Caesars Entertainment, a giant in the U.S. casino industry, was dealt a blow by the Massachusetts Gaming Commission after learning that the Commission may deem the company “unsuitable” for licensing in the state. According to a Caesars’ SEC filing on the matter, the commission, relying on reports from its Investigations and Enforcement Bureau, “primarily cited” concerns over Caesars relationship with Gansevoort, the company that would be branding Caesars boutique hotel under construction in Las Vegas, formerly the home of Bill’s Gambling Hall. The commission report, which is not yet public, reportedly does cite concerns that an investor in Gansevoort, Arik Kislin, has been identified as having ties to organized crime in Russia.
Caesars had signed an agreement with Suffolk Downs Racetrack in Boston to manage their casino at the track. After receiving a copy of the briefing from the commission, Suffolk Downs asked Caesars to withdraw as a qualifier from their license application. Caesars then agreed to the withdrawal in Massachusetts, after also severing its ties to Gansevoort in Las Vegas. Gary Loveman, CEO of Caesars seemed surprised that removing the company’s relationship with Gansevoort was not enough to continue suitability approvals in Massachusetts. As first reported in the Boston Globe, Loveman said “In other jurisdictions if you do something that raises a regulator’s concerns . . . in almost every instance as long as you discontinue or disassociate it is considered a reasonable action”. The Globe has also reported that Suffolk Downs plans to move forward to procure the casino license, finding a management partner other than Caesars.
According to the SEC filing however, the Gansevoort ties may not be Caesar’s only problem, and those problems may not be limited to Massachusetts.
The report claims that the commission report “noted matters” that pertain to Mitch Garber, CEO of Caesars Interactive and CEO of Caesars new subsidiary, Caesars Acquisition Company. Garber, who came to Caesars in 2009, was previously the CEO of Party Gaming (now bwin.party), and was so at the time that the Unlawful Internet Gambling Enforcement Act (UIGEA) was enacted in 2006. Party went on to agree to a non-prosecution agreement with the U.S. Department of Justice, forfeiting $ 105 million and admitting to certain gaming related federal felonies including violations of the Illegal Gambling Business Act, Wire Fraud and Bank Fraud. As reported by DiamondFlushPoker.com in March, Party admitted to using payment processors that were intentionally miscoding credit card payments through banks in the U.S., to using ACH processors to accept e-checks from their players. In many instances players deposits were sent to particular individuals at an international remitting company in Gibraltar and then simply transferred to the players accounts at Party. Party further admitted to masking outgoing payments to its customers in the U.S. by using intermediaries that used bank accounts in the U.S. in the name of “Advanced Marketing Solutions”, not Party Gaming.
Before moving to Party Gaming, Garber was the CEO of Firepay, and during his tenure there, Firepay serviced customers in the USA, processing payments for online poker, casino games and sportsbetting.
Last, but certainly not least, the SEC report notes that on October 11, Caesars was informed by FinCEN (the Financial Crimes Enforcement Network of the U.S. Department of the Treasury) that Desert Palace, the Caesars subsidiary that owns Caesars Palace in Las Vegas, is being investigated for alleged violations of the Bank Secrecy Act. FinCEN is determining whether to impose civil monetary fines or take additional enforcement actions. A federal grand jury is investigating.
While Caesars notes in their filing that neither they, nor their subsidiaries, have been found unsuitable in any jurisdiction, and that no final findings have been submitted by virtue of the aforementioned investigative bodies, they can make no assurances about the possible outcomes, how they might affect the financial position of the company and at this time, they cannot predict the range of loss, if any. Caesars currently carries a whopping debt of ~ $24 billion.
Caesars operates casinos in 13 U.S. states and six countries. They also have recently launched an online poker product in Nevada and are awaiting a permit for approval in New Jersey. It is unclear what impact these investigations may have in jurisdictions other than Massachusetts but each individual jurisdictional gaming commission will be watching the outcome.