Casino’s Atlantic City link may lead to suit

Foxwoods Development Co. L.L.P. won a slots license in Philadelphia in part because it did not own a New Jersey casino, but the company never disclosed to Pennsylvania regulators that it had an agreement to pursue a gambling site in Atlantic City, officials said yesterday.

Selecting casino operators without interests in New Jersey was important to Pennsylvania officials, who feared that a company with venues in both states would steer its affluent customers to Atlantic City, where the tax on gambling proceeds is 9.25 percent, compared with Pennsylvania’s 55 percent.

Also, the more Pennsylvanians who play slots in New Jersey, the less money there is for property- and wage-tax relief in the commonwealth, the state Gaming Control Board has said.

The disclosure that Foxwoods was looking at a development in Atlantic City at the same time it was courting Pennsylvania prompted an investor in Riverwalk Casino L.P., a Philadelphia-based group that lost a licensing bid, to suggest that court action was possible.

Kenneth Trujillo, a former city solicitor, said his partners were studying the disclosure and would not rule out challenging the license award.

City Councilman Frank DiCicco, whose district includes the Foxwoods site in South Philadelphia, called the disclosure further proof of a flawed site-selection process.

A citizens‘ group is trying to stop construction of the two waterfront casinos licensed in Philadelphia – Foxwoods and the SugarHouse Casino in Fishtown.

Foxwoods and SugarHouse beat out three other competitors, including Pinnacle and TrumpStreet, both owned by firms that have Atlantic City casinos. TrumpStreet’s investors included Donald Trump and Brian Tierney, publisher of The Inquirer and chief executive officer of Philadelphia Media Holdings.

Foxwoods‘ interest in Atlantic City is mentioned in an April 2006 memorandum between Foxwoods and MGM Mirage that discussed possible gambling sites the two groups could develop.

The document, first reported yesterday by the Atlantic City Press, was called „preliminary“ by Foxwoods spokesman John Dorsey, who said there were no current plans to build in New Jersey.

Gordon Absher, a spokesman for MGM, said yesterday, „We’re examining several different opportunities – Atlantic City and Las Vegas are prime locations where we might work together.“

Gaming Control Board Chairman Thomas „Tad“ Decker said the board was unaware of the agreement when the license was awarded.

„I don’t know what they had agreed to in Atlantic City. Maybe we should have asked,“ Decker said yesterday.

In its Feb. 1 decision explaining the licensing of Foxwoods and SugarHouse, the board said it „considered the fact of competing Atlantic City properties as a negative factor for licensure in Philadelphia.“

But that was only one factor, and Decker said yesterday that he selected Foxwoods over its closest competitor, Pinnacle Entertainment Inc., because Pinnacle would also have been situated on North Delaware Avenue and two casinos in that area would have generated too much traffic.

Foxwoods also said it would commit 42 percent of its profits to charity, while Pinnacle made no commitment, Decker said.

„I believe this vote would have come out exactly the same way if they said they had plans for Atlantic City,“ Decker said.

The board has seven members.

Decker would not comment on whether he believed the document should have been disclosed.

At a Nov. 14 licensing hearing, Gary Armentrout, chief of development for Foxwoods, called Atlantic City’s casino industry a rival to a casino in Philadelphia.

„The real competition, quite honestly, in our minds is… Atlantic City,“ Armentrout said. „We believe that with no property to protect in Atlantic City – we have no operations in Atlantic City – that we intend to compete with Atlantic City head-on and we believe that we can take them on successfully.“

The Mashantucket Pequot Tribal Nation – founders of Foxwoods, in Ledyard, Conn., the world’s largest casino – announced the alliance with MGM last year, and The Inquirer reported in December that Foxwoods and MGM said they were interested in other markets, including Atlantic City, Biloxi, Miss., and Las Vegas.

Trujillo said his partners were „reviewing all our options.“ He would not rule out appealing the Gaming Control Board’s decision. The deadline for appealing the decision is March 3.

Representatives from Pinnacle and TrumpStreet declined to comment.

DiCicco, the gaming board’s harshest critic on City Council, said the failure of Foxwoods to disclose the agreement underlined a flawed process.

„Just on face value, it seems to me there was not full disclosure here – who you are, and what your business is about,“ said DiCicco, whose First Council District also includes the Fishtown site.

At DiCicco’s urging, Council has authorized the spending of up to USD 100,000 to appeal the board’s ruling.

Dorsey, the Foxwoods spokesman, said the MGM document was „so preliminary“ that „it would open up an entire range of how much disclosure you have to make before it becomes irrelevant, or begins to waste people’s time.“

Foxwoods will operate the casino in partnership with a local partnership, led by Comcast/Spectacor chairman Ed Snider, developer Ron Rubin, and the family of entrepreneur Lewis Katz.

Potential Conflict, Then and Now

The Pennsylvania Gaming Control Board’s Feb. 1 written decision addressed the potential for a financial conflict if a firm operated casinos in Philadelphia and Atlantic City:

„The operator will obtain more profit from the same dollar gambled in Atlantic City than it will in Pennsylvania because of the much higher tax rate which the operator must pay here.“

Pennsylvania taxes casinos at 55 percent, New Jersey at 9.25 percent, so a casino keeps nearly 91 cents on the dollar in New Jersey, compared with 45 cents in Pennsylvania. The casinos with properties in both states „may attempt to use the Philadelphia property as a gambling incubator to gain new customers who will then be lured to its Atlantic City properties,“ costing Pennsylvania tax revenue, the board stated.

So: „The board has considered the fact of competing Atlantic City properties as a negative factor for licensure in Philadelphia.“

Yesterday, board chairman Thomas „Tad“ Decker said he had been unaware that Foxwoods Development Co. L.L.P. had agreed with MGM Mirage to discuss possible future casinos in Atlantic City.

„We didn’t know anything about it. Maybe we should have asked,“ he said.

But for other reasons, including Foxwoods‘ location and its commitment to give 42 percent of profits to charities, the decision would still stand, he said: „I believe this vote would have come out exactly the same way if they said they had plans for Atlantic City.“