2.0
BACKGROUND
1993 – 1996
Negotiations with the NDP-led Ontario Government for a First Nations Casino began in or about 1993. By February 1994, fourteen First Nations and First Nation groups had submitted proposals to host the Casino. An independent Site Selection Committee selected Mnjikaning First Nation (MFN) as the host site in December 1994. The site selection process did not deal with the issue of revenue distribution/sharing among First Nations, which was specifically reserved for later discussions. The Casino opened in August 1996. Prior to the opening of the Casino, three significant events happened earlier that year.
In February 1996, the Mike Harris Progressive Conservative
Government announced that Ontario would take 20% of the
Casino’s gross revenues in the form a WinTax. This
violated the legally binding agreement with First Nations.
Secondly, in May of 1996, certain Métis groups,
seeking a share of the Casino’s revenues, filed the Lovelace claim in court.
Thirdly, in June, the Chiefs in Assembly supported a
35% profit allocation to MFN for five years (1996 to July
31, 2001) for the enhancement of the Casino as a destination
resort. It was agreed that the remaining 65% would be divided
equitably among the remaining 133 First Nations during
the initial five-year period.
1998
In July, the Chiefs of Ontario filed a Statement of
Claim to recover the 20% of gross revenues taken via the
WinTax by the Provincial government. In December, the Chiefs
in Assembly ratified a net revenue distribution formula
of 50-40-10 for the initial five-year period.
1999
In June, the Chiefs in Assembly supported financing
up to $225 million for a hotel and entertainment centre.
The Chiefs did not support the construction of a cultural
centre. MFN refused to use any of the 35% for this Casino
enhancement project.
In December, a revised negotiation structure was imposed
to finalize an agreement by January of 2000. To this end,
a “Closure Committee” was formed on December
16, 1999 to finalize the agreement package. The Closure Committee,
comprised of three representatives from each side, met during
the holiday period to address technical issues.
The Province filed a Statement of Defense in the 20% (WinTax)
case in November.
2000
Continuing throughout January 2000, the Closure Committee
started an extensive process to agree on the basic agreement
components. An agreement-in-principle was reached verbally
by February 2, and the draft evidenced by February 3.
This process led to the task of finalizing the legal
text of the Revenue Sharing Agreement and several related
documents, including (1) Métis Litigation Agreement;
(2) Other First Nations Limited Partnership Agreement;
(3) Mnjikaning Limited Partnership Agreement; (4) Shareholders
Agreements for the general partnership corporation; and
(5) Protocol Agreement (between the other First Nations
and Mnjikaning).
The drafting process was extensive but concluded successfully
when the First Nations and Ontario signed the CRRA in
June 2000. This included formal approval to transfer 35%
of the Casino’s net revenues to MFN for the initial
five-year period (1996-2001) for Casino enhancement.
The initial distribution amount was in excess of $350 million,
with regular distributions to happen thereafter on a monthly
basis as net revenues became available. The Chiefs of Ontario
and the OFNLP were able to actively pursue the 20% (WinTax)
lawsuit against the Province, as the CRRA contemplated.
In July, the Supreme Court of Canada dismissed the Lovelace (Métis)
claim, confirming that all revenues would only be available
to the First Nations. The Métis Litigation Agreement
effectively became a dead letter.
2001 Efforts to negotiate an appropriate allocation of the 35%
net revenues following the initial five-year period broke
off between MFN and the 35% committee of COO/OFNLP. In spite
of all factual and legal positions, MFN refused to consider
any option except 35% forever. At the All Ontario Chiefs
Conference (AOCC) held at Walpole Island (Bkejwanong Territory)
June 25–27, 2001, all of the Chiefs (excluding MFN),
voted to have the 35% shared among all of the First Nations
in Ontario following July 31,2001 (end of the five-year period),
including a formula share for MFN.
Mnjikaning First Nation did not accept the traditional First
Nation decision-making process and issued a court claim against
the Province of Ontario, tying it in with a claim for the
20% WinTax dollars.
Also, at the AOCC, the Chiefs voted to extend the 50-40-10
distribution formula for one more year.
2002
At the next All Ontario Chiefs Conference, held in Eabametoong
First Nation, the Chiefs voted (June 27, 2002) to confirm
and adopt (Resolution 02/08) the distribution formula for
net revenues from the Ontario First Nations Casino at Rama
at 50 (population)-40 (base)-10 (remoteness), without the
special arrangement for the “Four Large First Nations” tied
to the Future Generations Fund. The formula would be reviewed
every five years and the Chiefs reserved the right at a
future Assembly to adjust the remoteness factor based on
the independent remoteness study conducted by Ernst and
Young LLP .
t this time, the Chiefs also approved (Resolution 02/33) the
Project Fund Policy as presented by OFNLP. This special projects
fund allows for 2% of the total distributable net revenues
(including the Future Generation Fund) from the Casino to be
set aside annually
for projects that would have a positive regional impact
on First Nations. Eligible projects must come within the
five spending purposes described in section 3.3.1 of the
CRRA. Additionally, the Chiefs confirmed that OFNLP and COO should
represent them in the 20% and 35% court cases.
2003
Mnjikaning First Nation did not abide by the AOCC decision-making
process and attempted in the Ontario Courts to block
COO and OFNLP from representing OFNs. All of MFN’s
procedural objections were dismissed by Judge Campbell
of the Superior Court of Justice on February 24, 2003.
This means that OFNLP and COO can now proceed to have
the substantive merits of the 35% and 20% issues settled
in court.
At the 2003 All Ontario Chiefs Conference, held in
Whitefish Lake First Nation, June 24 to 26, the Chiefs
voted to confirm their opposition to Mnjikaning’s
plan to build a cultural centre near the Casino with
Casino revenues. MFN continues to advocate the plan.
At the 3 rd Annual General Meeting (AGM) of OFNLP, held
during the AOCC, an Extraordinary Resolution was passed
by the Chiefs/Partners, approving an amendment of the
Limited Partnership Agreement to facilitate certain collective
funding initiatives.
MFN presents its intent to force through a cash sweep
repayment of the loan it assumed for the construction of
the hotel and entertainment centre. OFNLP strongly opposes
this scheme because of the devastating effect it will have
on the 133 First Nations.
2004
By early 2004, OFNLP had entered into a number of litigation
activities on behalf of the First Nations.
Litigation lawyers, Torys LLP , prepared the statement
of defence to the 35% (and 20%) claim. Pleadings were finalized
and exchanged and sworn affidavits of documents were served
and productions exchanged. The parties participated in
an initial mediation session (described as a case conference)
with Justice Winkler on February 25. Examinations for discovery
began on March 2 nd. While a second round of discoveries
will be required starting in the fall of 2004, mandatory
mediation maytake place before the end
of 2004. A trial is likely in 2006 or 2007.
In spite of opposition by OFNLP, the FNs, the Ontario
Lottery and Gaming Commission (OLGC) and the Courts (Judge
Katherine Swinton ruling of January 02, 2004), MFN remained
intent on forcing the cash sweep. MFN appealed Judge Swinton’s
ruling and went so far as to threaten to renege on the
loan due in 2007. In April, 2004, the OLGC responded to
MFN’s threat by informing OFNLP that the OLGC might
initiate its own cash sweep in order to ensure that the
loan is paid by 2007. A cash sweep of any kind by MFN or
the OLGC would negatively impact on the revenue flow to
First Nations. OFNLP is pursuing independent financial
options as well as joint alternatives with the OLGC in
order to protect the First Nations.
OFNLP filed an appeal from a portion of Justice Campbell’s
order of December 29, 2003 regarding an arbitrator for
the dispute concerning the province’s objection to
OFNLP using Casino Rama revenues to pay the legal costs
of the 20% case. The appeal is aimed at the portion of
Judge Campbell’s order that purports to define the
scope of the arbitrator’s jurisdiction by setting
out the issues in the dispute. The appeal will be heard
by the Ontario Court of Appeal in September of 2004.
In May, 2004, Penn National, the Operator of Casino
Rama, filed an application in Federal Court against MFN
for refusing to issue building permits, which the Operator
requires to make necessary repairs to the Casino. MFN refuses
to issue the permits until its dispute with the Province
over provincial sales tax (PST) is resolved even though
the PST issue is totally unrelated to the repair work.
By this action, which could lead to the deterioration of
the Casino and a decline in business, OFNLP believes that
MFN is breaching obligations under the Development and
Operating Agreement (DOA).
In July, 2004, the Operator filed an emergency application
with regard to two areas in critical need of repair,
which had raised serious health and safety concerns – an
approved ventilation system and a washroom in the bacarrat
pit area. OFNLP was successful in obtained intervenor
status in this application. The application was heard
in court on July 17. The Judge reserved her ruling. OFNLP
supported the principal of First Nations tax immunity
under sec.87 of the Indian Act, but took the position
that it was inappropriate for MFN to link the issue with
the issuance of normal building permits.
At the 2004 AOCC, held at Hiawatha First Nation, June
15 – 17 th, the Chiefs in Assembly voted to disband
the 2% Project Fund and release the accumulated funds
of approximately $1.2 million, for distribution to the
communities through the approved distribution formula.
The Chiefs did confirm their support for on-going funding
for the Little NHL and Travelling Hockey Hall of Fame.
At the OFNLP 4th Annual General Meeting (AGM), held
on June 17 th at the Hiawatha First Nation, the Partners
passed an Extraordinary Resolution authorizing OFNLP to
conduct without prejudice settlement discussions with the
Province on the 20% WinTax case. A Partners Committee will
be established to provide advice to the Board during any
discussions. OFNLP will report to the Partners on any progress
and bring back any settlement proposal to a Partners meeting
for review.
Click here for the Basic Chronology of Casino Rama Development and Major Litigations.
3.0 CONCLUSIONS
Several accomplishments, as well as challenges, stand out
as described below.
3.1 Accomplishments
The CRRA
The Closure Committee, which worked towards the development
of the CRRA, believed that, while not a perfect arrangement,
the Agreement protected all fundamental First Nation interests.
This Agreement is at the centre of the revenue distribution
package. It protects the Provincial programs, as they existed
in 1996, from reduction or elimination as a result of the
Casino Rama distribution.
The Agreement does not in any way undermine the legal
position of First Nations with regard to Aboriginal and
Treaty rights to gaming.
The Agreement provides that Audit information on the
Casino Rama funds is to be produced at the same time as
general First Nation audits, i.e. 90-120 days
after the fiscal year-end.
Five broad purposes for the use of funds were
identified and these include:
- Community Development;
- Health;
- Education;
- Economic Development; and,
- Cultural
Development.
First Nations have a great deal of flexibility
in allocating the funds based on local priorities.
First Nations can also use the funds to retire
existing debt, but the First Nation must establish
that the debt was accumulated in relation to one
or more of the five purposes. |
The Agreement also addresses the possibility of a First
Nation success in the 20% litigation, which might lead
to a new or amended Agreement. The Province reserves the
right to terminate the existing Revenue Sharing Agreement,
but is obliged to distribute the monies to First Nations
in accordance with the court ruling and the five spending
purposes of the Revenue Sharing Agreement.
The Protocol Agreement
Issues that mostly concerned Mnjikaning and other First
Nations were placed in a First Nations Protocol during
the 1999-2000 negotiation process.
The Protocol includes an after-the-fact review mechanism
for certain related party transactions at the Casino involving
Mnjikaning.
The Chiefs in Assembly agreed that Mnjikaning should
receive 35% of the net revenues for the first five years
of the operation of the Casino (ended July 31, 2001). The
allocation was conditional; the money was for the specific
purpose of Casino enhancement. The Chiefs mandated the
establishment of senior level committees to negotiate with
Mnjikaning to reach, if possible, a distribution agreement
following July 31, 2001. If no understanding was reached
by this date, the 35% Funds would be then placed in a joint
escrow account or a provincial account, subject to a final
direction from a court or the First Nations parties. Such
a situation would not in any way affect the distribution
of 65% of the net revenues to First Nations in Ontario.
This is in fact what happened following the 2001 AOCC.
3.2 Challenges Ahead
The 35% Issue
While the Chiefs in Assembly voted in June 2001 to return
the 35% to all of the First Nations, Mnjikaning First Nation
issued claim against the Province in October 2001 to retain
the 35% on a permanent basis. As a result, the 35% may be
held in a segregated account for many years and will be unavailable
for distribution to Ontario First Nations while the lawsuit
is active.
The 20% Issue
MFN has included the 20% claim as part of the lawsuit
it filed to keep the 35%, even though MFN signed away the
20% funds when it entered into a Development and Operating
Agreement (DOA) with the Province in March of 1996. OFNLP
is presently representing the 133 First Nations in the
courts of Ontario in a vigorous attempt to recover the
monies confiscated by the province under the WinTax.
Other Major Challenges
There are several major concerns for First Nations regarding
the flow of Casino Rama revenues to their communities.
Most of the challenges have come from MFN’s apparent
belief that the Casino exists because of and for MFN. The
35% litigation, the cash sweep challenge, a threatened
cultural centre and legal action over the Rama Road are
just a few examples of the ways in which MFN is attempting
to grab as much of the Casino revenues as possible. The
province and the OLGC have initiated further challenges
such as the 20% WinTax, the litigation funding dispute
and OLGC’s threat to impose its own cash sweep.
3.3 OFNLP Position
OFNLP works on behalf of the 133 First Nation Partners
in Ontario to protect their interests.
OFNLP vigorously resists the attempts by MFN and Ontario
to put their interests first.
To this end, OFNLP successfully moved to become a party to the Chiefs of Ontario’s 20% case. As well, the OFNLP moved to successfully amend the Statement of Claim. MFN opposed many of the procedural steps taken by COO and OFNLP.
On February 24, 2003, Judge Campbell ruled against MFN
and for the right of OFNs to have OFNLP and COO represent
them in court cases. At the same time, Judge Campbell ruled
that the OFNLP law firm (Blakes LLP ) was in a conflict
of interest on the 20% case, in spite of a signed consent
given by MFN with independent legal advice (McCarthys LLP
). After an RFP process, the OFNLP hired the Toronto firm
of Torys LLP as litigation counsel in June of 2003.
With Tory as litigation counsel, OFNLP is presently
actively engaged in litigation activities on behalf of
the 133 First Nations in Ontario.
4.0 HISTORY OF ONTARIO FIRST NATIONS
LIMITED PARTNERSHIP
OFNLP came into being in 2000 to (among other things) monitor,
receive, invest and distribute the net revenues of Casino
Rama on behalf and for the benefit of all the First Nations
in Ontario and, in doing so, to exercise all powers in a
reasonable and responsible manner. It is also the related
business of the OFNLP to conduct the 20% and 35% cases, and
related litigation. The Mission Statement is “To act
on behalf of and work for the success of Ontario First Nations
Limited Partners in ways that best achieve their common interests”.
The decision to establish a Limited Partnership was made
in 1998 and, in December of that year, the Chiefs in Assembly
approved the current business structure in general terms.
The (1) Business (including scope and activities) and (2)
Governance of OFNLP/OFNGP (including the business structure
and roles and responsibilities of the Board of Directors
of the Corporation and the Officers and Senior Personnel
of the Corporation) are described under the CRRA, the Ontario
First Nations Limited Partnership Agreement, and the Shareholders
Agreement, as well as in the articles of incorporation and
general by-law of Ontario First Nation General Partnership
(OFNGP). Highlights are outlined below...
4.1 The Business of OFNLP Scope:
The scope of the business of OFNLP and OFNGP is comprehensively
described in the Agreements and includes the following key
points:
TheCRRA:
This Agreement recognizes that OFNLP was established by
Ontario First Nations (other than MFN) to receive their
share of the Accumulated Net Revenues and the Ongoing Net
Revenue from the First Nations Casino and distribute net
revenues to the First Nations and to manage all related matters
on their behalf. The Agreement additionally contains a number
of provisions regarding (1) the 20% WinTax litigation, (2)
MFN’s claim to a permanent share of 35% of net revenues
and (3) a potential dispute over the term of the agreement
for the First Nations Casino. Each of these disputes is of
critical importance to the nature of the First Nations’ interest
in the Casino and Section 1.15 expressly provides that “nothing
in the CRRA will affect the ability of OFNLP (or any other
party) to commence any of those actions during the term of
the CRRA”. It is the business of the OFNLP to conduct
the 20% and 35% cases.
The CRRA further provides that Limited Partners (i.e. signed-up First Nations)
are to spend Casino Rama Funds on one or more of the following five purposes:
(a) community development; (b) health; (c) education; (d) economic development;
and (e) cultural development. Limited partners are permitted to invest Casino
Rama funds in “Approved Investments” prior to spending on one
or more of the five purposes.
The interest earned from those investments must also be
expended on one or more of the five purposes. In addition,
funds may be used to retire debt, as long as the debt was
accumulated in relation to one or more of the five purposes.
Engaging in a simple per capita or individual distribution
to members would be a contravention of the CRRA. Contravention
of the CRRA may result in suspension of future payments of
a First Nation’s formula share of the revenues, and
other remedies/penalties under the Agreement and related
agreements.
The Partnership Agreement:
The Partnership Agreement makes reference to the First Nations’ approval
of a limited partnership as their “business organization
to monitor Casino Rama and for the receipt,
administration and distribution of net revenues from
Casino Rama”. It also refers to the formation of OFNLP
to carry on “the business” as described by the
CRRA. The “Business” is broadly defined here
to mean all activities of the Partnership pursuant to the
CRRA including “acting pursuant to those Revenue Arrangements
to which the Partnership is a party; investing in Permitted
Interim Investments and Approved Investments, making distributions
of Net Cash and the Future Generations Fund and receiving
and making reports on the uses of Transferred LP Amounts
and Investment Income”. A key point of the business
of the OFNLP is the conduct of the 20% and 35% cases, with
the objective of increasing the revenue sharing to the Limited
Partners.
OFNGP Inc., the general partner in the Partnership, is authorized
to carry on the Business as defined in Section 1.1, and is “further
authorized to exercise all powers ancillary and incidental
thereto or reasonably in furtherance thereof”. The
Partnership is not permitted to carry on any business other
than “the Business”. As noted, the business of
OFNLP includes the conduct of the 20% and 35% lawsuits, which
are both specifically mentioned in the CRRA.
4.2 Governance of OFNLP and OFNGP Inc. Business Structure:
The Ontario First Nations General Partner Inc. is governed
by the Business Corporations Act of Ontario, (the “OBCA”),
its Articles and By-Law and the Shareholders Agreement, and
has the rights and powers and is subject to the restrictions
and liabilities of a partner in an ordinary partnership.
The authority of the General Partner , however,
is restricted so that certain actions may not be undertaken
without written consent of all Limited Partners.
The Ontario First Nations Limited Partnership is a limited
partnership formed under the Limited Partnership Act of Ontario
(the “LP Act”) and pursuant to the Limited Partnership
Agreement, its principal governing document. Additionally,
OFNLP is bound by certain governance-related provisions in
the Revenue and Protocol Agreements. As the name implies,
limited partners have a limited liability for the obligations
of the Partnership. This liability protection may be lost,
however, if the limited partner (First Nation) “takes
part in the control of the business”. The limited liability
may also be lost in other circumstances specified within
the LP Act. The primary reasons for this business structure
approved by the Chiefs include (1) Flexibility – Flow
Through; (2) Tax Effectiveness; and (3) Limited Liability.
Management Structure:
Management and staff working in the OFNLP office include
the General Manager, the Administrative Assistant, the Finance
Officer, Communications Officer and the Office Clerk/Receptionist.
Board of Directors:
The Board consists of five directors who are nominated
and elected as provided for in the Articles, By-law, the Business
Corporation Act, and the Shareholders Agreement. The
AIAI, GCT #3, Independents, NAN and UOI are permitted to
nominate one qualified individual for election to the Board
of Directors.
The Board is responsible for the overall supervision and
control of all matters relating to the OFNGP Inc. business.
4.3 Reporting and Communication
Reporting requirements of all parties are outlined in
the CRRA, Partnership Agreement, and Shareholders Agreement.
Reporting and Communicating with First Nations
Limited Partners:
Annual meetings are called to approve audits, appoint directors and to conduct other business. In addition to
the annual audit, OFNLP also distributes quarterly unaudited
financial statements and provides individual, monthly distribution
sheets.
In addition, OFNLP endeavours to keep the Partners apprised
of all relevant matters, including the disputes and issues
with the Province, MFN and OLGC.
Information is disseminated in various ways including (1)
ongoing bulletins called “Updates” distributed
to the Partners on a privileged and confidential basis; (2)
timely information posted on the website; (3) presentations
to partners delivered by Board members with PowerPoint presentations and other means;
(4) Information Kits; and, (5) the distribution of special
briefing papers as required.
First Nations Reporting:
Within 120 days following the end of each Fiscal Year (i.e.
by July 31), each Limited Partner/First Nation will deliver,
to OFNLP, audited financial statements for distributions
and expenses during the Fiscal Year.
Reports and Information Available to Limited Partners:
- Each Limited Partner shall permit any persons who are
members of that First Nation to examine copies of financial
statements, reports and other documents and information
provided by such Limited Partner to the Partnership pursuant
to the CRRA, at such reasonable times and as often as may
be reasonably requested by any such persons, and the Limited
Partner shall answer any inquires which such persons may
make fully, and fairly and to the best of their ability.
Reporting to the Province:
Under the Agreements, OFNLP must “make reasonable
efforts to obtain from First Nations annual reports of receipts
and use of funds”. Further, OFNLP provides to the Province:
(1) the annual report and supplemental reports on First Nations
receipt and use of funds; and (2) annual audited financial
statements for OFNLP, with a separate disclosure of Held
Amounts for unsigned First Nations.
By September, 2003, all 133 eligible First Nations had
signed on as limited partners.
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