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Magic Palace sues Council, Commission

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The owners of Magic Palace have filed legal actions against the Mohawk Council of Kahnawake (MCK) and Kahnawake Gaming Commission (KGC), urging Quebec’s Superior Court to restore the facility’s right to operate Electronic Gaming Devices (EGDs) on the territory.

In the filings, the facility’s owners, Stanley Myiow and Barry Alfred, allege that a regulatory loop deprived them of the opportunity to preserve their rights after their license to operate EGDs was revoked in March.

“It’s an uphill battle. I think it’s not the first battle the MCK is doing, and they need to learn to follow the rules of law,” said Pierre L’Ecuyer, a lawyer representing Myiow and Alfred.

The decision came months after a bombshell report in La Presse alleged that a man who held a key person license for the establishment had ties to a Mexican drug cartel and had used the establishment to launder money for organized crime. The article relied on court and police documents.

“It’s bullshit, it’s not been proven,” said L’Ecuyer.

Luftar Hysa’s key person license was revoked the next day by the KGC, and Magic Palace quickly claimed to have severed ties with the man, who had invested millions of dollars into the business and was receiving over 50 percent of profits, according to the documents filed by Magic Palace. At the time, the MCK put out a press release praising Magic Palace for its actions.

The facility continued to operate for more than six months, but on March 25, the KGC announced it had issued an immediate suspension pending a hearing, citing concerns arising from investigations. These include a recent report conducted by the Spectrum Gaming Group. The establishment was shuttered the same day.

However, on March 26, the MCK followed suit by announcing it had decided to terminate the royalty agreement Magic Palace requires to operate EGDs – the machines are responsible for 95 percent of Magic Palace’s revenues, according to the lawsuits.

Following the MCK’s decision, the gaming commission announced that because of the termination, Magic Palace’s EGD license was rendered invalid, overriding the KGC’s Immediate Suspension and Show Cause Notice and barring the facility’s EGD operations.

The plaintiffs allege that this series of notices amounted to a catch-22. “The MCK and the KGC defer to the other’s actions to justify their EGD ban,” read the plaintiffs’ legal actions.

According to the filings, on May 13 the KGC decided to dismiss an appeal from Magic Palace on the question of EGDs, due to the termination of the royalty agreement. On May 22, the filings continue, the MCK refused to reinstate the agreement.

According to KGC chairperson Frank Phillips, the gaming commission stands by its actions.

“As the matter is currently before the Quebec Superior Court, we believe it is appropriate to limit any communications regarding the proceedings filed by Magic Palace. We can say that we are aware of the lawsuit filed against the KGC, and we think it is misguided and wrong. It will be contested by the KGC,” wrote Phillips in response to a request for comment.

“The KGC believes the process it followed in arriving at its decisions was thorough and fair, and consistent with the principles of the KGC’s applicable regulations and the Kahnawake Gaming Law. We are confident that any court will conclude the same.”

MCK sent a similar response to The Eastern Door.

“MCK stands by its decision to terminate the royalty agreement with Magic Palace for the reasons provided in its prior press release on the matter. We will not be commenting further on this while the matter is before the courts,” wrote the MCK in a statement to The Eastern Door that was sent by spokesperson Lisa Lahache.

However, the lawsuits argue that MCK and KGC acted prejudicially, leaving Magic Palace’s owners without recourse.

“They’re feeling that their livelihood has been taken without any reason, that’s the way they feel,” L’Ecuyer said.

MCK’s press release announcing the termination of the royalty agreement, which saw $12 million flow to Council in the years it was valid, according to the filings, cited the presence of an “undisclosed beneficial owner,” in violation of the agreement – a reference to Hysa.

In the originating applications filed by lawyers representing Myiow and Alfred, they allege that the KGC had full knowledge of Hysa’s role as an investor as far back as 2016, when the application was made for him to be awarded a key person license. The process took months to complete.

Magic Palace argues that Hysa was not – and could not – be an owner. “You can’t be an owner if you’re not Native, of any goods, on a reserve, so it was clear he was not an owner. He was an investor,” said L’Ecuyer, who said Hysa simply aimed to make a profit like any investor. He said nothing changed about the establishment’s relationship with Hysa in the proceeding years.

“There’s nothing new that happened except an article based on nothing, that’s the only new thing that happened,” he said.

Despite so far earning dividends of $9 million, according to the filings, Hysa’s investment has not yet been fully repaid, according to L’Ecuyer. The owners of Magic Palace or another investor would buy out the investment, he said.

According to an excerpt of the Spectrum report included in the plaintiffs’ filings, Hysa’s dividends mean it would be “highly irregular if he was not an owner of the facility,” which the lawsuits describe as a false premise.

Spectrum’s report was not provided in full to Magic Palace ahead of KGC hearings, a factor cited repeatedly in the lawsuits as an example of a denial of the plaintiffs’ rights.

There are two originating applications that were filed late last month by Magic Palace, Myiow, and Alfred. One names KGC as defendant with MCK as an impleaded party, and it seeks judicial review. The other names the MCK as defendant and the KGC as impleaded party, seeking an injunction against the termination of the royalty agreement.

The actions are likely to be heard by the same judge in the same hearing, according to Sebastian L. Pyzik, one of the civil lawyers representing Magic Palace.

The application against the KGC asks that the court’s judgement be substituted for that of the local gaming commission.

“Given the clear violation of the principles of natural justice, the plaintiffs and the public cannot reasonably continue to have faith in the current process,” it reads.

L’Ecuyer argued that this is not an attack on the gaming commission’s legitimacy or Kahnawake’s jurisdiction.

“We’re asking a judge to rule to give us back our permit, which means it’s legitimate for Kahnawake to have a KGC, it’s legitimate for them to issue this. We’re not attacking their right to oversee gaming, we’re saying in this matter, the way they proceeded, is against the principle of justice.”

According to the application against the KGC, more than 150 staff are at risk of unemployment. It also notes that without Magic Palace, Kahnawake is left with a gaming monopoly.

The MCK expects $20 million in revenues from EGDs in the current fiscal year, solely from Playground Poker, nearly a fifth of the band council’s entire budget.

marcus@easterndoor.com

Marcus Bankuti, Local Journalism Initiative Reporter

This article was originally published in print on June 7 in issue 33.23 of The Eastern Door.

Marcus is an award-winning journalist and managing editor of The Eastern Door, where he has been reporting since 2021 on issues that matter to Kahnawake and Kanesatake. He was previously editor-in-chief of The Link and a contributing editor at Our Canada magazine.

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Marcus is an award-winning journalist and managing editor of The Eastern Door, where he has been reporting since 2021 on issues that matter to Kahnawake and Kanesatake. He was previously editor-in-chief of The Link and a contributing editor at Our Canada magazine.