June 22, 2009 — The government is suing Southland Gaming of the Virgin Islands for millions of dollars in gross-receipts taxes the government claims the company has failed to pay since 2003.
In a complaint filed in V.I. Superior Court, the government charges that Southland has breached its contract with the government, and is asking the court to force the company to hand over 100 percent of what's owed.
Southland is licensed by the V.I. Lottery Commission to run video "lotteries," or video gambling, through hundreds of machines on St. Thomas and St. John. St. Croix has a casino, but no video lottery terminals.
Local law requires all corporations and individuals doing business in the territory to report their gross receipts and pay a four-percent tax on the "gross receipts of business conducted" in the Virgin Islands.
"There is an exemption only on commissions paid for the sale of V.I. Lottery," Justice Department spokeswoman Sara Lezama explained Monday. "There are no sales of V.I. Lottery tickets in connection with the operation or playing of video lottery, so Southland is not exempt, and to date they have paid nothing."
Furthermore, Southland has been paying its retailers before paying the government its fair share of net VLT revenues, she said.
"Southland Gaming has been paying its share of net game revenue after paying the retailer commissions — and then they give the government their share," Lezama said. "They need to give the government its share and then pay the retailers from their own share."
Also challenged in the lawsuit is the validity of a master licensing agreement signed in December 2003 that exempts Southland from paying gross-receipts taxes. Because the agreement was signed only by former Lottery head Paul Flemming and Southland's president, the government claims the contract is invalid.
The agreement also needed a green light from the V.I. Lottery Commission, Property and Procurement commissioner and the governor before it could be enforced, according to a news release from Government House.
Furthermore, at the time the agreement was signed, senators had already repealed a section of the V.I. Code giving the lottery director the power to act on behalf of the commission "until the governor had appointed at least two members" that were confirmed by the Legislature.
"Since the Legislature repealed that section, the director would not have been able to act on his own accord as a representative of the commission," Lezama said. "Therefore, we're saying the document didn't go through the normal procedure, since it would have also had to have gone through the commission, along with the Property and Procurement director and the governor."
These issues have been aired at several meetings between the government and Southland Gaming, but to date there has been no resolution, she said.
Meanwhile, the Senate is set to discuss Lottery's woes during an Appropriations and Budget Committee meeting scheduled for 1:30 p.m. Tuesday at the Earle B. Ottley Legislative Hall on St. Thomas.
"For some time now, there has been an ongoing controversy surrounding the issue of whether monies are owed to the V.I. government by Southland Gaming," committee chairman Sen. Carlton "Ital" Dowe said in a recent news release. "At the request of several of my colleagues to have a public discussion on the issue, and in an effort to get clarity for both senators and the community, I scheduled this public hearing and invited all of the parties involved. That is still our goal. Whether invited parties will be able to discuss the issue now that a complaint has been filed against Southland Gaming by the Virgin Islands government does not negate our efforts to get some clarity on this issue."
Invited to testify Tuesday are both Lottery's current acting Executive Director Conrad "Ricky" Francois and former Executive Director Lenyse Shomo, along with Attorney General Vincent Frazer and Finance Commissioner Angel Dawson, who serves as the head of the Lottery Commission. Also expected to testify are Southland Gaming President Robert Huckabee, Executive Vice President Shane Gaspard and legal counsel Arturo Watlington Jr.
Residents interested in testifying at the hearing should contact Dowe's office at 693-3572 and ask to speak with either Grethelyn Piper or Michelle van Beverhoudt.
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