Unable To Quantify With Precision, Jepsen Said Risk of Tribal Exclusivity Is ‘Not Insubstantial’
HARTFORD, CT — In a much anticipated legal opinion, Connecticut Attorney General George Jepsen, said Monday there is a legal and financial risk to granting Connecticut’s two federally-recognized tribes exclusivity to open up a third casino.
The risk of a constitutional challenge and losing the more than $260 million in slot revenues the tribes currently share with the state is what’s at stake in a hotly contested debate over casino expansion.
If the tribes were given exclusivity, the risk to the state “while impossible to quantify with precision, are not insubstantial and cannot be mitigated with confidence,” Jepsen concluded in his 8-page letter to Gov. Dannel P. Malloy.
Jepsen pointed out that there is an increased likelihood if the state was taken to court, the court would reach the merits of constitutional questions about equal protection and the Commerce Clause.
Jepsen would be required to defend Connecticut on these constitutional challenges and believes defenses exist, but he said he can’t with any certainty predict the state would succeed in those arguments.
“We do believe that there are potentially meritorious defenses that we would be able to raise against these constitutional claims, including the special nature of state-tribal relationships permit special legislative treatment and require judicial deference,” Jepsen wrote. “However, the relative novelty of that legal issues such claims would represent makes it difficult to predict their outcome with confidence. We caution that the potential of equal protection or commerce clause challenges succeeding in this context is not at all insubstantial.”
MGM Resorts International, which is building a casino in Springfield, Mass. filed a lawsuit against the state two years ago claiming that it was violating the U.S. Constitution by allowing the Mashantucket Pequots and the Mohegan Tribal Nation form a joint business venture to negotiate the location of a third casino. A federal court judge ruled it was too soon to make the claim because Connecticut had not yet actually granted the tribes exclusivity to build a casino.
As the General Assembly contemplates allowing the tribes to move forward with a casino in East Windsor, MGM has been lobbying lawmakers to open up the bidding process for a new commercial casino.
MGM has raised the argument that giving the tribes the ability to build a casino off their reservations would require approval of the U.S. Interior Department, which oversees Indian Gaming Compacts.
That means the 25 percent revenue sharing agreement the tribes have with the state for slots could be altered.
There have been several developments since 2015 “but none completely resolves the concerns we previously expressed, namely that the Secretary’s review might extend to raising objections about the existing payment arrangements,” Jepsen wrote.
Jepsen pointed out that the Interior Department does not settle disputes regarding Indian gaming compacts. Those disputes are settled by the federal courts.
“We continue to believe that passing such legislation absent amendments to the Compacts and MOU’s poses serious risks to the State’s agreements with the Tribes,” Jepsen wrote.
Jepsen said they agree with an attorney for the Mohegan Tribal Nation that it would be “highly unusual, if not unprecedented, for the Secretary, in the context of reviewing proposed amendments to affirmatively invalidate or modify existing payment arrangements not directly related to the terms of the proposed amendments.”
The opinion is not that much different from the opinion Jepsen issued lawmakers back in April 2015.
Uri Clinton, senior vice president at MGM, said Jepsen’s letter Monday “underscores” what he’s been telling lawmakers for two years.
“Connecticut risks hundreds of millions in annual revenue if it proceeds with a commercial casino - even if that casino is to be operated jointly by the two federally-recognized tribes,” Clinton said. “Connecticut cannot afford to take this and the other risks identified by Attorney General Jepsen, especially in the midst of budgetary shortfalls and economic uncertainty.”
He said the way to avoid the risk and possibly generate more revenue is to establish a competitive bidding process.
Andrew Doba, a spokesman for MMCT Venture, the business entity formed by the two tribes, said they appreciate the opinion, but it doesn’t address the actual pending legislation.
“The Senate bill makes the authorization of a casino expressly contingent upon BIA approval of the Tribes’ compact amendments, which should assuage concerns about losing the Tribes’ sharing of slot revenues,” Doba said.
“Moreover, we have heard from people who spent their careers working at the BIA that the proposed changes will not adversely impact anything.”
As far as MGM is concerned, Doba said ” they need to stop talking out of both sides of their mouth. The AG’s testimony made it absolutely clear that the MGM bill would immediately jeopardize slot revenue and their insistence to the contrary should call their credibility into question for any policy makers.”
The Public Safety and Security Committee has until Thursday to vote on two proposals. One that would give the tribes the exclusive right to build a casino and a second that would open up the bidding process to all commercial casino operators.
Senate Republican President Len Fasano, R-North Haven, said the issues raised by Jepsen “will be looked at closely by lawmakers in the coming weeks as discussions around the proposed legislation continue.”