AUSTRALASIA 32
CNMI
Poor regulation undermines CNMI gaming industry The fundamental problems now sinking IPI were not only predictable—they were predicted, according to industry insiders.
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few months after the US$7.1 billion investment figure was announced, analysts began to query how much sense a property of that size would have on the island, due to the small local population, distance from China and weather instability. It wasn’t just foreign analysts either: Alexander Sablan, head of the Saipan Chamber of Commerce, announced in June 2015 that his organization had officially asked the government to ensure that the IPI investment wasn’t too large for the local economy to support. He was worried that the project would fail, especially without supplementary facilities like a meeting and convention center available on the island. Nevertheless, the soft opening of the temporary casino occurred on July 26, 2015. Then, something amazing began to occur: IPI’s management claimed—in Hong Kong—that visitors were packing into the temporary casino at an average of about 5,700-5,800 per day. In its first full month of operations, IPI said that they had brought in US$1.63 billion in revenues, based upon its 12 VIP gaming tables and 34 mass tables. It claimed US$6.1 billion in VIP table game rolling chip turnover for the first quarter of 2016. All of these VIPs must have come in direct since no junket operators had yet been authorized by the local government. IPI continued to pile up incredible revenue results at its temporary casino throughout 2016, and many experienced gaming analysts began to whisper that the results were not simply impressive—they were impossible. A Bloomberg article in November 2016 revealed that these suspicions were not limited to gaming industry analysts, that the US Treasury’s Financial Crimes Enforcement Network (FinCEN) had begun to investigate IPI’s “suspicious financial flows.” Throughout the controversy, Commonwealth Casino Commission Executive Director Edward Deleon Guerrero vocally defended IPI and its financial reporting: “I can tell you the numbers
Asia Gaming Briefings | August 2020
are real. We are watching, documenting, and tracking it… It is an irrelevant issue if FinCEN is doing an investigation.” Local lawmakers soon began to question the regulatory structure itself, particularly the lack of a gaming tax. Representative Edwin K. Propst noted, “US$15 a year is peanuts for what they are raking in when compared to what we would be receiving if we actually had a gross gaming revenue tax implemented from the beginning. We have the only casino industry in the world that charges zero on gross gaming revenue taxes.”
Indeed, whether the real issue was money laundering or an effort to pump up company share values or massive accounting errors, the lack of a gaming tax presented a perverse incentive for IPI. Ben Lee, managing partner of IGamiX Management & Consulting, observed, “When you have no gaming revenue tax, it doesn’t matter what you roll.” The IPI headlines in recent weeks sound eerily like those of Tinian Dynasty from just a few short years ago: cash flow problems, unpaid
