Attorneys for the Oklahoma-based Cherokee Nation Businesses have asked the Arkansas Racing Commission to reverse its decision to deny the firm the license to operate a casino in Pope County.
In their appeal filed Thursday with the Racing Commission, the attorneys also asked the commission to deny the license to Mississippi-based Gulfside Casino Partnership and instead to issue its intent to award the license to the Cherokees.
Attorneys Bart Calhoun, Dustin McDaniel and Scott Richardson filed the appeal on the behalf of Legends Resort and Casino LLC, a limited liability company in Arkansas that is owned by Cherokee Nation Businesses.
In their appeal, they wrote that the Racing Commission erroneously relied upon biased scoring, failed to follow its own rules, accepted an application that doesn't meet the minimum requirements of Amendment 100 to the Arkansas Constitution, and is presumably going to award a license to an entity that made serious misrepresentations to the commission.
Lucas Rowan, counsel to Gulfside Casino Partnership, said "we are not surprised by this latest attempt to overturn a decision made in Gulfside's favor -- even though it was supported by a majority of commissioners.
"However, it is disappointing the appeal was made before seeing whether all parties could reach an amicable resolution on the process, as the Racing Commission requested [on Monday]," he said Friday afternoon in a written statement.
But McDaniel said "we have suggested that both parties meet with the Attorney General [Leslie Rutledge] and Chairman [Alex] Lieblong separately prior to meeting jointly.
"To our knowledge, no meetings with either party have taken place, nor have any been scheduled," he said Friday afternoon in a written statement.
"The appeal was required because we only learned of the June 18th rejection letter after the [Monday] hearing. Had we known it existed, we would have certainly raised the matter with the commission that day," said McDaniel, who is a former state attorney general.
However, Amanda Priest, a spokesman for Rutledge, said Friday that she has been advised that representatives of the attorney general's office, Gulfside and Cherokee Nation Businesses are expected to meet early next week.
On June 18, the Racing Commission, which has authority under Amendment 100 of the state constitution to award casino licenses, signaled its intent to award the license for Pope County to Gulfside based on the seven commissioners' total score of 637 for Gulfside, compared with 572 for the Cherokees.
McDaniel then filed a complaint alleging that commissioner Butch Rice of Beebe was biased in giving a score of 100 to Gulfside, compared with 29 to the Cherokees. That 71-point difference in Rice's scores was larger than the 65-point difference in the combined scores of all commissioners.
While Rice disputed that he was biased in his scoring, the other six commissioners voted Monday to find that Rice was biased in favor of Gulfside.
Then, the commission voted to ask Rutledge's office and representatives of both companies to try to reach agreement on a remedy. The commission's options include throwing out Rice's scores and awarding the license based on the collective scores of the six other commissioners.
On June 18, Rice and commissioners Denny East of Marion, Bo Hunter of Fort Smith and Michael Post of Altus gave higher scores to Gulfside, while Lieblong of Conway and commissioners Mark Lamberth of Batesville and Steve Landers of Little Rock gave higher scores to the Cherokees.
Besides Rice, Landers was the only other commissioner to give a score of 100. Landers gave the Cherokees a score of 100 compared with 90 for Gulfside.
The largest difference in the scores for any commissioner beyond Rice was Lieblong's 22-point difference -- he gave the Cherokees 95, compared with 73 for Gulfside.
State voters in November 2018 approved Amendment 100, but its rejection by voters in Pope County signaled the opposition faced by companies that sought the license there.
The amendment allows the expansion of casinos at the racetracks in Hot Springs and West Memphis, and allows new casinos in Pope and Jefferson counties.
A year ago, the Racing Commission granted the license in Jefferson County to the Downstream Development Authority of the Oklahoma-based Quapaw Tribe before transferring the license to the Saracen Development LLC in October.
In its 2018 campaign promoting proposed Amendment 100, the Driving Arkansas Forward committee reported raising $7.1 million. Its largest contributors were the Downstream Development Authority of the Quapaw Tribe, which contributed $3.78 million, and Cherokee Nation Businesses, which contributed $2.28 million.
Gulfside and the Cherokees were the last two Pope County license applicants standing after all five original applicants -- including them -- were rejected by the Racing Commission in the first application period last year. All five were rejected because none met the commission's rule then in place requiring endorsements from local elected officials in office at the time of the application filing.
Gulfside sued the Racing Commission because its application contained endorsements from local elected officials who had left office in December 2018.
Endorsements are required by Amendment 100. However, the amendment doesn't specify that endorsements must come from officials still in office.
Earlier this year, Pulaski County Circuit Judge Tim Fox ruled unconstitutional the commission's rule and a state law with the same requirement.
The Cherokees resubmitted their application after being endorsed by the Pope County Quorum Court in August.
Cherokee Nation Businesses operates 10 casinos in Oklahoma. Gulfside Casino Partnership operates a casino in Gulfport, Miss.
The Cherokees are proposing a $225 million casino and resort with 1,100 slot machines, 32 table games and 200 hotel rooms near Russellville off Hob Nob Road, while Gulfside is proposing a $254 million casino and resort with 1,900 slot machines, 90 table games and 500 hotel rooms near Russellville north of Interstate 40 and off Exit 84.
ARGUMENTS IN APPEAL
In asking the commission to reverse its June 18 decision to deny the license to Cherokee Nation Businesses, the Cherokees' attorneys argue:
• The commission's decision is based on Rice's scores that the commission found to be biased.
• Gulfside failed to meet the minimum qualifications for the casino license in Pope County under Amendment 100 because it was not a casino license applicant until it filed its application in May 2019.
Amendment 100 requires that the applicant submit a letter or a resolution of support from the county judge or quorum court and at the time Gulfside became a casino applicant, Jim Ed Gibson, the only person to issue a letter of support for Gulfside, was no longer the county judge, according to the attorneys for the Cherokees.
• The commission's decision is arbitrary based on Gulfside's misrepresentations about its owners' history of bankruptcy.
Terry Green, a co-owner of Gulfside Casino Partnership, told commissioners June 18 that he had never filed personal bankruptcy and was a minority, noncontrolling owner in a company that had past financial struggles. Rowan has said McDaniel's allegations were incorrect.
• The commission's scoring of the applications was arbitrary and capricious because Cherokee Nation Businesses is objectively more qualified in all four criteria for the license than Gulfside.
Casey Castleberry, an attorney representing Gulfside, has maintained that the Cherokees should have been eliminated from the candidate pool because the application was submitted under Legends Resort & Casino LLC rather than Cherokee Nation Businesses.
The limited liability company was formed Sept. 11 and therefore does not have any casino gambling experience as required by the state to be eligible for a casino license, according to Castleberry.
"We believe the corporate structure objection is a nonissue," McDaniel said. "It is common for a business to hold an asset such as a casino gaming license in a separate specially formed company. This was recommended to us by the Racing Commission's counsel in part to be consistent with how they addressed the Quapaw Nation's application. Their casino license in Pine Bluff is held by Saracen Development, LLC, an Arkansas LLC formed in December 2018."