IPI admits violations, ready for suspension

Imperial Pacific International (CNMI) LLC entered into an agreement with Commonwealth Casino Commission executive director Andrew Yeom yesterday that basically admitted it violated many CCC orders as alleged in Yeom’s three consolidated complaints against IPI.

CCC board chair Edward C. Deleon Guerrero, who presided over the tribunal hearing yesterday, directed IPI and Yeom to file separately proposed global orders outlining the fine and penalties to be imposed on IPI.

Assistant attorney general Michael Ernest, counsel for Yeom, asked the board to suspend IPI’s gaming license and be fined a total of $5 million.

The five complaints against IPI are its failure to pay the $3.1 million annual regulatory fee last Oct. 1; failure to comply with a CCC order directing IPI to settle amounts owed its vendors; failing to comply with the minimum capital requirements of CCC’s order, among other issues; failing to pay the $15.5 million annual casino license fee by Aug. 12; and failing to contribute $40 million in community benefit fund money in 2018 and 2019 as required by the Casino License Agreement.

Ernest pointed out that nothing needs to be tried anymore at the hearing since both parties—CCC and IPI—have agreed to the facts of the case. Ernest asked that IPI be found guilty as charged in the second consolidated case involving three complaints. He asked the board to issue an order declaring that the claims in the three complaints have factual and legal basis and have been proven beyond a preponderance of evidence and reasonable doubt.

“We’re asking for a license suspension of indeterminate amount until they fully comply with the orders that they have violated,” he said.

Ernest said the maximum possible total fine is $808 million, but Yeom is asking the tribunal to order IPI to pay a lump sum of $1.5 million in the third case, $2 million in the fourth case, and $1.5 million in the fifth case, for a grand total of $5 million.

Ernest said that after hearing IPI counsel Tiberius Mocanu’s statement and considering what he said and listening to the commissioners’ questions, Yeom’s position is that the commission probably could revoke IPI’s gaming license right now if it wanted to. “I believe there’s regulatory authority for it. But having said that, I agree with counsel for IPI that it would not be appropriate at this time,” Ernest said, adding that Yeom, in fact, doesn’t believe that revocation is proper in all of his five complaints against IPI. “I don’t believe his opinion has changed,” said Ernest, adding that the complaints don’t mention revocation directly, but only talked about suspension and penalties.

Ernest said IPI should be put on notice that it could lose its license but also giving IPI ample time to correct its actions. “We should be screaming from the tree tops, ‘We’re going to revoke your license, we’re going revoke your license.’ The good news is I think they’re hearing that message right now,” he said.

Ernest said IPI now can’t say that they don’t have notice going forward. “But I think it would be very arguable that they didn’t have proper notice should that (revocation) occur as a result of today’s hearing,” he said.

In place of revocation, Ernest said, is increasing the fine against IPI. He said pumping up the fine is basically a de facto revocation anyway, because IPI is “financially unsuitable.” Ernest said that giving IPI a $20-million fine will be similar to a revocation since IPI will never be able to pay it.

“Again, it is up to the commission, whatever you want to happen can happen. [But the] executive director does not seek revocation. [The] executive director seeks suspension until they [IPI] comply,” he added.

As for monetary sanctions, if any, Ernest said the grand total of all of the violations is 16,165 violations, and at $50,000 per violation, that brings the possible maximum fine to a total of $808,250,000. However, he said, Yeom does not request that amount and does not expect the tribunal to impose that. Instead, he said, Yeom seeks the imposition of a fine that—in the commission’s judgment—will impress upon IPI that it has to take the CNMI’s laws and the CCC’s regulations seriously.

“We’re asking for the commission to impose a penalty that impresses upon IPI the need to start following the Commonwealth law and to start respecting the CCC,” he said, adding that the difficult truth about the matter is that the evidence shows that IPI has absolutely zero respect for the commission. “I hate to say it, it gives me no pleasure to say it, but I have to say it,” he said. Ernest said if IPI respected the commission, it would have done the bare minimum.

Mocanu said the argument for suspension and not revocation appears to show a desire for IPI to succeed and come back from this situation and do well. “That’s not to say that fines or an imposition of sentence by this tribunal isn’t necessary to assure that to create a structure for that success. But it should not be one that is punitive,” Mocanu said.

He said that, as Ernest described, it should not be one that carries $808-million burden, but should be one that creates a system through which IPI has the ability to regroup and begin to come on board with its payments and be squarely under the law and the regulations of the commission as it tries to regain its gaming license.

“It has to be given some breathing room, and it has to be able to execute a plan that’s reasonable and sets them up for success,”Mocanu said.

He added that that they’re asking that the commission hold IPI accountable, but with the understanding of the economic crisis that it’s faced with and its ability to incrementally make progress.

Deleon Guerrero and CCC commissioners Rafael Demapan, Diego M. Songao, Mariano Taitano, and Ramon M. Dela Cruz served as the tribunal in the two consolidated cases involving five complaints against IPI. Deleon Guerrero recused from the first consolidated two cases, which were already heard last week.

John P. Lowrey, the chief of the Office of the Attorney General’s Civil Division, appeared at the hearing as counsel for the tribunal.