Commonwealth Casino Commission Sanctions against Imperial Pacific Ruled Improper by CNMI Supreme Court

Commonwealth Casino Commission Sanctions against Imperial Pacific Ruled Improper by CNMI Supreme CourtOn Friday, the CNMI Supreme Court ruled that the Commonwealth Casino Commission (CCC) had improperly imposed sanctions against Imperial Pacific International LLC (IPI). According to the court, the sanctions imposed on IPI for failing to pay the 2018 and 2019 Community Fund contributions (Complaint 001) and the Annual License Fee within the designated timeframe (Complaint 002) were inappropriate.

The court, however, found that the penalties imposed on the company for failing to maintain the required cash or cash equivalents in a CNMI or United States bank (Complaint 003), failing to pay accounts payable that were over 89 days old (Complaint 004), and failing to pay the Casino Regulatory Fee due by October 1, 2020 (Complaint 005) were upheld. The sanctions included the suspension of the company’s license and hefty fines. The justices noted that there was enough evidence supporting these sanctions. Besides, IPI had previously admitted to the violations without any defense.

Chief Justice Alexandro Castro and Justices John Manglona and Perry Inos issued the ruling, which affirmed and reversed some of the Superior Court Associate Judge Wesley Bogdan’s orders from March 15, 2022. In line with the high court’s decision, the justices remanded to the casino commission for further proceedings.

IPI and the Commonwealth Lottery Commission Sign Amendment No. 9 to Offset the Economic Impacts of the Covid-19 Crisis

The legal dispute revolves around the exclusive Casino License Agreement (CLA) signed between the Commonwealth Lottery Commission and IPI in 2014. Under this agreement, IPI was granted exclusive operating rights on the condition that it complies with the state’s laws and regulations. CLA stipulates that IPI must pay a $15 million annual license fee and a $3 million casino regulatory fee. IPI was also required to pay $20 million annually to a Community Benefit Fund.

The company failed to pay the Community Benefit Fund contributions for 2018 and 2019 and closed the casino shortly after the coronavirus outbreak. In 2020, the CCC initiated five complaints against IPI. But in December of the same year, the IPI and the Commonwealth Lottery Commission signed Amendment No.9, which addressed IPI’s inability to make the Community Benefit Fund Contributions and extended the deadlines to 2025.

The Legal Battle over IPI’s Sanction was Fierce

The CCC conducted hearings for the five complaints filed against IPI. In response to Complaint 001, IPI pointed out that Amendment No. 9 extended the payment dates. In response to Complaint 002, IPI cited force majeure due to the pandemic’s negative impact on tourism. On April 22, 2021, CCC asked IPI’s representative to present IPI’s parent company’s 2020 annual report, which included details about its financial situation. Then, the casino commissioners unanimously voted to suspend IPI’s license and imposed a $6.6 million fine on the company.

IPI appealed CCC’s decision to the Superior Court, citing force majeure events as an excuse for its violations. IPI also pointed to Amendment No.9 and claimed that CCC violated its due process rights by discussing IPI’s parent company’s annual report. However, the court found that CCC acted within its authority and upheld its decision.

On its latest appeal, IPI said the trial court failed to address force majeure, explaining that the pandemic was a force majeure event. The company tried to excuse its performance in all five complaints with force majeure and Amendment No. 9, which extended the payment dates to 2025. IPI also asserted that the court must set aside all sanctions because its due process rights were violated.