The Feds are failing the CNMI’s people and the country with no sign of federal corruption prosecution

[Editor’s note: Kandit shares this article, which we took from Jim Bob Kingman’s public blog, jimbobkingman.substack.com. Mr. Kingman neither asked us to republish his article, nor is he a contributing writer for Kandit.]

By Jim Bob Kingman

Loving Saipan and trying to help those who call it home is the honor and adventure of my life. But it comes with frustrations. The largest, for me, is the feeling of being ignored. It may be a small town far from the media centers of America, but this place and these people matter. And some of the stories from the Commonwealth’s short history should be front page news at multiple media outlets around the world. “If only,” you think, “someone knew, then they would care. And then there would be change!” Unfortunately, however, it never seems to happen.

Last week, the United Nations Office on Drugs and Crime issued a TOCTA, a Transnational Organized Crime Threat Assessment, regarding Pacific Island Nations.

UNODC is an organization that helps law enforcement by identifying trends and projects that would be impossible to identify on the street level. Recently, a John Oliver segment on Pig Butchering, a modern type of systemic online fraud, relied on a report from this organization to explain the mechanics of the operation.

The TOCTA is a lengthy document, but I will excerpt and comment on the portions about Saipan.

Why did they release this now?

Per the report “The transnational organized crime threat environment in the Pacific is evolving faster than in any previous point in history.”

Is it appropriate to lump all of these places together?

There are certainly massive differences between Micronesia, Melanesia, and Polynesia, with as many differences among different nations within those regions, and differences among the islands within the same national groupings. However, they share some key features that make them uniquely susceptible to abuse by international criminals.

Per the report: Pacific Island Countries and Territories (“PICTs”)

“are situated along a vast maritime corridor utilized for legitimate trade between major economic markets on the Pacific rim while also being surrounded by some of the world’s largest and most lucrative markets for illicit activity and commodities. Together with the region’s porous coastlines and advancements in aerial and maritime mobility, trade integration and physical and digital connectivity, implementing sufficient law enforcement and regulatory strategies has proven challenging for governments. At the same time, these factors have provided new opportunities for powerful transnational criminal networks to target vulnerabilities in their ability to effectively monitor, detect, prevent and address illicit goods and criminal activities.

Further, they are also facing the same sets of threats:

“The thriving criminal ecosystem in the Pacific has attracted powerful transnational criminal networks from different corners of the world, and there are growing concerns that parts of the region may mature into key nodes and footholds targeted by criminal groups engaged in a range of illicit activities. In most cases, foreign criminal actors have come to dominate the space, eager to acquire market share and expand their spheres of influence.

Why do I care about what the United Nations says?

The UNODC is instructive in its use of the ‘T’ in PICT. We are not the only nation with overseas sovereignty over island groupings. One of the 6 shared factors in the Islands that make it particularly susceptible to organized crime is corruption. Even though the CNMI is part of America, it shares all of these factors as well.

Corruption as an enabler of transnational organized crime

The intensifying transnational organized crime situation in the Pacific has been further compounded by high levels of corruption… Corruption exists in many sectors and in various forms across the Pacific, representing a key facilitator and source of serious crimes and illicit proceeds. Among the most vulnerable sectors across the region include natural resources, public administration and services (land and titles administration, police and customs)… and offshore banking. Bureaucracies of many PICTs are also susceptible to corruption at senior levels, evidenced by several recent high-profile corruption-related arrests examined in this report. While the extent and nature of corruption varies across the PICTs, many countries share common forms of corruption, including bribery, cronyism, and political corruption.

Every clean government is alike; every dirty government is dirty in its own way. Nevertheless, there are valid lessons to be learned from looking across examples across cultures and regions. In some place, an activity that would be considered corruption in America simply would not be considered anything other than ‘the way things have always been.’ This is true in particular in the Pacific.

There is plenty of blame to go around for mismanagement here. But the recent drop in Foreign Direct Investment has rendered these resource-poor, remote nations even more susceptible. Obviously for the CNMI, we do not have Foreign Direct Investment, as we are part of the United States.

Since the Commonwealth was founded, there has been a concerted effort from some sectors to bring gambling in various forms, despite its initial ban in the Commonwealth’s Constitution. The island is pock-marked with the slot-machine ‘poker rooms’ that drain the finances of an impoverished people. In recent decades, especially after the demise of the garment industry, there has been a pipe-dream about a casino industry here. This made it particularly ripe for the next trend identified by the TOCTA:

Targeting of casinos, junket, and hospitality industries by Asian organized crime

“While authorities have observed several sectors being targeted by transnational criminal networks, this has been most visible in the development of casinos, junkets and hotel resorts used to conceal a wide range of illicit activities and expand influence in the region. The casino industries of several PICTs are steadily growing, presenting opportunities for transnational organized crime groups to launder proceeds of crime…At the same time, this modus operandi…has proven highly effective in providing organized crime with a cover and venue for various illicit business lines including drug trafficking, human trafficking, underground banking, and various forms of cyber-enabled crime… Casinos…are considered underregulated and high risk, characterized by low levels of awareness and understanding of related money laundering, terrorist financing and other organized crime-related risks.

This was pointed out in the John Oliver piece as well – casinos also serve as nodes for all sorts of networks and scams.

Human Trafficking

The idiosyncrasies of the Commonwealth’s immigration system and the rise of the casino industry here has caused real human misery.

“A human trafficking network operating in Saipan is implicated in other forms of transnational organized crimes, including migrant smuggling and money laundering. A large casino complex in Saipan was built with a crew of hundreds of Chinese, many working illegally on tourist visas. Some workers died and many more workers suffered severe injuries resulting from falls and electric shocks, prompting an FBI investigation into the labour conditions.”

When the TOCTA finally does lay out the case-study regarding the Imperial Pacific International Casino operation on Saipan, you can start to see that this is clearly a United Nations document. They go out of their way not to implicate China, one of the five permanent Security Council members. This is obfuscation – the IPI op was run just like the Belt-and-Road initiative and used Chinese State-owned companies.

Targeting of casino and junket industries in the Pacific by Asian Organized Crime

The casino industries of several PICTs are steadily growing, presenting opportunities for transnational organized crime groups to launder proceeds of crime.131 Casinos in many jurisdictions across the Asia Pacific region are considered underregulated and high risk, characterized by low levels of awareness and understanding of related money laundering, terrorist financing and other organized crime-related risks. Incidents of transnational criminal activity related to land-based and online casinos and junkets have been reported in the Pacific… Among the highest profile cases relates to the Commonwealth of Northern Mariana Islands (CNMI) and Saipan casino operator Imperial Pacific International (IPI) LLC, a CNMI-based subsidiary of former publicly traded investment holding company, Imperial Pacific International Holdings, which was delisted from the Hong Kong Stock Exchange in June 2024.

That delisting announcement points out that “trading in the Company’s shares has been suspended since 1 April 2022,” that “The Company failed to fulfill the resumption guidance set by the Exchange, on 7 February 2024, the Listing Review Committee upheld the decision of the Listing Committee to cancel the Company’s listing, and on 5 March 2024, the Company applied to the High Court for leave for judicial review of the decision of the Listing Review Committee (the Application). On 30 May 2024, the High Court made an order ordering that the Application be discontinued.”

The Chinese governmental authorities have done more to scupper the lawlessness of IPI than the Americans.

“Following its acquisition of an exclusive casino license on the island in August 2015, IPI had established a temporary casino, Best Sunshine Live, and associated junket operations in a nearby strip mall in November and December 2015 while the construction of its main US$ 7.1 billion integrated resort, the Grand Mariana Casino Hotel and Resort was to be constructed.

It is difficult to overstate how much bigger this structure is than everything else on the island.

The report does not touch on the corruption leading to this license, but an excellent investigative Bloomberg piece by Matthew Campbell, a Canadian Bloomberg reporter who —by one of the more wild small-world connections with this place—is a brother of a law school sectionmate of mine. His 2018 piece should have broken this whole thing open. A more accessible 2020 video gives some updates.

“The 45-table ‘training casino’ quickly gained international attention following the vast volumes of cash flowing through it, with Best Sunshine Live reporting VIP bets totaling US$ 13.5 billion in the first half of 2016. This culminated in an astounding US$ 3.95 billion in bets reported in September 2016 alone while the casino remained largely unoccupied.

“According to media reports based on annual corporate filings, by the first half of 2017, prior to opening it’s megacasino in July of that year, IPI turned over nearly six times more cash than the largest casino operators in Macau, while other sources indicated that Best Sunshine Live’s high-roller tables reported US$ 170,000 in average daily takings during the first half of 2016, representing volumes just under eight times the average of Macau’s largest casinos at the same period.

 

 

“According to industry experts, the revenues could most likely be explained in the context of large-scale capital flight and money laundering from parts of East Asia at the time, unless the company had intentionally misrepresented and inflated these figures in their corporate filings.

This is a substantially more cautious approach that the UN is taking. It is clear that is what is going on. Expert testimony from one of the many federal lawsuits against IPI show that they would write down hundreds of millions of dollars of bad debt in each of its pending years. In their current bankruptcy proceedings show that there is more than $500M of gambling losses that it has no hope of recovering. This operation was never intended to make money. It was intended to destabilize an American strategic territory.

[B]etween 2016 to 2017, the CNMI Bureau of Environmental and Coastal Quality (BECQ) issued multiple fines to Best Sunshine Live for discharging wastewater into a local lagoon and violating work-hour regulations.

This is part of one of the frustrating things for me. In and of itself, capital flight from our primary geopolitical foe is not a terrible thing for America. But there are irreparable human costs to this. In addition to scarring this island permanently, a place that does not deserve even more scars, it was built on top of an ancient Chamorro village. There are simply not a large number of archaelogical sites related to the physical culture of the Chamorro. Their low population, the materials they used, weather, and their needs made traces of their civilization from which we can learn about them more ephemeral than other civilizations from similar times. Each site that is destroyed or mangled is a loss to all of humanity.

Where are the Feds?

“In 2017, the Federal Bureau of Investigation (FBI) raided the IPI construction site in Saipan over a federal violation of the workplace visa system and systematic human smuggling following the death of a construction worker in March that year. The FBI would go on to execute multiple search warrants on the company’s offices between March 2018 and November 2019 in connection to a corruption probe involving the family of a former CNMI governor.

I have no idea what has happened with the federal investigations here.

“The United States Department of Labor also secured a US$ 3.3 million judgment against IPI for various violations. In August 2020, three IPI executives were indicted and ultimately convicted in the United States on federal criminal charges including a (RICO) conspiracy, harboring illegal aliens and unlawful employment of aliens for the purposes of building the Grand Mariana Casino and Resort, and international promotional money laundering.

Without irony, I heard IPI’s attorney claim that, until COVID forced them to shutter operations and cut off their revenue, they had been a ‘good corporate citizen.’

“The series of allegations and investigations into IPI’s various criminal activities culminated in a November 2023 ruling delivered by the Beijing Municipal First Intermediate People’s Court, which convicted 14 individuals including the founders and senior IPI executives on charges relating to leading an organized criminal group, illegal casino operations, and human smuggling, among other charges.

There is some irony here that it is the Chinese courts that moved with dispatch, though the entire op was done with their backing. But Jack Ma was a favored son, until he wasn’t. Essentially, the gangsters screwed up by going too big on American soil and getting caught, so Beijing burned them.

“Prior to this series of legal conclusions, in June 2020 the Commonwealth Casino Commission of CNMI announced its intention to suspend IPIs casino license for non-payment of money owed to a community benefit fund. However, following its April 2024 bankruptcy filing, IPI has stated that it owes its creditors approximately US$ 165.8 million, with the local government not receiving any of its owed US$ 79.63 million in licensing fees.

There are only 50,000 people here. This is real money that is missing. But the same people that enabled IPI have also scuppered federal assistance. The Casino Commission has still not revoked their license. Everyone continues with an elaborate kabuki that there is somehow going to be a functioning casino or a bailout. There will not be. Ever.

“Experts familiar with the case of IPI in Saipan have indicated that the criminal network continues to operate through a newly established hybrid (land-based and online) casino operation based on a neighbouring Island in CNMI despite significant disruptions caused by recent enforcement action.

This is referring to Tinian, the neighboring, tiny island. There are also reports of a casino scam being attempted on the further, smaller island of Rota. It is difficult to overstate how impractical it would be for there to be large scale casinos on these islands, but in fact it has already happened. On Tinian, one of these money-laundering ops ran for 18 years. It ended up with the largest ever fine from FINCEN. This is the same island broadcasting Voice of America, where the Enola Gay was launched.

As soon as that was shuttered, IPI opened. My only conclusion is that it was all part of the same enterprise.

“Concerningly, in recent years there are other strong indications of criminality connected to IPI. For instance, IPI’s founders were also controllers of the Hengsheng Junket, at one time among Macau’s most capitalized and successful junket operators, which began to diversify its offshore casino and junket operations between 2013 and 2014 and establish satellite businesses in various parts of Southeast Asia.

I don’t know what has happened to cause the massive failure by the Department of Justice. But the bottom line is that the federal government knows what has happened to this island and has chosen to permit it through gross neglect. In this case, it is China, not America, that has done something to enforce the idea of a rules-based order.

I am trying my best out here, but ultimately the federal government has failed as the senior partner in this relationship. The local government is not blameless, by any stretch. But I can understand why they feel like they are only valued when America wants to stash something inconvenient, like the plea deal of Julian Assange.

The CNMI can and should be the best version of America. It should not be included as the largest case study from the United Nations about brazen organized crime operations that have caused untold human misery.

I need reinforcement, but know that at least someone is on the barricade.

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Jim Bob Kingman is the CNMI government’s anti-corruption prosecutor.