For just the second time in its history, the New Jersey Casino Control Commission has refused to re-license an operating casino.

On December 12 the commissioners voted 4-1 to deny a gaming license to Atlantic City's Tropicana Casino and Resort, citing “abysmal” regulatory performance and the failure of parent Columbia Sussex to install an independent auditing committee during its first six months of operation. For that violation, the commission levied a fine of $750,000, the largest in New Jersey gaming history.

Attorney Paul O'Gara for Columbia Sussex said the company would appeal. However, few expect the courts to overturn the state regulators—an eventuality that would require evidence of mishandling of the case by the commission, which few see in the record.

The announcements were met with gasps and muffled cheers by members of the largest union representing Atlantic City casino employees, UNITE-HERE Local 54. The union had pushed for license denial, alleging that massive employee layoffs at the Tropicana caused reported unsanitary conditions including roaches and overflowing toilets.

Hotelier and Columbia Sussex CEO William Yung III acquired the Tropicana in January. He then trimmed staff by about a fourth (approximately 900 jobs). Commission Chairwoman Linda Kassekert blasted Yung for “slashing staff in pursuit of profit” and implementing a “cut list” with the goal of saving $30 million to $40 million. According to testimony, the Tropicana was left with just one locksmith for a property that includes more than 2,100 hotel rooms.

“Simply put,” said Kassekert, “I do not believe this applicant has the business ability to operate a facility of this size and magnitude, given the decisions that were made.”

She also slammed the CEO for establishing an internal audit team that included his own attorney.

Columbia Sussex owns some 80 hotels and casinos in about 30 states. In May 2006 its casino affiliate, Columbia Entertainment, bought Aztar Corporation, Tropicana's owner, for about $2.1 billion. That deal pushed out Pinnacle, which had also made a deal to buy Aztar; Aztar reportedly paid millions in termination fees to go with Columbia. The final cost of Aztar surprised some analysts and other gaming companies who had also submitted bids.

Just before the vote, Commissioner Michael C. Epps said Yung was “disingenuous” to claim that he did not fully grasp the regulatory requirements for a New Jersey casino operator.

Yung was not present when the vote was taken. The commission later named retired Supreme Court Justice Gary S. Stein as trustee of the Tropicana organization pending a sale of the property.

The casino and hotel will remain open, and President and COO Mark Giannantonio pledged full cooperation with the appointed trustee.  

“We have a very dedicated and hard-working staff here who will remain committed, as always, to provide our guests with a quality experience throughout their stay,” said Giananntonio in a statement.

The day after the vote, Columbia Sussex brought up the possibility of bankruptcy as a result of the license denial, complicating the state's takeover of the casino complex. The company said the denial could cause a default “on a complex cross-collateralized credit agreement,” with the lenders accelerating the repayment clauses.

Potential buyers for the Tropicana will line up quickly, hoping to pick up the property at a bargain (a published report estimates the value of the Tropicana in Atlantic City at $1 billion). Leading the queue might be the new company recently announced by former Aztar Gaming President and Tropicana chief Dennis Gomes and Baltimore developer David Cordish.

Gomes+Cordish Gaming has a high level of interest in Atlantic City, as evidenced by Cordish's recent negotiations with Donald Trump for one or all of his Atlantic City casinos. Gomes has repeatedly expressed a desire to return as an operator in Atlantic City.

Other companies which have wanted a foothold in Atlantic City could also be interested. Wynn Resorts is reportedly considering a purchase, and even Pinnacle Entertainment, which imploded the Sands Casino Hotel in the fall, is rumored to be interested. And Penn National Gaming, the industry's third-largest company, has been looking at opportunities in Atlantic City for some time and might also be a bidder.

The first time an Atlantic City casino was denied licensure was in 1989, when the owners of the Atlantis Casino Hotel teetered on the verge of bankruptcy. The Atlantis later became a Trump casino and then a non-gaming Trump hotel.

For Columbia Sussex, the denial might just be the beginning of its troubles. The company still has not come to a contract agreement with the Culinary Local 226 of UNITE-HERE at the Tropicana in Las Vegas, although all other major Strip properties have reached agreements. The Nevada Gaming Control Board may also question the suitability of the company to run the Tropicana, especially since some of the pledges offered by Yung at the initial hearings have not been kept.

By Casino Connection Staff

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