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Edgewater Casino operator Paragon is accused of breaking its agreement with the Alexis Nakota Sioux Nation.

DARRYL DYCK/The Globe and Mail

A company proposing a half-billion-dollar "urban resort" in downtown Vancouver faced receivership proceedings in Alberta for one of its ventures, with a business partner accusing it of not living up to its development commitments.

Las Vegas-based Paragon Gaming promised to build a hotel as part of a casino operation but failed to follow through on that commitment, according to an affidavit filed as part of a receivership proceeding in Alberta.

The affidavit is among documents filed in connection to receivership proceedings for the Eagle River Casino and Travel Plaza, which is located in Whitecourt, Alta., about 180 kilometres northwest of Edmonton. The project, a joint venture between Paragon and the Alexis Nakota Sioux Nation, opened in 2008 and ran into financial difficulties in recent years. A court-appointed receiver, Alvarez and Marsal, was named in January.

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In a Jan. 14 affidavit, Don Kootenay – a director with the Alexis group – described a "history of difficulties with the project" and said Paragon had not addressed the First Nation group's concerns about debt, operating costs and a planned hotel.

While agreements between the partners did not require Paragon to build a hotel, a hotel was expected as part of a second phase of the development, Mr. Kootenay said in his affidavit.

"In 2010, Mr. Menke promised then-chief Cameron Alexis of the Nation, who then informed members of the Nation, that the hotel would be constructed in 2011," Mr. Kootenay's affidavit states, referring to Paragon president Scott Menke.

"That did not happen and the Nation has lost faith and confidence in Mr. Menke's word, and therefore Paragon's promises, ever since."

In a separate affidavit, Mr. Menke replied that Paragon "engaged in good faith efforts to try and finance and construct a hotel," but the project's debts made it impossible to arrange financing.

Paragon's focus is now trained on Vancouver, where it operates the Edgewater Casino and is pursuing plans for a $535-million "urban resort" downtown next to BC Place. Plans for that project call for two luxury hotels, a conference centre, restaurants and retail space.

Paragon's partner in the urban resort proposal is Dundee Corp., a publicly traded holding company with interests in energy, real estate and corporate finance.

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The Eagle River project "was an extremely complex and unique project," Paragon spokeswoman Tamara Hicks said Wednesday in an e-mail. "It was subject to a highly complex regulatory framework that involved multiple levels of government and was reliant on the provincial government funding arrangements for First Nations casinos that were approved at the outset of the project.

"The project faced many challenges, not the least of which was the provincial government changing its policy regarding the funding arrangements that were critical to the success of the project."

The Vancouver project, she added, involves "strong and experienced Canadian partners and an entirely different private funding model."

An Alberta judge approved the sale of the Eagle River operation in March. According to documents filed as part of receivership proceedings, the first phase of the project consisted of a 26,000-square-foot casino with 250 slot machines, 12 table games and six poker tables and was built for about $54.5-million. A second phase was to involve an 83-room hotel.

Paragon was also involved in another operation in Alberta, the River Cree Resort and Casino, but sold its minority interest in that project earlier this year.

The City of Vancouver approved a development permit for Paragon's proposed urban resort last year.

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