IAG July 2014 - page 7

Cover Story
“We’re the only US city in Asia, four or five hours from Asia’s
biggest population centers. That brings a lot of value to the table,”
says Phillip Mendiola-Long, president of CNMI-based consultants
ShermanPacific.MrMendiola-Long, whose clients include investors
proposing a Titanic-themed casino resort in Tinian, thinks the US
connection could leverage broader interest from investors drawn by
the opportunity to gainUS residency or haveUS dollar revenue as a
hedge. “The [CNMI government], in its haste, left a lot of money on
the table,” he says.
He says there was no research to determine the proper scale of
a Saipan casino. The new casino lawmandates Saipan’s licensee to
spend $2 billion and construct 2,000 hotel rooms in a market that
currently has 2,300 rooms. For comparison,Manila’s Entertainment
City requiresa$1billion investment and800 rooms for its integrated
resorts. Macau, when it sought licensees in 2001, required a $500
million investment.
“The legal and regulatory framework in CNMI needs to be
updated in order to encourage significant capital investment in
tourism,”MrGalaviz agrees.
The law calls for a Commonwealth Gaming Commission to
oversee the industry but offers few regulatory details. Sparsely
inhabited Rota has its own gaming law and commission, though its
one casino operated for only a fewmonths before closing inMarch
2011andhaspostponed twoscheduled reopenings this year. Tinian’s
gaming ruleswere “Xeroxed from theNew Jersey law,”MrMendiola-
Long says.
Spectrum Gaming Group Managing Director Fred Gushin,
who served as an advisor to the Tinian Casino Gaming Control
Commission in the early ’90s, says US law enforcement suggested
Tinian adopt New Jersey’s regulations as its model. “[We] all knew
that it was a big mistake and tried to interpret Tinian law in a way
that wouldnot be sodifficult,” he says. “TheNew Jersey gaming law
wasdesigned for anurbangamingenvironment and for ahigh-traffic
casino. Tinianneverwas able to secure that kindof base.”
Mr Gushin also disputes one Saipan applicant’s assertion that
gaming in theCNMI isnot subject toUS jurisdiction.As inUSstates,
federal law has supremacy. Noting that US Internal Revenue Service
agents raided and temporarily shut down Tinian Dynasty last April
for failing to record large cash transactions, he says, “The US Bank
Secrecy Act applies toCNMI. However, as it relates to licensing and
other regulatorymatters, the statesor commonwealthshaveprimary
oversight for gaming control.”
The IRS raid also raised questions about the competence of
the Tinian Gaming Control Commission, which has since been
reorganized. The commission is currently trading barbs withMega
Stars, which took over ownership of the property last July. The
commission saysMega Stars delayed applying for its license, which
has yet to be granted even though the casino is open, while Mega
Stars accuses the commission of dragging its feet, even though the
company has spent $40 million to rescue the property and begin
renovating it.Neither partywould comment on their differences.
When Tinian first tried to grant gaming licenses, Mr Gushin
and his colleagues found several applicants had ties to Japan’s
underworld. “In the 1980s and early ’90s, [CNMI] was a playground
for middle-class Japanese,” he says. “It could have been a credible
beachhead in Asia for a US operator before Macau opened up.”
CNMI tourism peaked at 700,000 arrivals in the early 1990s. But
nogaming licensewas granteduntil TinianDynasty opened in 1998.
NowMrGushin thinks a$2billionSaipan resortmay be arriving
late to theAsian gamingparty. He comparesCNMI to theBahamas,
an island chain in the Caribbean near the US southeastern coast.
“When Florida and the northeastern US didn’t have casinos, the
“TheNorthernMariana Islandshavegreat
potential for tapping thegreaterAsiagrowth
story in tourism,” saysGlobalMarketAdvisors
partnerJonathanGalaviz. “Thebeaches, overall
environmentandUSoversightbodewell for the
futureofCNMI inmanyrespects.”
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