Abstract
INTRODUCTION
This article describes gambling in the Northern Mariana Islands (NMI). 1 To do so, it begins with a thumbnail sketch of the NMI. 2 Next, it summarizes the NMI's gambling laws. 3 It then discusses the NMI's efforts to foster a commercial casino industry. 4
THUMBNAIL SKETCH OF THE NMI
Government
The NMI constitutes one of the United States' six overseas possessions (the others being American Sāmoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the so-called “Minor Outlying Islands,” which are uninhabited). 5 From 1947 to 1986, the NMI was part of the United Nations' Trust Territory of the Pacific Islands (TTPI), which was administered by the United States. 6 Since 1986, the NMI has been a “commonwealth in political union” with the United States. 7
In preparation for the end of the UN trusteeship, the NMI negotiated a “Covenant” with the United States (1976; effective 1986) 8 and adopted a constitution (1977; effective 1978). 9 As a result of these and later instruments, U.S. law applies in the NMI; 10 a federal trial court operates in the NMI, 11 with appeals heard by the Ninth Circuit; 12 and NMI residents hold U.S. citizenship, 13 although they are not eligible to participate in U.S. presidential elections 14 and are represented in Congress by a single non-voting delegate. 15
The U.S. territory of Guam sits 125 miles to the south of the NMI. 16 Together, the two form the Mariana Archipelago, with the NMI at the northern tip and Guam at the southern tip. 17 Although the NMI has voted in favor of establishing a political union with Guam on four different occasions (1958, 1961, 1963, and 1969), Guamanians, still harboring resentments from World War II (when many NMI Chamorros aided the Japanese army), and worried that the less-developed NMI would be an economic drain, rejected the idea in 1969. 18
People
The NMI is part of Micronesia, a subregion of Oceania, in the northwestern Pacific Ocean. 19 The NMI is 6,000 miles from Los Angeles; 3,700 miles from Honolulu; 3,400 miles from Sydney; 3,000 miles from Singapore; 2,500 miles from Beijing and Hanoi; 2,100 miles from Hong Kong; 1,900 miles from Seoul; 1,700 miles from Manila and Taipei; and 1,500 miles from Tokyo. 20 The only U.S. airline serving Saipan International Airport (the NMI's main airfield) is United Airlines (UA). 21 Because there are no direct flights, U.S. travelers usually fly to the NMI via Japan, a journey that takes 28-30 hours and costs (round-trip) approximately $2,100-$6,500. 22
The NMI consists of 14 islands, encompassing 183.5 square miles, which are administratively divided into 10 “northern islands” (formed from volcanic rock) and four “southern islands” (primarily coral limestone). 23 The northern islands have just seven residents; the southern island of Aguiguan is even more desolate (zero inhabitants). 24 As a result, the NMI's population is clustered on the southern islands of Rota (1,893), Saipan (43,385), and Tinian (2,044). 25
Capitol Hill (formerly Army Hill), a village in northwest Saipan with 979 residents, 26 has been the NMI's seat of government since 1962. 27 Currently, it serves as the home of the NMI's bicameral legislature (a nine-member senate and 20-member house of representatives) 28 and governor. 29 Since 1996, the NMI's supreme court has been in Susupe, a village seven miles to the southwest of Capitol Hill. 30
In the 2010 U.S. Census, the NMI had a per capita income of $9,656 (the second lowest of any U.S. jurisdiction, ahead of only American Sāmoa), and a median household income of $19,958 (again the second lowest of any U.S. jurisdiction, ahead of only Puerto Rico). 31 Due to the final departure of the garment industry, the NMI shrank from 53,833 residents in 2010 to 47,329 residents in 2020, a decrease of 12.1%. 32
The NMI's population is chiefly Asian (50.0%) and Native Hawaiian/Pacific Islander (34.9%). 33 Filipinos (35.3%) and the indigenous Chamorros (23.9%) constitute the two largest ethnic groups. 34 Although the NMI has three official languages (Carolinian, Chamorro, and English), 35 everyday conversations frequently are conducted in Chinese, Filipino, or Korean. 36 While Spanish has all but died out, many islanders continue to have Spanish surnames. 37 The NMI's predominant religions are Roman Catholicism (64.1%), Protestantism (16.0%), and Buddhism (10.6%). 38
The NMI's most visible symbol, seen on both its flag 39 and seal, 40 is the latte stone, a pillar with a bowl-shaped top. As explained elsewhere, the latte stone was “used as a house support by the ancient people of the Marianas. In modern times the latte stone has become a symbol of Chamorro cultural identity[.]” 41
Throughout history, the NMI has been ravaged by typhoons. 42 On October 24, 2018, Super Typhoon Yutu struck the NMI with Category 5 winds (180 m.p.h.), causing catastrophic destruction (two deaths, 133 injuries, and $800 million in property damage). 43 The storm tied for the second strongest in U.S. history, trailing only the Great Labor Day Hurricane of 1935, which pounded Florida with 185 m.p.h. winds. 44
Education
The NMI does not have a law school—the nearest U.S. law school is the William S. Richardson School of Law at the University of Hawai'i (UH). 45 UH does not offer a course in gambling law. 46 Similarly, no gambling-related courses are offered by either of the NMI's two local institutions of higher education: Eucon International University (a Christian fundamentalist school) 47 and Northern Marianas College (a public land-grant college). 48 The NMI's bar, however, includes several lawyers with gambling law experience. 49
Economy
From 1983 to 2007, the garment industry was the mainstay of the NMI's economy, due to the fact that the islands were exempt from U.S. immigration and labor laws. 50 As a result, Hong Kong and South Korean clothing manufacturers (among others) could pay textile workers in the NMI, most of whom were temporary residents from China and the Philippines, far less than minimum wage while touting that their products were “Made in the U.S.A.” 51 When these exemptions were phased out beginning in 2007, 52 the NMI's garment industry collapsed. 53 In response, the NMI began leaning more heavily on tourism, its only other significant source of income. 54 As part of this shift, the NMI doubled down on its years' long effort to become the preferred destination of Asian gamblers. 55
THE GAMBLING LAWS OF THE NMI
Gambling is not part of traditional Chamorro culture, 56 and only limited forms of legalized gambling existed in the NMI during the TTPI period. 57 Thus, in 1978, in an effort to spur tourism, the newly-constituted CNMI legislature passed the Gaming Control Act of 1978. 58 It authorized, as an initial matter, the establishment of up to two casinos in each of four designated Saipan tourist areas 59 and created a Casino Gambling Commission to oversee them. 60 In 1979, however, the statute was repealed in a hotly-contested referendum. 61
In 1983, the NMI legislature passed four new statutes dealing with gambling. The first authorized the holding of lotteries and created a Lottery Commission to license and oversee operators. 62 The second authorized games of skill and banned games of chance. 63 The third permitted bona fide charities to continue their gambling operations. 64 The fourth recognized certain matters as appropriate subjects for local regulation, including: “… (8) [g]ambling prohibition and regulation, so long as such regulations are in addition to Commonwealth regulations; (9) [r]egulation of cockfighting; [and] (10) [r]egulation of bingo and batu[.]” 65
Two years later, gambling was constitutionalized. During the NMI's second constitutional convention, 66 Article XXI was added to the NMI's constitution: “Gambling is prohibited in the Northern Mariana Islands except as provided by Commonwealth law or established through initiative in the Commonwealth or in any senatorial district.” 67
In July 1989, acting pursuant to Article XXI, 261 Tinian voters submitted to CNMI Attorney General Edward E. Manibusan a local initiative calling for the legalization of casinos on Tinian. 68 In August 1989, Manibusan certified the measure for placement on the ballot as Tinian Local Initiative 1. 69 On November 4, 1989, the proposal passed by a vote of 520 to 92 (85.0%-15.0%). 70 As a result, the Tinian Casino Gaming Control Act of 1989 (“TCGCA”), authorizing up to five casino licenses, became effective on January 1, 1990. 71
In February 1990, James M. Mendiola, the mayor of Tinian, chose Joaquin P. Aldan, Serafin M. Dela Cruz, John U. Hofschneider, Lino V. Lizama, and Joseph M. Mendiola to be the inaugural members of the Tinian Casino Gaming Control Commission (“TCGCC”). 72 Hofschneider, an enthusiastic casino supporter, subsequently was named chair, 73 while attorney William B. Nabors was appointed executive director. 74
To be considered for a casino license, the TCGCC required interested parties to pay a $200,000 non-refundable application fee. 75 By November 1990, seven companies had done so. 76
In May 1991, the TCGCC began scheduling hearings to interview the applicants. 77 On June 24, 1991, however, the CNMI's government sued the TCGCC in the CNMI's superior court, 78 claiming that “several regulations of the gaming act [are] in conflict with CNMI law, and that conflict exists between the Government and the commission as to the interpretation of the [1989 voter] Initiative.” 79
In September 1991, Judge Robert A. Hefner of the superior court sided with the TCGCC. 80 In May 1992, however, the CNMI's supreme court vacated Judge Hefner's decision. 81 “The Attorney General and the Commission members [then] resolved to mediate the matter and chose a prominent member of the Reno, Nevada, gaming industry as mediator. The mediation session was successful, and the group returned to the CNMI with an agreement over the many issues in dispute.” 82 As a result, in April 1993 Judge Hefner
upheld some of the challenged provisions in the act but accepted claims that others violated Commonwealth-wide law. In an [unpublished] order issued April 8, 1993, the Superior Court “modified” several provisions, “deleted” others, and directed the Tinian Casino Gaming Control Commission to “revise and submit to this court … the Tinian Casino Gaming Control Act of 1989 in a manner that is consistent with the entirety of this Final Order, such revisions to include re-numbering of the Sections of the Act to reflect adding new sections/subsections and deletions of sections/subsections.” Commonwealth v. Tinian Casino Gaming Control Comm'n, Civ. No. 91-0690 (N.M.I. Super. Ct. Apr. 8, 1993) (Final Order at 15). On August 18, 1993, the Superior Court issued an [unpublished] order approving and adopting a revised act. 83
With the TCGCA finally having cleared the courts, 84 the NMI's effort to become an international gambling mecca began in earnest. The road, however, has proven exceptionally bumpy.
THE NMI'S EFFORTS TO BECOME AN INTERNATIONAL GAMBLING MECCA
Tinian
In January 1997, the U.S. Navy, having leased two-thirds of the land on Tinian, issued a report discussing its future development plans and noted:
Tinian has worked for 10 years to develop a casino industry, overcoming differences between political parties and opposition from the Catholic church. Casinos will be regulated by the Tinian Casino Gaming Control Commission (TCGCC), created in 1990. The first casino to open was the [Texas-backed] Lone Star, which operated in a converted small office building from May through December 1995. The Lone Star's license was revoked in 1996. Two licenses have been awarded to Hong Kong companies (currently fully financed) and one has been awarded to a Taiwan-Saipan company which has not yet paid the full licensing fee. A memorandum of understanding has been signed for a luxury casino ship to be berthed in the harbor area. In addition, the governor has announced a floating casino/hotel, but no license application or fee has been filed. The first resort, the Dynasty Casino and Hotel, is currently under construction in San Jose, in the area between Taga and Tachogna Beaches. The casino resort will include a hotel with over 400 rooms, a casino, entertainment theater, night club, restaurants, and fitness center, as well as an employee village for an estimated 800 employees. The casino is scheduled to open in April 1997. The governor has pledged funding for public infrastructure to support the casino resort, but not all infrastructure requirements are currently available (e.g., wastewater disposal).
85
On April 25, 1998, a year behind schedule, the Dynasty finally opened.
86
A leading casino guide later described the resort by writing:
Tinian Dynasty Hotel and Casino is located at 1 Broadway, San Jose, Tinian, in the Northern Mariana Islands. The casino has 14,000 square feet of gaming space and offers 98 slots, 28 table games, restaurants, bars, and a hotel. The casino is open 24 hours a day. Enjoy the long stretch of white sandy beach or the hotel swimming pool. This is the only 5-star resort with a luxury casino on the island. The casino has been open since 1998 and offers 390 guestrooms along with 22 executive suites and two presidential suites. The architecture is luxurious in Renaissance period design along with modern accents.
87
As soon as the Dynasty opened, rumors began to swirl that Hong Kong Entertainment (Overseas) Investments Ltd. (HKE), the resort's owner, was violating U.S. bank, immigration, and labor laws. 88 Matters finally came to a head in May 2013, when a federal grand jury indicted HKE for money laundering. After being fined a record $75 million by the Financial Crimes Enforcement Network (FinCen) (June 2015) 89 and reaching a deal with the U.S. Attorney's Office to forfeit $3 million (July 2015), 90 HKE closed the Dynasty's casino (August 2015); filed for bankruptcy (November 2015); and then shut down the rest of the resort (March 2016). 91
During its 17-year existence, the Dynasty was Tinian's only casino. 92 Thus, when the Tinian Entertainment Corporation, backed by Hong Kong investors, announced in January 2018 that it was considering reopening the Dynasty (which it had bought out of bankruptcy), Tinian Mayor Joey P. San Nicolas publicly encouraged the company and added that he hoped to soon see “three hotels and casinos on the island.” 93 To date, however, the Dynasty remains shuttered. 94
In the meantime, Tinian has pinned its hopes on a Chinese company called Bridge Investment Group LLC (“BIG”). In 2005, BIG began talking about building a $100 million, 300-room casino-hotel. 95 By 2014, its plans called for the resort to be located in the Port of San Jose (on the island's southwest side) and be Titanic-themed (due to the popularity of the movie Titanic in China), with a full-size replica of the famous ship moored next to the resort. 96 In 2019, BIG announced that it also planned to operate a liner service between Tinian and Saipan (travel time: 45 minutes) using a custom-built “fast ferry” (dubbed the Sand Diamond) capable of carrying 290 passengers and 30 cars. 97
Since breaking ground, the undertaking—which has had multiple names 98 —has been bedeviled by land, money, and permitting issues (the last of which has centered around the resort's wastewater plant). As a result, the project has been scaled back (the ship, for example, has been replaced by a small museum) and pushed back, even as its price tag has doubled to $200 million. 99 In June 2022, however, Kimberlyn K. King-Hinds, the chair of the Commonwealth Ports Authority (BIG's landlord), predicted the resort will be operational by September 2022. 100 When it does open, the casino plans to target gamblers in Japan, South Korea, and Vietnam. 101
Rota
On November 3, 2007, Rota passed its own casino gambling initiative. 102 Dubbed Local Initiative 1, the Rota Casino Act of 2007 (“RCA”) won 85.4%-14.6% (1,095 votes to 187 votes). 103 Following the RCA's passage, the newly formed Rota Casino Gaming Commission (“RCGC”) 104 “set a casino license application fee of … USD 100,000 and an annual fee of USD 200,000.” 105
To date, there has been only one casino on Rota. On October 10, 2010, the 32-room Rota Hotel, near Songsong (on the island's southwestern side), having been renamed the Rota Treasure Island Casino and Hotel and given a $300,000 facelift, 106 opened to considerable local fanfare. 107 Aimed at Japanese tourists, it closed on March 25, 2011, two weeks after the Great Tōhoku Earthquake and Tsunami off the coast of eastern Japan led to numerous cancelled reservations. 108 Repeated efforts to revive it have come to naught. 109
In 2019, a government report concluded that Rota is not a good candidate for casino development:
Rota (Luta) is the southernmost island of the United States Commonwealth of the Northern Mariana Islands (CNMI) and the second southernmost [after Guam] of The Marianas Archipelago. It lies approximately 40 nautical miles north-northeast of Guam. Sinapalo village is the largest and most populated followed by Songsong village. Despite the island's beauty and environmental appeal, tourism has a spotty history on Rota and it is unclear what can really succeed there. Although a Gaming Commission exists on the island, there are no current likely prospects for casino development. … Interviews with public and private officials for this study suggest that small upscale eco-tourist lodges are now more likely to be developed on the island.
110
In 2022, following a public outcry, 111 the Rota legislative delegation voted to amend the RCA. If this change goes through, in the future the RCGC's five members will collect their $60,000 salaries only during times when there is an active casino on the island. 112
Saipan
In 2007, on the same day that Rota's voters approved their local gambling initiative, Saipan's voters rejected one of their own. 113 This failure set off a fierce battle in the CNMI's legislature, where for the next seven years pro-expansion and anti-expansion forces squared off against each other. 114 Finally, however, on March 21, 2014, with the NMI's government employee pension fund in desperate need of money, 115 Governor Eloy S. Inos reluctantly approved Public Law 18-38 (subsequently superseded by Public Law 18-56). 116
The law authorized the NMI's four-member Commonwealth Lottery Commission (CLC) 117 to award one commonwealth-wide casino license good for 25 years (extendable to 40 years). 118 In exchange, the winning applicant, having already paid the law's non-refundable $1 million application fee, 119 would be required to: 1) pay $15 million in annual licensing fees (with $30 million, representing years one and five, due immediately, and subsequent amounts adjusted upwards every five years after the fifth year based on the Saipan Consumer Price Index); 120 and 2) build, from the ground up, a $2 billion casino-hotel with at least 2,000 hotel rooms. 121
In July 2014, the CLC began taking applications. As explained on the web site of the Commonwealth Casino Commission (CCC), 122
[t]he CLC invited interested applicants for the exclusive license by issuing a Request for Proposal (RFP). Two applicants[, both from Hong Kong,] responded to the RFP—Marianas Star Entertainment and Imperial Pacific International (CNMI), LLC.
After an extensive review and vetting process, the Commonwealth Lottery Commission awarded Imperial Pacific International (CNMI), LLC, the exclusive casino license. This was formalized on August 12, 2014, with the signing of [a] Casino License Agreement (CLA) between the Commonwealth Lottery Commission and Imperial Pacific International (CNMI), LLC (IPI). 123
IPI immediately announced plans to build multiple NMI casinos, with the first one—dubbed the Grand Mariana Casino Hotel and Resort (now the Imperial Palace Saipan)—slated for Garapan (Saipan's main tourist area, on the island's western side). Initially budgeted at $3.14 billion with 2,229 hotel rooms, in September 2014 IPI announced it had increased the complex's price tag to $7.1 billion and expanded it to include 4,200 hotel rooms, 300 villas, a 600-seat theater, more than 20 restaurants, a theme park, and a casino with 3,500 slot machines and 1,600 gaming tables. 124 To outside observers, however, the project appeared highly risky due to its unprecedented size. 125
In July 2015, IPI opened a temporary casino called Best Sunshine Live Casino (BSLC) in Saipan's duty free DFS T-Galleria Mall. 126 Although “wedged between a one-story laundromat and a cell-phone shop,” 127 within a year BSLC was reporting that “its [16] high-roller tables [were] outperform[ing] the most profitable gambling palaces in Macau … and [were] generat[ing roughly] $32 billion in gambling volume[.]” 128 Leading BSLC to these eye-popping numbers was Mark A. Brown, IPI's new chief executive officer and one-time (2000-05) head of Donald Trump's casinos. 129
In July 2017, IPI closed BSLC and began operating out of the resort's casino, even though the adjoining hotel wing was not finished. 130 By now, however, IPI was squarely in the crosshairs of the U.S. government, which for some time had been receiving reports that IPI's huge foreign labor force was being mistreated. The litany of complaints included bad food, sub-standard housing, below minimum wage paychecks (often delayed), excessive hours, and, most concerning of all, job sites that lacked even the most basic safety precautions. 131 The government's investigation had become more aggressive in March 2017, after Yuanyou Hu, a 43-year-old Chinese construction worker who was not wearing a protective harness, fell off a hotel scaffold and died. 132
In October 2018, Super Typhoon Yutu hit the NMI,
133
forcing IPI to temporarily shut the casino.
134
In March 2020, when COVID-19 began spreading, IPI announced it again was temporarily shutting the casino.
135
This time, however, the casino did not reopen.
136
In November 2021, CDC Gaming Reports provided readers with a lengthy update:
The casino at Imperial Palace closed in March 2020 due to COVID-19, and since then IPI has seen its license suspended for failure to fulfil its contracted financial commitments, including its annual US$15.5 million license and US$3.1 million regulatory fee in 2020, as well as [its] annual US$20 million contributions to the community benefit fund in both 2018 and 2019. Construction long ago ground to a standstill, leaving large sections of the hotel structure without roofing and exposed to the elements. Despite this, IPI has maintained its Hong Kong Stock Exchange listing and continues to provide regulatory and financial updates, suggesting it still holds out hope for a white knight to ride in and save the day—presumably by purchasing what stands of Imperial Palace to do with it as they will. Whether that is a realistic expectation is dubious at best, with industry experts adamant that the property was always going to be too big and too ambitious for the market. … There are, of course, many larger questions that may never be answered, such as what exactly IPI's intentions were in the first place when it bid for and won a 25-year license to build and operate [a] Saipan casino back in 2014, paying an initial US$30 million fee for the privilege. Majority owned by former Macau junket executive Cui Li Jie, who stepped down as IPI chairwoman in June of this year, the company originally opened a temporary casino facility in Saipan in 2015, Best Sunshine Live, and quickly attracted global attention by reporting rolling chip volumes on its 16 VIP tables that exceeded volumes on the 100-plus tables at The Venetian Macao. … Even before COVID-19, IPI had given every indication that completion of Imperial Palace Saipan was in doubt, having been granted half-a-dozen deadline extensions and hinting at further requests to come. That so many requests were granted is more an indication of just how much authorities in Saipan and the smaller islands of Tinian and Rota … had riding on its success. [In October 2021, Representative Ralph N. Yumul (R-Saipan)] introduced [House Local Bill 22-26] to end IPI's casino monopoly and issue up to five more licenses for smaller, more sustainable casinos that would, presumably, be located inside some of Saipan's existing hotels.
137
There has been little further movement since CDC's reporting. Most of the action that has taken place has occurred in federal court, where Chief Judge Manglona has put IPI into partial receivership (to allow its gaming machines to be auctioned off—in January 2022, she stayed her order at the parties' request); 138 entered numerous judgments against it; 139 and “directed the American Contractors Indemnity Co. to release to [a group of seven] plaintiffs the $3 million secured by an appeal bond [put up by IPI].” 140 On May 23, 2022, however, two months after the CNMI's superior court ruled the CCC could strip IPI of its license, 141 Chief Judge Manglona threw the company a lifeline by issuing a temporary restraining order (TRO) preventing the CCC from taking such action. 142 In the meantime, it has been reported that IPI is considering pulling the plug 143 and that two unidentified New Jersey investors (who the CCC describes as “legitimate”) may be interested in buying the resort. 144
CONCLUSION
As noted at the outset of this article, the NMI is a thoroughly modern U.S. gambling jurisdiction, 145 experiencing all the aches and pains such status brings with it. 146 Gaming attorneys (and others) therefore would do well to keep an eye on its developments.