The Catawba Nation Attempts to Lower Divorce Costs from a Casino Investor
The Catawba Tribe in North Carolina is required to give a payment of $125 million to the company SkyBoat, LLC, if they decide to end their partnership for the development and management of their permanent casino resort.
The tribe's temporary gambling facility, named Two Kings Casino, opened in the summer of 2021 and offers around 1,000 slot machines. The idea of this casino space came about when the tribe gained federal recognition a year earlier.
SkyBoat, a commercial real estate development company with North Carolina roots, helped the Catawba Nation get their 17-acre land in King County into the federal trust. This was necessary for the tribe to legally operate a casino on its sovereign land, thanks to the Indian Gaming Regulatory Act (IGRA).
Wallace Cheves, a politically connected businessman from North Carolina, is responsible for controlling SkyBoat. He initially partnered with the Catawba Nation to construct and oversee the operation of their future casino.
However, the National Indian Gaming Commission (NIGC) sent a notice to the Catawba Tribe at the end of last year stating that SkyBoat had too much power over the tribe's gaming activities and violated certain IGRA regulations.
Substantial Severance Cost
To finance the creation and oversight of the temporary Two Kings Casino and the future permanent resort (worth $273 million), SkyBoat Gaming, a subsidiary of SkyBoat, was formed. The plans for the permanent resort involve a 400-room hotel and a casino floor featuring 3,000 slot machines, 120 table games, and a sportsbook.
In a deal from 2021, the Catawba Tribe agreed to pay SkyBoat's Wallace Cheves $125 million if they wanted to separate from the partnership. Catawba Chief Brian Harris, who has held the position since this year, considers this fee to be unreasonable.
The NIGC found that SkyBoat violated IGRA regulations by acting as the main contact for third-party vendor negotiations, as well as handling payments for the construction of the temporary gambling space.
"We issued a Notice of Violation to both enforce regulatory compliance and ensure the Nation is the main beneficiary of its gaming revenue," explained NIGC Chair E. Sequoyah Simermeyer.
Fee with no Foundation
The Catawba Tribe wants to get rid of their partnership with SkyBoat, but the hefty exit fee is halting this process.
Chief Brian Harris says, "SkyBoat is preventing us from moving forward with this casino resort project and all the economic and quality-of-life benefits for our people and the local community."
According to Harris, the $125 million exit fee is "based on air," meaning that there's no documentation or evidence of financial loss for SkyBoat that would justify such a payment.
"There's no proof as to where the $125 million comes from," Harris emphasized.
The Native American leader is working to negotiate a resolution that meets both the tribe's and Cheves' expectations. He intends for construction on the permanent casino to start early next year.
