Racetrack Alleges Bribery in Massachusetts’ Suit Versus Wynn
Sterling Suffolk Racecourse LLC is proving to be an especially sore loser when it comes to Wynn Resorts. It is using the recent settlement the Las Vegas-based gaming giant made with the Nevada Gaming Control Board as evidence that Wynn was unsuitable to hold a license in Massachusetts, where in 2014 it beat Suffolk Downs for the Boston Metro license—and as a result it is now poised to open the $2.6 billion Encore Boston Harbor in June.
That settlement has been used to amend the lawsuit originally filed in September by Sterling Suffolk. It is suing in U.S. District Court asking for a jury trial and seeking damages of $3 billion. It alleges racketeering and violations of the state’s gaming laws. It names in the lawsuit Steve Wynn, current Wynn CEO Matt Maddox, former Wynn counsel Kim Sinatra; and a Wynn real estate partner, FBT Everett Realty LLC.
Its lawsuit now includes the fact that Wynn and the Nevada board last month settled a 10-count complaint that the company had for years turned a blind eye to allegations of sexual harassment against its founder, and CEO Steve Wynn.
The Nevada Gaming Commission will consider the settlement at its February 28 meeting. It is expected to announce a fine of the company at that time.
The complaint cites “Steve Wynn’s long and sordid history of inappropriate and at times criminal sexual conduct.” Wynn, who has maintained his innocence of any inappropriate behavior, resigned as CEO and chairman a year ago after a piece came out in the Wall Street Journal detailing many of the allegations against him, including a $7.5 million settlement he made to an employee who claimed he sexually assaulted her. He also divested himself of all Wynn stock.
Wynn Resorts responded to the newest allegations: “This is a repackaging of the baseless claims Suffolk Racing has been making since they failed to win a license based on the merits four years ago. We will continue to defend ourselves in court.”
The lawsuit accuses Wynn of “fraud, kickbacks, political cronyism crossing the line of legality.” The “racketeering” accusation refers back to Suffolk’s accusations that former Massachusetts Gaming Commission Chairman Stephen Crosby made backroom deals with city leaders to bring the license to the city of Everett.
The amended RICO complaint discusses a supposed hidden deal between Crosby and land developer Paul Lohnes, who was the majority owner of the 36 acres of former Monsanto chemical that eventually became the current site of the casino. It alleges that Lohnes and Crosby met many times in 2012 while Wynn was seeking place to build a casino after he failed to complete a deal to build a casino near the Gillette Stadium.
Lohnes and Crosby are longtime friends who served together in the National Guard. After Lohnes became wealthy he invested in a Crosby publishing startup and subsequently lost a lot of money.
Several decades later, goes the narrative, Lohnes used this earlier association to leverage the Everett land deal, with the foreknowledge that Crosby would be secretly pulling for the deal with Wynn. It notes several social gatherings in 2012, shortly after Crosby was named MGC chairman, where Lohnes and Crosby appeared together.
Crosby resigned in September from the panel in response to constant claims of by Wynn Resorts and the Mohegan Sun, which was the partner with Suffolk Downs in the unsuccessful bid.
Wynn was awarded the gaming license in December 2014, with a vote of 3-1, with Crosby recusing himself.
The amended complaint alleges that Everett Mayor Carlo DeMaria got kickbacks because of a disputed land acquisition agreement and hidden deals. The defendants “conspired to fix the application process,” states the amended lawsuit. “The Defendants herein conspired to, and did in fact, circumvent the safeguards and protections that the Gaming Act was intended to provide.”
Mayor DeMaria in a statement called the Suffolk Downs’ claims “blatantly false,” adding “To be clear and unequivocal, at no time did I engage in any improper activity of any sort in connection with the casino project as Mayor of Everett. The collateral allegations reported in the lawsuit about me are false, scandalous and offered by those who are seeking only to engage in a political attack against me.”
Steve Wynn’s attorney Brian Kelly, called the latest broadside, “more nonsense from a disgruntled competitor which we will file a response to soon.”
The Massachusetts Gaming Commission offered “no comment” to the latest development.
Whether the Encore Boston Harbor actually opens on schedule is still up in the air since the Massachusetts Gaming Commission is still reviewing what action it might take after it recently concluded its own yearlong investigation of the company’s actions, and whether it tried to hide Wynn’s history when the company was applying for the license in 2015. It is also determining the continued suitability of the company under its new regime, headed by Maddox.
Clyde Barrow, the longtime gaming expert who specializes in New England, told the Boston Herald that the allegations of kickbacks against DeMaria “seems like a pretty explosive allegation to make if you don’t have evidence to back it up.” He added, “I don’t think any of this is going to derail whatever ruling they’ve already decided to make on that case. They’ve conducted their investigation.”
Maddox recently sounded optimistic about Wynn’s chances of retaining its license when he soothed investors and told them the casino would open on time.
Crosby’s replacement as chairman, Cathy Judd-Stein, recently joined the panel. Its decision on Wynn had been postponed for several months due to a lawsuit by Steve Wynn claiming that some documents obtained by MGC investigators involving him violated attorney client privilege. Another of several hearings has been scheduled in March before a Nevada judge whose final decision could be months from now.
Although gaming is the primary reason for the existence of the $960 million MGM Springfield, which opened in August at the South End of the state’s third largest city, the 125,000 square foot facility with 2,500 slot machines and 125 gaming tables is part of a downtown complex on 14.5 acres that is upgrading the downtown with top-end hotel rooms, upscale dining, event space, live entertainment, and tribute to the city past.
MGM spokesman Saverio Mancini told the Connecticut Post, “Springfield is special and that was the whole idea behind how the casino was developed. MGM spent nearly $1 billion to celebrate Springfield.” He added, “We did not want a glitzy Las Vegas appearance but rather one that blended with the city’s architecture and celebrated its successes. And we think it has been done.”
The main entrance is the salvaged facade of the city’s historic Chandler Hotel, which in its earlier incarnations hosted presidents James K. Polk and James Buchanan. It also boasts an aluminum sculpture that is a tribute to the revival of the city center after the devastation 2011 tornado devastated the area.
The interior includes a lobby with a library of books, many of which were written by authors of the region. One of those writers, poet Emily Dickinson, the “Belle of Amherst,” a nearby town, is honored with an homage. As is Charles Merriam, the first publisher of the Merriam Webster Dictionary.
There are also tributes to Indian Motorcycle, which was first manufactured in Springfield, and to one of its most celebrated favorite sons, Theodore “Dr. Seuss” Geisel.
Keven Kennedy, Springfield’s chief development officer, told the Post that when the city was accepting bids for a casino that it demanded much more than just a casino. “For us, this was not just about gaming but developing something more,” he said. “We did not want a traditional fortress of a casino but rather something that would reflect and be part of Springfield.”
The city encouraged the casino to not only use the old hotel façade but to also employ the 129-year old First Spiritualist Church. Trees that were removed to make way for the casino were made into hotels for the lobby.
The facility has plenty of non-gaming amenities, such as a cinema, event space, “Top Golf Swing Suite” and bowling alley. Restaurants include celebrity chef Michael Mina’s Cal Mare, celebrating Italian seafood, and the Chandler Steakhouse (recalling the landmark hotel) operated by another celebrity chef, Meghan Gill. If you want casual dining, there’s the South End Market, which has Bill’s Diner and Jack’s Lobster Shack.
The casino now operates two of the big entertainment venues downtown, including the MassMutual Center and Springfield symphony hall. Kennedy explains, “That is part of the cooperative agreement between MGM and the city. MGM had to agree to use our existing facilities. We wanted interaction with the community and wanted them to be part of us, not us them.”
The 252-room hotel expands on these themes with a Presidential Suite that has a chandelier which features hats worn by characters from Dr. Seuss’s books. Or a hallway with rugs that have Dickinson poetry woven into the fabric.
Mayor Dominic Sarno credits the casino with helping to revive the downtown. “We’re proud to have them here,” says Springfield Mayor Dominic Sarno. “MGM has been a wonderful addition and partner to the city,” he adds, “They’ve not only had a positive effect in Springfield, but also in Western Massachusetts and New England.”
Meanwhile, MGM Resorts International President and CEO James J. Murren told a conference call of stock analysts that despite less than predicted returns for the MGM Springfield that some aspects of the resort are actually ahead of the game, such as business at the 250-room hotel (the one with the Dr. Seuss chandelier.)
Murren characterized business at the Springfield operation as “slower, but ramping.” Murren, who just visited Springfield, enthused, “I was just there. Oh gosh, it’s a beautiful property and great. Unbelievable feedback we get from customers, from the gaming commission in Massachusetts, from the elected officials and our food and beverage operations are ahead of target. Our hotel business is ahead of target. Our gaming business is slower, but ramping. We actually saw the almost exact same thing at National Harbor, as we built into a brand-new market for us. So, we expect that, given the quality of the assets and the people working there and the word-of-mouth marketing, we are going to be a little bit more tactical in marketing and reminding people that we are there, particularly, leading up to a competitor in Everett, that’s opening up in the second half of this year. But we view its operating future very much the same as what we’ve seen in a different scale, with a smaller investment up there than at National Harbor, but what we are seeing in our other new properties.”
Nevertheless, it is undeniable that the MGM Springfield’s revenues are lower than expected. For example, MGM assured the Massachusetts Gaming Commission that it would have $418 million in annual gross revenue its first year. That works out to be $34.8 million a month.
However, in December the property generated $21,583,225 in gross revenue and in the just released January figures were even more dismal: $19.7 million, the lowest since opening and an 8.73 percent drop in one month. Those figures, released by the MGM, came days after the “ramping” claim.
Michael Mathis, president and chief operating officer of the property, issued a prepared statement: “As we enter our sixth month of operation, we continue to gain valuable insights on the market. Our business strategy continues to evolve as our relationship with existing customers grows, and as thousands of new guests enter our loyalty program. This includes new features and promotions on the casino floor and more dining and entertainment like brunch in Cal Mare and ROAR comedy in our historic Armory. We remain grateful for the ongoing support of the New England region and look forward to an exciting 2019 bringing more great shows to downtown and introducing legalized sports betting for the first time in the Commonwealth.”
Both the MGM Springfield and Plainridge Park Casino report their monthly revenues to the commission, which releases them to the public. The Springfield facility is taxed at 25 percent
Plainridge, which is a slots-only casino, reported $12 million in January, compared to $14 million in December. This dip occurred the previous January, possibly indicating a slowdown each year at this time.