Foxwoods Casino, Lacking a Key Financial Partner, is Questioned by Mass Gaming Panel

BOSTON — The Massachusetts Gaming Commission ended a five-hour hearing into the ethical and financial suitability of Foxwoods Massachusetts Wednesday, following a startling public disclosure that the casino team lacks a 55 percent equity partner in the development.

Foxwoods Massachusetts leaders, who are seeking the state resort casino license for the greater Boston region, told Gaming Commission members they are close to securing the financial backing of an equity partner who could provide the 55 percent of the $330 to $350 million expected to be brought to the table by its partners. The remaining portion, or two thirds, of the $1 billion development would be financed through a loan.

The absence of the financial partner, however, resulted in an incomplete background investigation into the project. The state will require any partner with a significant financial interest in the project to undergo a background investigation. The process began for the other partners in Foxwoods earlier this year.

[Editor's Note: background report can be found here, under commissioner's packet link.]

The commission received no recommendation on the suitability for Foxwoods from its Investigations and Enforcement Bureau Wednesday, because the background investigation could not be completed, and the ownership and management structure has not yet been determined. On Aug. 23, the commission's enforcement staff notified Foxwoods that its application was incomplete.

In a report to the commission, Karen Wells, director of the IEB, stated: "Due to the applicant's inability to identify the complete equity ownership of the proposed project in a timely manner, the IEB cannot submit a complete investigatory report and recommendation to the commission. As the investigation now stands, there are a number of issues that should be matters of consideration by the commission regarding the applicant. Should the commission choose to have a hearing on the suitability despite the incomplete status of the application, the IEB recommends the commission require the applicant to address the following concerns:

1. The inability of the applicant to yet identify its planned majority owner and financial source; 2. The suitability of the applicant's principal organizer, David Nunes; 3. The potential impact on Crossroads Massachusetts LLC's suitability given the information in the report regarding Michael Thomas, Steven Thomas and Anthony Beltran; 4. The business ability of the applicant to run a successful gaming operation in Massachusetts given its difficulty in finding an additional equity interest and the current debt load and declining revenues of their proposed operator; and 5. The legitimacy of the provision in the operating agreement for Foxwoods MA LLC that the entity has the exclusive and irrevocable control over the proposed gaming enterprise."

Steven Thomas is the former treasurer of the Mashantucket Pequot Tribal Council, who resigned in October and was found guilty of theft. Michael Thomas, the former tribal council chairman, was convicted in July of embezzling from the tribe. Anthony Beltran, the tribe's chief of staff, has a criminal record, according to commission staff. None of these men would play a role in the casino management in Milford, although two other tribal members would, based on the structure described by Foxwoods Resort CEO Scott Butera.

Of the incomplete financing, Butera said following the meeting that he was confident the partner would be secured and the project move ahead. "We're very close," he said. The delay in the naming of the partner, he said, was due to the need to reach a host community agreement with Milford, then allow the partner time to become familiar with specifics of the development. "Equity investors don't like to waste their time," he said.

The town, through two selectmen, reached an agreement with Foxwoods MA on Sept. 9, setting in motion the community referendum.

The financial suitability issue for Foxwoods is critical: all gaming applicants for the resort casino license need to be found suitable for a state license, the so-called Phase I process. The deadline for casino applicants to move on to the Phase II part of the licensing — the site-specific state review — is Dec. 31

The state commission could, however, find the project suitable pending a background investigation into an equity partner, as yet unidentified. Robert Allen, the attorney for Foxwoods Massachusetts, whose application is filed under the name Crossroads Massachusetts, requested the commission to do that.

"Leaving the elephant of the equity out of it, there are very few issues in our suitability," Allen told commissioners.

Gaming Commission Chairman Stephen Crosby ended the hearing about 2:15 p.m., and said the commission would deliberate privately before reaching a decision. He said that decision could be released before Milford votes on the project, on Nov. 19.

"We are very sensitive of the election day," he said.

In questioning Wednesday, several commissioners asked critical questions of the Foxwoods partnership, the role of Nunes — who left the project earlier this year, saying he had no trust in the partnership, then came back — and of the role of various Mashantucket Pequot tribal council members in the Massachusetts development.

Commissioner Gayle Cameron cited the many changes made in the financial plans since January, and questioned whether the partnership would remain stable. "And at this late date, there's still a piece of it missing. How can we have faith that this is now the version moving forward that will be the applicant?"

Other commissioners questioned how the development team described the proposed collector-distributor road, after receiving a letter and a brochure that described the highway access as a "highway interchange," and also questioned the proposed management structure of the casino.