Gaming panel rejects MGM's Rosemont deal
Officials may start again from scratch
By Douglas Holt
Tribune staff reporter
Published March 23, 2002
The Illinois Gaming Board announced Friday it has rejected a $615 million offer
by Las Vegas-based MGM Mirage Inc. to buy out the beleaguered Emerald Casino and
now wants to reopen the process for finding an operator for the proposed casino
in Rosemont.
On the same day, Rosemont filed suit against the Emerald and its top owners,
Donald and Kevin Flynn. The suit alleges the Flynns were required to use their
"best efforts" to gain approval from the Gaming Board for the casino,
but torpedoed the process by making false statements and misrepresentations
under oath that ultimately led the board to find them unsuitable to hold the
license.
"Rosemont has lost, and will continue to lose, hundreds of millions of
dollars as a result of Emeralds' and the Flynns' wrongful conduct," said
the suit, filed in Cook County Circuit Court.
Both actions heightened the controversy surrounding the Rosemont casino, which
has now generated five lawsuits as well as a legal proceeding that will
culminate in May when the Gaming Board is expected to detail Emerald's alleged
misdeeds before a hearing officer.
Rosemont's lawsuit has been long expected because Mayor Donald Stephens has been
complaining for more than a year that the Emerald failed to meet its obligation
to pay for a $40 million parking garage.
But the Gaming Board's rejection of the MGM buyout, delivered in a statement
read by administrator Phil Parenti, caught many off-guard.
"The board has rejected the current MGM proposal and is considering its own
counterproposal, which is encouraging a process where other candidates,
including MGM, can participate as part of a settlement agreement," Parenti
said in the statement, declining further comment.
"I've got to tell you, I'm shocked," said Larry Suffredin, a Chicago
lawyer just nominated to the Cook County Board who represents MGM Mirage.
He said he was flabbergasted because the Gaming Board's rejection came even
though there has been no public discussion of the proposal.
Suffredin said any attempt to open the process to other suitors may invite yet
another lawsuit, because Emerald entered into an oral, unsigned contract to be
bought by MGM.
Emerald lawyer C. Barry Montgomery expressed disappointment at the setback but
said he remained optimistic that the board was still interested in reaching a
settlement.
"We have an agreement for 615," he said, referring to the $615 million
price tag for the state's coveted 10th casino license. "I'm not sure
Emerald can go anywhere. Rather than clarifying things, it looks like this is
going to create more litigation."
Settlement had been touted
For two months, Parenti has touted a settlement with Emerald as the best option
for the state. He has repeatedly emphasized his efforts to negotiate a $160
million payment to the state as part of MGM's proposed $615 million buyout of
Emerald, and he has never expressed concern about the process by which Emerald
and MGM came to their agreement.
As recently as last week, Parenti defended the proposed settlement to an
Illinois House subcommittee, including its most controversial aspect: that the
agreement would mean hundreds of millions of dollars will be paid to a group
that allegedly lied under oath to casino regulators and sold casino shares to
two people with alleged mob connections.
He emphasized that under Illinois law, casino licenses are not state property,
but belong to private casino owners "unless and until we take it away from
them."
But the process for revoking a license is so cumbersome that it will take five
years for the state to regain control of the license, he said. In the meantime,
he said, the state will lose hundreds of millions in tax revenue.
"The naysayers of the settlement is that the wrongdoers are going to get
all the money," he told lawmakers last week at a hearing in Springfield.
"I want to remind the committee that nobody in the history of this state
who has sold a casino, who has sold a license, has walked away with anything but
fair market value."
Plan always controversial
The settlement has remained controversial almost from the time it was first
proposed. Illinois Atty. Gen. Jim Ryan, who won the Republican nomination for
governor this week, has indicated he may block a settlement if one was approved
by the Gaming Board.
The first inkling that the board had turned against the proposal came in
Illinois Gaming Board letters this week barring two African-American activists
in Las Vegas from speaking to the board at its meeting Wednesday regarding what
they claim are discriminatory hiring practices by MGM Mirage.
In a letter, board spokesman Gene O'Shea wrote that "there is no proposal
or issue concerning MGM-Mirage that is before the Illinois Gaming Board or is
being considered by the Illinois Gaming Board at this time."