Bay State blunders: Massachusetts now an embarrassment on gaming scene

Two years ago, Massachusetts was considered a potentially lucrative gaming opportunity.

The past two weeks, however, have called into question the viability of the Bay State’s incubating casino market.

Massachusetts is moving ahead with a single Las Vegas-style casino in each of three geographically separate regions: Boston, the southeast corridor and the western half of the state.

But it might become nothing more a second-rate gaming jurisdiction.

Rather than creating resort destinations, the state’s casino industry could be viewed as just a deterrent to Connecticut, keeping Massachusetts gamblers and gaming tax revenue in house, instead of across the border in Indian casinos.

Initially, gaming observers thought Massachusetts’ licensing process was moving too slow.

Now, it seems totally out of whack.

Chances are none of Nevada’s major casino operators — despite spending hundreds of millions of dollars in planning and promoting potential billion dollar developments — will be involved in Massachusetts when the first hands of blackjack are dealt in 2016 or 2017.

Caesars Entertainment Corp. is out of a proposed $1 billion project in Boston.

Wynn Resorts Ltd. could soon pull the plug on a $1.3 billion development in Everett.

MGM Resorts International is still seeking state approval for an $800 million resort in Springfield, but city leaders are already asking how the gaming giant would be replaced if found unsuitable by the state.

It turns out Las Vegas Sands Corp. made the wisest decision. The company never entered the Massachusetts process.

Anger from the gaming industry is directed toward the Massachusetts Gaming Commission, which was formed in 2012.

“We’re scared to death, not that you won’t pick us, but that you will, and there goes a billion-three, or a billion-five,” Wynn Resorts Chairman Steve Wynn told the gaming commission during a public hearing in Boston on Oct. 17.

Wynn was incensed by comments from Commissioner Gayle Cameron, who, according to the Boston Herald, told Wynn, “There’s never been a casino anywhere in the world that has no criminal activity. You really have some disdain for investigations and law enforcement. That’s my opinion.”

Wynn is concerned his company would spend $1 billion on a Boston-area casino only to have the license revoked because of rumors or unfounded allegations.

“No sane person would ever risk such exposure,” Wynn said.

Wynn told investors on Oct. 24 the Massachusetts situation is “confusing” and he would “have a conversation” with his company’s board to discuss the topic.

Caesars experienced the scrutiny first hand.

Massachusetts gaming regulators, based on concerns raised in a 600-page investigative report authored by an outside consultant, suggested to the Suffolk Downs Race Track that Caesars, its partner in the project, wouldn’t be found suitable. Caesars withdrew and Suffolk Downs is scrambling for a new partner.

Four different concerns about Caesars were raised, most notably the company’s gaming industry-high $23.7 billion debt load and its partnership with the Gansevoort Hotel Group. The New York City-based boutique hotel operator was leasing its name to Caesars for the $185 million renovation of Bill’s Gamblin’ Hall on the Strip.

A Gansevoort investor is alleged to have ties to Russian organized crime. Caesars’ outside compliance committee knew about the allegations, but it wasn’t deemed an issue since Gansevoort was providing nothing more than its name and marketing ideas to the project. Nor did Gansevoort have anything to do with the Boston proposal.

Caesars agreed to cut Gansevoort loose, but that wasn’t enough to satisfy the Massachusetts Gaming Commission.

“I don’t believe (the commission) acted in the long-term best interest of the industry or any particular jurisdiction,” Caesars Chairman Gary Loveman said last week. “This was a very distant relationship (with Gansevoort). We were simply licensing a trademark. The commission was unwilling to take any remedy, which was, in my view, quite extraordinary.”

Loveman’s disappointment was also personal. He lives outside of Boston, taught at the Harvard Business School, holds a doctorate in economics from MIT and owns a minority interest in the NBA’s Boston Celtics.

Caesars’ massive debt is an issue in any of the 13 states where Caesars is licensed. Gansevoort is not.

Nevada Gaming Control Board Chairman A.G. Burnett said he was disappointed his Massachusetts counterparts relied on a “private and independent contractor” to practice “gotcha gaming regulation.”

Burnett said Massachusetts makes Nevada, with its 50 year-history of gaming regulation, look the part of a mature jurisdiction.

“We understand transactions and licensing agreements,” Burnett said. “We understand how the (Caesars-Gansevoort) relationship worked. Regulators need to be both reasonable and intelligent.”

Caesars spent about $100 million on Boston, including $1 million in licensing fees. None of that money is coming back.

How strange are things getting in Massachusetts? MGM Resorts was overwhelmingly approved by Springfield voters in July for its proposal. Two days after Caesars was dumped, the president of the Springfield City Council asked the gaming commission if it could replace MGM Resorts should the company be found unsuitable.

MGM Resorts Chairman Jim Murren was more diplomatic in his comments on the Massachusetts process than his counterparts.

He has no doubt his company is suitable. He said MGM Resorts “has worked hard” and “has a great plan” for Springfield. The final outcome, however, is up to the commission.

“It’s been a surprising couple of weeks. There is no doubt about that,” Murren said.

The outside consultants that investigated Caesars are now looking at MGM Resorts. They authored a report on the company’s Macau partnership with Hong Kong businesswoman Pansy Ho two years ago that New Jersey gaming regulators used to force the company out of Atlantic City.

“We have complied with everything they have asked of us,” Murren said. “Our response to the RFP will about a thousand pages. At the end of day, when you look at all the facts, I see no reason why we we won’t be found suitable.”

Massachusetts gaming was once a vibrant gaming idea. Now, it’s on the verge of becoming an embarrassment.

Howard Stutz’s Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.