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Michigan Casino Developments

2 March 2005

These are interesting times on many fronts for the casino gaming industry in Michigan. In the past two weeks, it has become clear that there is a change in ownership for one of Detroit's casinos. There also has been an end to a several-year battle over the validity of four of the tribal compacts in this state, which should help bring two to three new casinos to Michigan's lower peninsula in the next few years. Meanwhile, one other prominent Detroit businessman is being lauded nationally for his success in the industry.

First, on the Detroit front, an announcement is expected any day now on a change in ownership for either the MotorCity Casino or the MGM Grand Detroit Casino.

Last week, the Nevada Gaming Control Board and the Nevada Gaming Commission approved MGM Mirage's plan to acquire Mandalay Resort Group to create one of the world's largest gaming companies. The Federal Trade Commission has previously signed off on the deal.

Now, many in the industry are keeping a close eye on Michigan, where either the MGM Grand Detroit Casino or the Mandalay Resort Group's interest in the MotorCity Casino must be sold prior to closing. Michigan law prohibits the same operator from having more than 10 percent ownership in two casinos. Rumors of various potential deals have been circulating within the state over the last few weeks, and a Michigan Gaming Control Board meeting to consider the approval of a transfer of interest in one of the casinos is currently scheduled for March 8th.

Mississippi approved the MGM Mirage and Mandalay merger last December. Michigan has no set requirement for the formal approval of such corporate combinations by the parent companies of the local casinos. However, the Michigan provision prohibiting dual ownership provides a unique hurdle for the overall transaction. Normally, the investigation process for a new owner of a casino takes anywhere from six months to a year. Thus, the speculation locally has been that the new owner will be an existing local owner or owners in one of the casinos, or alternatively, some sort of trust arrangement may be established to hold the interest pending an investigation and approval by the Board.

Following Nevada's approval of the merger, MGM Mirage Inc.'s Chairman and CEO Terry Lanni announced that the company expects to sell one of the two Detroit casinos within two weeks. He told the Gaming Wire, "We have multiple opportunities in Michigan, and we'll accept the offer that closes the earliest."

On the tribal gaming front, on Tuesday, February 22, 2005, without comment, the U.S. Supreme Court declined to hear an appeal of the Michigan Supreme Court's June 30, 2004, decision holding that the state Legislature did not violate Michigan's Constitution when it passed a resolution in 1998 approving four Indian gaming compacts rather than approving the compacts through the passage of legislation. Taxpayers of Michigan Against Casinos ("TOMAC"), an anti-casino group based in New Buffalo, had appealed the 2004 decision.

A February 22, 2005, press release from Nottawaseppi Huron Band of Potawatomi, Pokagon Band of Potawatomi Indians and Gaming Entertainment (Michigan), LLC, quoted attorney Lance Boldrey, who represented intervening defendant Gaming Entertainment (Michigan), LLC as saying, "In almost six years of litigation, three appellate courts have delivered victories for the Indian tribes and the State. While this decision was not unexpected, I'm happy to see the nation's highest court uphold the Michigan process, which reflects a proper understanding of the government-to-government relationship between the State and Michigan tribes."

"The tribes are pleased that yet another court has made a decision supporting the process by which these inter-governmental agreements were ratified," said Nottawaseppi Huron Band of Potawatomi Tribal Chairperson Laura Spurr. "We are pleased the court has preserved the right of the tribes to create jobs and economic development for the entire community."

The gaming compacts, signed by former Governor Engler, are with New Buffalo's Pokagon Band of Potawatomi Indians, Mackinaw City and Petoskey's Little Traverse Bay Band of Odawa Indians, Battle Creek's Huron Band of Potawatomi Indians, and Manistee's Little River Band of Ottawa Indians.

The final resolution of this lawsuit moves three tribes one step closer to the opening of casinos in New Buffalo, Battle Creek and possibly in Mackinaw City.

While all these casino developments are occurring close to home, one prominent Detroit businessman is gaining recognition from a national perspective for his success in the gaming industry. Coming on the heels of a detailed profile in Ebony magazine last December in which Mr. Barden outlined his plan to double the size of his company in five years, financial reporter Frank Fantini in this week's Global Gaming Weekly Magazine suggested that an eye should be kept on the possibility of Barden taking his company public in the next few years.

The City of Detroit and State of Michigan have already demonstrated an ability to succeed in this new industry in the past few years. If we can all learn to embrace the changes and find ways to participate in the process, the potential for continued success is unlimited.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com