Catawba Nation Seeking to Reduce Separation Fee From Casino Financier

Posted on: October 12, 2023, 09:19h. 

Last updated on: October 12, 2023, 12:10h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

The Catawba Nation is on the hook to pay a North Carolina-based firm called SkyBoat, LLC, a $125 million fee. That’s should the tribe dissolve its partnership for the commercial entity to bankroll and manage its permanent casino resort.

Catawba casino Two Kings North Carolina
An aerial view of the temporary Catawba Two Kings Casino, a modular gaming facility in Kings Mountain. The North Carolina tribal gaming facility is supposed to be a precursor to a permanent $273 million resort. (Image: The Wall Street Journal)

The Catawba Nation opened its temporary gambling facility at its forthcoming Two Kings Casino west of Charlotte in the summer of 2021. The casino space, which offers about 1,000 slot machines, came a year after the tribe gained federal recognition.

SkyBoat, a commercial real estate development firm, is controlled by North Carolina businessman Wallace Cheves. The politically connected Cheves assisted the Catawba Nation in placing the tribe’s 17 acres of land in King County into the federal trust, a requirement of the Indian Gaming Regulatory Act (IGRA) for a federally recognized Native American tribe to conduct gaming operations on its sovereign land.

Cheves’ motivation was that the Catawbas, in exchange, agreed to partner with SkyBoat to build and operate the tribe’s forthcoming casino. But late last year, the National Indian Gaming Commission notified the Catawbas that SkyBoat had too much control over its gaming undertakings, and the tribe was uncompliant with IGRA.

Costly Separation Fee

Cheves formed a subsidiary, SkyBoat Gaming, to finance the construction and management of the temporary Two Kings Casino and the forthcoming permanent resort, a $273 million investment. The permanent resort plan includes a 400-room hotel and a casino floor with 3,000 slots, 120 table games, and a sportsbook.

An agreement in 2021 between the tribe and SkyBoat said the Catawbas would need to pay $125 million to Cheves to terminate the partnership. Catawba Nation Chief Brian Harris, who was elected and sworn into the role only earlier this year, says the exit fee is unreasonable.

The NIGC says SkyBoat, in violation of IGRA regulations, served as the point of contact in negotiating third-party vendor contracts and managed payments for the construction of the temporary gaming space.

“Based on an exhaustive investigation and analysis of the circumstances, we issued a Notice of Violation to both enforce regulatory compliance and ensure the Nation is the primary beneficiary of its gaming revenue,” said NICG Chair E. Sequoyah Simermeyer.

Fee ‘Based on Air’

Facing civil penalties of up to $57,527 a day, the Catawbas are seeking to remedy the situation by dissolving its pact with SkyBoat. But the separation fee Harris’ predecessor agreed to is stalling the separation.

SkyBoat is holding hostage this casino resort project and all of the economic and quality-of-life benefits for our people and residents of the area,” Harris said in a statement. “We need a fair deal so we can realize the full financial benefits of the project, create 2,600 permanent jobs and hundreds of construction jobs, and provide local governments and the state of North Carolina with tax revenue and other investments under our compact.”

Saying the $125 million fee “is based on air, so to speak,” Harris contends that SkyBoat never provided any sort of documentation or forecast revenue losses that the separation would result in for the company to warrant the payment.

“There is no proof as to where the $125 million comes from,” Harris added.

The Catawba chief said he’s continuing to negotiate an exit deal that satisfies the tribe and SkyBoat. Harris hopes to begin construction early next year on the permanent casino.