Casino Controversy in Saipan: The Tough Choice Between Marianas Stars and Best Sunshine

Best Sunshine, a subsidiary of Hong Kong-listed Imperial Pacific Holdings, was a favorite candidate for the Saipan casino market and now the company has an exclusive license.

For those of you who have never heard of Saipan, it is the largest island of the Northern Mariana Islands, a commonwealth of the United States, located in the western Pacific Ocean. The island is best known for the battle of 1944, when 3,000 US troops, 27,000 Japanese defenders and another 20,000 Japanese citizens died.

The island is drawing hundreds of thousands of tourists – 439,000 over the past year, to be more precise. Home to 90% of the Commonwealth of Northern Marianas Islands’ (CNMI) 54,000 residents, Saipan has been debating legalizing gambling since the 1970s. But voters rejected the proposal first in 1979, then again in 2007.

Recent gambling news has announced that the local administration awarded Best Sunshine an exclusive license to operate a casino on the island.

Not a “banana republic”

Casino investment in Saipan

Under the new law, the company licensed to operate the only casino on the island will have to:

• make a $2 billion investment
• offer 2,000 hotel rooms
• pay $15 million in tax/year

But not everyone is satisfied with the move to offer Best Sunshine the right to run all gambling operations on the island. Phillip Mendiola-Long, president and managing director of CNMI-based consultant Sherman Pacific believes Saipan could draw interest from bigger casino operators, with a little bit of effort.

“We’re not a banana republic,” he told reporters. His clients include American company Bridge Investment Group, one of the many investors planning new casinos on the neighboring islands of Tinian and Rota.

American gambling laws allow casinos, but commonwealths get to decide on their own whether they want to do open the market to such businesses. And CNMI’s House of Representatives has desperately tried to pass its casino bill for years, but the Senate has repeatedly rejected it.

It was only this March that the Senate finally agreed to approve the bill. The only problem is, it was all done without public hearings or committee consideration.

How they said “yes”

The media has been wondering what brought on this sudden change of heart. But earlier in January, casino investors with ties to Macau junket promoter Hengsheng Group took four key senators on a “fact-finding” trip to Hong Kong and Macau.

Officials promised to use the immediate $30 million upfront casino fee payment to make 25% cuts in public pensions. The decision was made by Governor Eloy Inos, who is up for reelection this autumn and is facing charges of corruption.

Two anti-gambling groups in Saipan demanded a referendum, gathering enough signatures to make themselves heard. But all legislators did was replace the previous bill with a new one, without bringing significant changes to it.

The move was meant to void the petitions, as they were based on the previous casino law, in order to avoid a referendum. And now it’s too late for a new campaign to gather signatures in support of the referendum.

Casino wars

Opponents of the bill say the document was drafted with Best Sunshine in mind and with the intention of deterring other potential investors. According to the new law, the licensee will have to make a $2 billion investment and build a hotel with 2,000 rooms. All this considering that all of CNMI has a little over 1,000 rooms at the moment.

The application fee set for potential bidders was $1 million, with an additional $30 million deposit, as well as upfront payment of two years’ gaming tax. There is an annual $15 million flat tax rate and experts believe this will discourage authorities from checking up on the casino operator. Not to mention setting a percentage would have been much more advantageous.

Two other companies teamed up to bid as Marianas Stars Entertainment, but officials tried to disqualify them right from the beginning. The proposal was for a theme park and investment in air links between CNMI and Guam. The two companies have also supported the referendum and suggested awarding two licenses instead of just one, each with a $1 billion investment.

Meanwhile, Best Sunshine started its own campaign and promised a $10 million fund for adult residents, but skeptics say the developer will just buy a hotel, add a casino and delay the construction of the resort indefinitely.

Even though CNMI officials have already made their choice, the war is not over yet. Marianas Stars has engaged Washington lobby group Park Strategies and is planning on taking this fight to Washington.