casino licensed by Tinian, a political subdivision of the CNMI.

Berline said the court erred when it agreed with the U.S. that the Bank Secrecy Act’s statutory definition of “United States” amounted to express authority to extend the territorial limitation embedded the statute’s definition of “casino.”

Berline said because the term “United States” does not authorize the U.S. Department of the Treasury to expand the Bank Secrecy Act’s definition of “casino,” which is limited to a casino licensed by a State, the court should reconsider its order and find that the Treasury’s definition of “casino” may not be applied to HKE.

Berline said this is particularly so given that the definition of “United States” being used to support imposition of criminal penalties despite not appearing in the statute.

Last June 1, U.S. District Court for the NMI Chief Judge Ramona V. Manglona ruled that the U.S. Congress has given U.S. Department of the Treasury Secretary the authority to regulate casinos in the CNMI.

Manglona said because Treasury has been duly authorized by the U.S. Congress under a statute to expand the definition of the United States to include the CNMI, and because Treasury has in fact promulgated regulations consistent with that authority, it has the authority to enact regulations to prevent money laundering by casinos licensed in the CNMI.

Manglona discussed the Treasury secretary’s authority in her order that denied HKE’s motion to dismiss the indictment against the company for lack of federal jurisdiction and failure to state an offense.

In HKE’s motion for reconsideration in part, Berline said HKE has never disputed that the Bank Secrecy Act applies to the CNMI generally, and that Treasury has authority to implement the Act through regulation in all of the “United States” including, where expressly authorized, in the CNMI.

Berline said the court did not consider in its ruling the controlling Ninth Circuit authority in the U.S. v. Bordallo case that holds that the term “State” is limited in meaning to one of the 50 states unless Congress expressly provides that a territorial or insular possession is to be included.

Berline said HKE’s argument has always been that Congress saw fit to define “casino” to be of limited territorial scope and that, under the Bordallo ruling, the only path to an expansion of that territorial scope is an express statement of Congress that the term “casino” should include casinos licensed by one of the insular possessions.

Berline said that statement is lacking in the Bank Secrecy Act’s statutory scheme.

The lawyer said in this case, where the Ninth Circuit in Bordallo case determined that the undefined term “State,” used in a criminal statute does not include an insular possession unless Congress expressly says so, the federal court’s approach to determining the scope of Treasury’s authority was incorrect.

The U.S. government filed in November last year 158 criminal charges against HKE, owner of Tinian Dynasty.

The charges are one count of conspiracy to cause a financial institution to fail to file a currency transaction report or CTR, 155 counts of failure to file a CTR, one count of failure to file a suspicious activity report, and one count of failure to maintain an effective anti-money laundering program. The indictment has also a notice of forfeiture.

Assistant U.S. attorneys Marivic P. David and Ross K. Naughton said the parties are awaiting a final decision from the Department of Justice relating to a proposed settlement, which if approved, will resolve the need for a jury trial.

The trial was re-set several times following the parties’ request to continue because the U.S. Department of Justice’s Main Justice in Washington, D.C. has yet to issue a final decision regarding the settlement deal that the U.S. Attorney’s Office and HKE have agreed in principle to dismiss the criminal case.

The parties agreed to dismiss the case against HKE in exchange for the company’s forfeiture to the U.S. government of $3.02 million, plus other terms and conditions.