....the lawsuit alleges, the commission’s investigators showed little concern for other applicants’ operations in Macau, where operators often engage in practices not permitted in US jurisdictions.
Caesars says gaming board chair interfered in screening
By Milton J. Valencia
| Globe Staff
January 03, 2014
Yoon S. Byun/Globe Staff/File
In an amended federal lawsuit, Caesars says Stephen Crosby (above) urged competitor Steve Wynn to stay in the contentious application process.
Caesars Entertainment, the Las Vegas gambling giant, has lodged new discrimination allegations against the state’s top casino regulator, saying in an amended federal lawsuit that the regulator had personally urged Caesars’ competitor, Steve Wynn, to stay in the contentious application process.
The regulator, Stephen Crosby, chairman of the state gambling commission, has personal ties to the Everett land owner who could see significant financial benefits from the sale of his property to Wynn, if Wynn is successful at winning the sole casino license for Eastern Massachusetts.
The amended lawsuit claims that Crosby called Wynn in October, after the casino mogul suggested at a hearing he may not pursue one of three state casino licenses if the board intended to require local casino operators to follow Massachusetts law in other jurisdictions. Wynn and another Massachusetts applicant, MGM, run highly profitable casinos in Macau, China, where gambling regulations are significantly different than in the United States.
Crosby “took it upon himself to place a call to Wynn and to ask Wynn to remain in the Massachusetts license process,” according to the complaint.
Crosby has also voluntarily defended Wynn in news stories related to the ownership of the Everett land, according to the new portions of the lawsuit. Caesars, which filed the original lawsuit in mid-December, was dropped from the Suffolk Downs project in East Boston after investigators for the gambling commission raised red flags about the company during background checks.
Wynn rejected as “a serious misrepresentation’’ the suit’s contention that Crosby initiated a call and attempted to persuade him not to withdraw. In a statement Thursday night, Wynn said he had reached out to Crosby and when the chairman returned his call, he offered to pull out of the process over the Macau operations.
“I was advised that Wynn Resorts, not the Macau SAR, was being licensed and that my company would be required to present responsible business and compliance procedures in order to be licensed,’’ Wynn said. “This lawsuit and the misrepresentations included within it are a shameless, desperate attempt by Caesars to deflect attention from the serious issues raised in their investigation.’’
Elaine Driscoll, spokeswoman for the gambling commission, said in a statement “the allegations remain baseless and we are confident that we will prevail.”
“This lawsuit is nothing more than the act of a disappointed party who withdrew from the lawful licensing process,” she said in the statement.
The modified lawsuit also added a new defendant, Karen Wells, director of the gambling commission’s Investigations and Enforcement Bureau. Caesars alleges she discriminated against the company in collaboration with Crosby and that she had known, or should have known, about his relationship with the Everett land owner.
“Plaintiffs believe that they have been discriminated against and deprived of their constitutional and contractual rights by virtue of the acts and actions of Crosby and Wells,” the lawsuit alleges.
Both Crosby and Wells declined through Driscoll to comment, citing the litigation.
Caesars, 75 years in the industry and licensed in more jurisdictions than any other casino company, had been a partner with Suffolk Downs for a $1 billion project in Revere, but the operator stepped aside in October, just as a report was to be issued that questioned the company’s suitability for a Massachusetts license. The report, by investigators in Wells’s bureau and State Police, raised several concerns, including Caesar’s licensing deal with a boutique hotel firm owned in part by a businessman allegedly tied to Russian mobsters.
Suffolk Downs is now partnering with Mohegan Sun, which would lease a portion of the racetrack’s land in Revere as a site for a casino. Wynn’s company has moved forward with plans for the casino in Everett, and it recently passed the suitability screening process.
Gambling industry analysts have suggested in interviews with the Globe that Caesars may want to try to discredit the gambling commission’s investigation so that it can protect its image in an industry where reputations are critical.
The company, which says it invested more than $100 million in the Suffolk Downs casino venture, is asking a federal judge to declare that the suitability process for Caesars was constitutionally flawed and to order the gambling commission to seal the suitability report. The report is currently on the commission’s website.
The suit does not seek monetary awards from Wells but names Crosby in his official and individual capacity and asks for “further and different relief as may be just and appropriate.”
Crosby is the first chairman of the five-member commission that was created by a 2011 gambling law to oversee the competitive process for awarding casino licenses.
Crosby declared in an August ethics filing that he has known Everett landowner Paul Lohnes since the 1970s and that they were business partners from 1983 to 1990. The potential conflict was not widely known until December, and though Crosby was cleared to participate in the licensing process, he has been criticized for not disclosing the ties sooner.
The lawsuit alleges that Crosby knew the Everett land was being marketed for a casino and suggested to an “internationally known casino operator” in August 2012 — a year before his ethics filing — that the operator consider the Boston area.
Caesars officials also alleged in the suit they were surprised the gambling commission gave such close scrutiny to the deal with the hotel firm. Meanwhile, the lawsuit alleges, the commission’s investigators showed little concern for other applicants’ operations in Macau, where operators often engage in practices not permitted in US jurisdictions.
The lawsuit alleges that the Caesars officials were assured by representatives from a private investigative firm for the gambling commission that the firm found no reason to declare the casino operator unsuitable. The company, Spectrum Gaming Group, said in a statement, however, it did not make a recommendation on Caesars’ suitability. Spectrum said that it submitted a draft report recommending that Caesars address certain issues at an adjudicatory hearing.
Caesars, however, withdrew before a hearing was held.
The firm alleged in the lawsuit that Wells had told Suffolk Downs officials by then they “should start searching for a new operator because [Caesars officials] were in trouble.”
“No other major operator was treated in this fashion,’’ the lawsuit alleges.
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