State gets $25M slots settlement
The state will receive $25 million from the Mashantucket Pequot and Mohegan tribes as part of a settlement that now counts free slot play promotions as wagers.
Announced Wednesday by the attorney general’s office, the settlement resolves a dispute over free slot-machine play given out as coupons and bonuses to casino patrons.
The tribes will collectively pay the $25 million to the state as part of the settlement agreement. The agreement also allows for the free play revenue to now be counted as wagers that should be calculated into the tribe’s monthly contributions to the state.
”The tribes have commendably agreed to a settlement that serves all interests - enabling all to benefit from successful promotional programs,” Attorney General Richard Blumenthal said in a statement. “We avoid a lengthy court battle - with millions of dollars frozen in bank accounts - and enable more jobs, more competitive casinos and more financial opportunities.”
Foxwoods Resort Casino, which is owned by the Mashantucket Pequot Tribal Nation, introduced in 2006 a promotion that sent patrons $50 “Free Slot Play” coupons. About a year later, Mohegan Sun initiated a similar promotion.
The money lost in the slot machines was not accounted for as revenue, state officials said.
State officials contested that the use of the free play coupons and bonuses were wagers and should be counted as revenue. Mashantucket Pequot officials disagreed and the state sued the tribe in 2006 seeking the lost revenue.
The settlement also, in effect, limits the free slot play promotions that the casinos could give out, unless they are willing to pay more to the state. The settlement includes an agreement that if the total amount of the free play coupons or credits played in a month exceeds 5.5 percent of the tribes’ gross operating revenue from their slot machines, the tribes will pay the state 25 percent of the face amount of the coupons or credits used that exceeds 5.5 percent.
Both tribes agreed to deposit a percent of the free slot play revenue in an escrow account while the matter was settled.
As of July 31, the tribes had escrowed slot revenues of nearly $50 million - 25 percent of the face value of the redeemed promotional coupons and bonuses. The Mashantuckets had set aside about $38.5 million while the Mohegans had escrowed $11.4 million, according to figures the casinos reported to the state Division of Special Revenue.
The state did not take action against the Mohegan tribe because it reached a separate agreement that the tribe would abide by the outcome of the terms of the settlement or court order with the Mashantuckets.
”We’re happy that once again our two governments have proven that the way to resolve issues is through communication,” said Chuck Bunnell, the Mohegan Tribe chief of staff.
Paul A. Young, executive director of the special revenue division, said the settlement upholds the terms of the Tribal Gaming Procedures and Compact. Under an agreement between the state and tribes, the tribe will pay the state 25 percent of the “gross operating revenues” from its slot machines. The agreement defines those revenues as “the total sum wagered less amounts paid out as prizes.”
The tribe had argued that the “total sum wagered” only refers to money wagered by patrons and “not notional value assigned to coupons or credits.”