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Duluth's contract with casino called illegal

The casino contract between the city of Duluth and the Fond du Lac Band of Lake Superior Chippewa violates gaming laws, according to a notice filed Tuesday by the National Indian Gaming Commission.

City of Duluth news conference
Duluth Mayor Don Ness (left) and City Attorney Gunnar Johnson hold a news conference Tuesday about a Notice of Violation the city received regarding the downtown Fond-du-Luth Casino. (Bob King /

The casino contract between the city of Duluth and the Fond du Lac Band of Lake Superior Chippewa violates gaming laws, according to a notice filed Tuesday by the National Indian Gaming Commission.

The ruling is the latest twist in an ongoing dispute between the city and the band about agreements made in 1994. Since those agreements were made, the band, which owns and operates the Fond-du-Luth Casino on tribal land in downtown Duluth, had been paying the city 19 percent of its gross revenues. The band discontinued payments in August 2009, saying it thought the terms of the contract were not lawful. Although federal courts so far have disagreed, the 20-page notice of violation from the Gaming Commission supports the band.

"The band is vindicated today," Fond du Lac Chairwoman Karen Diver said at a press conference on Tuesday. The band requested the review as its contract with the city was expiring last year.

"We now have two very different opinions," Duluth Mayor Don Ness said at a press conference held earlier Tuesday. "The federal courts have confirmed the city's position. This (notice of violation) takes the opposite position."

Gaming Commission Chairwoman Tracie Stevens said the agreements violate the Indian Gaming Regulatory Act because they give the city of Duluth an unlawful proprietary interest in the band's gaming activity. Under the act, a band must have sole responsibility for gaming activity, meaning no other entities can be involved.


In the document, Stevens said she based her findings on the length of the city-band relationship, the amount of revenue paid to the city and the right of control provided to the city over gaming activity.

"The parties share in the profits, with the city assuming no risk, providing no services commensurate with the payments received and the city retains control over the gaming operation," she wrote in the document.

Because of those issues, and especially the compensation to the city of more than $75 million, she concluded the 1994 agreements violate a mandate that the band retain the sole proprietary interest in and responsibility for the gaming activity.

The city argued that the 1994 contract terms are similar to those in tribal-state compacts reviewed at the time. The city agreed not to enter into similar compacts with any other Indian tribe, which was of value to the Fond du Lac band.

The National Indian Gaming Commission's stance in the Notice of Violation is a reversal from 1994, when the then-commissioner approved the agreements between the city and the band.

In her document, Stevens says that previous approval was given hastily and did not include any substantive analysis of the issues to support it. She also said neither the Gaming Commission chair nor the commission has approved any other agreement with terms similar to the ones in the 1994 agreement in Duluth.

Up until the band stopped payments to the city, the proceeds went to Duluth's Community Investment Trust, a fund used primarily to repair and rebuild city streets. The city says the band conservatively now owes the city $10 million in back payments and interest.

The ruling by the Gaming Commission puts into question how much money the city will be able to get from casino revenues in the next 25-year contract, which came up for renegotiation in 2010, and whether the band will have to pay the $10 million the city says it owes.


Because of the violation notice, arbitration to discuss the new contract has come to a halt, while the city reviews the notice. Both parties said the next step in this matter probably would involve a federal courtroom.

In order for the band to avoid fines from the gaming commission, the band has been ordered to cease payments to the city, which they did in 2009, and must stop providing the city any records related to gaming operations, Diver said.

Diver said she plans to keep the casino operating and will abide by the conditions.

"We can now move forward to make sure that the band is the primary beneficiary of its own business!" Diver posted on Facebook on Tuesday evening.

Karen Diver news conference
Fond du Lac Band of Lake Superior Chippewa Chairwoman Karen Diver tells the media on Tuesday that the Indian Gaming Commission has sided with the band in its dispute with the city of Duluth over payments from proceeds at Fond-du-Luth Casino. "The band is vindicated today," Diver said. (Clint Austin /

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