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Seneca Nation Seeks Arbitration in NY Gaming Compact Dispute

The Seneca Nation of Indians will seek an expedited arbitration to settle a gaming compact dispute with New York State involving more than $330 million in slot machine revenues to the state and cities that host the Nation’s casinos.

Seneca Nation of Indians President Robert Odawi Porter said November 2 that the Cuomo administration has failed to negotiate in good faith in a long-running dispute over the exclusivity provision of its 2002 gaming compact with the state and that the Nation will immediately seek an expedited briefing schedule for arbitration.

The Nation has withheld $333 million in payments to the state since 2009, charging that the state had violated the exclusivity provision of its gaming compact by allowing and promoting slot machines at private business and three state-run racinos located within the Nation’s exclusivity zone in Western New York. The funds are being held in an escrow account pending a resolution of the dispute. The nation pays 25 percent of its slot revenues from its casinos in Niagara Falls, Buffalo and Salamanca to the state in exchange for the exclusive right to operate gaming machines in its exclusivity zone. The state then pays out around 25 percent of the revenues it receives to the host municipalities.

Concerned that the revenue loss was hurting the towns, the Nation proposed making direct payments to the cities to Cuomo’s predecessor, former Governor David Paterson, while the state and Nation worked out their differences, but Paterson denied the request. Porter renewed the offer to the Cuomo administration in a February 8, 2011 letter. Howard Glaser, Gov. Andrew Cuomo’s director of state operations, responded on November 1, confirming that the state now supports the Nation’s proposal for direct payments to the host communities.

Porter responded in a tersely-worded letter the next day. “Thank you for your letter yesterday, responding to my (February 8) letter on the Governor’s behalf and confirming the State’s position that it is now willing to facilitate ‘through legislation or otherwise’ the nation’s ability to restore the flow of funds to the host communities through a direct payment system.... The state has yet to meaningfully respond to the Nation’s proposed terms, or alternatively, to provide the Nation with a good-faith offer to settle the matter.”

Glaser blamed the Seneca for the delay in resolving the dispute. “The State has been long committed to resolving this dispute. As you are well aware, we commenced arbitration almost eleven months ago on Dece.ber 14, 2010. Unfortunately, the Nation has failed to name its arbitrator, thus preventing a timely and effective resolution of the concerns underlying the exclusivity dispute,” Glaser wrote.

Porter responded that he was “surprised”: to read that the state had started dispute arbitration 11 months ago. “As we discussed at our August 2, 2011 meeting, the State has yet to meet and negotiate in good faith concerning the exclusivity dispute – a mandatory requirement under the Compact before proceeding to arbitration—and has never provided the Nation with a written analysis of its position on the exclusivity breach issue, notwithstanding the State’s commitment to the Nation to provide this written analysis back in October of 2010,” Porter wrote. Because of concerns that the issue “languishing and the continued lack of meaningful progress in negotiations, coupled with the adverse impacts to the host communities, we are willing to waive the requirement for good faith negotiations to allow the matter to proceed swiftly to arbitration,” Porter wrote.

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Joshua Vlasto, Cuomo’s press spokesman, acknowledged receipt of an email requesting comments, but did not respond. Among the answers sought was why the state, with a $10 billion deficit, has not pursued a solution that would allow the Seneca Nation to turn over the $333 million to the state.

According to the Associated Press, Porter said that Glaser’s letter was "inflammatory." He said the Nation had given the new administration time to pursue good faith negotiations before continuing with arbitration, only to find out this week that it wasn't interested. "This is a very frustrating scenario, 10 months later, to finally hear that arbitration is the official position for resolving the dispute," Porter told the AP. "It's wasted an awful lot of time for our nation and for the local governments who've been hanging out there without getting paid."

The AP reported that Cuomo laughed at the idea that his administration has moved at a glacial pace. “Yes, that's us, we're known for glacial-type movement," he told reporters. "We're looking and have been looking to resolve the differences as quickly as possible."

In a press release issued November 3, Seneca Nation Council Chairman Richard Nephew said the Nation has made $476 million in exclusivity payments to the state. “The Nation has reached out repeatedly to two administrations for meaningful, substantive dialogue to resolve the compact dispute. We continue to seek that dialogue and continue to propose ways in which we can fulfill our end of the bargain, according to the terms of the 2002 compact, despite the state breach of the compact since the arrival of VLTs and slots at the racetracks, and Moxie Mania at taverns and restaurants in our exclusivity zone. We will fight vigorously to defend the terms of the compact and hold New York State to the agreement it made with the Seneca Nation back in 2002, an agreement that is still a matter of law,” he said.

Porter also restated in the press release the Nation’s long-time efforts to make direct payments to the local communities. “Our preference would be that we make these payments directly to the host communities so that these dollars are immediately made available to the host communities in Western New York and benefit our fellow Western New Yorkers, as we’ve sought all along.”

But tensions are running high, according to a source close to the Seneca administration. The Nation was scheduled to make direct payments of around $70 million to the local communities on November 3, but the proposal collapsed after Glaser’s claim that the Nation was at fault for not resolving the dispute.

“I think why there is such impatience and frustration and a level of tension is because the Nation was patient and reasonable and tried to take the high road and tried to be good little Indians and sit tight and tiptoed around. The state has turned the entire situation around to say that Seneca failed to appoint an arbitrator and they’ve done nothing but attempt to meet and it’s just not true. Why isn’t someone asking why the state would allow nine months to pass before answering a letter from the Nation? Why would NY State lend the City of Salamanca $5 million last summer instead of letting Seneca make the direct payments? Why is the state taking so long to resolve a dispute that could put more than $330 million into the state coffers when the state is supposedly so broke? Why don’t they want to take the Seneca’s money? Why don’t they want to talk to them?” the source said. The arbitration process, which is likely to take around three months, may answer some of those questions, the source said.