Imperial Pacific Facing Possible Casino License Suspension After Violations Admission

  • IPI admitted to breaking numerous regulations of the Casino Control Act in Saipan 
  • Failure to make various forms of payments totaling $58.6m is among the violations
  • Maximum potential fines could total $808m, but CCC is only seeking $5m plus license suspension
  • IPI got a 25-year license in 2014 to build a Saipan casino resort and is way behind schedule
  • Receivership is now on the table for the operator because of its failure to pay employees
many fingers pointing to one person holding up a guilty card in front of his face
Imperial Pacific International is facing suspension of its Saipan casino license after admitting to numerous regulatory violations. [Image: Shutterstock.com]

As many as 16,165 regulatory violations

Imperial Pacific International (IPI) is facing possible suspension of its casino license in Saipan after it admitted to various Casino Control Act violations. The Saipan Tribune reported that the Commonwealth Casino Commission (CCC) and the IPI came to an agreement on Tuesday, whereby IPI admitted to breaking many of the regulator’s orders.

IPI did not pay the annual regulatory fee of $3.1m and its $15.5m casino license fee

In response to five complaints filed by CCC Executive Chairman Andrew Yeom, IPI admitted that it did not pay the annual regulatory fee of $3.1m and its $15.5m casino license fee last year. The casino developer and operator also did not meet minimum capital requirements or comply with an order to settle its debts with vendors. Finally, IPI did not pay $20m annually in 2018 and 2019 to a community benefit fund. In all, the CCC estimated that IPI had made as many as 16,165 regulatory violations.

Lawyers for both the CCC and IPI now have to file separate proposed global orders that will suggest the penalties the casino operator will face as a result of its violations. It appears that suspension of IPI’s casino license is likely.

Potential punishment for IPI

Andrew Yeom’s legal counsel has outlined that he will be seeking “license suspension of indeterminate amount” until IPI is completely compliant with the violated orders. Assistant Attorney General Michael Ernest went on to state that with a $50,000 penalty for each of the 16,165 violations, the total possible fine for IPI would be $808m. However, Yeom is only seeking total payment of $5m in fines to lift the license suspension.

Some parties are seeking a $20m fine and would otherwise want the complete removal of the license from IPI. Two senators filed a bill last month that would authorize a second casino license in the event that the CCC revokes IPI’s license. Assistant Attorney General Ernest however outlined that a $20m fine would likely have the same effect of license removal, as IPI has financial struggles and would unlikely be able to pay the sum. He believes the operator should be made aware that it is on notice of potentially losing its license, while still giving it time to correct its issues.

IPI has absolutely zero respect for the commission”

In conclusion, Ernest called for the imposition of a penalty on IPI to ensure its starts following the law and respecting the CCC. Ernest said that currently “IPI has absolutely zero respect for the commission”, in light of its actions to date.

Delay after delay for the project

Since IPI got a 25-year casino license in August 2014 to develop and operate a Saipan casino, the project has faced scandal after scandal. The budget for the resort with over 4,200 hotel rooms and 1,600 gaming tables was $7.1bn.

The Imperial Palace casino resort project has missed deadline after deadline. Its completion was originally set for late 2018, but delays led to an extension until February 28, 2021. IPI sought another extension in May 2019, this time until August 2022, but further extensions are not allowable under the license agreement. With a stop-work order in place, IPI did not meet the recent February deadline, and its final completion target date is currently December 2022.

While the development of the casino resort is ongoing, IPI has a temporary casino up and running on the island of Saipan.

Issues over not paying workers, work permits, and the COVID-19 pandemic were just some of the reasons for the delays. IPI is also in dire financial straits, with significant losses mounting up over the past few years.

Operator facing receivership

IPI is now facing receivership as a result of its mounting issues. Failure to pay workers led to multiple lawsuits, with some construction workers even filing a 2019 complaint claiming they were victims of forced labor and human trafficking. In January, senior IPI management managed to avoid prison time over these issues.

Commonwealth of Northern Mariana Islands (CNMI) Chief Judge Ramona Manglona ordered IPI to meet its $1.18m in outstanding payments to employees, as well as to create an escrow with $800,000 for future payroll or face receivership. She set IPI a March 1 deadline, putting a stop-work order on the casino resort project until then. Legal counsel for IPI argued that it would not be able to fully meet the requirements by the deadline and requested an instalment-based repayment plan.

On March 1, Manglona nominated a receiver and asked IPI to provide a complete list of assets by no later than 5pm on March 3. She also asked for relevant payroll information and documents relating to back payments of about $600,000 that the operator currently owes. Two IPI lawyers did not object to the nominated receiver or to proceeding with the receivership. The stop-work order will remain in place until further notice.