Will Casinos Shut Down?

October 6, 2010 Updated Oct 6, 2010 at 11:29 PM EDT

By WKBW Programming

October 6, 2010 Updated Oct 6, 2010 at 11:29 PM EDT

BUFFALO, NY ( WKBW ) Governor David Paterson is now threatening to shut down three casinos in Western New York if the Seneca Nation doesn't pay up.

That ultimatum is directly related to the battle over whether New York State has the right to tax cigarettes sold on Indian reservations.

Right now, the Senecas are withholding revenue sharing payments due in Albany, saying until the cigarette tax is resolved, they are not going to pay.

Top lawyers for the Governor say the Senecas have breached the terms of a "compact," permitting them to operate the casinos. State officials say if the issue is not resolved swiftly, they have the right to terminate the compact between the State and the Senecas.

Eyewitness News has obtained a release from the Seneca Nation, and a letter from New York State.


State Finally Commits to Discuss Long Standing Compact Disputes
After Years of Neglect

October 6, 2010 – Cattaraugus Territory, Irving, NY – The Seneca Nation of Indians recently received two separate letters from New York State officials invoking Class III Gaming Compact procedures to discuss payments the Nation has withheld for two years. The Compact provides that the Nation shall reimburse the State only for reasonable State regulatory costs incurred in connection with gaming regulation under the Compact, and that the Nation will pay to the State a percentage of slot machine proceeds in exchange for slot machine exclusivity within Western New York.

New York State has been in violation of its Class III Gaming Compact with the Seneca Nation for over two years, authorizing Moxie Mania at private businesses and introducing slot machines at the State’s racetrack casinos in the Nation’s exclusivity zone (west of State Route 14). The State has also been in violation of the Compact nearly since its adoption in 2002 for excessive and unreasonable State Police charges.

“I have no idea why the State violated our Compact, and no idea why it took the Governor’s Office 9 months to agree to discuss the State’s breach of the Compact terms,” said President Barry E. Snyder, Sr. said. “We certainly look forward to hearing the explanation of why they violated our Compact.”

In a January of 2010, the Seneca Nation advised the Governor’s office that the operation of certain gaming devices within Western New York violated the Nation’s right of exclusivity under the Compact and, thus, jeopardized the State’s ability to continue to receive the very substantial “State Contribution” payments under the Compact. The Nation invited a dialog on the matter, but never heard back.

In late August of 2010, the Nation’s Council adopted a resolution directing that all exclusivity funds being held by the Nation are to be withheld from payment to the State.

The Compact provides that the Nation is authorized to withhold all payments to the State upon a breach of the Nation’s exclusivity and has done so since 2008. The Compact also provides that the State cannot terminate the Compact until there has been a determination by an arbitration panel that there has been an uncured material breach.

“We look forward to a visit by State officials to Western New York to discuss these very important matters,” Snyder stated. “Perhaps through this process we can also get some simple and timely back up documentation that can explain precisely what it is that the New York State Police gaming unit does under the Compact.”

The State’s refusal to provide funding to local governments in Western New York, because of the exclusivity violation, has also created financial hardships for these local communities. On Sept 30, 2010, the Seneca Nation invited representatives of the local governments to attend a meeting on Oct 8, 2010 to discuss the issues and concerns surrounding their inability to get funding from Albany to cover part of the looming budgetary gaps they face, and other potential solutions.

Here is the text of a letter sent by the Counsel for the Governor to the Seneca Nation:

RE: Notice of Claim

Dear President Snyder:

This is to invoke the negotiation provision of paragraph 14(b) of the Nation-State Gaming Compact between the Seneca Nation of Indians ( the "Nation" ) and the State of New York ( the "State" ), for the Nation's continued nonpayment of past due State contributions for 2009 and 2010.

As Governor Paterson indicated in his September 17, 2010 letter to you, the Nation's past due amount to the State for exclusivity payments for 2009 is approximately $105,500,000, and the Nation owes the State approximately $108,665,000 for 2010. These non payments, coupled with the Nation's failure to remit in timely fashion the State exclusivity contributions from past, uncontested calendars, constitute a material, uncured breach. Accordingly, in the absence of a prompt resolution to this matter, the State is entitled to terminate the Nation-State Gaming Compact.

We are hopeful the Nation will agree to meet within 14 days of receipt of this letter to negotiate in good faith and attempt to reach a prompt solution. Otherwise, in accord with the Nation-State Gaming Compact, the State will commence arbitration and seek a finding of material breach.

Very truly yours,
Peter J. Kiernan

Eyewitness News will continue to cover this story.