Seminoles sue Cordish in Fla.

Tribe seeks to end casino pact, saying Baltimore firm does `nothing'

May 24, 2006|By ROBERT LITTLE | ROBERT LITTLE,SUN REPORTER

The Seminole Tribe of Florida is suing to overturn its casino gambling contract with Baltimore developer David S. Cordish, saying his company will earn as much as $2.2 billion over 10 years for developing the tribe's two Hard Rock Hotel and Casino complexes despite taking on virtually no financial risk and "doing absolutely nothing" once the casinos opened in 2004.

In a lawsuit filed in Broward County Circuit Court in Florida, the Seminoles call their deal with Cordish "illegal and unconscionable," and say it violates a federal law prohibiting non-Indians from acquiring a "proprietary interest" in tribal gambling operations.

It asks the court to negate the contract and force Cordish's Power Plant Entertainment subsidiary to repay more than $310 million in fees already received from the tribe.

"Power Plant's advisory fees bear no rational relationship to services provided," the tribe says in the lawsuit. It claimed tribal leaders were unaware that the contract was illegal when they negotiated and signed it in 2000.

Power Plant, a partnership between Cordish and a former Donald Trump associate who brought him the Seminole Tribe deal, released a statement yesterday saying it was "shocked and saddened" by the "less than honorable tactic" and promising to fight the lawsuit.

"To claim six years after the fact that the financing agreement is defective is not only ridiculous, it is shameful," the statement said.

Cordish called the Seminole Tribe deal "the proudest accomplishment in the 90-year history of the Cordish Co." when the two Hard Rock Hotel and Casino complexes he developed opened in early 2004 in Tampa and Hollywood, Fla.

Since then the two casinos, with accompanying hotels and retail complexes in the Cordish Co. style that has been successful throughout the country, have been wildly profitable, earning roughly $326 million the first year.

But the project's novel financing, and Cordish's deal to reap 30 percent of the net gambling proceeds for 10 years, have been controversial.

In late 2004 the Internal Revenue Service, in a rare action, issued a "preliminary adverse determination," declaring that the tax-exempt bonds used to build the complexes were an inappropriate use of a federal subsidy.

Trump sued Cordish about the same time, alleging the Baltimore developer and his business partner, Richard Fields, stole the Seminole deal by representing themselves as Trump associates, a claim Cordish called "ludicrous."

Tribal leaders announced last year that they wanted to negotiate a new deal with Cordish, saying he stood to earn more money than they ever anticipated.

A series of stories in The Sun in early 2004 suggested Power Plant would earn more than $1.3 billion over the 10-year contract - an estimate Cordish subsequently deemed "absurd." The tribe's lawsuit projects Cordish's payments at $1.6 billion to $2.2 billion.

The Sun raised questions about Cordish's 30 percent fee in 2004 with federal regulators and with Seminole Council member Max B. Osceola Jr., who said "if we weren't happy with the terms, we wouldn't have them. It's as simple as that."

Late last year tribal attorney Jim Shore released a statement saying "the Tribe believes the original deal with Cordish was fair."

Yet in its recent lawsuit, the tribe says of the contract: "Such an abuse against a protected people cannot be tolerated and the illegal contract must be declared invalid."

A tribal spokesman did not return calls yesterday, and the lawsuit does not make clear what caused the tribe to change its assessment of the deal.

The Sun also raised questions with Cordish three years ago about the legality of his contracts, and he said at the time: "Everything has to go to Washington, has to be approved by the federal government, has to be within a parameter, and the rules are right there."

But the final deal was never approved or even reviewed by federal regulators. According to correspondence between the regulators and attorneys working with Cordish, the deal was crafted specifically to avoid federal scrutiny, by paying Power Plant primarily as a financial adviser rather than as a management partner.

One sore point apparent in the lawsuit is a provision in the contract that allows Cordish to collect 30 percent of the gambling revenue from two casinos that existed in Tampa and Hollywood, Fla., before the Hard Rock projects were built close by.

Early plans envisioned razing the two casinos, but they continued operating successfully and have contributed to Power Plant's fee even though the company played no role in developing them.

Cordish and the tribe also disagree on the amount of upfront investment that Power Plant contributed to the Hard Rock projects. Whereas Cordish has told The Sun at various times that he kicked in anywhere from $40 million to $140 million of his own money, the tribe asserts that Power Plant contributed a "de minimus" sum of $6 million, all of which was repaid before the casinos opened.

In the statement from Power Plant, Cordish and his partners say the Seminole Tribe's action, if successful, will have a chilling effect on any developer or business considering a contract with an Indian tribe.

"If a Tribe can unilaterally declare that it has violated its own ordinances and thereby avoid paying its contractual obligations on the most successful project in the history of Indian gaming, then no prudent business would be willing to provide the financing needed for any Indian economic development."

Reneging on a casino gambling contract it deems unfair is not a new concept for the Seminole Tribe. In 2003 it asked federal regulators to invalidate a 10-year, 35 percent deal with another developer on essentially the same "proprietary interest" grounds it is raising in the Cordish deal, resulting in a settlement.

robert.little@baltsun.com

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