Caesars in Massachusetts – Much Ado About Nothing


Caesars has some serious issues, but the reason it withdrew from Massachusetts is not one of them.  Caesars has been in the news a lot lately and most of it has been negative.  The latest flurry of Caesars news was generated by Caesars’ decision to drop out of the Suffolk Downs’ bid for a casino in the Boston area.  Both Suffolk Downs and Caesars agree on the details.  The Massachusetts Gaming Commission told Suffolk Downs it had an issue with Caesars and its association with Gansevoort.  Caesars had an agreement with Gansevoort Hotel Group, a boutique hotel company from New York, to use the name both in Massachusetts and Las Vegas.  The Massachusetts regulators have information that one of the investors in Gansevoort is in some way associated with the Russian mafia.

Because of the gaming commission’s concerns, Suffolk Downs asked Caesars to withdraw from the project, Caesars agreed.  Caesars announced its decision to withdraw from the Suffolk Downs project and at the same time announced that it had terminated its agreements with Gansevoort, including the project currently under development on the Las Vegas Strip.

Caesars’ CEO Gary Loveman speculated that the circumstances surrounding its withdrawal would dampen the interest of other casino operators.  However, the Suffolk Downs spokesman said immediately that he has been bombarded with offers from other gaming operators willing to fill in for Caesars.  Some of those have already been given a preliminary vetting by the Massachusetts Gaming Commission.  Suffolk Downs and Wynn are the only two bidders for the Boston area.  A referendum on the Suffolk Downs project is scheduled for a public vote on November 5th.

Caesars was only to have a small equity position, less than 5 percent, in the property.  It would have acted as the manager of the casino if Suffolk had won a license.  Gansevoort would have had no equity position nor any role in operating the casino. Gansevoort’s hip name and reputation was what Caesars and Suffolk Downs wanted.  They hoped the name would draw the hip New Yorkers and international travelers to Suffolk Downs.

Caesars, Suffolk Downs and Gansevoort also agree on some other details.  Caesars had properly vetted Gansevoort before signing any agreements and nothing of significance surfaced.  They also agree the information that the gaming commission was using was out of date and based on speculation – actually gossip – by the New York Post. The Post said one of Gansevoort’s investors had ties to a company that had a link to members of Russia’s organized-crime syndicates.  Of course, that is not evidence of a connection, it is not evidence of Gansevoort’s integrity and it certainly is not evidence of any wrong doing by Caesars.

In an interview after the announcement, Loveman said Massachusetts was undercutting the integrity of an established process of gaming regulation.  He said the accepted procedure was to allow the operator to disassociate itself with the individual or organization to which the regulators object.  Loveman is right on both counts. Massachusetts is diligently trying to make its gaming regulation as overbearing, complicated and expensive as possible. By the time a casino finally opens in Massachusetts, it will have spent years and millions of dollars just in the process.

His second point, the process that allows a casino company to disassociate with questionable associates is of long standing.  The original Caesars of Caesars Palace fame, in 1979 was given a choice between a New Jersey license and its association with the Pearlman brothers.  Caesars opted for the license.  In 2010, MGM opted to sell its share in Borgata rather than give up its association with Pansy Ho and its operation in Macau.

In the 1990s, Colorado objected to the involvement of the Ainsworth family in Aristocrat. Several other states also suspended Aristocrat’s license due to Colorado’s actions.   As a condition of license renewal, Colorado required Aristocrat to get the family out of operations.  Aristocrat was founded by Len Ainsworth as a family business in the 1950s.  The Ainsworth family owned and worked at Aristocrat; even after the company went public the family still held the majority of the shares.  The family members all left active participation and their shares in the company were put into a trust over which they could exercise no control. Colorado and the other states reissued Aristocrat’s licenses.

Massachusetts simply over-reacted.  It should have investigated the claims fully.  It should have offered Caesars some alternatives, as any other jurisdiction would have done.  Now, Caesars may have some serious issues that would affect licensing, but this was simply not one of them.  It is as Shakespeare famously said, much ado about nothing.

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1 Response to “Caesars in Massachusetts – Much Ado About Nothing”


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