Granholm, Little River Band of Ottawa Indians, Little Traverse Bay Bands of Odawa Indians Announce Club Keno Settlement

March 21, 2008

LANSING - Governor Jennifer M. Granholm, the Little River Band of Ottawa Indians and the Little Traverse Bay Bands of Odawa Indians today announced a settlement in a long-standing lawsuit over the state lottery's Club Keno game.  The agreement settles the question of whether Club Keno terminated the tribes' obligation to pay a portion of their tribal casino revenues to the Michigan Strategic Fund (MSF).

"This agreement restores funds vital to Michigan's economic development efforts at this critical time and will help ensure a more stable and cooperative economic relationship between the state and these two tribal governments," Granholm said.

"The tribe is pleased to be able to bring this question to a close," said Larry Romanelli, Ogema of the Little River Band of Ottawa Indians.  "The settlement allows both the tribes and state to work together for our mutual future while respecting the sovereignty of each side."

"I am excited about the cooperative spirit that enabled this settlement," Little Traverse Bay Bands of Odawa Indians Tribal Chairman Frank Ettawageshik said.  "We have many tough economic challenges that are much easier to work through when we all work together."

The Little River Band and Little Traverse Bay Bands both entered into gaming compacts with the state in 1998.  In these compacts, the tribes agreed to pay 8 percent of their net win on slot machines to the MSF but only for so long as the state did not permit new gaming competition by other persons anywhere in the state.  In 2004, after the Michigan Lottery introduced Club Keno, both tribes suspended payments to the MSF, claiming the Club Keno game was a new gaming competition that terminated their payment obligation under their compacts.  When negotiations failed to resolve the dispute, the state filed suit in federal court.

Under the settlement agreement announced today, the percentage of slot machine revenues paid by the tribes will be reduced to 6 percent in most cases.  In return, the tribes have agreed to changes in their revenue sharing agreements that will make those payments more stable in the future,
specifically:

• Gaming exclusivity will no longer be measured on a state-wide basis but will instead be based on a more limited market area for each tribe - generally nine to ten county areas in the immediate vicinity of each tribe's casino.  This means that new commercial gaming activities elsewhere in the state will no longer result in the termination of payments.
• Lottery and other similar activities by the state will not be considered to be new commercial gaming unless they involve large scale use of electronic machines. 
• If new commercial gaming does occur within one of the tribe's market areas, it will no longer result in permanent termination of payments; instead, payments are suspended and can be reinstated later at a reduced rate if the tribe's casino business continues to grow.

The changes made to the revenue sharing agreement were accomplished by amendments to each of the tribe's gaming compacts.  Under the terms of those compacts, such amendments require the approval of the governor, the tribe, and the Secretary of the Interior.  The governor and the tribes approved the compact amendments on February 27; the Department of Interior has now issued a letter advising that it will permit the amendments to take effect.  Their gaming compacts also require both of the tribes to pay 2 percent of their net win to local units of government; these payments are not affected by the settlement.

The settlement agreement filed today also provides for distribution of approximately $52 million paid into escrow by the tribes during the dispute.  Under the agreement, the funds escrowed by each tribe will be divided evenly between the Michigan Strategic Fund and the tribe.

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