Resort management firm says Chukchansi tribe owes it $21 million for helping reopen casino

Fresno Bee Staff Photo

A group that was managing Chukchansi Gold Resort & Casino and made arrangements to get it open at the end of 2015 has filed a lawsuit saying the tribe and its business authority owe the company $21 million.

The case stems from efforts to reopen the casino in 2015 after it was shut down in October 2014 following a casino office raid and fight between Chukchansi factions. The suit alleges fraud, breach of contract, negligence and state Business and Professions Code violations. The company, Florida-based Osceola Blackwood Ivory Gaming Group, also is seeking punitive damages from the tribe and the Chukchansi Economic Development Authority.

The lawsuit, filed March 16 in U.S. District Court, said tribal officials approved an agreement in the summer of 2015 to pay Osceola 30% of net revenues for seven years, which is allowed under the National Indian Gaming Commission rules.

The tribe worked for much of 2015 to get the casino open and revive its revenue stream. In the summer that year, an agreement was reached with Osceola, but an election later in the year changed the political leanings of the tribal council.

In approving the agreement, the tribe “expressly, unequivocally and irrevocably” waived its sovereign immunity, the complaint said, which allows the company to sue the tribe if the agreement was breached.

The agreement was for management of the hotel and casino. The Osceola firm also assisted the tribe in negotiating a settlement with the National Indian Gaming Commission, as well as helping to secure funding to reopen the hotel and casino.

The group and the tribe rearranged the contract when the tribe secured financing without the gaming group’s assistance. The contract was then revised from seven to five years and from 30% of net revenues to 25% net revenues. The five-year contract was a management agreement to reopen the hotel and casino and then operate it. Osceola stood to make $21 million from the arrangement based on incoming revenues.

The amount specified in the suit is money the company is losing “that it otherwise would have been paid under the terms of the management agreement had (Chukchansi) properly submitted the management agreement to the NIGC for approval.”

The lawsuit said the Osceola group took on “financial risk” by assisting the tribe without an approved agreement from the federal gaming commission, but was promised by the tribe economic development arm that the management agreement would be submitted, a process that could take up to a year for approval.

“We don’t think that the complaint has any merit whatsoever,” said John Peebles, lawyer for the Chukchansi tribe. “You can mark my words the evidence that will be presented in this matter will be substantially different from what is alleged in this complaint.”

Osceola worked 13 months with the understanding that the tribe would submit the Osceola agreement to the gaming commission after the hotel and casino opened on Dec. 31, 2015. Osceola worked for Chukchansi until Aug. 10, 2016.

Chukchansi Gold is now generating significant revenue for the tribe, the company said, thanks to the operational model the company put in place.

“The complaint filed in court is a necessary step in our repeated efforts to make certain the tribe honors their end of the parties’ agreements,” said Patrick Muncie, a spokesman for the company. “We are hopeful this matter will be resolved quickly.”

After this story was published online, Claudia Gonzales, Chukchansi’s tribal chairwoman, gave a statement.

In it, Gonzales said since the tribe has resolved its internal conflicts, many “unscrupulous companies and individuals,” including Osceola, have suddenly surfaced looking for cash.

“(Osceola) was a vender of the casino; but they were well compensated for their services,” Gonzales said. “Their lawsuit makes it clear that now (Osceola) wants more money than it was owed and paid; but we are a tribal government, not an ATM ... We will fight it through the courts and we will win.”