SIOUX CITY | A local nonprofit agency has filed a lawsuit against the owner of the former Argosy Sioux City riverboat casino seeking nearly $2 million in revenue-sharing payments that were withheld from a local gaming group for distribution to charities.
Community Action Agency of Siouxland sued the gambling boat's former owners, seeking the money on behalf of itself and as many as 54 other nonprofit agencies that in the past have received grants from Missouri River Historical Development, the state-licensed nonprofit gaming group that distributed a portion of the casino's gambling profits to dozens of area organizations.
"I believe that the money was to be set aside to be given to agencies like ours," Community Action Agency executive director Jean Logan said. "It would be our intent that the money be distributed to benefit the community."
The Belle of Sioux City, which operated the Argosy, was an Iowa-based subsidiary of Penn National Gaming Inc., the nation's largest gaming operator. Penn stopped making payments -- 3 percent of the Sioux City boat's adjusted gross revenues -- to MRHD in April 2013, seven months after the company sued MRHD for breach of contract.
The monthly payments ceased two months after the Iowa Racing and Gaming Commission awarded Woodbury County's first land-based gaming license to MRHD and SCE Partners, the operator of the Hard Rock Hotel & Casino. The Hard Rock opened in downtown Sioux City on Aug. 1, 2014, two days after state regulators ordered the Argosy to close because its state gaming license had expired.
In June 2013, Penn had sought appointment of a third-party receiver to collect and distribute the funds until its civil suit against MRHD was settled, but that request was denied by a Polk County judge. State regulators also denied Penn's request to redirect the funds to a new local nonprofit for distribution. Iowa law requires casino operators to partner with licensed gaming nonprofit organizations such as MRHD, which collect and distribute a portion of gambling profits to charitable and civic organizations.
Filed Wednesday in Woodbury County District Court, the Community Action Agency lawsuit provides two alternatives for collection of the $1.93 million it believes the former Argosy owners withheld from MRHD during the 16-month period.
Under one scenario, a judge could set up a trust in which the Belle would deposit the money owed. A judge would then determine how and to which agencies the money would be distributed.
A judge could also follow a second scenario under which the case would proceed as a class-action lawsuit in which Community Action Agency would seek a monetary judgment against the Argosy owners.
In the lawsuit, attorney Terry Giebelstein, of Davenport, Iowa, said Belle attorneys have said in previous hearings in court and before the Iowa Racing and Gaming Commission that the Belle knows it must make the payments.
" ... Belle admitted that it had an obligation to pay 3 percent of its adjusted gross revenues for the use and benefit of charities, but objected to such payment being made through MRHD under the operating agreement in dispute (in a previous lawsuit)," Giebelstein said in the lawsuit.
Giebelstein declined to comment on the Community Action Agency lawsuit Wednesday.
Logan said the lawsuit would allow the Belle to settle its debt by not dealing with MRHD.
"This would provide an alternative way for them to get this money to the community where it's sorely needed," said Logan, whose agency has received past MRHD grants for such uses as capital improvements projects and providing emergency funding to help people pay their utility bills.
The MRHD board had considered several alternatives to seek the money. MRHD board president Mark Monson said Wednesday the board did not think it would have been productive, given its history of litigation with Penn National Gaming, to file another lawsuit to seek the money itself.
"Filing another lawsuit by MRHD wouldn't accomplish very much," Monson said. "This (lawsuit) makes a lot of sense to me and the MRHD board that the nonprofits are basically saying, 'Wait a minute. That's our money and you need to pay it and we'll distribute it.'"
Earlier in November, the MRHD board, after learning of Community Action Agency's impending lawsuit, passed a resolution providing the agency with the names of 54 other nonprofit organizations that have received gambling revenues in the past. The list did not include government and civic organizations.
MRHD and Penn have yet to resolve the breach of contract lawsuit Penn filed in September 2012 in which it claimed that MRHD schemed to replace the Argosy with another operator before their contract expired in July 2012. The two had been unable to agree on a long-term contract extension, and the IRGC took the unprecedented step of putting Woodbury County's license up for grabs and began accepting proposals for a land-based casino.
MRHD countersued, claiming that Penn interfered with MRHD's prospective relationships by sending letters threatening legal action against potential operators with whom MRHD might pursue an agreement. MRHD also claimed that Penn's actions prevented or delayed it from negotiating a more lucrative land-based casino agreement.
There are no hearings scheduled in that case, filed in Polk County District Court.
In May, the Iowa Supreme Court denied the Belle's request to review an Iowa Court of Appeals ruling that upheld previous rulings that led to the casino's closure. Belle had challenged the IRGC's actions denying the company a license renewal and instead awarding it to the MRHD partnership that led to the construction and opening of the Hard Rock in downtown Sioux City.
After its closure, the riverboat casino was sold to an Illinois shipyard that removed the boat and accompanying structures on shore.