The owners of Magic Palace Casino have filed lawsuits against the Mohawk Council of Kahnawá:ke and the Kahnawá:ke Gaming Commission after the venue was forcibly shut down earlier this spring.

In late March, the commission closed down Magic Palace indefinitely after the venue’s operational license was terminated after the council had terminated its agreement with the casino in the wake of allegations that it was being used for money laundering. The commission noted it had taken the decision based on “numerous concerns” arising from investigations conducted over the previous several months.

An electronic gaming device operator’s license is not valid without a contractual agreement between the operator and the council under the council’s regulations.

Last week, the casino’s owners Stanley Myiow and Barry Alfred filed legal action asking the Quebec Superior Court to legally restore the facility’s right to operate electronic gaming devices (EGDs) on the territory.

Myiow and Alfred allege that a regulatory loophole deprived them of the opportunity to preserve their rights after their license to operate EGDs was revoked. The lawsuit states that EGDs make up 95% of Magic Palace’s revenues.

Pierre L’Ecuyer, a lawyer representing the casino owners, told The Eastern Door’s Marcus Bankuti that the lawsuit is “an uphill battle” but he stressed that the council “needs to learn to follow the rules of law.”

What was alleged?

The council alleged that it was justified in terminating the operating agreement because the casino and the adjoining restaurant Mirela’s were being used for criminal activity.

An investigation conducted by independent U.S. consulting firm Spectrum Gaming Group found that “an undisclosed beneficial owner” of Magic Palace who is not a member of the Kahnawá:ke exercised “significant degrees of control over the establishment and received the majority of the benefits” in breach of the terms of the casino’s agreement with the council.

The council’s Gaming Portfolio Chief Cody Diabo said the council had “grave concerns” about the results of the investigation and the suspected activity.

Back in October 2023, La Presse had reported that the RCMP suspected that an investor in Magic Palace, Luftar Hysa, might be using the casino for laundering Sinaloa Cartel money.

L’Ecuyer called that claim “bullshit” and stressed that nothing has been proven in court.

What do the new lawsuits argue?

Myiow and Alfred’s lawyers have filed two separate applications. One names the commission as the defendant with the council as a party and seeks a judicial review, while the other names the council as the defendant and seeks an injunction against the termination of the royalty agreement.

The owners allege that the commission had full knowledge of Hysa’s role as an investor as far back as 2016. The documentation stresses that Hysa is not an owner of the casino and cannot be such because he is not a member of the Kahnawá:ke.

Hysa has earned around $9 million from the casino’s operations, per the filings. The Spectrum report concluded that level of payment would be “highly irregular if he was not an owner of the facility.” The lawsuits counter-argue that that is a false premise.

The filings assert that last month, the commission rejected an appeal from Magic Palace on the question of EGDs due to the termination of the royalty agreement and the council refused to reinstate the agreement. It argues that both the council and the commission acted with prejudice and left Magic Palace’s owners high and dry.

“They’re feeling that their livelihood has been taken without any reason,” added L’Ecuyer. “The way they proceeded is against the principle of justice.”

L’Ecuyer clarified that the plaintiffs are asking for their permit to be reinstated rather than questioning the authority of the commission to oversee gaming.

Commission chairperson Frank Phillips said the body will contest the lawsuit.

“The KGC believes the process it followed in arriving at its decisions was thorough and fair, and consistent with the principles of the KGC’s applicable regulations and the Kahnawake Gaming Law,” Phillips told Bankuti. We are confident that any court will conclude the same.”

Canadian Gaming Business reached out to the KGC for comment but has yet to receive a response.