Detroit Casinos Settle with Tribe

Detroit Casinos Settle with Tribe

DETROIT – A long-awaited end to a lawsuit was realized with a partial
settlement that favored the Lac Vieux Desert Band of Lake Superior Chippewa
for $79 million.

The settlement was approved on April 9 by federal District Judge Robert
Holmes Bell. The settlement with two of three organizations waiting to
build permanent casinos came after seven years of legal battles that
started in 1997 when the Lac Vieux Desert Band claimed it was unfairly
treated in the casino bidding process for the city of Detroit and entered
into litigation.

Two casino organizations, MotorCity Casino and Greektown Casino, primarily
owned by the Sault Ste. Marie Band of Chippewa, will share the settlement.
It will also allow them to begin construction of casinos in downtown
Detroit following changes in ordinances and re-zoning efforts.

Former investors in Greektown Casino, Ted Gatzaros and Jim Papas will pay
the tribe an additional $15 million.

MGM Grand Casino, owner of one of three Detroit gaming franchises, was not
a party to the settlement. MGM argued that it would be prejudiced by a
provision that removes the other two casinos from any further selection
process. Even though it was part of the original lawsuit, MGM executives
said they were hopeful an appeals court will find in their favor.

The original lawsuit filed by Lac Vieux Desert, which ended in an
injunction against building permanent casinos in downtown Detroit, will
continue against MGM. MGM said it hopes to prevail at the appellate level.
Judge Bell stated that MGM was as much a victim as was Lac Vieux Desert in
the original bidding process, but did not present a case of legal prejudice
in the issuance of the partial settlement agreement.

The 6th Court of Appeals issued the injunction, and has on two occasions,
overturned judgments issued by Judge Bell in favor of the Lac Vieux Desert.

Conley Schulte, attorney for the band, said the band will pursue the
lawsuit with the intent of eventually forcing the license to be re-bid.

The city of Detroit approved of the partial settlement in order to get the
casino construction started. The Detroit City Council originally opposed
the partial settlement, but later changed its position. Re-zoning also
needs to take place so the casinos can begin the process of tearing down
existing buildings and construction of the new casinos which will cost
between $400 and $500 million each.

MotorCity and Greektown casinos both said they would not be ready for
opening when the Super Bowl takes place near Ford’s Field in 2006.

Howard Hughey, spokesman for Mayor Kwame Kilpatrick said the mayor was
pleased by the re-bid decision to accept the settlement and that the city
would clear way for the next steps to take place.

City Council members also disapproved the re-zoning for Greektown and
MotorCity. MotorCity minority investors have complained they have not
received any profit sharing funding, and Greektown is on the outs with the
council because the primary owner, the Sault Ste. Marie Band of Chippewa
has made plans to open a casino in Romulus, Mich. which would compete with
the downtown Detroit casinos.

When the city of Detroit went to the voters to legalize gambling in the
city, three tribes helped in the effort, the Sault Ste. Marie Band received
preferential treatment, court documents stated.

When the initiative was under consideration Lac Vieux Desert opposed
opening the city of Detroit to gambling, but argued that it wasn’t its
opposition to the gaming initiative, but that it didn’t actively support
the effort because it was not included in the original bidding process for
a casino.

Opening Detroit to gaming would break the tribal monopoly on gaming, yet
would help the tribes economically because a 9 percent fee to the state
would be eliminated.

The city ordinance stated that preference shall be given to potential
developers who “actively promoted and significantly supported the state
initiative authorizing gaming.”

Lac Vieux Desert continues to pursue the possibility to bid for one of the
three licenses, and the one held by MGM is the one the band wants to have
opened for the re-bid.

It is now up to the 6th Circuit Court of Appeals as to whether or not that
will take place.

The appeals court ordered the District Court to take up the partial
settlement in advisement, approve if appropriate and also to consider
whether or not MGM would be prejudiced against further litigation by the
partial settlement action. Judge Bell found that MGM would not be legally
affected to defend itself against Lac Vieux Desert’s request for relief.

Lac Vieux wants the re-bidding process to affect only the franchise held by
MGM. Under the settlement agreement, Greektown and Detroit Entertainment,
agreed in addition to the money, to not execute a Stipulated Consent
Judgment that agrees in part to allow them to continue operation of their
respective casinos without entering into a new casino development
competitive selection process.

This is the part of the settlement MGM found objectionable and that is the
portion of the agreement that would allow for Lac Vieux and MGM to enter
into competition for the franchise should the appellate court find in favor
of the band.

The agreement does include the Stipulated Consent Judgment in order to
protect Greektown and Detroit Entertainment from any change in the existing
condition, so the MGM argument does not hold, Judge Bell stated.

Judge Bell, said, however, that MGM’s position with respect to the Lac
Vieux claim and request for re-bidding is strengthened because it does not
include all three franchises, only the one held by MGM, and that Lac
Vieux’s position is diminished, by its “voluntary relinquishment of its
request for a reselection of all three casinos and by its receipt of
substantial relief under the Stipulated Consent Judgment.”

The Lac Vieux Desert appeal continues as there is not a date set for
hearing the case.

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