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For the third time in two-and-a-half years a judge has slapped down the Ontario government and the OLG for failing to honour a revenue sharing agreement it made 13 years ago with a consortium of 132 Ontario First Nations.

And the Ontario Court of Appeal ruling could cost the government — possibly tens of millions of dollars.

The case begins with a 2008 revenue sharing agreement between the Ontario Lottery and Gaming Corporation and the Ontario First Nations Limited Partnership (OFNLP). In that agreement, the province is required to give 1.7 per cent of three types of revenue streams to the OFNLP — gambling revenue from sources like lotteries and casino gaming, plus two types of non-gambling revenue such as hotel stays and food and beverage.

But while privatizing the operations of casinos in the province, the OLG unilaterally agreed to allow private operators to keep all non-gambling revenue and did not inform its First Nations partners about the changes, conduct one judge on a three-judge arbitration panel in 2019 called “breathtaking in the age of reconciliation.”

The Sept. 1 ruling by the Court of Appeal upholds an earlier Superior Court ruling that the provincial government and the OLG breached the terms of that landmark revenue-sharing agreement, even though the OLG no longer receives cash from the two non-gambling revenue streams.

The Ontario Ministry of the Attorney General and the OFNLP have both declined to comment on the case, citing a 60-day time limit to appeal the matter to the Supreme Court of Canada.

Written decisions from both the appeal court and the Ontario Superior Court of Justice, which heard the government’s first appeal from the arbitration ruling, paint a picture of a troubled relationship between the OLG and its First Nation partners.

The rulings cite internal OLG emails acknowledging this would be a “hot button issue” as well as communications about the changes with at least one government department but not with the OFNLP.

The 2008 deal was struck to settle a $2-billion claim over an earlier agreement that entitled the First Nations to a share of revenue from the Casino Rama complex, which is located on the reserve lands of The Chippewas of Rama First Nation, near Orillia.

After years of negotiation that included high-level government officials and solemn ceremonies in accordance with First Nations tradition, the province and the OFNLP agreed to a 25-year deal.

It requires the OLG to share a portion of: gambling revenue; the value of goods and services provided to customers on a complimentary basis; and non-gambling revenue such as hotel stays and food and beverages.

The OLG announced plans to privatize casino operations in 2012 and the first new deal with a private player was implemented in 2016. According to court rulings in the case, the OLG did not inform the OFNLP that it agreed to forego the two non-gambling revenue streams as part of that process.

The OLG has said it expected gambling revenues would be higher under privatization, which would generate greater payments to the OFNLP.

In a 2017 press release announcing the arbitration proceedings, OFNLP vice-president Linda Commandant called it “shocking” that politicians were publicly affirming the province’s commitment to revenue-sharing with First Nations groups, “while at the same time Ontario and OLG officials were dealing with third parties behind closed doors to give away the First Nations’ 1.7 per cent share.”

The OLG also declined to comment on the details of the case, but spokesperson Tony Bitonti said the crown corporation “values its long-standing relationship” with the OFNLP. He added that the OLG is “fortunate to have a board member” appointed from a slate of nominees put forth by the First Nations partnership.

Yet, Court of Appeal Justice Mahmud Jamal noted that one of the reasons the First Nations partnership was kept in the dark was because they did not in fact have a representative on the OLG’s board of directors until 2015.

The 2008 agreement guaranteed the OFNLP a seat on the lottery corporation’s board, but the “province and OLG failed to seat a representative” until after the First Nations group launched a separate arbitration on that matter.

The rulings state that the crown corporation was aware that its decision to exclude the two revenue streams could lead to less revenue for the OFNLP, yet did not disclose this.

“At the meeting with OFNLP’s board of directors in December 2015, the chairman of OLG’s board of directors stated that it was ‘time to enter an era of respect’ between OLG and First Nations,” the ruling stated, adding, “But he failed to tell OFNLP’s board about the plan to stop sharing (the two revenue streams) with First Nations.”

Around that time, the OLG told the provincial Ministry of Finance about its plan to stop sharing the two revenue streams with the First Nations partnership. But the ruling states “no one within the Ontario government ever told” the Ministry of Indigenous Relations and Reconciliation, which was responsible for administering the agreement at the time.

The OFNLP only found out about the OLG’s decision in June 2016, through a footnote in an audited revenue statement.

The court rulings do not specify the amount of damages in the case. In the 2017 press release, the OFNLP estimated it could be “significantly in excess of $100 million.”

OLG’s Bitonti noted that, “In the last couple of years, OLG’s payments to OFNLP were (approximately) $150 million annually,” which is based on 1.7 per cent of the prior fiscal years gross gambling revenues.

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