Seneca Gaming Corp.'s fourth-quarter profits fell by 10 percent as the casino operator paid an extra $14.6 million to subcontractors that were owed money at the center of a dispute between the company and the former construction manager of its Niagara Falls hotel project.
Seneca Gaming said the additional payment to its subcontracts -- on top of $14.6 million it previously paid to its former construction manager, Klewin Building Co., that it claims was never passed on to its building firms as intended -- wiped out what otherwise would have been improved earnings.
Seneca Gaming fired Klewin as the construction manager of its hotel project in August and replaced it with Seneca Construction Management Corp., which is owned by the Seneca Nation of Indians.
Klewin countered, in court papers, that Seneca Gaming was mounting a campaign to steal its business and destroy its credit.
Seneca Gaming also said it now expects construction of the 604-room hotel in Niagara Falls to cost between $235 million and $240 million, roughly 20 percent more than the $200 million that was initially forecast. Klewin had warned Seneca earlier this year that construction costs were running over budget.
Seneca officials said they would "evaluate our options against the appropriate parties" regarding the increase in the hotel project's cost.
"We believe Seneca Gaming's and the Nation's payment of subcontractors was the correct action in response to the non-payment by Klewin," said Barry E. Snyder Sr., Seneca Gaming's chairman and the president of the Seneca Nation, in a statement.
"Not only did it ensure the continuity of construction on our projects, but also paid subcontractors for work performed," he said.
The Niagara Falls hotel partially opened earlier this month, with the entire facility expected to be open by the end of March.
Seneca Gaming's profits slid to $20.7 million from $23.1 million a year earlier, even though the company's revenues increased by 7 percent to $119.9 million.
The company also slashed its interest expenses by 44 percent after paying off ahead of schedule an $80 million construction loan that carried an interest rate of nearly 30 percent.
Revenues from the company's Seneca Niagara casino were down 1 percent to $73.5 million, with all of that decline coming from the shift of Class II gaming operations, including poker, video lottery terminals and bingo, to Seneca Gaming and Entertainment, which is owned by the Seneca Nation.
Revenues from the Seneca Allegany Casino jumped by 29 percent to $40 million from $30.9 million a year earlier.