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Caesars Entertainment will be dropped from Suffolk Downs casino bid

Posted by Your Town  October 18, 2013 10:06 PM

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Caesars Entertainment, one of the biggest names in the gambling industry, will be dropped from a casino venture at Suffolk Downs due to grave doubts that the international gambling giant would pass its mandatory state background check.

The racetrack’s ownership team intends to replace Caesars with another casino manager, to continue their bid to win the sole Greater Boston resort casino license.

The stunning shake-up at Suffolk Downs comes less than three weeks before voters in East Boston and Revere decide the fate of the casino proposal at referenda, and likely will provide casino opponents new ammunition to attack the project.

State casino investigators, charged with keeping people of questionable character out of the Massachusetts gambling industry, raised serious concerns about the company’s international business relationships, and other matters, according to people familiar with the content of the investigators’ report, which was provided to Suffolk Downs late Friday. The report is not yet public.

After receiving a briefing from casino regulators Friday, Suffolk Downs said it is confident the track will be deemed suitable to bid for a license — but not with Caesars.

“As a result of the briefing we have asked our management partner, Caesars Entertainment, to withdraw as a qualifier from our license application,” Suffolk Downs Chief Operating Officer Chip Tuttle said in a statement. The track formally asked Caesars in a letter Friday “to resign as the manager … and to take such other reasonable steps as may be necessary to cause the removal of Caesars from the Suffolk Downs gaming license application.”

Without the Boston project, the highly-leveraged Caesars loses a chance to win a piece of one of the most attractive emerging gambling markets in the US. The move comes four months after South Korea rejected a casino bid in which Caesars was a major partner, due to concerns over the company’s high debt, according to Reuters.

For the state gambling commission, a new board just 18 months old, raising such strenuous concerns against a major player in the industry could cement Massachusetts’ reputation as the toughest US jurisdiction in which to qualify for a gambling license.

In the commission’s background investigations to date, the five-member panel has already disqualified one bidder, Ourway Realty, the initial applicant at Plainridge Racecourse, after state investigators discovered that the former track president had taken more than $1 million from the struggling track’s money room.

Several applicants have passed background checks: Penn National Gaming, Cordish Cos., Raynham Park and partner Greenwood Racing, Mohegan Sun, and Rush Street Gaming. Rush Street abandoned its slot parlor bid in Millbury and at the moment is not an active applicant.

Even among those approved for a license, the commission has grilled casino executives over hiring practices, and business and personal relationships — even relationships many years in the past. By coming down hard on casino companies for old or relatively small concerns, the commission has seemed to leave itself little leeway to go easy on an applicant with any major problems.

Caesars is a massive company, which owns or runs 54 casinos in 13 states and six countries, according to SEC filings. It operates 39 casinos in the US, including its Las Vegas flagship, Caesars Palace, where daredevil Evel Knievel famously almost killed himself trying to jump the ornamental fountains on a motorcycle.

Caesars, led by chief executive Gary Loveman, who lives outside Boston, joined Suffolk Downs as a partner in 2011, bringing one of the gambling industry’s household names to the Depression-era racetrack on the East Boston-Revere city line. Caesars acquired a small stake in the venture, about 4.2 percent, but had planned to earn lucrative fees running the resort.

The company has similar arrangements in Ohio, where Caesars operates casinos and holds a minority stake.

The Suffolk Downs partnership includes horse and racing enthusiast Richard Fields, a casino developer and former Donald Trump associate; Joseph O’Donnell, founder of Boston Culinary Group; and several other partners with small shares.

A New York property investment company with about 20 percent of project, Vornado Realty Trust, last spring declined to participate in the background checks. The gambling commission in March allowed the company to transfer the shares into a blind trust, with the understanding Vornado would divest from the project.

Mark Arsenault can be reached at mark.arsenault@globe.com.

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