NC Catawba Two Kings Casino violated federal law | Charlotte Observer

The Catawba Nation and its casino development partner violated the law with business agreements related to the tribe’s Two Kings Casino in Kings Mountain, a federal investigation has found, raising questions about the immediate future of the gaming operation.

The National Indian Gaming Commission on Wednesday announced the findings of its investigation, which has been under way for more than a year. The violation could carry a daily fine until the tribe and its partners have addressed the issues with its contracts.

If the tribe is unable to bring its business agreements into compliance, the casino could be temporarily shut down by the NIGC, agency officials said.

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“We do not take this enforcement action lightly, but do so to preserve the integrity of the industry and protect the valuable tool Indian Gaming represents for many Tribes,” NIGC Chairman E. Sequoyah Simermeyer said in a statement Wednesday.

The violation stems from a management agreement between the Catawba and a company called Kings Mountain Sky Boat Partners, LLC, which has been working with the South Carolina-based tribe for years to develop the casino in North Carolina.

The agreement gave Sky Boat “management authority” over the casino operation, which is not allowed under the Indian Gaming Regulatory Act, the NIGC found. The NIGC also found that the Catawba and Sky Boat failed to submit a management contract within 60 days of its execution, as required by law.

The tribe and Sky Boat face fines up to $57,527 per day for each violation and the Two Kings Casino could be subject to a temporary closure order, according to a press release Wednesday from the NIGC. The agency has not yet imposed the fines and would file a separate action before doing so, said NIGC spokesman Justin Platt.

Catawba Chief Bill Harris said the tribe is working to address the violation.

“The Catawba Nation is committed to resolving the issues cited by the National Indian Gaming Commission regarding the lease agreements for our casino resort project with Sky Boat Partners,” Harris said in a statement on Wednesday. “The issues don’t involve current casino operations.”

The gaming commission has issued violations in just 15 cases in the past decade, according to the agency’s website. Only twice did the NIGC order a gaming operation temporarily closed.

Gaming agency concerned for months

The NIGC’s chief compliance officer alerted the tribe to the issues with the contract in March, according to documents obtained by The Charlotte Observer. The tribe had since been working to satisfy the NIGC’s concerns, evidently without success.

The agency had concerns as early as July 2021 about other contracts the Catawba signed related to the casino, letters between the tribe and the federal regulators show.

In letters to the tribe, the NIGC raised substantial concerns to Catawba Nation about its contractual relationships with Sky Boat and other companies involved in the casino. Sky Boat is owned by Wallace Cheves, the politically connected casino developer hired by the Catawba to help them open a casino.

“Moving forward, please be aware that operating under these agreements puts the Nation and related parties at risk of violating IGRA, NIGC’s regulations, and the Nation’s gaming ordinance,” NIGC Chief Compliance Officer Tom Cunningham wrote in a letter dated July 1, 2021, which was also the day the first phase of Two Kings Casino opened off Interstate 85 in Cleveland County.

The commission has drilled into two primary issues: whether the Catawba retained sole proprietary interest in the casino and whether the Catawba got approval for management contracts related to the casino.

Both are key requirements of the Indian Gaming Regulatory Act, a law passed in the 1980s to shield tribes “from organized crime and other corrupting influences (and) to ensure that the Indian tribe is the primary beneficiary of the gaming operation.” That law also created the NIGC to regulate Indian gaming.

In a letter to tribal members dated Nov. 18, Catawba Chief Bill Harris acknowledged the troubles the tribe was having with its agreements with Sky Boat and said those issues largely come down to paying Sky Boat and Cheves for helping land a casino for the tribe.

“From Sky Boat’s perspective, they were essential in the successful establishment of Two Kings — and they are now getting the short end of the stick,” Harris wrote in that letter, which was obtained by The Observer. “For the Nation, however, the question, again, is: What is fair compensation for their 13‐year commitment to this successful effort in which they were of critical importance?”

So far, the NIGC has rejected the Catawba’s proposals on paying off Cheves and Sky Boat.

Cheves has not yet responded to questions sent to him on Wednesday morning.

A web of financial ties

Not related to the commission’s probe, news reporting in recent months has exposed that politicians and other people with influence have financial stakes in multiple companies linked to Cheves, to the casino and to development around the Cleveland County site.

Two former Cleveland County officials have multiple ties to companies that either own land around the casino or are connected to the developer Cheves, The Observer reported last month. Cleveland County is where the casino is located. Both David Dear, former county manager, and Eddie Holbrook, former county commissioner, were vocal supporters of the casino during their time working in government.

Reporting in the Wall Street Journal over the summer showed that John Clyburn, brother of U.S. Rep. Jim Clyburn, and Michael Haley, husband of former South Carolina Gov. Nikki Haley, had financial stakes in a company called Kings Mountain Equipment Supply, which provides slot machines to Two Kings Casino. Local officials Dear and Holbrook also held stakes in Kings Mountain Equipment Supply, The Observer reported in August.

The Catawba, whose reservation is near Rock Hill, S.C., initially wanted to open a casino in their home state. But South Carolina bans most gambling, so the tribe began eyeing land in North Carolina, a state friendlier to tribal gaming.

That began years of political efforts, including a legal fight with the Eastern Band of Cherokee Indians, whose federal lawsuit opposing Two Kings failed. In March 2020, the Catawba landed approval from the federal Department of the Interior to build a casino on 17 acres in Cleveland County, property the government acknowledged as Catawba ancestral land. Work on the casino began that summer.

In January 2021, the tribe reached an agreement with the state of North Carolina to share the revenue generated by the casino. Then in December, Congress passed a law that allowed the Catawba to move forward with their casino, pending the investigation.

But the tribe has not yet been able to build out the full casino, a $273 million project meant to include a hotel, restaurants and more. Construction was supposed to start by the end of 2021, tribal leaders announced last summer. But that work has not started.

The casino remains in its temporary facility, a large red modular unit full of slot machines, electronic table games and a sports book — sitting in a parking lot off Exit 5 of Interstate 85, about 35 miles west of Charlotte. Mountains of red dirt tower above the building, undisturbed long enough for grass to cover parts of the mounds.

A timeline on further development of the full casino project remains unclear, as the tribe is still seeking to get in compliance with the NIGC, while figuring out how and how much to pay Sky Boat for its help in getting a casino for the Catawba.

This is a breaking story and will be updated as more information is available.

This story was originally published December 07, 2022 10:30 AM.