Inside Asian Gaming

July 2014 inside asian gaming 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 Sherman Pacific. Mr Mendiola-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 gain US residency or have US 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 law mandates 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 requires a $1 billion investment and 800 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,” Mr Galaviz 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 few months before closing in March 2011 and has postponed two scheduled reopenings this year. Tinian’s gaming rules were “Xeroxed from the New Jersey law,” Mr Mendiola- 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 would not be so difficult,” he says. “The New Jersey gaming law was designed for an urban gaming environment and for a high-traffic casino. Tinian never was able to secure that kind of base.” Mr Gushin also disputes one Saipan applicant’s assertion that gaming in the CNMI is not subject to US jurisdiction. As in US states, 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 to CNMI. However, as it relates to licensing and other regulatory matters, the states or commonwealths have primary 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 with Mega Stars, which took over ownership of the property last July. The commission says Mega 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 party would 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 no gaming license was granted until Tinian Dynasty opened in 1998. Now Mr Gushin thinks a $2 billion Saipan resort may be arriving late to the Asian gaming party. He compares CNMI to the Bahamas, an island chain in the Caribbean near the US southeastern coast. “When Florida and the northeastern US didn’t have casinos, the “The Northern Mariana Islands have great potential for tapping the greater Asia growth story in tourism,” says Global Market Advisors partner Jonathan Galaviz. “The beaches, overall environment and US oversight bode well for the future of CNMI in many respects.”