Saipan —The never-ending saga involving Imperial Pacific International continues to trigger anxiety in a community that had just gone through the rebirth of an economy that once hit rock-bottom. Rumors and speculations have become part of the people’s daily living on Saipan as the yet-to-be finished casino-hotel project towers over the Garapan main tourist district.
Yes, IPI pumped in tens of millions of dollars to the CNMI economy through taxes and casino license fees since being awarded the exclusive rights to operate a casino almost four years ago. The new revenues allowed the CNMI government to pay off its debts and meet other financial obligations, such as the then ailing NMI Retirement Fund.
IPI’s multimillion-dollar investment was hailed as the savior of the CNMI’s economy, which went into deep slumber after the once lucrative garment industry transferred its operations to other countries in Southeast Asia where labor costs are cheaper.
But that came at a heavy price. IPI, in trying to finish the Imperial Pacific Resort, obtained the services of a number of contractors which then hired construction laborers that entered the CNMI illegally—posing as Chinese tourists—but then wind up working at the mega-structure. Travelers from China enjoy a visa-free entry to the CNMI due to the conditional parole authority, which is also applied to Russian tourists.
It was a messy 2017 as protests erupted with more than 100 Chinese workers—from contractors Sino Great Wall, MCC International, and Gold Mantis — demanding they be paid their wages and overtime, and be reimbursed for other fees collected from them before they left their respective provinces in China. Cases were filed against individuals and other executives of the construction firms for allegedly being involved in human trafficking and other unfair labor practices.
IPI helped the workers get paid and even shouldered the airline cost of sending them home. Some of the cases against several people who hired them were still pending and being tried in the courts.
IPI had already obtained the services of new construction companies to finish the project. But, another controversial bubble burst when a GPPC representative informed the Commonwealth Casino Commission in July that IPI has still not paid the $160,000 they were owed for the electrical and mechanical work they had done at the casino-hotel.
A few days later, another contractor, Pacific Rim, placed on “temporary leave” all of its workers involved in construction of the casino-hotel. IPI, in a statement, said the workers were put on “temporary leave” as they work on the changes to the construction contract they entered with the Guam-based construction firm.
IPI’s contract with the Pacific Rim is itself raising another concern. Hundreds of U.S. citizens who have been laid off from their jobs at the casino resort project will be replaced by H-2B workers, CNMI Rep. Gregorio “Kilili” Sablan said, taking a jab at the U.S. Department of Labor for accommodating a company that has a history of labor violations.
In a privileged statement published in the Congressional Record, Sablan said he has received a report that the U.S. Department of Labor has issued 1,668 labor certifications for the casino project, allowing IPI’s contractor, Pacific Rim Constructors, to replace U.S. workers with foreign labor.
“This must stop. The people of the Northern Mariana Islands, whom I represent, are tired of having outside, foreign interests time-after-time give our islands a black eye by skirting the law, cutting corners on safety, playing fast and loose with the rules and thinking they can get away with it, beholden only to their bottom line and a handful of high-ranking local officials,” Sablan said. “The U.S. Department of Labor, after enabling IPI by granting 1,668 foreign labor certifications, must take immediate action to step up enforcement and ensure IPI maintains absolute compliance with U.S. law.”
Prior to the Pacific Rim’s announcement of the workers’ layoff, IPI announced on July 17 the recruitment of 600 workers from the Philippines to join more than 1,000 workers out of Guam who are already involved in the project. “In order to obtain an H–2B visa, an employer must attest that they have not laid off and will not lay off any similarly employed U.S. worker, unless the layoff is for lawful, job-related reasons and unless all H–2B workers are laid off first,” Sablan said.
He said demand for foreign workers in the CNMI already exceeded the available number of CW-1 permits in 2016. Most of the approved H-2B visas were for construction workers from China who were hired for the casino project.
According to the Government Accountability Office’s 2017 report, the demand for foreign workers jumped from 9,188 in 2014, exceeding the 2016 cap of 13,299. “The result was to crowd out established local businesses, who employed CW workers and to force long-time foreign workers, who had demonstrated value to our economy and established roots in our community, to return home,” Sablan said.
While acknowledging IPI’s contribution to the CNMI economy, Sablan at the same time pointed out that the Chinese company has a “troubled history of labor violations” that should have raised a red flag at the U.S Department of Labor.
In 2017, IPI subcontractors were fined $193,750 for violations of the Occupational Safety and Health Act related to a death and multiple injuries suffered by workers at the construction site. This year, the U.S. Labor Department finalized a settlement with IPI subcontractors of $13.9 million for violations of the Fair Labor Standards Act. During a raid last year, FBI discovered that subcontractors had hired tourists to work at the construction site.
“To end further abuse of the CW program and to protect the interests of local businesses in my district and their long-term workers and their families, I introduced legislation that, among other provisions, prohibited any further use of CW permits for new construction workers in the Marianas,” Sablan said, adding that the replacement of U.S. workers by foreign labor pool “did not jibe with the rules for the CW program.”
IPI is building the Imperial Palace, a 14-story luxury resort with 350 rooms and over 200 gaming tables and more than 350 slot machines. The project is supposed to be completed by Aug. 31, but the company informed the Commonwealth Casino Commission that it would not be able to meet the deadline.
Last month, in a span of one week, two high-ranking IPI officials stepped down while news of the company having problems with its cash flow broke out. These were later confirmed by Rep. Edwin K. Propst (Ind-Saipan) after meeting with commission officials led by executive director Edward Deleon Guerrero. Marco Teng resigned as chair of the company with director and executive committee chair Cai Lingli, a relative of majority owner Cui Li Jie, exiting a few days after.
Uncollected gambling debts from some VIPs could be one of the causes of IPI’s cash flow problems as they took a major risk of not using junket operators when it comes to dealing with high rollers. The company offers direct credit to let the big wigs play at the Saipan casino, which became fully operational more than a year ago. IPI has sued some of these high rollers.
In 2017, IPI wrote off HK$4.75B in uncollectable VIP gambling debts compared to the HK$547 million in 2016, which is the same year where CCC officials granted South Korean junket operator Big Bang Entertainment a license to operate and deal directly with the casino operator on Saipan. There are still more than 10 junket operators that are in the vetting stage as IPI hopes to attract more high rollers.
The resignations of Teng and Lingli, however, sandwiched the issue of the delayed payment of their employees for the Aug. 17 pay period per a memo sent out by IPI chief executive officer Henry Cheang to its workers. IPI said the payroll delay was due to transfer issues. The first group that had been paid included hourly employees, while managers received their salary a few days after that.
Rep. Joseph Leepan T. Guerrero (R-Saipan) said transferring huge amounts of money from China to a local bank on Saipan needed strict scrutiny as federal laws safeguard the industry from financial crime issues. According to the Republican lawmaker, IPI is making sure they are doing things legally to avoid speculation that they are laundering money.
Another worker protest broke out on Aug. 23 as 46 Chinese workers skipped work, demanding payment for their overtime work and the reimbursement of other fees collected from them when they were recruited in China. Jiangsu Provincial Construction Group directly hired the workers from various provinces in China and they entered the CNMI legally under the CNMI-Only Transitional Worker program or CW1 visas.
It was later found out that Jiangsu had moved the workers to the two development projects by American Sinopan, the Saipan Garden Resort in Tanapag and the former Heavens II on Capital Hill. Jiangsu’s contract with IPI was only for nine months and their work at the casino-hotel was already done a few months ago.
Also, Jiangsu legal counsel Robert Torres denied the workers’ claims that they were not paid. “The workers were paid for their regular work time and were also paid their overtime rates by Jiangsu—the hours they worked and if they worked in overtime. The company denies that they were not paid. With respect to recruitment and agency fees, Jiangsu is a construction company and not a manpower or recruitment agency. Jiangsu neither charges any agency or recruitment fees for any of the workers.”
Torres said his client, despite workers’ claims, assisted them and cooperated with federal and local labor officials, who were provided all the information they needed in order to resolve the issues.
On that same day, IPI Holdings Limited, IPI CNMI’s parent company based in Hong Kong, filed a profit-warning announcement at the Stock Exchange of Hong Kong as they were expecting a decrease in earnings after June this year. In the last calendar year, 2017, IPI Holdings’ net revenue was HK$8.15 billion or $1.04B. “The board wishes to inform shareholders and potential investors that, based on the information currently available to the board, the group is expected to record a substantial decrease in profit for the six months ended 30 June 2018 as compared with the profit for the corresponding period in 2017," wrote IPI Holdings Ltd. executive director Teng Sio I to HKEx.
IPI CNMI is one of the subsidiaries of the Hong Kong-based Chinese investment holding company that has other business ventures in food, hotel, trade, and property development in Hong Kong, Shanghai, and Macau. IPI Holdings’ stock price recently closed at 0.076 HK$ an 0.004 from 0.072 during mid-afternoon trading at the Hong Kong exchange. (With reports from Mar-Vic Cagurangan)