A primary role of the Ontario First Nations Limited Partnership (OFNLP) is to aggressively protect and act in the best interest of the 133 First Nations in Ontario. In this capacity and pursuant to the explicit authorization of the First Nations Partners, OFNLP is vigorously challenging actions by the Province and Mnjikaning First Nation (MFN) that may impact negatively on the flow of revenue rightfully owned by the First Nations in Ontario.
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As directed by the Partners, OFNLP is representing the rights of the 133 First Nations in litigation against the Province to reclaim the 20% gross revenues that the Province has confiscated as a WinTax ever since the Casino opened in 1996.
OFNLP is also challenging the Province’s attempt, through court application, to block OFNLP from using Casino revenues to pay for legal costs.
OFNLP is also representing the 133 First Nations in cases brought on by MFN. As the host community of the Casino, MFN reaps over $10 million in annual financial benefits – but MFN wants more and is attempting through the provincial courts to grab 35% of the total net revenues of the Casino away from the other 133 First Nations forever and without condition.
MFN also wanted to force through a “cash sweep” plan to accelerate the repayment of the loan for the hotel and entertainment centre, even though such a plan would have devastating repercussions for the other 133 First Nations.
Over several years , MFN has attempted to finance a new cultural centre for the community and improvements to the Rama Road with Casino revenues that rightfully belong to the 133 FNs. OFNLP continuously monitors MFN’s actions and has opposed any attempts by MFN to divert revenues to these two projects.
In May, 2004, Penn National, the Operator of the Casino (“the Operator”), took MFN to Federal Court over MFN’s refusal to issue building permits which the Operator requires to make necessary repairs to the Casino.
CASINO RAMA REVENUE SHARING
Casino Rama was established as an Ontario First Nations’ Casino
to share all its revenues among all First Nations within Ontario.
For the first five years, MFN, the host community, was paid 35%
of profits (approx. $172 million), to cover Casino enhancement
costs. During the first five year period (which ended July 31,
2001), the remaining 65% was shared by the other 133 OFNs. After
July, 2001, 100% of net revenues were to be shared among all
First Nations. All revenues distributed to First Nations are
governed by a Revenue Share Formula (50-40-10), which was approved
in 1998. 50% is distributed according to the population of the
community; 40% is distributed equally among all communities;
and, 10% is set aside for distribution to listed remote communities.
The Partner First Nations must use their Casino Rama distributions to benefit the agreed upon ‘Five Purposes’ of: Education, Health, Cultural Development, Community Development and Economic Development.
An independent Remoteness Study was tabled at the AOCCs of 2003 and 2004. At the June 2006 AOCC Chiefs voted to implement the study, within 6 months and after the development of an appeals process.
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BASIC CHRONOLOGY OF CASINO
RAMA DEVELOPMENT AND MAJOR LITIGATIONS |
April, 1993 |
Negotiations with the Ontario
NDP Government for a First Nations Casino. |
February, 1994 |
Fourteen First Nations proposals
are submitted to host the Casino. |
April, 1994 |
Ontario Ministers Churley
and Wildman confirm to Ontario First Nations that, unlike
the situation at the Casino in Windsor, Ontario would
not treat the First Nations Casino as a source of revenue,
i.e. the 20% WinTax would not be imposed. |
May, 1994 |
Site selection by an independent
Site Selection Panel begins. The Panel was focused on
site selection. It was specifically provided that the
formula for revenue sharing would be subject to further
negotiation with First Nations. |
December, 1994 |
MFN is selected as host
for the OFN Casino. In the weeks preceding MFN’s
selection, it was reconfirmed to all finalists that revenue
sharing among First Nations (including the host First
Nation) would be the subject of a separate process to
follow the selection of the host nation. |
May, 1995 |
Request for Proposal (RFP)
is issued for a commercial operator for Casino Rama. |
September, 1995 |
The management company “Carnival” is
selected as the Casino operator. |
February, 1996 |
The Mike Harris PC government
announces that Ontario will take 20% of the Casino’s
gross revenues and halts construction through its control
of the bridge financing. First Nations vigorously object
to the confiscation of these revenues, in violation of
the agreement between Ontario and OFNs. |
May, 1996 |
Lovelace claim
is brought by certain Métis groups seeking a share
of Casino revenues. In June of 1996 the Chiefs in Assembly
support a 35% profit allocation to MFN for five years
(1996 -2001) for the enhancement of the Casino as a destination
resort. The 35% was opposed by Ontario as an inequitable
distribution. |
August, 1996 |
Casino Rama opens to the
public. |
July, 1998 |
Chiefs of Ontario file Statement
of Claim to recover the 20% of gross revenues taken by
the Ontario government. |
December, 1998 |
Chiefs in Assembly ratify
a revenue distribution formula (50-40-10) for the initial
five-year period. |
June, 1999 |
The Chiefs in Assembly support
financing up to $225 million for a hotel and entertainment
center at the Casino. The Chiefs do not support the construction
and operation of a cultural centre with Casino funds.
MFN is not willing to use any of the 35% for this Casino
enhancement project. |
November, 1999 |
Ontario files Statement
of Defense in the 20% case. |
June, 2000 |
First Nations and Ontario
sign Revenue Agreement on the distribution of revenues
among the First Nations. Formal approval is given for
MFN to receive 35% of the Casino’s net revenues
for the first five years of operations “primarily” to
develop a destination resort. |
July, 2000 |
Supreme Court of Canada
dismisses the Lovelace claim. All revenues are
available to the First Nations. |
June, 2001 |
First Nations vote at the
AOCC against renewal of the special 35% allocation to
MFN beyond July 31, 2001, instead allocating MFN a formula
share on the same basis as other First Nations. |
October, 2001 |
MFN issues Statement of
Claim against the Province of Ontario to retain the 35%
on a permanent basis. MFN does not sue COO and OFNLP
because of the MFN theory that the only applicable legal
arrangement is between MFN and Ontario. In fact, the
other First Nations represented by COO and the OFNLP
are the parties most directly affected by the lawsuit.
This action of MFN causes unnecessary expense and delay. |
November, 2001 |
OFNLP and COO file a motion
in court to be added as defendants in MFN’s 35%
lawsuit and as representative plaintiffs in the 20% action
against the Province.
In Update # 13, distributed to all Chiefs, the OFNLP
Board states “that any attempt by MFN to put
its interests ahead of the 133 other First Nations
will be vigorously resisted, in court if necessary”. |
June, 2002 |
Penn National replaces Carnival
as the Casino Operator.
The Chiefs in Assembly at the Eabametoong AOCC vote
to reaffirm their position that they want OFNLP and
COO to represent them in the 20% and 35% court cases.
MFN and Ontario continue to raise a series of procedural
objections in these actions, causing further unnecessary
delay and expense to OFNs. |
October, 2002 |
Ontario files a court application
to block OFNLP from using Casino revenues for the 20%
case.
The Chiefs, through a number of Resolutions going
back as far as 1996, support the use of funds necessary
to fight the 20% issue in the courts. The Chiefs have
continuously supported using necessary funds for the
35% court case. The Chiefs reauthorize OFNLP and COO
to represent the OFNs in these cases. |
February, 2003 |
MFN’s and Ontario’s
procedural objections are dismissed by Judge Campbell
of the Superior Court of Ontario on February 24, 2003.
This means that OFNLP and COO can proceed to have the
substantive merits of the 35% and 20% settled in court.
Judge Campbell also rules that the law firm of Blake,
Cassels & Graydon LLP is in conflict in handling
the 20% case. This ruling is not appealed. |
June, 2003 |
MFN files a court action
to force a cash sweep accelerated repayment plan for
the loan on the hotel and entertainment centre. The result
of a 100% cash sweep could deprive OFNs and OFNLP of
all funding for several years. At the Whitefish Lake
AOCC, the Chiefs reconfirm their opposition to the cash
sweep. First Nations are not named as a party on the
MFN application; OFNLP must bring a motion to be added.
MFN serves a notice of intention to arbitrate on
the Rama Road issue. This dispute goes back to 2000.
MFN stated to the 2001 Assembly that it (MFN) would
pay for the Road on a conditional basis. After the
Chiefs voted at the 2001 AOCC to have the 35% shared
among all First Nations, however, MFN indicated it
would seek reimbursement of its contribution to the
Road.
MFN continues to push for the building of a cultural
centre with Casino revenues. Chiefs at the 2003 AOCC
pass Resolution 03/33 confirming their opposition to
the cultural centre plan.
Following an RFP process, OFNLP hires new litigation
counsel, Torys LLP . |
December 2003 |
Formal document exchange
for the 20% and 35% lawsuits is completed.
MFN threatens that it will not refinance the loan
for the hotel and entertainment center when it comes
due in June, 2007. |
January 2004 |
The court rules that MFN
does not have the right to impose a cash sweep.
MFN appeals the court’s decision to the Ontario
Court of Appeal and again threatens that it will not
refinance the loan in 2007. |
March 2004 |
The discovery witness phase
for the 20% case commences on March 2. |
April 2004 |
MFN’s threat of default
on the hotel and entertainment centre loan causes the
Ontario Lottery and Gaming Corporation (OLGC) to develop
its own form of cash sweep in order to see the loan repaid. |
May 2004 |
The Casino Operator, Penn
National, files an application in Federal Court challenging
the refusal by MFN to issue eight building permits for
needed improvements at the Casino. The application alleges
that MFN has held up the permits in order to put pressure
on the Province on an unrelated matter, this being the
retail sales tax treatment of certain transactions at
the Casino. |
June 2004 |
At the OFNLP 4th AGM at
Hiawatha First Nation, the Partners approved an Resolution
authorizing OFNLP to conduct without prejudice settlement
discussions with the Province on the 20% WinTax case.
OFNLP will report to the Chiefs/Partners on the progress
of any discussions and must bring back any settlement
proposal to a Partners or Annual Partners/Shareholders
meeting and Chiefs Assembly for review, possible acceptance,
rejection or modification. The resolution also included
the establishment of a Partners Committee to provide
advice to the OFNLP on the conduct of any settlement
discussions. |
| July 2004 |
The Operator, files an Emergency
Application in the Federal Court regarding MFN’s
refusal to issue two of the eight requested building
permits. The emergency application focuses on two critical
areas that raise serious health and safety issues, these
being repairs needed for a washroom in the baccarat pit,
and the ventilation system. |
| February 2005 |
Justice Heneghan dismisses the emergency application (building permits) with costs to MFN. The Judge rules that MFN is a public authority that has a duty not to make decisions on irrelevant grounds. Judge also ruled the Federal Court has no jurisdiction to decide issues that arise under the Development and Operating Agreement (DOA).
Based on the above ruling, the Federal Court could not require MFN to issue the permits.
The Judge did not rule on the ownership issue. |
| March 2005 |
Negotiations with MFN, regarding the Cash Sweep, and other issues (35%, DOA, etc.) end without result.
Negotiations with Province begin.
The Casino Operator appeals Justice Heneghan’s decision to the Federal Cour of Appeal |
| June 2005 |
The Partners confirm that no further negotiations (re: cash sweep) with MFN are appropriate. |
| September 2005 |
OFNLP Board authorized extension of the Negotiating Committee (re: province) mandate to January 30,2006. |
| October 2005 |
MFN passes a new by-law regarding building permits. MFN issues Penn National, the Operator of the Casino, building permits with attached consent forms. Consent forms acknowledge MFN as owner of the First Nations Casino at Rama, and effectively rewrites the DOA by declaring the operator to be MFN’s agent for the purpose of building permits.
OFNLP Board informed Operator did not sign the consent form. |
| November 2005 |
MFN files notice of motion in the Federal Court to strike the appeal (re:building permits) on the grounds they have issued building permits, therefore the appeal is moot.
The Operator advises MFN that in the absence of an agreement that the consent/agency/contracting requirement under the Amended By-Law does not apply to the Operator of Casion Rama, the Operator will have no alternative but to seek further relief from the court.
OLGC provides notice to MFN pursuant to the DOA that it requires MFN to remedy its breaches of the DOA by unconditionally issuing the building permits.
As intervenor, OFNLP files a motion with the Federal Court of Appeal submitting that the appeal is in no way moot and must be heard. |
| February 2006 |
The Partners ratify the elements of a New First Nations Gaming and Revenue Sharing arrangement with the province, as expressed in a Term Sheet. |
| March 2006 |
OFNLP Directors and the Province of Ontario sign a new First Nations Gaming and Revenue Sharing Agreement in Principle, based on the Term Sheet and the authority granted by the SPM in February.
If Partners and the Province approve new Business Agreements, procedural steps will be taken to discontinue the 20% litigation, in late 2005. |
June 2006 |
OFNLP Counsel informed that the Operator and MFN have reached a settlement regarding the building permits. |
The 35% Issue
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For the first five years of operation,
the OFN Casino net revenues were divided 35% to MFN, to
be used for Casino enhancement, and 65% to OFN, shared
among the other 133 FNs in Ontario.
-
The Chiefs in Assembly agreed that MFN
would receive the 35% to cover Casino enhancement costs
for a five-year period that expired July 31, 2001.
-
These funds were intended to be used to
ensure that profits from the Casino would grow for the
benefit of all OFNs. In fact, little or none of the money
was spent on Casino enhancement. MFN even objected to spending
just over $1 million for the improvement of a road leading
directly into the community and Casino.
- Pursuant to the Protocol Agreement, during
2000 and 2001, OFNLP held meetings with MFN in an attempt
to negotiate a joint proposal to present to the Chiefs
at the June 2001 AOCC on how the 35% should be allocated
after July 31, 2001.
-
Negotiations did not result in a joint
proposal because MFN took the position that they were entitled
to receive the full 35% on a perpetual basis. MFN was not
prepared to take anything less.
-
The Chiefs at the 2001 AOCC voted to have
the 35% shared among all First Nations after July 31, 2001,
including a formula share for MFN.
-
In October of 2001, MFN filed a lawsuit
against the Province of Ontario to keep the 35% forever.
OFNLP and COO are representing the Partners in this court
case. Because of the lawsuit brought on by MFN, the
35% may be unavailable for distribution to Ontario First
Nations for several years. MFN did not name OFNLP and COO as parties in the 35% law suit, forcing OFNLP to bring a motion to be added.
-
Examinations for discovery, along with
the 20% case, began on March 2, 2004.
- OFNLP anticipates that a trial will occur in 2007, at the earliest. The final scheduling is up to the courts.
The 20% Issue
- This refers to the 20% WinTax levied against Casino revenue
by the provincial government.
- The provincial NDP government originally agreed that
no “WinTax” would
be levied against Casino Rama. There was a legally
binding agreement that all available revenues would
go to First Nations.
- When the Casino Rama project was developed and launched,
the 20% share of gross revenues was to have gone into
a First Nations Fund for distribution to First Nations
in Ontario.
- After the PC government took over, it breached the agreement
in February of 1996 and indicated that the 20% WinTax
would be applied.
- The Chiefs of Ontario commenced their lawsuit against
Ontario in 1998 to recover these funds - more than
$700 million to March of 2004. OFNLP moved to become
a party to the proceedings. As well, a motion was filed
to amend the Statement of Claim. MFN opposed many of
the procedural steps taken by OFNLP and COO, but, in
February 2003, the court dismissed MFN’s
objections.
- MFN has included the 20% claim as part of their lawsuit
filed against the Province of Ontario and the Ontario
Lottery and Gaming Corporation regarding the 35%. This
is difficult to comprehend as MFN has stated on many occasions
that it has no beneficial interest in the 20%. The Development
and Operating Agreement (DOA) specifically says Rama agreed
to the 20% going to Ontario. This was not binding on other
First Nations, but the DOA was signed by MFN.
- In accordance with the wishes of the Chiefs, OFNLP and
COO are representing the OFNs in the Court cases involving
the 35% and 20%.
- Examinations for discovery, along with the 35% case,
began on March 2, 2004. There will be a second round
of examinations starting in the fall of 2004.
- OFNLP anticipates that a trial will occur in 2007, at the earliest. The final scheduling is up to the courts.
- It has not been determined if the 20% and the 35%
cases will be tried separately or together.
- The 35% and 20% litigations are closely related. Because several similar questions arise in both cases, such as casino ownership, a judge will determine if the two cases will be tried together
The Cash Sweep Issue
- Ever since 2001, MFN has been attempting to force
through a cash sweep to accelerate repayment of the loan
for the hotel and entertainment centre even though such
a plan would have a devastating impact on the revenue
flow to First Nations.
- A cash sweep of up to 100%, for example, would deprive
First Nations of any revenue for about three years. MFN,
on the other had, would continue to collect millions
of dollars in benefits for being the host community!
- MFN filed a court application in June 2003 in an attempt
to receive court approval to initiate the cash sweep.
The court ruled in January, 2004, that MFN did not have
the right to impose a cash sweep.
- MFN appealed the court
ruling and also stated that it would not refinance
the loan when it comes due in 2007.
- This action caused the Ontario Lottery and Gaming
Corporation (OLGC) to
threaten that it would impose its own cash sweep in order
to see the loan repaid.
- OFNLP is presently in reviewing alternatives.
- Elements of a new First Nations Gaming and Revenue Arrangement (2006) have Cash Sweep considerations.
The Rama Road Issue
- Part of the Rama Road leading directly into the Rama
community and the Casino required improvements in 2000.
OFNLP refused to approve using general Casino revenues
to fund the improvements, taking the position that MFN
was obliged to pay for the improvements from the 35% of
net revenues it was receiving.
- MFN used 35% funds on a without prejudice basis.
- After the Chiefs voted at the 2001 AOCC to have the
35% shared among all First Nations, however, MFN indicated
it would seek reimbursement of its contribution to improvements
to the Rama Road.
- MFN has been slow to prosecute its objection to the
Rama Road expenditure, to the point where MFN may have
lost its right to object.
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