OPINION: Gaming industry rife with scams, deceit

By James Chua

[email protected]

To the Honorable Representatives of the House, and for the people of the Commonwealth, it will be an honor and pleasure to share my personal views regarding the development of the proposed Saipan Integrated Resorts with the House Gaming community.

I hope I can contribute by sharing my thoughts and ideas and be a responsible member of this community, which I have called home for the last thirty years.

Perhaps it does take the subpoena of the House Standing Committee on Gaming to get our act together.  For the readers on this online comment page, I humbly ask for your constructive comments and criticisms the concerns of our community are tabled and known. I also take this opportunity to provide a background of who I am, what my role was, and what I can, and cannot do or share due to my contractual obligations with respect with this newspaper report.

In 2017, my company Pacific Century Inc., responded to a RFP issued by the Office of the Governor, for the opportunity to provide consulting services related to the Development Plan and Advisory Committee for the proposed Saipan Integrated Resorts. We were selected due to our capabilities in project management and our expertise in risks assessments. Our consulting team included members who had participated in various casino developments around the world, such as the Sands Marina Bay in Singapore, the Venetian in Macau, and had worked in executive positions at Caesars Palace, Sun City, and other mega integrated resorts and provided services to global top ten casino operators. One key consultant Dean MacComber turnaround the 96,000 square foot casino in Niagara, Ontario, from a shutdown to complete recovery and operations in 8 months.  Another consultant today is assisting a Bulgarian operator in setting a culture of compliance related to proxy and internet gaming to avert complete failure due to the pandemic.

For those who are not aware of my past development experience, I was involved in prior casino developments in Tinian. I have also provided consulting services to multinationals such as ABB, Mitsui & Co, Huawei Technologies in proposed developments on Saipan and abroad I am also involved in desalination with friends who are pioneers in this industry. Today I promote sustainable development in alternative energies and water re-use, and my family operates LJ’s I and LJ’s II convenience stores on Saipan. I have conceptual training in management, focused on financial modelling, strategic and systems management. I am also a member of the Project Management Institute, which provides industry best practice guidelines in Project and Risk Assessments.

The Development Plan and Advisory Committee comprised of two members, my company Pacific Century Inc., representing the interests of the CNMI and N14, a local architectural design and project management firm, representing the interests of the developer IPI. The DPAC effort was not well received by the management of IPI – they viewed us as a threat rather than an opportunity for resolving development difficulties that they faced.

The DPAC effort was supported by the Office of the Governor which generally did take our advisory role in a positive manner and sought our views in risk abatement.  We undertook a high-level risk assessment of the proposed development and developed a financial model to determine whether the CNMI should or should not grant an extension to the licensee.

Our reports are highly speculative as we could not get the required facts from Imperial Pacific.  We had to use economic indicators and available secondary data, and high level management testing techniques developed by Shell and MIT to make an assessment of the development efforts.   In 2018, we develop various scenarios which highlighted that Imperial Pacific will enter into a phase similar to what is the situation today.

We also provided the Office of the Governor development concerns and risks, and how to abate the risks.  As our contract is advisory, we are not involved in any recommendations related to enforcement of any rules or regulations.   Our contract approved by the CNMI Attorney General and contains non-disclosure terms that we remain bound to. The entire products of DPAC are owned by the CNMI Executive Branch, and we do not have any ownership rights to the products.  I am contractually obligated to these non-disclosure requirements, and I cannot share the reports with the House of Representatives or the public.

The CNMI Legislature is seeking the reports which are owned by the Executive Branch of the CNMI.  Therefore, the distribution of our reports and availability to the public is really in the hands of the Commonwealth Government, and the fight for the documents is between the Legislative Branch of the Commonwealth and the Executive Branch of the Commonwealth. The person who perhaps can resolve the issue is the CNMI Attorney General, or ultimately, the CNMI courts.  As a former DPAC consultant, I have no standing to provide to anyone, a copy of any product that belongs to the CNMI.

During the term of our engagement, the management of IPI was not cooperative, and the project management and schedule monitoring became impossible. We were not allowed by IPI management to visit the construction, so we used drones and high-definition cameras. We suspected that the executives and representatives of IPI did not want their owners to really know the truth regarding the development problems that they were facing. I personally believed that the owners of Imperial Pacific were keep on a mushroom diet – feed BS and kept in the dark.  The entire project has hallmarks of internal cheating, scams, fake workers, deceptive if not faked invoices, elevated pricing, defective products, thefts at the expense of the IPI holding company.   There were also conspiracies to gain control of management, and so on.  This is common in Chinese owned companies, where the owners truly do have a ground sense of what is going on studies have proven these management defects that occur on a grand scale in many countries in the Pacific Rim.

The acquisition of the Kan Pacific lease is one hallmark of the best scams I have seen, perpetuated by Imperial Pacific executives.  Somehow, they were able to convince Imperial Pacific owners to buy the worthless 2 years remaining lease of the property for $20 million.  One does not have to suspect that somebody must have misrepresent the facts of the lease.  This is just one of the scams perpetuated by Imperial Pacific representatives to their owners.   The other is the community chest fund agreement.  How on earth would a company that is not yet profitable, and does not have sufficient cash flow agree to contribute money it does not have?

One of our key recommendations was the need for IPI to revamp their Best Sunshine management and set in fiscal and project management controls. Obviously, we were indeed a threat, not to the owners, but to those receiving incredible pay checks from IPI.

So now, its time we come to the billion-dollar question – how do we ensure that the building is completed and we do have a sustainable and beneficial casino development?

Personally, I hope to see IPI complete the hotel casino on Garapan. The residents and businesses in Garapan all face the risk of a major disaster if the uncompleted hotel becomes the material for a debris storm in the event of future storms.  I think that IPI will not easily give up on the project and the worst-case scenario for the community is an abandoned eye-sore that poses a danger to the community.  I would think that many of our residents share the same view.  The danger is that the building will be abandoned, and legal battles will tie up the facilities and, in the end, it will be very dangerous and costly to dismantle.

To answer the question reportedly being asked whether the CNMI casino industry viable?  My answer is of course it is, but the conditions for it to be viable has not yet been fostered by the CNMI and the developer IPI.

To resolve the problems, the CNMI Legislature, the CNMI Leadership, and the good people of the Commonwealth must understand the six fundamental root causes of the current situation we are in:

1. Instrumentation defects of the casino license act.
2. Implementation defects of the casino license agreement.
3. Management and control failures.
4. Missing Culture of compliance.
5. Missing Capacity to develop and operate.
6. Political disputes and self-interests in the CNMI.

Five of these problems are not hard to solve.  All we need is for everyone to work together, be transparent and be accountable to our community.   We can achieve a turnaround situation quickly by understanding that the law is flawed, how it is flawed, how it can be fixed.  We can only do this if we consider Imperial Pacific as a partner.  Our regulatory bodies do not have such views, they only know how to enforce, and there is not one iota of resource allotted to ensure consistency with the visions and the development desires when the CNMI approved the casino license act.

We can only be successful if Imperial Pacific understands the need for a culture of compliance and follow our laws.  Of course, IPI must develop a credible turnaround plan, a credible management team, and a commitment for success.   So, we must start with the intention of developing for shared community prosperity and health.  With community support and trust, Imperial Pacific can be assured of a supportive environment for development and business.  But we also need Imperial Pacific to assure us that they will be good corporate citizens and deliver what they promise.   This is not rocket science, it is just common sense.

To start the Common-Sense approach to problem solving, we need to plan and act for success.  This can start with the Lottery Commission by calling an open discussion amongst the community leaders, interested residents, and of course the developer Imperial Pacific to determine the opportunities to resolve the development standstill and truly have a sustainable gaming industry.  We should also hear from the Chairlady of Imperial Pacific, as now the real owner is here, and we do not need to hear more lies from executives who have lost our confidence in them.   We need to hear from her, why they have stumbled in their vision, so that our expectations are not baseless nor a construct of our imagination.   If really there is any skeletons to look for, it must be the Kan Pacific lease.   Our reports are already three years outdated, and the scenario of failure that we forecasted in 2018 is already true.

I am sure the opportunity to complete the casino hotel does exist, unless we fail to control negative tendencies of people who are just in to fight rather than to resolve problems for common good.   Rather than trying to dig for skeletons in every closet, we should be planting fruits of opportunities for our people and our young generation.  Rather than politic fights, lets work for our community good and prosperity.  This is the core problem – problem 6 – political risks in the CNMI.    We can abate this risk collectively by asking the CNMI Executive Branch and the Legislature to work together and resolve the IPI issues.  I am sure this is the best time for our community to stand up so that our elected representatives truly work for our common good.

So, having said too much, I hope I have said enough to provide a general idea of what I think we can do.  I am no longer a DPAC consultant – we terminated the agreement voluntarily on August 27, 2021, even though the Executive Branch desired that the DPAC contract could be continued.  I felt that the termination was necessary as I could no longer keep a team on standby.   Also, now I can speak freely, act freely without being bound by contractual terms and without a conflict of interest. Now that I have asked for a sandstorm of criticisms, I try to respond according and contribution ideas and together with you, bring a better tomorrow.  I love Saipan and the Commonwealth and may we prosper together.

James Chua is a former CNMI DPAC Consultant