Catawba Two Kings Casino hasn’t satisfied federal regulators as investigation nears end
This summer, Catawba Indian Nation leaders said a federal investigation into its business dealings for the tribe’s Two Kings Casino was a “standard review.”
But documents pertaining to the investigation show the National Indian Gaming Commission has had substantial concerns about the legality of the Catawba business agreements for more than a year.
If Catawba Nation does not satisfy the commission’s concerns over control of the casino and who profits from it, that could spell trouble for the Kings Mountain project, which promoters promised for years would bring jobs and more to Cleveland County.
Catawba Chief Bill Harris acknowledged that the tribe is still working with the gaming commission on these issues.
Construction of the permanent casino — a $273 million project to include a hotel, restaurants and more — was supposed to start by the end of 2021, tribal leaders announced last summer. But that work has not started as the investigation continues.
In March, the chief compliance officer of the commission alerted Harris that a lease agreement between the Catawba and the company the tribe is working with to develop the casino violated the Indian Gaming Regulatory Act.
A ground lease between the tribe and Kings Mountain Sky Boat Partners, LLC, granted the company “management authority” over the casino operation and had not been approved by the gaming commission chief compliance officer, Tom Cunningham wrote.
These violations “may result in the issuance of a notice of violation, a civil fine assessment, and/or an order of temporary closure to the Nation and Sky Boat as the manager of the Tribe’s gaming,” the letter said.
That outcome may soon be clear, as the federal investigation could be completed by the end of the year, an official at the commission told The Charlotte Observer on Friday.
But the issue under investigation — whether the Catawba Nation would hold adequate ownership of its gaming operations at the Cleveland County casino — appears unresolved, as the Catawba said they are still going back and forth with the federal commission.
Doug Brown, a Cleveland County business owner and early investor in the Catawba Casino project, said the gaming commission has warned interested parties of too much involvement from non-native people.
He unloaded all financial interest in the project over the last year fearing the project’s impending failure, he said.
“I don’t know if they’re going to be able to build the casino,” Brown said.
‘At risk of violating’
The March 7 letter, along with several others obtained in a Freedom of Information Act request by The Charlotte Observer, show the commission found several issues with the contractual agreements between Two Kings Casino and other companies.
In correspondence as early as July 2021, the commission raised substantial concerns to Catawba Nation about its contractual relationships with Sky Boat Partners and other companies involved in the casino.
Kings Mountain Sky Boat Partners is a company owned by Wallace Cheves, the politically connected casino developer hired by the Catawba to help them open Two Kings Casino. Cheves declined to answer questions for this story, deferring to the Catawba.
“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,” Cunningham wrote in a letter dated July 1, 2021.
Subsequent correspondence between the tribe and the commission shows that the Catawba terminated and amended certain contracts that had raised concerns at the commission. But the March 7 letter, which the Catawba said was the most recent official correspondence regarding the investigation, shows that concerns remained.
“The Catawba Nation continues to work closely with the National Indian Gaming Commission on its review of our casino resort project and necessary agreements, and we are working to follow its recommendations as required,” Catawba Chief Harris said in an emailed statement on Saturday.
“With regard to the agreement between the Catawba Nation and Kings Mountain Sky Boat Partners, we actively proposed a number of pathways to resolve NIGC’s objections and are continuing to revise the agreement in response to NIGC. We are hopeful this can be resolved in the coming weeks,” Harris said.
The gaming commission official, who asked to not be named because the investigation is ongoing, said the commission is looking into two primary issues: whether the Catawba have 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 commission to regulate Indian gaming.
A beat-the-odds casino
The Catawba, whose reservation is near Rock Hill, S.C., were unable to build a casino in their home state because South Carolina bans most gambling. So the tribe shifted its gaze north of the border, to a state friendlier to tribal gaming.
After years of political maneuvering, and clashes with the Eastern Band of Cherokee Indians, the Catawba landed permission from the federal Department of the Interior in March 2020 to build a casino on 17 acres in Cleveland County, property the government acknowledged as Catawba ancestral land. That approval reversed an earlier Interior Department decision that rejected the tribe’s bid for a casino.
That summer, work on the site began.
In January 2021, the Catawba 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.
The current casino facility is a sprawling modular unit packed with 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.
While development of the full casino complex has stalled, previously unknown financial ties between the project and influential people, locally and beyond, have been revealed.
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, according to reporting this summer by The Wall Street Journal.
Clyburn in March 2021 sponsored a successful bill that reaffirmed in federal law the Interior Department’s decision enabling the Catawba to own and operate a gaming facility in Cleveland County.
Kings Mountain Equipment Supply is contracted with Two Kings to provide slot machines and has also featured in the NIGC investigation, records show.
Also with stakes in Kings Mountain Equipment Supply are Butch Bowers, an attorney who has represented former President Donald Trump and former Gov. Haley; and Patti Solis Doyle, a former campaign manager to both Joe Biden and Hillary Clinton, the Journal reported.
Others put in a position to profit, The Observer revealed in August, include former Cleveland County Manager David Dear and former Cleveland County Commissioner Eddie Holbrook, both of whom were vocal supporters of the casino during their time in county government.
The NIGC is not investigating these connections, which are outside its statutory authority, the commission has said.
Warnings from Washington, D.C.
Letters obtained by The Observer detail the investigation into Two Kings Casino going back to at least May 2021, though the documents suggest the inquiry had been going on longer.
In a July 1, 2021 “letter of concern”, Cunningham wrote that the gaming commission “has identified several provisions within the agreements that explicitly or implicitly allow the third parties to manage the Nation’s gaming operations and that grant a proprietary interest to third parties,” both of which are against the law.
On Oct. 7, 2021, the commission again wrote to the Catawba, saying that while the tribe had satisfied one issue, several “substantial concerns” remained, including at least two contracts that the commission had determined violate the Indian Gaming Regulatory Act and a third contract that, if executed, would violate the act.
That letter asked the Catawba for additional financial records for both the tribe and Kings Mountain Sky Boat Partners so it could continue its investigation.
The letters obtained by The Observer were partially redacted by the commission, which blacked out the specifics of the casino’s contracts.
After the October letter, the Catawba amended and terminated contracts that had been flagged, and submitted new contracts for review, records show. Still, the updated contracts did not satisfy investigators’ concerns that the Catawba had relinquished management control and sole proprietary benefit of the casino.
On December 21, 2021, the commission wrote that “operating under this agreement puts the Nation and parties at risk of violating IGRA” and again warned of the consequences of such a violation, including fines and temporary closure.
In correspondence from January, the commission requested additional documents from the Catawba related to the updated contracts.
Later that month, the Catawba asked the commission to reconsider its conclusion that the ground lease agreement between the tribe and Kings Mountain Sky Boat Partners gave the company managerial control. In March, the commission declined and stood by that conclusion, again warning that the agreement violated the law.
“It is the (Compliance) Division’s recommendation to the NIGC Chairman that the contract is void and the exercise of any management activity under it is a substantial violation of IGRA,” Cunningham wrote to the Catawba on March 7.
Catawba Chief Harris confirmed that letter was the last official correspondence from the commission, though he said the parties were still working through the issues raised.
CORRECTION: A previous version of this story said Tom Cunningham was the NIGC’s chairman. His title is chief compliance officer. This story has been updated to reflect that change.
This story was originally published November 5, 2022 at 3:03 PM with the headline "Catawba Two Kings Casino hasn’t satisfied federal regulators as investigation nears end."
