Dynasty’s new ownership hits snag

Tinian Dynasty Hotel & Casino’s new ownership application has hit a snag that officials hope would only be “temporary,” when the Tinian Casino Gaming Control Commission decided on Friday to “return” Mega Stars Overseas Ltd.’s application for a license to own and operate the only casino in the CNMI right now.

Mega Stars, when sought for comment, said yesterday it is “dismayed” and “quite surprised,” but would continue to work cooperatively with the commission.

The Tinian Casino Gaming Control Commission returned Mega Stars’ application by a 4-0 vote, citing the investor’s failure to execute the proper forms necessary as part of the application process.

Mega Stars has already spent more than $40 million so far “to save the Dynasty from going under,” said Mega Stars chief executive officer Cario Hon.

Workers and taxes have been paid, he added.

But the commission, chaired by Mathew C. Masga, gave Mega Stars the opportunity to resubmit its application within five business days “by executing and submitting the forms required, unchanged and unaltered and in its original form.”

The other commissioners are vice chair Bernadita C. Palacios, Ignacio K. Quichocho, and Lydia F. Barcinas.

The Tinian casino commission also directed its executive director, Lucia L. Blanco-Maratita, to look into whether the current licensee—Hong Kong Entertainment Overseas Ltd.—should have its casino license “suspended or revoked for failure to comply with the Act and regulations in connection with a transfer of any interest in the casino without the approval and consent of the commission” and other conduct.

“The Commission finds it necessary to [take] this action in order to ensure compliance with the Act and regulations, protect the interest of the people of Tinian, and to abide by the duties and responsibilities mandated by the Act,” Blanco-Maratita said in a statement on Friday.

In its two-page resolution, the Tinian casino commission said Mega Stars has apparently taken over Tinian Dynasty’s operation and control without the commission’s authorization or approval to do so. It said such action is “disrespectful.”

Hon said over the past few months, Mega Stars has had frank and fruitful discussions with the TCGCC staff, in particular its executive director, regarding the process that Mega Stars has to follow in seeking the commission’s approval.

He said during this consultation process, commission laws and regulations were reviewed and discussed and the commission created forms for Mega Stars to complete.

Hon said they submitted the disclosure forms asking for approval of the change in control of Hong Kong Entertainment.

“These disclosure forms are the ‘application’ that the TCGCC returned to us without prejudice last Friday,” Hon said.

Mega Stars had already paid $100,000 to fund the Tinian casino commission’s investigation of Mega Stars and the change of Dynasty’s control.

Hopeful

Blanco-Maratita said the forms required to be submitted by any casino license, casino employee, or casino service applicants are necessary “before any action can be taken by the executive director or the gaming commission with respect to its suitability and authority to operate the casino.”

“It is the desire of the Gaming Commission to move forward with the application process and suitability investigations but it cannot do so if the application is not complete. Compliance with the application process is, thus, necessary,” Blanco-Maratita said.

Tinian Mayor Ramon Dela Cruz, in a phone interview yesterday, said it’s always his hope that the casino regulatory agency and the operator would be able to sit down together and find a common ground for the industry to grow.

“At the end of the day, the requirements have to be complied with. It’s important that the casino industry has integrity; we don’t want the U.S. federal government swooping down on us again,” Dela Cruz told Saipan Tribune.

Rep. Trenton Conner (Ind-Tinian) separately said yesterday “it’s all a matter of solving the differences” together.

“We have to be optimistic on things. That’s what drives us,” he added.

Mega Stars is also the part owner of Marianas Stars Entertainment Inc., one of the two applicants vying for an exclusive license to operate a minimum $2 billion integrated casino resort on Saipan.

‘Mistaken’

Hon said that, while Mega Stars has great respect for the commission’s authority and has every intent to continue to cooperate with it, Mega Stars believes that the commission’s decision to return their pending submission to be “mistaken. “

Mega Stars, according to Hon, has “purchased control of the parent corporation that owns the company that was granted the license to operate the Tinian Dynasty casino, Hong Kong Entertainment Overseas Investment Ltd.

“As HKE owns the license, Mega Stars is not applying for a new casino license. Instead, HKE will continue to operate the casino using its existing license. However, we recognize that our investment plans will result in a change of who ultimately controls HKE, and as a result, the TCGCC has the authority to conduct an investigation in order to verify whether we are suitable to control HKE,” Hon said.

He said Mega Stars informed TCGCC of these plans and appreciates working together “in order to keep the Dynasty afloat during what has been a particularly difficult transition.”

‘Indemnification’

In a four-page statement, Hon said one particular issue that came up during discussions is indemnification.

He said Mega Stars’ understanding is that this is the issue that the commission is now basing its decision to return the investor’s documents.

“Specifically, the TCGCC is attempting to require us to provide an unlimited agreement to pay the TCGCC and its investigators for any and all expenses incurred by them if they are sued or claims are filed against them by third parties. This is known as the indemnification request,” Hon said.

As an example, if one of the TCGCC investigators went to Hong Kong and committed a crime and is fined, jailed, and sued, Mega Stars would be required to pay for the fine, the investigators’ expenses, including attorneys’ fees, any amounts owed to victims, and all other related costs, without any limit, Hon said.

“While we realize that this is an extreme example and we know the TCGCC’s investigators to be competent professionals who we would not expect to commit crimes, this example is helpful in pointing out how extreme the TCGCC’s indemnification request is,” he said.

Mega Stars calls this an indemnification “request” because that is what it believes it to be.

Hon said the words “indemnify” or “indemnification” or the like do not appear anywhere in the TCGCC law or regulations.

“In fact, these words do not appear anywhere in either of the first two versions of the disclosure forms that the TCGCC provided Mega Stars for signing. The CNMI Lottery Commission does not require indemnification as a part of its application process. Instead, the request for indemnification only arose in the third version of the disclosure forms and apparently only after the investigators that the TCGCC hired demanded indemnification from the TCGCC,” Hon said.

He added that Mega Stars finds it odd that a request that the commission has never made to any applicant before, is not required by law or regulations, and was not included in the original TCGCC application materials, “has now become the reason that the TCGCC has returned our materials.”

Rebuffed

Hon said Mega Stars has repeatedly attempted to resolve these issues with TCGCC through cooperation and negotiation “but was rebuffed.”

He said they have asked in writing for a meeting with the executive director during the last two weeks in order to try and resolve the issues, but she was off island.

Mega Stars also planned on meeting with her after her return and still plan on doing so this week.

They also attended commission’s board meeting last Friday “in order to respectfully request the TCGCC not to take any action on our pending request until Ms. Maratita returns to the CNMI and we have a chance to meet with her in order to attempt to work out a compromise.”

“Yet our simple request for an additional week or so in order to work out a compromise was refused, with particular vehemence by Commissioner Quichocho,” Hon said.

Effects

These issues do not just affect Mega Stars, Hon said.

The commission, he said, is now attempting to require that a key employee pay $3,000 and sign an indemnification agreement as a part of his key employee license application package.

“This, despite there being a clear TCGCC regulation requiring payment of $500 for a key employee license application and that our employees clearly cannot afford any sort of limitless liability like the TCGCC is proposing. Yet, despite all of this, the bottom line has not changed. We have great respect for the TCGCC and its staff and hired investigators. We have great respect for the relevant CNMI law and regulations. We have no desire to fight with the TCGCC or to break the law,” he said.

Mega Stars hopes that the commission will return to the discussion table this week “in a spirit of cooperation and reasonableness, as Mega Stars certainly will.”