Kahnawake Gaming Commission Review Allegations; Takes Sunny Group Offline

29 March 2002

The KGC will review the facts surrounding any allegations made by these permit holders and take appropriate regulatory action.

Early this week, the Sunny group announced the termination of its' software relationship with South African based Microgaming.

The termination started a stream of allegations from permit holders. Sunny Group claimed Microgaming had a special relationship with the Kahnawake's Mohawk Internet Technologies (MIT) . Microgaming maintained the relationship was terminated because licensing fees were severely in arrears. Sunny Group suspected that MIT may have prevented a smooth transition to its' new software supplier Playtech. Sunny Group stated it was convinced that MIT was "a biased jurisdiction that operates as an agent for Microgaming."

It is a requirement of the Kahnawake Gaming Commission's operational protocol regulations that notice be provided of a company's intention to switch software suppliers or leave Kahnawake. The requirement states that notice to KGC is necessary to change their control systems including software suppliers, and/or to terminate their permits for the purpose of relocating from the jurisdiction. These requirements apply to every permit holder and each permit holder understands these requirements upon their application to the KGC. However, according to KGC Chairman Alan Goodleaf, neither Sunny Group nor their gaming entity Casino Fortune, have provided the required notice.

"The KGC's Regulations were created to protect consumers, and the KGC has a responsibility to provide this protection by assuring that permit holders satisfy any obligations to players while operating in Kahnawake before allowing an operator to switch software suppliers or to leave, '' Goodleaf said.

"Through licensing standards and strict regulations, the KGC has been able to offer a safe and regulated environment to online gaming consumers," he stated.

A press release also stated that under the circumstances of this case, the actions taken by MIT to secure the gaming equipment and control systems until direction was received from the KGC, were appropriate. It would have been improper for MIT to allow unauthorized access to anyone including the software provider, in this case Microgaming.

The KGC has today directed that normal procedures be implemented and that Sunny Group's equipment and control systems be preserved - off-line - on the MIT premises until such time as Sunny Group has provided proper notice to the KGC of its intentions to change its software and/or to relocate from Kahnawake at which time the KGC will take the necessary steps in accordance with its Regulations.

The Mohawk Territory of Kahnawake is a large tribal reserve approximately 7 miles from the city of Montreal, Quebec, Canada. It has set up a sizable "server farm" that houses servers for high-tech businesses, including virtual casinos.

The Kahnawake Gaming Commission was established in 1996 pursuant to the provisions of the Kahnawake Gaming Law. According to its website, the Commission three members, appointed by the Mohawk Council of Kahnawake, are: Alan Goodleaf, Lindsay Leborgne and Iris Rice.

Using its own regulatory powers, the Commission enacted the Kahnawake Regulations Concerning Interactive Gaming in 1999. In tandem with this enactment, the MIT division's facilities were completed. It acts as a hosting facilitiy and serves as the ISP to the Commission's gaming license "applicants" and holders. The licensees are regulated by the Commission.

There have been questions raised in the past about the existence of online casinos in Canada. In July of 2001, the Canadian Press reported that the results of an investigation by the Surete du Quebec (French Provincial Police) could resolve whether online casinos are illegal, or whether the provincial government will have to rework its gambling regulations to maintain control of the lucrative industry.

The government's position is that while there may not be any specifics in the gaming regulations to address virtual casinos, anything not sanctioned by the province is a no-no. For us, theoretically at least, this is illegal,' said Francois Moisan, spokesman for Quebec's alcohol, racing and gaming board.

But the Mohawks of Kahnawake disagree. Representatives have said in the past that the company is not afraid of being shut down because the Internet is in a gray zone when it comes to the law and, technically, the gambling isn't taking place on the reserve.