‘IPI scrambling to make payments’

Imperial Pacific International (CNMI) LLC is really scraping the bottom of the barrel as it was barely able to pay the CNMI government last Friday $3 million in Business Gross Revenue Tax for up to April 2019.

The company was still short, however, of the $250,000 that it needed to pay the Department of Public Lands, according to IPI treasury director Frances Mafnas.

In her declaration filed in federal court last Friday, Mafnas said the payment is due for the annual $250,000 public land lease to DPL. “If we do not make the payment, DPL could cancel the land lease where the casino is,” she said.

She disclosed that, based on IPI’s current situation, they will not be able to pay any taxes unless they get substantial help from their parent company in Hong Kong.

Mafnas issued the declaration in support of IPI’s motion asking the U.S. District Court for the NMI to suspend proceedings in Pacific Rim Land Development LLC’s lawsuit until 10 days after the U.S. Court of Appeals for the Ninth Circuit resolves IPI’s appeal. The casino company had asked the Ninth Circuit to reverse Chief Judge Ramona V. Manglona’s order last April 23 for IPI to pay Pacific Rim $5.65 million for breach of contract. Pacific Rim is IPI’s former contractor.

IPI’s money woes are on top of the $15 million for annual casino license fee and the $3 million fee for the Commonwealth Casino Commission regulatory fee that are due toward the end of the year, Mafnas said.

Last March 17, IPI shut down its casino to comply with Gov. Ralph DLG Torres’ directive due to COVID-19 pandemic. Because they have no income, they had to furlough hundreds of employees, Mafnas said.

“We are now completely dependent on financial assistance from the parent company to meet our expenses,” she added.

Making payroll has been a serious problem for IPI as they are still employing 1,068 employees, mostly in construction for the casino/resort in Garapan. Mafnas said they were having funding issues since payroll 9 (April 24). She said they were able to come up with funds on time to release payroll for those earning $10.50 per hour or less last April 24. They partially released payroll 9 last May 8, and fully released payroll 9 last Friday.

IPI also experienced funding issues for payroll 10 (May 8). Mafnas said they released checks for those earning below $10.50 per hour on time last May 8 and checks for above $10.50 an hour were released last Friday.

For payroll 11 (May 22), all the payroll checks were released last Friday.

Mafnas said they are just now getting back to normal with payroll, but that they did furlough over 500 employees. “IPI has not been able to pay vendors because we prioritized payroll and taxes,” she added.

Mafnas said the Commonwealth Utilities Corp. shut off power to the casino in Garapan and office at Vestcor on Capital Hill last May 15 because they could not make payment on that day as promised. Mafnas said they did not have sufficient funds to make the payment to CUC because they did not receive funding from the parent company. She said that they were able to identify funds to make the payment to CUC last May 20. “But we do not know if we will be able to keep the power on in the future,” she added.

Mafnas said she is aware of the $6.8-million court judgment owed to IPI’s former contractor, Pacific Rim. She said IPI does not have the money to pay this judgment and a bond guaranteeing payment of the judgment.

Mafnas said if Pacific Rim is allowed to remove money from IPI’s accounts, the paychecks will bounce for 1,066 employees who have received paychecks. “For this reason, it is important to have the stay in place at the earliest possible time,” she said, referring to IPI’s motion to stay or suspend proceedings in Pacific Rim’s lawsuit.

IPI counsel Michael W. Dotts stated that IPI believes, in good faith, that it has a basis to appeal the judgment. “Yet if the judgment becomes enforceable while the appeal is pending, IPI will be unable to pay it, and will likely have to close permanently,” Dotts said.

The lawyer said this situation is due largely to the fact that COVID-19 has caused IPI to close its business and that IPI barely has the resources to cover payroll, taxes, and utilities.

Pacific Rim is suing IPI and five unnamed alleged co-conspirators for breach of contract (construction and promissory note), and unjust enrichment. Pacific Rim claimed to have completed the agreed-upon construction work on Sept. 30, 2018. The unpaid amount that is owed Pacific Rim is $5.65 million but it wants to collect from IPI approximately $10 million in damages.

Last Friday, Pacific Rim will be able to begin collecting from IPI on the partial summary judgment of $6.8 million, unless the District Court grants IPI’s motion to stay proceedings pending appeal.

Dotts said denying the stay pending appeal will not just force IPI to close its doors, but it will also leave 1,066 people on Saipan without jobs during COVID-19, an international pandemic that will last in the near term.

Pacific Rim and IPI entered into a construction contract on Feb. 13, 2018, for the Pacific Rim to build a hotel-casino complex in Garapan. Pacific Rim eventually stopped working on the project, claiming that IPI did not pay it the amounts owed under the contract. IPI recently filed counterclaims against Pacific Rim. IPI brought counterclaims against Pacific Rim for promissory fraud, fraud in the inducement as to the promissory note, violation of Consumer Protection Act, and breach of contract.