This article is reprinted annually to provide important information to shareholders about the law, regulations and orders governing CIRI’s gaming operations.

In April 2003, CIRI entered the professional casino gaming industry in Nevada with the opening of the Casino MonteLago at Lake Las Vegas Resort. In order to conduct gaming operations, CIRI (as holding company) and its wholly owned limited liability company, CIRI Lakeside Gaming Investors (as licensee), were required to undergo the strictest scrutiny to ensure that no persons within CIRI were deemed “unsuitable” under Nevada law. This is defined as possessing the kind of extensive criminal records, ties to organized crime, or other factors that would justify the Nevada Gaming Commission in concluding they were “unsuitable to be associated with a gaming enterprise in Nevada.”

The Licensing Process
In applying for a Nevada gaming license, CIRI’s leadership became subject to one of the most thorough and probing licensing processes in the country. CIRI executives and directors were subjected to extensive background checks, interviews, financial checks, credit checks and character reviews. The Gaming Commission sent agents to Anchorage to perform extensive reviews of CIRI documents, and to interview community leaders to determine the reputation of CIRI, its officers and directors. Business and personal financial records (sometimes going back as many as 10 years) were reviewed in detail by agents of the Commission. Personal safe-deposit boxes were searched. Residence addresses and educational backgrounds were checked, some as far back as childhood.

CIRI, its officers, directors and key employees passed these character “tests” with flying colors. On Jan. 23, 2003, the Nevada Gaming Commission found CIRI and its gaming subsidiary “suitable” to hold a gaming license in Nevada.

The Gaming Commission’s Licensing Order
CIRI made history by becoming the first Alaska Native corporation to be licensed in Nevada. Because of its unique status, CIRI had to plow new ground in the licensing process. For instance, in approving CIRI’s license as a “holding company” for a Nevada casino interest, the Nevada Gaming Commission found it necessary to issue a comprehensive order designed to recognize the unique features of CIRI as an Alaska Native regional corporation, and to allow licensing of an entity which, in many ways, does not technically “fit” within the Nevada gaming law structure.

Nevada law prohibits persons deemed “unsuitable to be associated with a gaming enterprise,” (such as a person found to have ties to organized crime), from serving as an officer, director, employee, or shareholder of a licensed gaming enterprise. The point of these rules is to ensure that such persons do not influence, or profit from, the gaming industry. While an ANCSA corporation could fire an officer, director, or employee if, for example, they were found to be associated with organized crime, ANCSA corporations, unlike publicly held corporations, are prohibited by federal law from removing a shareholder who may be believed unsuitable for regulatory purposes from the corporation.

The Commission exempts CIRI from the regulations requiring public corporations to buy back the stock of any shareholders found “unsuitable.” Rather, the Commission’s order provides that, if the Commission identifies a CIRI shareholder as “unsuitable to be associated with a gaming enterprise” and the shareholder refuses to surrender his or her shares to a third party, CIRI must ensure that profits from the gaming subsidiary remain in that subsidiary until the shareholder ceases to be associated with CIRI. CIRI’s gaming subsidiary may continue to repay loans to CIRI, pay its proportional share of income taxes, and engage in certain other specified transactions. CIRI may also sell its interest in the casino and distribute the sale proceeds. However, gains in value after the date of the Commission’s ruling of “unsuitability” must continue to be held at the subsidiary level until the shareholder in question ceases to be associated with CIRI.

The order requires that the Commission apply the same standards of “unsuitability” to CIRI shareholders as it does to shareholders of public corporations. There is no reported instance in which the Commission has acted to declare non-controlling shareholders (shareholders holding one percent or less of outstanding stock) of a public corporation “unsuitable.” Nonetheless, the order illustrates the importance of ensuring that CIRI’s reputation is protected at all times, and at all levels. To this end, CIRI has put in place a comprehensive system designed to ensure compliance with Nevada Gaming laws.

Gaming Compliance: A Full-Time Job
On Dec. 13, 2002, the CIRI Board of Directors adopted a comprehensive Gaming Compliance policy. The program appoints a committee made up of senior CIRI managers and a Board member. Together they oversee the legal aspects of the Casino’s operations, monitor its timely compliance with the Nevada gaming laws and filing requirements, and review reports and background checks of employees, vendors, managers, and business partners at the CIRI level and at CIRI Lakeside Gaming Investors, LLC. Under this program, violations of any rule, law or regulation related to gaming, as well as concerns regarding the “suitability” of any business associate, are reported to the Compliance Committee and, where appropriate, to the CIRI Board’s executive committee.

Leaving Gaming to the Guests: Rules Against Playing in Your Own Casino
To avoid the appearance of self-dealing, Nevada law prohibits “owners,” directors, officers and key employees from gambling in their own casino. Accordingly, CIRI’s policy is to prohibit gaming in the Casino MonteLago by all CIRI and CIRI Lakeside Gaming Investors, LLC officers, directors, employees and shareholders. All CIRI-related personnel and shareholders are encouraged to utilize CIRI’s other resort properties at Lake Las Vegas, but gaming at the Casino itself is prohibited.

CIRI has always been committed to the highest legal and ethical standards in its business dealings and its leadership. These values, which served the company well in the recent gaming licensing process, will continue to guide the corporation moving forward in the highly regulated world of Nevada casino gaming.