Council sued for $220 million
File photo
Magic Palace is seeking an unprecedented $220.57 million in damages from the Mohawk Council of Kahnawake (MCK) and grand chief Cody Diabo as part of its lawsuit to challenge the closure of its gaming business.
The amount at stake, hypothetically, would swallow up almost the entirety of the MCK’s net financial assets, most recently reported to total $248.64 million, with untold implications for the community’s financial health.
“MCK will take all necessary steps to protect the community’s assets and will review its next steps with its legal counsel,” said the MCK in a statement to The Eastern Door.
The updated injunction application, adding claims for massive damages, was filed on Wednesday by lawyers representing the facility and its representatives, Kahnawa’kehró:non Stanley Myiow and Barry Alfred, and relies on lengthy excerpts from Diabo’s depositions in the case, which was originally launched in May of last year.
“This course of action is not one we take lightly - it is truly a last resort,” said Myiow and Alfred in a written statement, claiming they have spent a year trying to engage the MCK in constructive dialogue after their business was effectively shuttered following allegations of ties to criminal activity.
“This legal action is directed at a small group of individuals within the MCK who acted unilaterally, undermining the traditions and values that bind the community together. We are committed to revealing the truth and restoring our reputation - and that of our people,” Myiow and Alfred’s statement reads.
The facility’s license to operate lucrative electronic gaming devices (EGDs) was suspended by the Kahnawake Gaming Commission (KGC) in March 2024 and then revoked altogether after Council terminated its royalty agreement, necessary to the operation of the devices on the territory, the next day.
“MCK will take all necessary steps to protect the community’s assets and will review its next steps with its legal counsel,” said the MCK in a statement to The Eastern Door.
The plaintiffs portray this as a regulatory Catch-22 because the KGC will not hold a hearing for Magic Palace due to the lack of a royalty agreement - the lawsuit argues the business has simply been trying to exercise its “fundamental right to be heard” by the KGC, the community’s gaming regulator.
“New evidence, including crucial admissions, now confirms what we had long known: that the MCK’s actions were based on false claims and a clear disregard for due process,” said Myiow and Alfred. “These revelations speak for themselves, are thoroughly detailed in public proceedings, and expose a pattern of abuse.”
The move against Magic Palace last March was a reversal for the Council, which had initially praised the gaming operation’s “swift actions” in the wake of a bombshell report in La Presse in fall 2023 that centred largely on Magic Palace’s non-Indigenous investor Luftar Hysa and his alleged ties to a Mexican drug cartel. Hysa’s key person license was almost immediately revoked by the KGC, and Magic Palace promised to cut ties with him.
While the loss of revenue from Magic Palace’s closure is substantial, a confidential plan that had been in place to expand the facility, which is revealed by the lawsuit, dramatically ups the ante.
The bulk of the eye-watering damages claim - a whopping $155 million of the amount demanded from the MCK - stems from the collapse of this plan, known as the Kahnawake Entertainment Luxury Complex, which the filing states had been supported by senior MCK officials and was in the process of being finalized.
The expansion was poised to contribute $265 million to the community’s coffers flowing from $1.6 billion in gaming revenues over an eight-year period, according to the filing.
“Then came the Termination,” it reads.
If realized, the lawsuit argues that the Kahnawake Entertainment Luxury Complex would have put Magic Palace in the same league as Playground Poker, a gaming juggernaut, in a community that has repeatedly resisted attempts by Council to open a casino in Kahnawake.
This preliminary sketch depicts Magic Palace’s confidential plans for an expansion, the Kahnawake Entertainment Luxury Complex, that was derailed by the termination of its royalty agreement with the Mohawk Council of Kahnawake in March 2024. According to a lawsuit filed by Magic Palace, the project had the support of senior MCK officials and was projected to bring in more than $1.6 billion in gaming revenue over eight years, with more than $250 million going to the community. File Photo
The lawsuit notes that Magic Palace and Playground Poker had been permitted to introduce EGDs over “strong public opposition,” contingent on royalties.
The filing refers to evidence that two unnamed Mohawk Council of Kahnawake chiefs hold direct financial interests in Playground Poker, but that it seems only one recused himself from decisions on Magic Palace.
Royalties from EGDs, which now flow exclusively from Playground Poker, have become a linchpin of community revenues, with $20 million having been projected for the current fiscal year - nearly a fifth of the MCK’s entire budget.
Magic Palace’s royalties from 2019 until its closure in spring 2024 amounted to $12 million.
With this updated legal action, Magic Palace has now put a financial figure on its claims that the MCK acted irresponsibly and prejudicially in shutting it down.
In addition to the sum for the derailment of Magic Palace’s planned expansion, the lawsuit asks for $10 million for losses already incurred and loss of value, $55.24 million for the loss of future operating profits, and $1 million in punitive damages from the MCK. It also asks for $1 million in legal fees and $250,000 for reputational harm from MCK and Diabo “jointly and severally” and $75,000 in punitive damages against Diabo personally.
“The amount claimed reflects not only the reputational harm caused but also the significant lost opportunities, including a development project underway that was poised to create hundreds of jobs and provide lasting economic benefits to the community,” said Myiow and Alfred.
The MCK indicated that it plans to update the community on the claim’s financial impact when the consolidated financial statements are presented. The MCK’s next audited financial statements are due within 120 days from the end of the fiscal year, which draws to a close on March 31.
“As with any potential liability, the MCK will conduct a thorough review with our Finance team and external experts to assess the short-term and long-term financial implications of this claim for damages on our community,” said the MCK’s statement.
The lawsuit was disclosed to community members who attended Wednesday night’s community meeting; The Eastern Door continues to be barred from covering these meetings pending the completion of a protocol that was proposed several months ago.
As in the unrelated Dean Montour lawsuit, Diabo here is accused of making, and failing to retract, defamatory statements. “Given that the plaintiffs are now pursuing defamation claims based on public statements, we must be cautious in our public communications going forward. At this time, we cannot comment further on the proceedings themselves and will share additional information once we can,” said the MCK’s statement, which included Diabo in CC.
Diabo was Council’s gaming liaison at the time of the termination of the royalty agreement prior to being elected grand chief in July.
According to the lawsuit, despite MCK saying overwhelming evidence was backing its decision to terminate the royalty agreement, Diabo said under oath that only a PowerPoint presentation had been reviewed before the decision and that he had never seen the report produced by Spectrum that had been commissioned by the KGC, nor had he seen court records that alleged that Magic Palace had been infiltrated by criminal elements.
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“MCK publicly stated that its decision to terminate Magic Palace was based on ‘overwhelming evidence’ and a ‘review of court records,’” reads the lawsuit.
The original news report about Magic Palace referred to a submission by the Royal Canadian Mounted Police (RCMP) pertaining to allegations of money laundering through Magic Palace’s restaurant, Mirela’s.
The lawsuit filed by Magic Palace claims that the affidavit exaggerates transfers to foreign jurisdictions by at least 12 times, based on the restaurant’s bank records, which it says the MCK never reviewed before termination. These bank records have not been viewed by The Eastern Door.
At least some of the “international funds transfers,” the lawsuit suggests, went to the MCK as per the royalty agreement.
Marcus Bankuti, Local Journalism Initiative Reporter
