{"id":2557,"date":"2013-03-03T15:58:55","date_gmt":"2013-03-03T15:58:55","guid":{"rendered":"https:\/\/forumarchives.tmsites.net\/index.php\/2013\/03\/03\/what-rules-for-casino-ownership-in-u-s-is-nj-strictest\/"},"modified":"2013-03-03T15:58:55","modified_gmt":"2013-03-03T15:58:55","slug":"what-rules-for-casino-ownership-in-u-s-is-nj-strictest","status":"publish","type":"post","link":"https:\/\/forumarchives.tmsites.net\/index.php\/2013\/03\/03\/what-rules-for-casino-ownership-in-u-s-is-nj-strictest\/","title":{"rendered":"What rules for casino ownership in U.S. is NJ Strictest?"},"content":{"rendered":"


\nFrom the Las Vegas Advisor http:\/\/www.LasVegasAdvisor.com<\/a> <\/p>\n

\tQ:
\n\tFeb. 18’s Record of Hackensack had a news item that the New Jersey Casino Control Commission might relax regulations to enable the sale of the Atlantic Club Hotel. What are the rules for casino ownership in the U.S. and is N.J. still the strictest?
\n\tA:<\/p>\n

\t Not any longer, although it remains one of the very toughest. We\u2019ll get back to that. Rules for casino ownership vary from state to state and, with so many states in the U.S. now having casinos, it would be impossible to enumerate the different levels of scrutiny that gaming companies face from state to state. For instance, in Nevada, anybody with a less-than -10% stake in a casino does not have to be licensed. Wall Street lobbyists have suggested bumping that level to 15%, but that proposal fell upon deaf ears.
\n\t No less an authority that the director of the University of Nevada-Las Vegas\u2019 Center for Gaming Research, David G. Schwartz, was foxed by your question. "It gets difficult to qualify exactly what’s meant by \u2018strictest,\u2019" Dr. Schwartz wrote. "With [Securities & Exchange Commission] rules, there are general corporate-governance guidelines that will be standard everywhere — it all comes down to \u2018suitability,\u2019 which is pretty subjective."<\/p>\n

\t For example, Jack Binion was denied a license in Illinois in 2000, accused of having strewn "a trail of poor business practices, regulatory violations and financial malpractice" behind him. Binion, however, was still a licensed operator in Indiana, Louisiana, and Nevada at the time. He had also previously "taken the Fifth" before a federal grand jury, which further worked in his disfavor.<\/p>\n

\t Although, theoretically, the loss of an owner\u2019s gaming license in one state will trigger suitability investigations in others, this rarely occurs. After Caesars World executive Clifford Perlman was run out of New Jersey in 1981 for being mobbed up, he was deemed perfectly suitable in Nevada just two years later and was tapped to oversee MGM Grand in 1989, before leaving the industry the next year.<\/p>\n

\t The Garden State has not been loath to crack down on big-name operators. In the last five years, it expelled hotelier Columbia Sussex outright and forced then-MGM Mirage to either sell its Atlantic City holdings or its Macao ones, due to its affilation with Pansy Ho, daughter of controversial casino billionaire Stanley Ho. (That decision is currently being revisited.) Not surprisingly, MGM chose Macao. By contrast, the Nevada Gaming Commission rarely denies a license \u2013 so rarely that it is a major news event whenever it occurs \u2013 and only to small-fry operators \u2026 although convicted felons are quietly discouraged from applying. Nevada regulators prefer to levy stiff fines than confiscate licenses. Neither Columbia Sussex nor MGM suffered any repercussions in other states due to their Atlantic City misadventures.<\/p>\n

\tQ: The state that\u2019s even tougher than New Jersey \u2026 and why MGM is getting a second look in the Garden State. And is that Atlantic Club sale a sure thing?
\n\tA:
\n\tOf all states, Missouri may be the most severe. It rejected Columbia Sussex in 2006 and, in 2000, had an epic brawl with Station Casinos over the conduct of lobbyist Michael Lazaroff, accused of improper ex parte contacts with state officials. As Missouri was moving to revoke Station\u2019s license, the company sold its Show-Me State properties to Ameristar Casinos (and paid a $1 million fine), in a deal brokered by then-Station general counsel Troy Stremming. The latter would go on to become Ameristar\u2019s senior vice president of governmental affairs and public relations.<\/p>\n

\t The Station\/Missouri brouhaha continues to have ramifications. Caesars Entertainment co-owners Apollo Management and Texas Pacific Group took control of Aliante Station by purchasing debt in the bankrupt property and rolling it into an ownership stake. Station stayed on for a year as manager. That relationship did not sit well with the Missouri Gaming Commission (Caesars owns a riverboat casino in Kansas City). Last summer, it ordered Apollo and Texas Pacific to liquidate their stakes in what is now Aliante Casino. Given a choice between Kansas City and a struggling, remote Vegas casino, it was a no-brainer. Apollo and Texas Pacific quickly complied.<\/p>\n

\t So, when it comes to "strict," Missouri is probably the most hard-ass state in the nation. It also ixnayed Pinnacle Entertainment\u2019s attempts to keep the unseaworthy President casino open, let alone move it to a new location. Pinnnacle eventually gave up and surrendered the license, which was re-bid and eventually won by Isle of Capri Casinos, which quickly built a new casino in Cape Girardeau.<\/p>\n

\t As for New Jersey: No buyers have emerged for MGM Resort International\u2019s half of Borgata. Due to the terms of MGM\u2019s quasi-expulsion from the state (having been deemed unsuitable and given an ultimatum to sell its Macao properties — or else), untold millions of dollars of MGM revenue are tied up in a state-controlled trust until a sale is consummated. <\/p>\n

\tAlso, new investors in Atlantic City have been hard to find. Hard Rock International recently shied away from a Boardwalk project and Trump Plaza just sold for a pittance: $20 million. So the Garden State\u2019s newly liberalized attitude toward casino ownership may have more than a little to do with encouraging investment. In that light, a second look at the MGM question was almost inevitable. All of the \u2018bad actors\u2019 in MGM\u2019s covert negotiations with Macanese kingpin Stanley Ho have either left the company, been cashiered, or have died. MGM could literally be said to be \u2018operating under new management.\u2019<\/p>\n

\t However, Rational Group\u2019s purchase of the Atlantic Club is anything but a done deal. Its subsidiary PokerStars paid a whopping $731 million settlement last summer \u2013 mostly to the Department of Justice \u2013 to make charges of money laundering and bank fraud go away. That is exponentially more grievious than anything of which MGM stood accused. Another Rational subsidiary, Full Tilt Poker, has its own history of trouble with Uncle Sam. <\/p>\n

\tAs former Caesars Entertainment corporate counsel Jason Gross told The Press of Atlantic City, "Both [Rational] companies had issues with U.S. law when, in 2011, the Department of Justice closed down their websites after they continued accepting U.S. bets. Here you have these two companies, both owned by Rational Group, that went farther than most companies, and it may create further issues." If the New Jersey Casino Control Commission green-lights Rational\u2019s bid, it may have to twist itself into some elaborate rhetorical pretzels in order to explain why Rational is suitable when MGM and ColSux \u2013 neither of whom ever faced federal charges — were not.<\/p>\n

\n

Replies:<\/h3>\n

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