As Wynn Resorts (Wynn) continues construction on its $2.5 billion casino in Everett, MA (just outside Boston), a case is winding its way through Suffolk County (Massachusetts) Superior Court that could provide some insights into how this deal came together.
Judge Mitchell Kaplan is expected to rule this month on a case involving the land sale transaction between Wynn Resort and FBT Everett Realty LLC (FBT), a small three person MA limited liability company. That decision has the potential of shedding more light on the controversial selection of Wynn to operate in Massachusetts. In this case, FBT is suing the Massachusetts Gaming Commission (Gaming Commission) for interfering with its transaction with Wynn. Judge Kaplan’s decision will determine whether the case moves on to a jury trial … or not. If it does, it might provide some insight regarding how the gaming license process worked and who helped Wynn along the way.
Wynn Resorts was a long shot at receiving the casino license in eastern Massachusetts. It had originally sought to team on a project near Gillette Stadium in Foxborough, MA but the local government voted against it. The likely winner was going to be a bid by Caesars Entertainment to revive a nearly abandoned horse race track in East Boston, Suffolk Downs, which had the support of the City of Boston and its then powerful mayor, Thomas Menino. Wynn found one more piece of land and, at the end of 2012, hustled to put together an alternative plan on the site owned by FBT.
FBT entered into an option agreement in December 2012 to sell Wynn 36 acres of land on a toxic site that was once home to a Monsanto Chemical plant. FBT agreed to sell the land for $75 million which, in casino terms, was a pretty good deal for Wynn. Conditions on closing the deal were dependent upon Wynn obtaining the casino license. If it did not, FBT would retain the land and look for another deal … most likely, nothing related to casinos. Part of obtaining a license to operate in Massachusetts was to determine if Wynn and some of its top executives were found suitable. That determination is the responsibility of the Gaming Commission, who has endured its own questions as to whether it is up to the task of regulating (a committee member failing to timely disclose conflicting relationship, accusations of bias in the selection of Wynn, nominating an interim executive director who had been accused of sexual assault ….).
FBT’s members should have been elated when they first entered into its agreement with Wynn. However, any celebration was short lived after Massachusetts State Police, working as part of an investigative arm of the Gaming Commission known as the Investigation and Enforcement Bureau (IEB), showed up. IEB was responsible for doing much of the background investigation work for the Gaming Commission.
IEB had received information about an intercepted jailhouse conversation between a known organized crime member and a person, who also had a previous felony, claiming to have an ongoing ownership in FBT. Suddenly, it was FBT who was the focus of suitability rather than Steve Wynn and his organization. Prior to any indictment (federal or state), the Gaming Commission alleged that FBT’s partners hid the ownership of Charlie Lightbody, a colorful figure in the Boston area who also had a few decades-old felony convictions. Lightbody would later be indicted along with two owners of FBT (one other owner, Paul Lohnes, was not indicted). A federal trial later proved that there was no fraud, and no ongoing ownership involving Lightbody. However, the Gaming Commission could not wait for a trial to determine whether or not its allegations were founded in truth. They needed to keep a casino-opening on schedule, so the Gaming Commission found an immediate remedy that would allow the casino land deal to close while the Feds figured things out. That remedy is what led to this lawsuit.
The Gaming Commission wanted to make a big statement about their regulatory oversight and FBT proved to be an easy target. While it waited for the federal case to run its course, the Gaming Commission demanded that FBT’s sales price to Wynn be greatly reduced, based on the logic that the new value assume a WalMart were going to occupy the land rather than a casino. The Gaming Commission worked with Wynn to fashion a revised agreement to purchase the land for $40 million less than the originally negotiated price. While FBT accepted the deal with Wynn, it did so reluctantly and under intense pressure.
The pressure applied on FBT’s partners was immense. The mayor of Everett threatened to take the land by eminent domain if a deal could not be negotiated. Massachusetts State Police and the FBI were conducting parallel investigations, reporting their findings to the US Attorneys Office in Boston. There were rumors that FBT’s owners were on the cusp of being arrested and the local media portrayed FBT as a problem that needed to be resolved.
On March 23, Judge Kaplan heard oral arguments from the Gaming Commission and FBT attorneys. Kaplan stated that he would decide as to whether the case will move forward by the end of April. If there is a case, it would allow the depositions of many of the players who were involved in this great casino-grab of Boston … including some of the most powerful people in Massachusetts politics. There are also questions regarding how Wynn used various limited liability companies to parse the land in such a way that certain parts of the transaction were subject to the Gaming Commission’s oversight while others were not. A trial would provide the people of Massachusetts an understanding as to how this casino landed in Boston and how the tax payers lost out (a bigger sales price would have meant more Massachusetts taxes for FBT owners rather than savings to Wynn).
One thing is clear, Wynn got a $40 million discount on land for its casino in Everett, MA as a result of the Gaming Commission alleging a scheme that turned out to be untrue. Wynn has the Gaming Commission to thank for that windfall … and that alone should raise some questions.
The case is in in Suffolk County Superior Court: FBT EVERETT REALTY, LLC, v MASSACHUSETTS GAMING COMMISSION (Civil Action No.: 16-3481)
When Walt is not writing on white collar crime, he works with experts who present on it. Check out 500 Pearl Street Speakers or contact him at [email protected]