1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 06-04-19 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, April 19, 2006 10 Atlantic City Commission Offices 11 Tennessee and Boardwalk 12 Atlantic City, New Jersey 08401 13 10:30 a.m. to 2:00 p.m. 14 15 16 Certified Shorthand Reporter: Christine Stanco 17 - - - - - - - - - - - - - - - - - - - - - - - - - 18 19 20 CIPOLLONI & ASSOCIATES, INC. 21 CERTIFIED SHORTHAND REPORTERS 22 1125 Atlantic Avenue, Suite 416 23 Atlantic City, New Jersey 08401 24 (609) 348-9190 25 2 1 B E F O R E : 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 RALPH G. FRULIO, VICE CHAIR MICHAEL C. EPPS, COMMISSIONER 4 WILLIAM T. SOMMELING, COMMISSIONER MICHAEL A. FEDORKO, COMMISSIONER 5 PRESENT FOR THE CASINO CONTROL COMMISSION: 6 DARYL W. NANCE, ADMINISTRATIVE ANALYST DANIEL J. HENEGHAN, PUBLIC INFORMATION 7 OFFICER 8 OFFICE OF THE GENERAL COUNSEL: DIANNA W. FAUNTLEROY, GENERAL COUNSEL/ 9 EXECUTIVE SECRETARY LEONARD J. DIGIACOMO, ASSISTANT GENERAL 10 COUNSEL SUSAN L. MYERS, SENIOR COUNSEL 11 STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL CAROLE R. JACOBSON, SENIOR COUNSEL 12 E. DENNIS KELL, ASSISTANT GENERAL COUNSEL SETH H. BRILIANT, SENIOR COUNSEL 13 LON E. MAMOLEN, SENIOR COUNSEL BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 14 DIVISION OF FINANCIAL EVALUATION: 15 CHRISTOPHER GLAUM, MANAGER 16 DIVISION OF GAMING ENFORCEMENT: DEPUTY ATTORNEYS GENERAL: 17 JACK ADAMS BRIAN BISCIEGLIA 18 CHARLES F. KIMMEL RAYMOND MARQUEZ 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S: 2 ITEM 3 DARYL W. NANCE, ADMINISTRATIVE ANALYST ITEM 4 BRIAN BISCIEGLIA, DIVISION STAFF 3 ITEM 5 STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL 4 BRIAN BISCIEGLIA, DIVISION STAFF ITEM 6 CAROLE R. JACOBSON, SENIOR COUNSEL 5 BRIAN BISCIEGLIA, DIVISION STAFF ITEM 7 BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 6 BRIAN BISCIEGLIA, DIVISION STAFF ITEM 8 BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 7 BRIAN BISCIEGLIA, DIVISION STAFF ITEM 9 BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 8 BRIAN BISCIEGLIA, DIVISION STAFF DARRIN LORD, ESQ. 9 FOR: RENEE HABERNEHL ITEM 10 BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 10 JACK ADAMS, DIVISION STAFF ITEM 11 SUSAN L. MYERS, SENIOR COUNSEL 11 RAYMOND MARQUEZ, DIVISION STAFF KAREN M. WOSNACK, ESQ. 12 FOR: HARRAH'S OPERATING COMPANY ITEM 12 SUSAN L. MYERS, SENIOR COUNSEL 13 RAYMOND MARQUEZ, DIVISION STAFF KAREN M. WOSNACK, ESQ. 14 FOR: HARRAH'S OPERATING COMPANY ITEM 13 SUSAN L. MYERS, SENIOR COUNSEL 15 ITEM 14 E. DENNIS KELL, ASSISTANT GENERAL COUNSEL 16 CHARLES F. KIMMEL, DIVISION STAFF KAREN M. WOSNACK, ESQ. 17 FOR: MARINA ASSOCIATES ITEM 15 SETH H. BRILIANT, SENIOR COUNSEL 18 ITEM 16 LON E. MAMOLEN, SENIOR COUNSEL ITEM 17 LON E. MAMOLEN, SENIOR COUNSEL 19 ITEM 18 LON E. MAMOLEN, SENIOR COUNSEL ITEM 19 LON E. MEMOLEN, SENIOR COUNSEL 20 ITEM 20 LEONARD J. DIGIACOMO, ASSISTANT GENERAL COUNSEL 21 RAYMOND MARQUEZ, DIVISION STAFF PATRICIA A. WILD, ESQ. 22 -AND- WOLF, BLOCK, SCHORR & SOLIS-COHEN, LLP 23 BY: GILBERT L. BROOKS, ESQ. FOR: RIH ACQUISITIONS, NJ, LLC 24 25 4 1 AGENDA PUBLIC MEETING NO. 06-04-19 2 April 19, 2006, 10:30 a.m. ITEM DESCRIPTION PAGE VOTE 3 1 Ratification of the minutes of April 5, 2006 public meeting 11 12 4 2 Applications for employee and casino service industry licenses: 5 Remand for hearings 13 license applications for initial and/or 6 renewal of casino key and casino employee licenses 12 12 7 Remand for hearing CSI license applications of MFC Productions, Inc. 8 and Highgate Steel, Inc. 13 13 Grant 7 applications for initial 9 and/or renewal of casino key and casino employee licenses 14 14 10 Grant CSI license initial and renewal applications of: 11 Fondacara Companies, Inc., 13 14 Rockwell Architecture, Planning and 12 Design, P.C., House Advantage, LLC, Atronic International Gaming 14 15 13 Grant applications for initial and renewal of casino key employee 14 licenses and for qualification: William Cooney, Vice President of 15 Casino Marketing for Ace Gaming, LLC; William J. Larmour, Director of 16 Security for Marina Associates 15 16 3 Petition of Atlantic City Showboat, 17 Inc., (d/b/a Showboat Casino Hotel) for the issuance of a temporary 18 casino key employee license to Mark Starrett, pursuant to N.J.S.A. 19 5:12-89(e) and to permit him, pursuant to N.J.A.C. 19:43-2.6, 20 to assume the duties and exercise the powers of Vice President of Hotel 21 Operations, without first having been found qualified (PRN 0940613) 16 17 22 4 Stipulations of settlement and consent agreements: 23 A) Chantay D. Dunlop-Davenport (Not present) (05-0542-ER) 17 19 24 B) Wayne E. Evans (Not present) (05-0341-ER) 17 19 25 C) Luis A. Figueroa (Not present) (05-0663-ER) 17 19 5 1 ITEM DESCRIPTION PAGE VOTE D) Gretchen E. Kopf (Not present) 2 (05-0810-EA) 17 19 E) Branden A. Dang (06-0014-EA) 17 19 3 F) Erik M. Jaeger (Not present) (05-0100-EA) 17 19 4 G) Jerome Newsome (Not present) (05-0723-ER) 17 19 5 H) Zandro M. Corpus (Not present) (06-0013-EA) 17 19 6 I) Norman Seid (05-0457-ER; 06-0184-EA) 17 19 7 5 Stipulation of Settlement in State vs. Margaret Murray (06-0096-EA) 19 20 8 6 Initial Decision in renewal application of Tamara Y. Davies (05-0539-VC) 20 22 9 7 Petitions for early reapplication: A) Carla A. Jamal (a/k/a Carla 10 Rotellini) (06-0041-RA) 22 32 B) Benjamin E. Howard (06-0048-RA) 33 35 11 C) Linh Tran (06-0052-RA) 36 37 8 Motion of Movita Terrell for relief 12 from a denial order (06-0068-MO) 38 48 9 Application for suspension in State 13 vs. Renee Habernehl (06-0071-RC) 48 56 10 Motion of the Division of Gaming 14 Enforcement for a temporary prohibitory order concerning MFC Productions, Inc. 15 and Julius D. Feinstein(06-0150-MI) 57 58 11 Petition of Harrah's Operating Company, 16 Inc., Marina Associates, Atlantic City Showboat, Inc., Bally's Park Place and 17 Boardwalk Regency Corporation, requesting permission for Jennifer Shatley to 18 perform the duties and exercise the powers of Program Vice President, 19 Code of Commitment pending plenary qualification (PRN 0880612) 59 60 20 12 Consideration of the qualification of two individual qualifiers of Harrah's 21 Operating Company, Inc. (Gerald Einsohn and Kirk England) 61 62 22 13 Proposed publication of readoption of N.J.A.C. 19:51 (Persons Doing Business 23 with Casino Licensees) 62 63 14 Petition of Marina Associates (d/b/a 24 Harrah's Casino Hotel Atlantic City) and Atlantic City Showboat, Inc. 25 (d/b/a Showboat Casino Hotel) seeking temporary waiver of the 6 1 ITEM DESCRIPTION PAGE VOTE requirements of N.J.A.C. 2 19:45-1.42(o) (PRN 0040606) 63 65 15 Proposed publication of amendments 3 to N.J.A.C. 19:49-3.1, 3.2 and 3.3 and new rule N.J.A.C. 19:49-3.4 4 concerning junket compensation agreements 65 66 5 16 Proposed adoption of amendments to N.J.A.C. 19:47-14.9, 14.13, 14.13A 6 and 14.15 (Poker Irregularities) 66 67 17 Proposed adoption of amendment to 7 N.J.A.C. 19:45-1.37b (Tower Lights for Low Denomination Slot Machines) 67 69 8 18 Proposed publication and temporary adoption of amendment to N.J.A.C. 9 19:47-14.9 (Player Maximum At Seven-Card Stud Poker Table) 69 70 10 19 Proposed adoption of amendment to N.J.A.C. 19:47-14.2 (Poker Card 11 Sorting Frequency) 70 71 20 Application of RIH Acquisitions NJ, 12 LLC, holder of interim casino authorization as to the Atlantic 13 City Hilton Casino, for plenary qualification as a Casino Licensee 14 (PRN 0930602) 71 156 15 16 17 18 19 20 21 22 23 24 25 7 1 I N D E X 2 WITNESS DIRECT CROSS 3 ITEM 20 ROGER WAGNER 4 By Ms. Wild 79 By Mr. Marquez 97 5 ERIC MATEJEVICH 6 By Mr. Brooks 120 By Mr. Marquez 136 7 8 9 10 E X H I B I T S 11 NUMBER DESCRIPTION ID EVD 12 ITEM 2 EL-1 Remand for hearings 13 license 13 applications 12 EL-2 Grant 7 license applications 12 14 ITEM 20 15 C-1 Entities and Qualifiers Report dated 4/17/06 by Leonard J. 16 DiGiacomo, Assistant General Counsel 75 17 C-2 Casino Hotel Alcoholic Beverage License Report dated 4/19/06 18 by Stephen French, Project Manager, License Division 75 19 C-3 Equal Employment and Business Opportunity Report dated 4/11/06 20 by Claire Frank, Sr. AA Coordinator 75 C-4, C-4A 21 C-4B, C-4C C-4D Draft Resolution 75 22 D-1 Report dated 4/5/06 by Raymond Marquez, Deputy Attorney General 23 Re: Application of RIH Acquisitions NJ, LLC, Holders of ICA as to 24 the Atlantic City Hilton Hotel Casino for Plenary Qualification 25 as a Casino Licensee (PRN 0930602) 75 8 1 E X H I B I T S: (Continued) 2 NUMBER DESCRIPTION ID EVD D-2 Letter report dated 4/6/06 to 3 Linda M. Kassekert, Chair, CCC, from Timothy Ficchi, Deputy 4 Attorney General, DGE Re: RANJ/ Atlantic City Hilton Casino 5 Resort Casino Hotel Alcoholic Beverage License 75 6 P-1 Petition for Plenary Qualification (PRN 0930602) 75 7 P-1A Petition (PRN 0930602) dated 3/31/06 75 P-1B Letter dated 4/11/06 amending, 8 supplementing and modifying the petition for plenary qualification 75 9 P-1C Letter dated 4/17/06 amending, supplementing and modifying the 10 petition for plenary qualification 75 P-1D Letter dated 3/30/06 regarding 11 Command Investments Company, Inc. attached as Exhibit A to the 4/17/06 12 letter 75 P-1E First Lien Credit Facility/Second 13 Lien Term Loan Lenders 75 P-1F Limited Partners in the Colony 14 Investors VI, L.P. Ownership Structure 75 15 P-1G Limited Partners in the Colony Investors VII, L.P. Ownership 16 Structure 75 P-1H Limited Partners in the RIH Co- 17 Investment Partners, L.P. Ownership Structure 75 18 P-2 4/11/06 letter to Thomas D. Carver, Executive Director of 19 the Casino Reinvestment Authority, to Linda Kassekert, Chair of the 20 Casino Control Commission 75 P-3 11/30/05 Amendment No. 1 Consent 21 and Waiver to the Revolving Credit and Term Loan Agreement dated as 22 of 4/26/05 among Resorts International Holdings, LLC, Deutsche Bank Trust 23 Company Americas Deutsche Bank Securities, Goldman Sachs Credit 24 Partners, LP, the CIT Group/ Equipment Financing, Inc., 25 Emigrant Savings Bank and Wachovia Bank National Association 75 9 1 E X H I B I T S: (Continued) 2 NUMBER DESCRIPTION ID EVD P-4 11/30/05 Amendment No. 1 Consent 3 and Waiver to the Second Lien Term Loan Agreement dated 4/26/05 among 4 Resorts International Holdings, LLC, Goldman Sachs Credit Partners, LP 5 and Deutsche Bank Securities, Inc. 75 P-5 3/24/06 Amendment No. 2 Consent 6 and Waiver to the Revolving Credit and Term Loan Agreement dated as of 7 4/26/05 among Resorts International Holdings, LLC, Deutsche Bank Trust 8 Company Americas Deutsche Bank Securities, Goldman Sachs Credit 9 Partners, LP, the CIT Group/ Equipment Financing, Inc., 10 Emigrant Savings Bank and Wachovia Bank National Association 75 11 P-6 3/24/06 Amendment No. 2 Consent and Waiver to the Second Lien 12 Term Loan Agreement dated 4/26/05 among Resorts International Holdings, 13 LLC, Goldman Sachs Credit Partners LP and Deutsche Bank Securities, 14 Inc. 75 P-7 4/17/06 Draft Note Purchase 15 Agreement between Colony RIH Holdings, LLC and RIH Resorts, 16 LLC 75 P-8 4/17/06 Draft RIH Resorts, LLC 17 $50,000,000 Promissory Note 75 P-9 4/18/06 letter amending, 18 supplementing and modifying the petition 75 19 20 (Exhibits retained by Commission.) 21 22 23 24 25 10 1 (Public Meeting No. 06-04-19 commenced 2 at 10:30 a.m.) 3 MR. NANCE: Good morning. I'd like to 4 read an opening statement. 5 This is to advise the general public 6 that in compliance with Chapter 231 of the Public 7 Laws of 1975 entitled the "Open Public Meetings 8 Act," the New Jersey Casino Control Commission on 9 October 13th, 2005 filed with the Secretary of 10 State at the State House in Trenton an annual 11 meeting schedule. 12 On October 14th, copies were mailed to 13 the Press of Atlantic City, the Newark Star 14 Ledger and the office of the Clerk of Atlantic 15 City. 16 Members of the press will be permitted 17 to take photographs, and we ask that this be done 18 in a manner which is not disruptive or 19 distracting to the Commission. 20 The use of cellular telephones in the 21 Public Meeting Room while the Commission is in 22 session is prohibited. 23 Any member of the public who wish to 24 address the Commission will be given the 25 opportunity to do so before the Commission 11 Item No. 1 1 adjourns for the day. 2 Please stand for the Pledge of 3 Allegiance. 4 (Whereupon, the Pledge of Allegiance 5 was executed.) 6 CHAIR KASSEKERT: Good morning. 7 MR. NANCE: Good morning. The matters 8 discussed in closed session were employee and 9 enterprise license matters. The Commission 10 approved the April 5th, 2006 closed session 11 minutes; litigation update regarding Warren 12 Lackland and Lewis M. Springer, Jr. versus State 13 of New Jersey, Casino Control Commission; Gloria 14 Ford versus State of New Jersey, Casino Control 15 Commission, et al; and Tyrone J. Floyd versus 16 Casino Control Commission and Sands Hotel Casino. 17 Personnel matters were discussed as 18 follows: The Commission approved the Information 19 Technology Policies within the Commission's 20 Personnel Policy and Procedure Manual. 21 Item Number 1, ratification of the April 22 5th, 2006 public meeting. 23 COMMISSIONER SOMMELING: Move to approve. 24 COMMISSIONER FEDORKO: Second. 25 CHAIR KASSEKERT: The motion has been 12 Item No. 2 1 made and seconded. All in favor? 2 (Aye.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: The motion carries. 6 (The Commission members vote unanimously 7 in favor of the motion.) 8 MR. NANCE: Item Number 2, applications 9 for employee and casino service industry 10 licenses. This agenda item will be entered as 11 Exhibit List 1 and 2. 12 (Whereupon, Exhibit Lists 1 and 2 are 13 entered into Evidence.) 14 MR. NANCE: Exhibit List 1 consists of 13 15 applications for initial and/or renewal of casino 16 key and casino employee licenses. The Division 17 has objected to licensure. 18 VICE CHAIR FRULIO: Motion to remand for 19 hearings. 20 COMMISSIONER FEDORKO: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Aye.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 13 Item No. 2 1 CHAIR KASSEKERT: The motion carries. 2 (The Commission members vote unanimously 3 in favor of the motion.) 4 MR. NANCE: For consideration is the 5 casino service industry license application of 6 MFC Productions, Inc. and Highgate Steel, Inc. 7 The Division has objected to this application. 8 VICE CHAIR FRULIO: Motion to remand for 9 a hearing. 10 COMMISSIONER FEDORKO: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Aye.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 (The Commission members vote unanimously 18 in favor of the motion.) 19 MR. NANCE: Also for consideration is the 20 casino service industry license application of 21 Fondacaro Companies, Inc. The Division has 22 recommended that this application be granted. 23 VICE CHAIR FRULIO: Motion to remand for 24 a hearing. 25 COMMISSIONER FEDORKO: Second. 14 Item No. 2 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Aye.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 (The Commission members vote unanimously 8 in favor of the motion.) 9 MR. NANCE: Exhibit list 2 consists of 10 seven applications for initial and/or renewal of 11 casino key and casino employee licenses. Staff 12 and the Division have recommended that these 13 licenses be granted. 14 VICE CHAIR FRULIO: Motion to grant 15 applications. 16 COMMISSIONER FEDORKO: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Aye.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: The motion carries. 23 (The Commission members vote unanimously 24 in favor of the motion.) 25 MR. NANCE: For consideration are the 15 Item No. 2 1 casino service industry license initial and 2 renewal applications pursuant to N.J.S.A. 3 5:12-92(a) and N.J.S.A. 5:12-92(c) for Rockwell 4 Architecture, Planning and Design, P.C., House 5 Advantage, LLC, and Atronic International Gaming. 6 Staff and the Division have recommended that 7 these applications be granted. 8 VICE CHAIR FRULIO: Motion to grant 9 application. 10 COMMISSIONER FEDORKO: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Aye.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 (The Commission members vote unanimously 18 in favor of the motion.) 19 MR. NANCE: For consideration are the 20 following applications for renewal of casino key 21 employee licenses and for qualification: William 22 Cooney, Vice President of Casino Marketing for 23 Ace Gaming, LLC; and William J. Larmour, Director 24 of Security for Marina Associates. Staff and the 25 Division have recommended that these applications 16 Item No. 3 1 be granted. 2 VICE CHAIR FRULIO: Motion to grant key 3 license renewals and for qualification. 4 COMMISSIONER FEDORKO: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. This is a roll call vote. 7 MR. NANCE: Commissioner Sommeling? 8 COMMISSIONER SOMMELING: Yes. 9 MR. NANCE: Commissioner Epps? 10 COMMISSIONER EPPS: Yes. 11 MR. NANCE: Commissioner Fedorko? 12 COMMISSIONER FEDORKO: Yes. 13 MR. NANCE: Vice Chair Frulio? 14 VICE CHAIR FRULIO: Yes. 15 MR. NANCE: Chair Kassekert? 16 CHAIR KASSEKERT: Yes. 17 MR. NANCE: The record will reflect the 18 motion carries unanimously. 19 Item Number 3, Petition No. 0940613 of 20 Atlantic Showboat, Inc., (d/b/a Showboat Casino 21 Hotel) is requesting the issuance of a temporary 22 casino key employee license to Mark Starrett, 23 pursuant to N.J.S.A. 5:12-89(e) and to permit 24 him, pursuant to N.J.A.C. 19:43-2.6, to assume 25 the duties and exercise the powers of Vice 17 Item No. 4 1 President of Hotel Operations without first 2 having been found qualified. 3 Staff and the Division have recommended 4 that this petition be granted. 5 VICE CHAIR FRULIO: Motion to grant 6 temporary key license and qualification. 7 COMMISSIONER FEDORKO: Second. 8 CHAIR KASSEKERT: The motion has been 9 made and seconded. This is a roll call vote. 10 MR. NANCE: Commissioner Sommeling? 11 COMMISSIONER SOMMELING: Yes. 12 MR. NANCE: Commissioner Epps? 13 COMMISSIONER EPPS: Yes. 14 MR. NANCE: Commissioner Fedorko? 15 COMMISSIONER FEDORKO: Yes. 16 MR. NANCE: Vice Chair Frulio? 17 VICE CHAIR FRULIO: Yes. 18 MR. NANCE: Chair Kassekert? 19 CHAIR KASSEKERT: Yes. 20 MR. NANCE: The record will reflect the 21 motion carries unanimously. 22 Item Number 4, stipulations of 23 settlement and consent agreements. When I call 24 your name, come forward, stand behind this middle 25 table spreading across the room that you may be 18 Item No. 4 1 seen: Chantay D. Dunlop-Davenport, Wayne E. 2 Evans, Luis A. Figueroa, Gretchen E. Kopf, 3 Branden A. Dang, Erik M. Jaeger, Jerome Newsome, 4 Zandro M. Corpus and Norman Seid. 5 CHAIR KASSEKERT: Is everybody whose name 6 been called come forward, please? 7 Would you each state your name for the 8 record? 9 MR. SEID: Norman Seid. 10 MR. DANG: Branden Dang. 11 CHAIR KASSEKERT: In a moment, we're 12 going to vote on the stipulations which you 13 agreed to with the Division of Gaming 14 Enforcement. I'm going to ask at this point if 15 any of you wish to be heard on your matter. You 16 do not have to say anything if you don't want to. 17 Do you wish to be heard? 18 (No response.) 19 CHAIR KASSEKERT: Very good. 20 Mr. Biscieglia? 21 MR. BISCIEGLIA: Good morning, Chair, 22 Vice Chair, Commissioners. The Division has 23 nothing further in this matter, and ask that the 24 Commission adopt the stipulation of settlement. 25 CHAIR KASSEKERT: Thank you. 19 Item No. 5 1 Any questions for the Division? 2 COMMISSIONER SOMMELING: Move to approve 3 the stipulations, Madam Chair. 4 COMMISSIONER FEDORKO: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Aye.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 (The Commission members vote unanimously 12 in favor of the motion.) 13 CHAIR KASSEKERT: Thank you very much for 14 coming. Good luck. 15 MR. NANCE: Item Number 5, stipulation of 16 settlement in State versus Margaret Murray. 17 Mr. Ingis? 18 MR. INGIS: Good morning, Madam Chair, 19 Commissioners. I would ask if Miss Murray is 20 present or represented today? 21 (No response.) 22 MR. INGIS: Apparently not. Brian 23 Biscieglia is here on behalf of the Division of 24 Gaming Enforcement. This is a stipulation for a 25 violation of Section 100n of the Casino Control 20 Item No. 6 1 Act and has recommended civil penalty in the 2 amount of $500. 3 CHAIR KASSEKERT: Mr. Biscieglia? 4 MR. BISCIEGLIA: The Division has nothing 5 further to add and would ask that the stipulation 6 be adopted. 7 CHAIR KASSEKERT: Any questions? 8 COMMISSIONER SOMMELING: No questions, 9 Madam Chair. 10 COMMISSIONER EPPS: Madam Chair, move we 11 approve the stipulation and impose a civil 12 penalty of $500 against Miss Murray in violation 13 of section 100n of the Act. 14 COMMISSIONER SOMMELING: Second. 15 CHAIR KASSEKERT: The motion has been 16 made and seconded. All in favor? 17 (Aye.) 18 CHAIR KASSEKERT: Opposed? 19 (No response.) 20 CHAIR KASSEKERT: The motion carries. 21 (The Commission members vote unanimously 22 in favor of the motion.) 23 MR. NANCE: Item Number 6, initial 24 decision in renewal application of Tamara Davies. 25 Miss Jacobson? 21 Item No. 6 1 MS. JACOBSON: Good morning, Chair, 2 Commissioners. Miss Davies, she's here today. 3 This is an initial decision by Commissioner 4 Fedorko in which he recommends Miss Davies' 5 renewal application for casino employee license 6 be denied, and that she be excluded from working 7 in the industry in any capacity. No exceptions 8 were filed. 9 CHAIR KASSEKERT: Thank you. 10 Mr. Biscieglia? 11 MR. BISCIEGLIA: Thank you. The Division 12 supports the initial decision in this matter, and 13 asks that it be adopted by the Casino Control 14 Commission. Thank you. 15 CHAIR KASSEKERT: Thank you. 16 Miss Davies, is there anything you'd 17 like to say today? 18 MS. DAVIES: No. 19 CHAIR KASSEKERT: Very good. 20 Any questions? 21 VICE CHAIR FRULIO: Motion to adopt the 22 initial decision and deny Ms. Davies' application 23 for a casino employee license and prohibit her 24 from employment by a casino hotel in any 25 capacity. 22 Item No. 7 1 COMMISSIONER SOMMELING: Second. 2 CHAIR KASSEKERT: The motion has been 3 made and seconded. All in favor? 4 (Aye.) 5 CHAIR KASSEKERT: Opposed? 6 (No response.) 7 CHAIR KASSEKERT: The motion carries. 8 (The Commission members vote unanimously 9 in favor of the motion.) 10 CHAIR KASSEKERT: Thank you. 11 MS. DAVIES: Thank you. 12 MR. NANCE: Item Number 7, petitions for 13 early re-application for Carla Jamal, Benjamin 14 Howard and Linh Tran. 15 Miss Frigen? 16 MS. FRIGEN: Good morning, Madam Chair, 17 Commissioners. 18 The first case is Carla Jamal, she's 19 present. I would ask that she have a seat first 20 at the table, and then we'll get to the gentlemen 21 next. You guys can have a seat. 22 For your consideration is Miss Jamal's 23 petition in which she seeks permission to reapply 24 early for a casino service employee registration 25 and/or non-credential casino hotel alcoholic 23 Item No. 7 1 beverage employment. 2 The Division has interposed an objection 3 to this petition, and Miss Jamal is here, and 4 Brian Biscieglia for the Division. 5 CHAIR KASSEKERT: Thank you. 6 Ms. Jamal, is there anything you'd like 7 to say today? 8 MS. JAMAL: Yes. 9 CHAIR KASSEKERT: We need to have you 10 stand up and be sworn in if that's the case. 11 MS. JAMAL: Okay. 12 MR. NANCE: Please raise your right hand. 13 (Whereupon, CARLA A. JAMAL, having been 14 first duly sworn, testified as follows:) 15 MR. NANCE: Please state your name for 16 the record. 17 MS. JAMAL: Carla Jamal. 18 MR. NANCE: Thank you. 19 CHAIR KASSEKERT: What would you like to 20 tell us? 21 MS. JAMAL: I feel that I rehabilitated 22 myself very well. I've ran a GA meeting for over 23 three years plus, wasn't told to do that, but I 24 did it on my own. I've done community service, 25 Atlantic City Hospital for two years. I've kept 24 Item No. 7 1 steady employment except for a car accident that 2 I had recently, and I feel that I would have no 3 problem going back. 4 CHAIR KASSEKERT: Where was your Gambling 5 Anonymous group located at? 6 MS. JAMAL: Absecon. 7 CHAIR KASSEKERT: Absecon? 8 MS. JAMAL: I had some paperwork and, you 9 know. 10 CHAIR KASSEKERT: Okay. Before we hear 11 from the Division, let me just ask if any 12 Commissioners have any questions? 13 (No response.) 14 CHAIR KASSEKERT: Mr. Biscieglia? 15 MR. BISCIEGLIA: Thank you. By way of 16 the Division's letter of March 8th, 2006, the 17 Division does oppose the petition for early 18 reapplication for casino service employee 19 registration or a non-credential employee or CHAB 20 license. 21 The petitioner's original casino service 22 employee registration was revoked on July 11th, 23 2001 after the respondent waived her right to a 24 hearing. The revocation was based on a January 25 19th, 2001 conviction for theft by deception. 25 Item No. 7 1 The underlying fact of that case was that the 2 respondent stole numerous credit cards and credit 3 card applications from the mail of the victim to 4 make unauthorized purchases. 5 She was convicted of this on January 6 19th, 2001, and ordered to pay $30,302 in 7 restitution. On January 5th, 2001, the 8 respondent was also convicted on a federal level 9 in the United States District Court, District of 10 New Jersey, for this matter and ordered to pay 11 restitution in the amount of $30,825. 12 It's the Division's position, as I 13 stated, that the petition be denied. This is not 14 the first instance of credit card theft for the 15 petitioner. She was charged with credit card 16 theft back in 1991 and entered into the pre-trial 17 intervention program. 18 While the petitioner has provided 19 documentation in support of her petition, it does 20 not outweigh the danger to the industry she 21 possesses with a history of credit card theft 22 violations. The offenses are very serious. 23 The 2001 conviction was the result of a 24 pattern of theft that went on for over a year. 25 This wasn't an instant of one theft, but a 26 Item No. 7 1 pattern of behavior that continued over the 2 course of the year. As I stated, these thefts 3 totaled over $30,000, and I think the important 4 factor in this is that a prior credit card theft 5 conviction that occurred 10 years before in 1991 6 was not enough to deter the respondent from 7 engaging in this conduct once again. 8 So based upon this information, the 9 Division must object to the instant petition of 10 the petitioner. 11 CHAIR KASSEKERT: Thank you. 12 Let me ask if the Commissioners have any 13 questions of the Division? 14 Commissioner Fedorko. 15 COMMISSIONER FEDORKO: Mr. Biscieglia, I 16 agree with everything you say; however, I mean, 17 what are we loosing for two months? She would 18 apply for a license in July anyway; correct? 19 MR. BISCIEGLIA: She would apply for the 20 license, but then she would be required to go 21 through the application process with us, and we 22 could once again -- I understand there's a time 23 matter of two months, but I believe that with the 24 seriousness of the offense, the Division did not 25 object to this petition, we would not be doing 27 Item No. 7 1 our duty to the industry, and I can understand 2 your position of a two month waiting period, why 3 not let it go, but I feel -- 4 COMMISSIONER FEDORKO: I'm not saying let 5 it go. 6 MR. BISCIEGLIA: Not let it go, excuse 7 me, I was incorrect, of two months and let it go 8 through that process, I should say, but I feel 9 that it's the Division's duty to oppose this 10 based on the seriousness of the offenses, and I 11 will leave that final, the final decision of that 12 matter, to the Commission. 13 COMMISSIONER FEDORKO: Okay. 14 CHAIR KASSEKERT: Commissioner Epps? 15 COMMISSIONER EPPS: She's requesting 16 permission to apply now as opposed to applying in 17 two months. Once she applies, it's still going 18 to take her through the process. 19 MR. BISCIEGLIA: Yes. 20 COMMISSIONER EPPS: What you're saying is 21 she deserves to be forced to wait two more months 22 before you take her to the process. 23 MR. BISCIEGLIA: I don't think it's a 24 factor of the time. I understand that the 25 Commission is looking at it in the factor of 28 Item No. 7 1 time, but what I think the Division is looking 2 at, it is a matter of justice and a matter of the 3 importance of these offenses and the seriousness 4 of them. 5 COMMISSIONER EPPS: I mean, but clearly, 6 you're saying what your position is, she has to 7 fullfil that period before she can file. 8 MR. BISCIEGLIA: Our position is that her 9 petition to reapply should be denied. 10 COMMISSIONER EPPS: Reapply early. 11 MR. BISCIEGLIA: Yes, and it's likely 12 that we oppose her petition to reapply on time as 13 well. 14 MS. FRIGEN: I just want to interject 15 just to make sure we're on the same basis here, 16 that her petition isn't seeking permission to 17 reapply early for a casino employee license. 18 She's seeking permission to come back in in a 19 registrant status for the hotel. 20 If the Commission were to approve the 21 petition, and Miss Jamal were to obtain 22 registration, she would get that within a couple 23 days after which the Division would then have, 24 still have opportunity to review her 25 qualifications. 29 Item No. 7 1 MR. BISCIEGLIA: Based upon that -- 2 excuse me, based upon that, she would be allowed 3 to enter back into the industry before the 4 Division has had a chance to vent these 5 convictions. 6 COMMISSIONER EPPS: Okay. 7 COMMISSIONER SOMMELING: Mr. Biscieglia, 8 it is true that the petitioner's only requesting 9 employment as, with an employee registration or 10 non-credential position within the industry. 11 Now, given the fact that after the 1991 12 conviction that you first pointed out in your 13 presentation before the Commission this morning, 14 in this latest incident, she has made significant 15 strides in my opinion at rehabilitation. 16 Now, she's within 60 days of the time 17 when her -- or 90 days within the time when she 18 would be able to apply for registration or work 19 in a non-credential position. At what point do 20 we recognize those efforts of rehabilitation and 21 allow the individual to get back on their feet in 22 terms of acquiring a means to make a living? 23 MR. BISCIEGLIA: I cannot speak to the 24 future as to what date this would be a time to 25 allow her to do this. What I can simply speak of 30 Item No. 7 1 at this time is now is not that time based on the 2 seriousness of these offenses, and I just want to 3 correct that in 1991, it was not a conviction, 4 she was entered into the PTI program where she 5 was given a bit of leeway to go through the 6 process and still repeated behavior in the 7 future. 8 Is a year from now enough time? I can't 9 speak to that right now, but I can speak to the 10 fact that now in the Division's opinion, this is 11 not the time. 12 COMMISSIONER SOMMELING: Thank you. 13 CHAIR KASSEKERT: Any other questions? 14 Miss Jamal, is there anything else you'd 15 like to say? 16 MS. JAMAL: Yes. So in my eyes, I -- two 17 months from now, I'm still not going to get a job 18 is basically what he's saying. 19 CHAIR KASSEKERT: Well, in two months, 20 you'll be able to apply, notwithstanding this 21 petition today, but two months from now, you'll 22 -- or three months actually, you'll be eligible. 23 MS. JAMAL: July 10th or July 11th of 24 '06. 25 CHAIR KASSEKERT: Yes. 31 Item No. 7 1 MS. JAMAL: So, I mean, we can be honest 2 here. I mean, it doesn't look good, you know. 3 CHAIR KASSEKERT: Well, I don't -- you 4 know, you can't foreclose what the Commission is 5 going to decide to do today or even in the future 6 when you are eligible again to reapply and go 7 through the process, you know. 8 Obviously, we take very serious the 9 Division of Gaming Enforcement's position on 10 these matters. They serve as the agency that 11 advises us on it, but this is a five member board 12 who makes their own decision on a case by case 13 basis. 14 MS. JAMAL: So perhaps on July 11th, they 15 could say I have to wait another five years. 16 They could say whatever they choose; correct? 17 CHAIR KASSEKERT: No. 18 MS. FRIGEN: I can explain the process. 19 CHAIR KASSEKERT: She'll explain the 20 process to you. 21 Let me ask if there are any questions? 22 Mr. Biscieglia, anything else? 23 MR. BISCIEGLIA: No, thank you. 24 CHAIR KASSEKERT: Okay, all right. I'll 25 entertain a motion. 32 Item No. 7 1 COMMISSIONER EPPS: Madam Chair, I move 2 we grant Miss Jamal permission to reapply early 3 for a casino service employee registration and/or 4 to obtain employment early as a non-credential 5 casino hotel alcoholic beverage employee. 6 VICE CHAIR FRULIO: Second. 7 CHAIR KASSEKERT: The motion has been 8 made and seconded. All in favor? 9 (Aye.) 10 CHAIR KASSEKERT: Opposed? 11 (No response.) 12 CHAIR KASSEKERT: The motion carries. 13 (The Commission members vote unanimously 14 in favor of the motion.) 15 CHAIR KASSEKERT: We're going to allow 16 you, I think given the fact that you are so 17 close, that you have given some indication about 18 your rehabilitation, we're going to allow you the 19 opportunity to apply early, and that still means 20 you will have to go through the process, and 21 Bernadette will explain that all to you, but I 22 think we felt moved with respect to the efforts 23 that you have been making. Okay? 24 MS. JAMAL: I appreciate that. 25 CHAIR KASSEKERT: Thank you. 33 Item No. 7 1 MR. BISCIEGLIA: Thank you. 2 MS. FRIGEN: Madam Chair, Commissioners, 3 the next case we have is Mr. Benjamin Howard, if 4 he would have a seat at the table. 5 In this case, according to the terms of 6 the stipulation of settlement, Mr. Howard has a 7 petition seeking permission to obtain 8 non-credential casino hotel employment early. In 9 this case, the Division has interposed no 10 objection to the petition. 11 CHAIR KASSEKERT: Thank you. 12 Mr. Howard, is there anything you'd like 13 to say to that? 14 MR. HOWARD: Yes. 15 CHAIR KASSEKERT: You need to rise, and 16 Mr. Nance will swear you in. 17 MR. NANCE: Raise your right hand, 18 please. 19 (Whereupon, BENJAMIN E. HOWARD, having 20 been first duly sworn, testified as follows:) 21 MR. NANCE: State your name for the 22 record. 23 MR. HOWARD: Benjamin Howard. 24 MR. NANCE: Thank you. You may be 25 seated. 34 Item No. 7 1 CHAIR KASSEKERT: You can proceed. 2 MR. HOWARD: In light of my improvement 3 and the reasons that I was granted, grant this 4 petition, January 31st, 2007 is when I'll be -- I 5 can apply for early reapplication for the actual 6 casino service employee registration, and I'm 7 curious as to, can you make an early 8 reapplication for that, or does it still stay, 9 you go by the stipulation? 10 CHAIR KASSEKERT: Yes, we have to go by 11 the stipulation. 12 Is there anything you want to tell us 13 about why we should grant your petition to obtain 14 employment early as a non-credential hotel, 15 casino hotel employee? 16 MR. HOWARD: Really other -- nothing 17 other than the fact that of all the reasons that, 18 the reasons that the Commission and the DGE wants 19 to grant it to me, and it's continuing on, and no 20 situation has changed for the worse, it's all 21 better. 22 CHAIR KASSEKERT: So kind of turned 23 yourself around. 24 MR. HOWARD: I would say so. 25 CHAIR KASSEKERT: Okay. Are you working 35 Item No. 7 1 now? 2 MR. HOWARD: Yes. 3 CHAIR KASSEKERT: Where are you working? 4 MR. HOWARD: For Labor Ready Temporary 5 Agency. 6 CHAIR KASSEKERT: Temporary Agency. 7 Let me ask if any of the Commissioners 8 have any questions for you? 9 COMMISSIONER SOMMELING: No questions, 10 Madam Chair. 11 CHAIR KASSEKERT: Mr. Biscieglia? 12 MR. BISCIEGLIA: Thank you, Chair. 13 In our March 24th, 2006 letter, the 14 Division did not oppose the relief sought by 15 Mr. Howard, and will answer any questions you 16 have. 17 CHAIR KASSEKERT: Thank you. 18 Any questions for Mr. Biscieglia? 19 COMMISSIONER FEDORKO: Motion to grant 20 Mr. Howard's petition to obtain employment early 21 as a non-credential casino hotel employee. 22 VICE CHAIR FRULIO: Second. 23 CHAIR KASSEKERT: The motion has been 24 made and seconded. All in favor? 25 (Aye.) 36 Item No. 7 1 CHAIR KASSEKERT: Opposed? 2 (No response.) 3 CHAIR KASSEKERT: The motion carries. 4 (The Commission members vote unanimously 5 in favor of the motion.) 6 CHAIR KASSEKERT: Thank you very much for 7 coming. Good luck. 8 MR. HOWARD: Thank you. 9 MS. FRIGEN: Next, we have Mr. Tran. 10 Mr. Tran, if you can have a seat at the table, 11 please. 12 For your consideration is Mr. Tran's 13 petition in which he seeks permission to reapply 14 early for a casino employee license and 15 registration and non-credential hotel employment. 16 In this case, the Division has 17 interposed no objection to the petition 18 conditioned upon Mr. Tran addressing a debt. 19 Mr. Tran indicated earlier a willingness to do a 20 wage execution to address that. 21 CHAIR KASSEKERT: Thank you. 22 Mr. Tran, is there anything you'd like 23 to say today? 24 MR. TRAN: No. 25 CHAIR KASSEKERT: No? 37 Item No. 7 1 Mr. Biscieglia? 2 MR. BISCIEGLIA: Thank you. Based upon 3 our April 7th letter of 2006, the Division does 4 not oppose the relief sought. Based upon the 5 condition that he will address this debt, I've 6 spoken with Mr. Tran, and he's agreed to after 7 this meeting execute a wage execution consent 8 order. So, therefore, the Division has no 9 objection and will answer any questions. 10 CHAIR KASSEKERT: Very good. 11 Any questions? 12 COMMISSIONER SOMMELING: Move to grant 13 Mr. Tran permission to reapply early for a casino 14 employee license, casino service employee 15 registration and/or to work as a non-credential 16 casino hotel employee, subject to his signing a 17 wage execution consent agreement addressing his 18 outstanding student loan. 19 COMMISSIONER FEDORKO: Second. 20 CHAIR KASSEKERT: The motion has been 21 made and seconded. All in favor? 22 (Aye.) 23 CHAIR KASSEKERT: Opposed? 24 (No response.) 25 CHAIR KASSEKERT: The motion carries. 38 Item No. 8 1 (The Commission members vote unanimously 2 in favor of the motion.) 3 CHAIR KASSEKERT: Thank you very much for 4 coming. Good luck. 5 MR. TRAN: Thank you. 6 MR. NANCE: Item Number 8, motion of 7 Movita Terrell for relief from a denial order. 8 Miss Frigen? 9 MS. FRIGEN: Miss Terrell is here. I'd 10 ask her to come forward, please, and have a seat 11 at the table. 12 Madam Chair, Commissioners, for your 13 consideration is Miss Terrell's motion in which 14 she seeks another opportunity. She's seeking 15 relief from a denial order that the Commission 16 entered back in June of 2005 seeking a remand to 17 further address licensure issues. 18 With this motion, the Division has 19 interposed an objection and recommends that it be 20 denied. 21 CHAIR KASSEKERT: Thank you. 22 Miss Terrell, is there anything you'd 23 like to say? 24 MS. TERRELL: Yes. 25 CHAIR KASSEKERT: Why don't you wait, and 39 Item No. 8 1 Mr. Nance will swear you in. 2 (Whereupon, MOVITA TERRELL, having been 3 first duly sworn, testified as follows:) 4 MR. NANCE: Please state your name for 5 the record. 6 MS. TERRELL: Movita Terrell. 7 MR. NANCE: Thank you. 8 CHAIR KASSEKERT: What would you like to 9 tell us today? 10 MS. TERRELL: That I have moved out of 11 state in December of '05, and I came back in 12 March -- well, I had a stipulation to pay a 13 hundred fifty dollars to the IRS when I was 14 working in the casino, I was keeping up with it. 15 Then I moved out of state in Georgia for 16 like nine, 10 months. So I stopped paying it, 17 but now, I work at Macy, and I made agreement to 18 take $75 a week out of my check, and they started 19 that last week. 20 CHAIR KASSEKERT: So your contention was 21 you weren't aware that you had to continue to -- 22 MS. TERRELL: I was aware of it, but when 23 I moved out of state, I was like hoping, trying 24 to find a job, and this, that and that, but it 25 was hard. So I can't keep up with that 40 Item No. 8 1 stipulation because I didn't have that type of 2 job. 3 CHAIR KASSEKERT: Let me ask if any 4 Commissioners have any questions? 5 COMMISSIONER SOMMELING: No questions, 6 Madam Chair. 7 CHAIR KASSEKERT: Commissioner Fedorko? 8 COMMISSIONER FEDORKO: Did you contact 9 anybody and tell them that you weren't able to 10 make the payments? 11 MS. TERRELL: No. 12 COMMISSIONER FEDORKO: Why not? 13 MS. TERRELL: I just didn't. 14 COMMISSIONER FEDORKO: You understand 15 it's your obligation to do that; right? 16 MS. TERRELL: Yes. 17 COMMISSIONER FEDORKO: Okay. 18 MS. TERRELL: Well, when I came back in 19 state, I did contact and make arrangements when I 20 got this job back at Macy to make arrangements to 21 make -- to take the money out of my paycheck. 22 COMMISSIONER FEDORKO: Okay. 23 CHAIR KASSEKERT: Commissioners Epps, go 24 ahead. 25 COMMISSIONER EPPS: I guess the question 41 Item No. 8 1 is, well, did you think to inform the Division 2 because you entered into an agreement with the 3 Division of Gaming Enforcement that you would 4 make the payments; is that accurate? 5 MS. TERRELL: Yes. 6 COMMISSIONER EPPS: So when you left, did 7 you let the Division know that you weren't able 8 to follow-up with it, or you were having 9 difficulty? 10 MS. TERRELL: No. 11 COMMISSIONER EPPS: Because see, I know 12 hindsight is 20/20, but the best way to do it, 13 even if you have a problem, if you entered into 14 an agreement, if you and I have an agreement, and 15 you're not able to keep up with it, and you don't 16 tell me, then I'm going to be aggressive against 17 you and try to follow-up with whatever my 18 recourse is. 19 If you tell me maybe, I'll work with 20 you. I guess what we have here, not only did you 21 not follow-up, you didn't even tell them there 22 was difficulty. So now, they're saying the next 23 level, we have to take it to the next level, and 24 that's where we're suck here because we have to 25 consider which side of that coin to prevail on. 42 Item No. 8 1 MS. TERRELL: Okay. 2 CHAIR KASSEKERT: Now you made 3 Mr. Biscieglia's argument. 4 Mr. Biscieglia, anything to add? 5 MR. BISCIEGLIA: During 2003, the 6 Commission was involved in settlement 7 negotiations over financial matters with the 8 Division of Gaming Enforcement. This culminated 9 in a stipulation of settlement between the 10 parties September 15th of 2003. The stipulation 11 was approved by the Commission on January 21st, 12 2004 and granted the petitioner the renewal for a 13 casino employee license. 14 Part of the stipulation required her to 15 report on a quarterly basis to the Division 16 regarding an IRS payment plan, and a small amount 17 of money to be paid off to the New Jersey Motor 18 Vehicle Commission. 19 The first date of correspondence from 20 her was on April 1st, 2004. The petitioner did 21 provide evidence on April 1st, 2004. 22 Unfortunately, this was the last time that the 23 Division ever received anything from the 24 petitioner. 25 I think it's important to briefly note 43 Item No. 8 1 the pattern of non-compliance. On October 7th, 2 2004, the Division sent a letter requesting 3 information. It was ignored. On January 11th, 4 2005, once again, the Division sent a letter 5 requesting this information, that was ignored. 6 The Division then requested that the Commission 7 reopen the matter. 8 Subsequently, the Commission sent a 9 conference notice to the petitioner on January 10 26, 2005, setting up a conference for March 22nd 11 of 2005. Both the hearing notice was ignored, 12 and the petitioner failed to attend the 13 conference of March 22nd. 14 The Commission requested written 15 explanation for the abandonment, and that request 16 was ignored. On May 23rd, 2005, the Commission 17 sent a letter to the petitioner advising her that 18 this matter would be heard in the public meeting 19 of June 8th, 2005, and that she should attend and 20 has an opportunity to explain her non-compliance. 21 She ignored this correspondence and did not 22 attend. 23 The Commission then filed an order 24 vacating the order of January 21st, 2004, sent a 25 letter to petitioner denying her license renewal 44 Item No. 8 1 on two days later, on June 10th, 2005. This was 2 ignored for over seven months, and this was the 3 end of the process, denying the order and even 4 correspondence of such weight as that was ignored 5 by the petitioner. 6 In the end, the petitioner has ignored 7 everything and every request for information the 8 Division has ever sent. Any argument that 9 moving, or something of the like, would absolve 10 her of this responsibility is moot, due to the 11 fact these conditions were clearly spelled out in 12 the stipulation of settlement, and there is 13 really no argument that can be made by the 14 petitioner that she was not aware of her 15 responsibilities set forth in the stipulation of 16 settlement. 17 Even in support of the instant petition 18 that we're here discussing at this moment, 19 petitioner has offered no explanation for these 20 repeated failures. She's still -- we've still 21 not seen any evidence of the IRS payment plan 22 that she spoke of today with a wage garnishment, 23 but we see no evidence of that. She's not stated 24 any reason why the Commission should grant any 25 relief to her pursuant to N.J.A.C. 19:42-2.12(c), 45 Item No. 8 1 and that is because there is no reason, quite 2 frankly. 3 The Division must ask that the 4 Commission deny this petition based upon the 5 repeated failure to cooperate with the Division 6 in any way or supply us with the information that 7 she agreed to in the stipulation of settlement. 8 Thank you. 9 CHAIR KASSEKERT: Thank you. 10 Are there any questions for 11 Mr. Biscieglia? 12 COMMISSIONER SOMMELING: No questions, 13 Madam Chair. 14 CHAIR KASSEKERT: Is there anything else 15 you'd like to say? 16 MS. TERRELL: Yes, I do have proof that 17 the IRS today is garnishing my wages right now. 18 CHAIR KASSEKERT: I think as 19 Mr. Biscieglia said, it is a little too late. 20 There is a process in place that you were to be 21 following all along; and, you know, although you 22 argued you moved, it looks like this was a much 23 more protracted process than just the time period 24 that you moved, and you haven't -- you're telling 25 us now, that's great, but these discussions 46 Item No. 8 1 should have been held a long time ago before we 2 even got to this point. 3 MS. TERRELL: Well, I had moved out of 4 state to Georgia because I had to take care of 5 somebody in my family. 6 CHAIR KASSEKERT: I understand that, but 7 as Commissioner Fedorko noted, that didn't 8 relieve you of your obligation. You entered into 9 an agreement with the Division, and which came 10 before us where we said okay, we're going to 11 allow this settlement to go forward. Because you 12 entered into this agreement, you didn't keep up 13 your end of the agreement. 14 COMMISSIONER EPPS: I have a question. 15 When you said you moved, but did you get any of 16 these letters that were sent out? 17 I mean, there were -- I mean, 18 Mr. Biscieglia just went down the list of about 19 six or seven letters because at every stage of 20 the process, they sent you a letter and said this 21 is what's going on, which is an opportunity for 22 you to write back and say this is my situation, 23 but, I mean, do you -- do you refute his 24 statements that you didn't reply to any of these 25 letters? 47 Item No. 8 1 MS. TERRELL: No. 2 COMMISSIONER EPPS: See, that's what puts 3 us in an pinch. I understand what you're saying, 4 but if they write you over and over and over and 5 say tell us something, and you don't say anything 6 in response, it's tough to show up, you know, 11 7 months later and say well, I was -- I was 8 struggling but now, I'm doing better. You know 9 what I mean? 10 You have to at least engage in the 11 process and let them know I think the way that 12 you're struggling. If you come at the end and 13 say I'm struggling, and that's why I didn't 14 respond to any of your letters, it's kind of 15 tough to hear that at that point. It's a lot 16 easier for them to say at least she's trying to 17 work with us, she's being honest, she's telling 18 us why she's not complying. 19 That was your opportunity to do it. 20 Now, like the Chair says, it's a little bit too 21 late. 22 CHAIR KASSEKERT: Any other questions? 23 COMMISSIONER FEDORKO: Madam Chair, I 24 make a motion to deny Miss Terrell's opportunity 25 for a hearing concerning her license renewal 48 Item No. 9 1 application. Miss Terrell may petition for early 2 reapplication in accordance with timelines set 3 forth in the order. 4 COMMISSIONER SOMMELING: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Aye.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 (The Commission members vote unanimously 12 in favor of the motion.) 13 CHAIR KASSEKERT: Miss Terrell, 14 Bernadette will explain to you what the early 15 reapplication process is, so you have an 16 understanding of what that process is, but at 17 this point, we have denied your motion for 18 another opportunity for a hearing. Thank you. 19 MR. NANCE: Item Number 9, application 20 for suspension in State versus Renee Habernehl. 21 Miss Frigen. 22 MS. FRIGEN: Madam Chair, Commissioners, 23 this is an application brought by the Division to 24 suspend Miss Habernehl's casino employee license. 25 Darrin Lord is here on behalf of the 49 Item No. 9 1 respondent. Brian Biscieglia is here for the 2 Division. Since this is a motion brought by the 3 Division, Mr. Biscieglia should proceed first. 4 CHAIR KASSEKERT: Mr. Biscieglia? 5 MR. BISCIEGLIA: Thank you. This motion 6 for suspension follows the February 6th, 2006 7 complaint filed by the Division seeking 8 revocation of the respondent's casino employee 9 license. That complaint was based upon a June 10 28th, 2005 indictment for theft of property while 11 employed at Dick's Sporting Goods in Hamilton, 12 New Jersey. The respondent allegedly stole $2575 13 by creating fraudulent returns removing the money 14 from her register and then using it for personal 15 use. 16 At the time of the arrest, the 17 respondent provided a written statement to the 18 Hamilton Police Department admitting to the 19 conduct. She was entered into PTI on October 20 21st, 2005 for a period of 24 months. 21 On March 14th, 2006, the Division and 22 the Commission held a conference in this matter 23 in which Miss Habernehl and Mr. Lord attended the 24 conference. At that conference, the Commissioner 25 now denied the conduct that is alleged and is 50 Item No. 9 1 contradictory to her prior written statement. 2 This led to the Division seeking a suspension in 3 this matter for two reasons. 4 The first -- in our motion, the Division 5 states our first reason is that the charges are 6 currently pending PTI until October 21st, 2007. 7 Now, this morning before this meeting began, the 8 Division was provided with evidence from Mr. Lord 9 stating that Miss Habernehl has completed all 10 conditions of PTI successfully. 11 Now, there is no dismissal order 12 involved in this. So as of right now, I would 13 argue the charges are pending, although I am 14 willing to concede that the letter from the court 15 states that she has fulfilled her obligations, 16 although those obligations, as I see it, would 17 only be the restitution obligations since the 18 time period obligation of the PTI is nowhere 19 close to being fulfilled. 20 Also, the respondent recently elected to 21 proceed to the hearing process rather than defer 22 the instant matter as under the statute; and 23 final adjudication of this matter could take 24 several months. 25 Based on the charges and the time limits 51 Item No. 9 1 of the adjudication, these are cause for concerns 2 because this type of behavior with the false 3 return ringing is something we've seen many times 4 in the industry and is a cause of great concern 5 for the Division. This behavior occurred less 6 than a year ago, and it also involved taking from 7 an employer and because of that, it raises great 8 concern with the Division, and the Division asks 9 that you grant our motion for suspension. 10 CHAIR KASSEKERT: Thank you. 11 Before hearing from Mr. Lord, does 12 anyone have any questions from the Division? 13 COMMISSIONER EPPS: Not yet. 14 CHAIR KASSEKERT: Mr. Lord? 15 MR. LORD: Chair, Vice Chair, 16 Commissioners, Darrin Lord on behalf of Renee 17 Habernehl. 18 First, I would like to address the fact 19 that we requested a hearing. At the last 20 prehearing conference we had, it was rescheduled 21 for May 9th; and subsequently, the reason it was 22 rescheduled was for the petitioner to complete 23 PTI. Hearing had not been requested yet. 24 Mr. Biscieglia, in all fairness, indicated that 25 in all likelihood, there would be no offer, and 52 Item No. 9 1 he was going to proceed to a hearing, but we were 2 given that May 9th to complete PTI. 3 In fact, she has completed PTI. If we 4 were meeting here today at three o'clock, I can 5 probably have the order. In all likelihood, the 6 order's been signed. 7 What happened is, she lived in Ocean 8 City. Wendy Kirk has basically signed off and 9 sent the order to Atlantic County. All that has 10 to be done is the judge would sign. He's 11 probably already signed it, one of the judges in 12 Atlantic County. So I would ask the Commission 13 to consider that the charges have already been 14 dismissed and charges are not pending. 15 Now, regarding the incident. What we 16 feel will be provided at the hearing, and we want 17 the opportunity to go to a hearing, is that Miss 18 Habernehl's conduct did not rise, any theft or 19 misconduct in Dick's Sporting Goods did not rise 20 to the level of third degree, and Mr. Biscieglia 21 made a reference she gave a statement to the 22 police officers, that's incorrect, and what we're 23 disputing, and although there is a handwritten 24 statement, I've had numerous litigations with big 25 corporations like Dick's, and I've taken 53 Item No. 9 1 depositions of their risk management and their 2 loss prevention; and what they do, they'll bring 3 somebody in a room, and they'll basically say, 4 you know, we have you this, we have you that, and 5 they threaten someone, who's not a criminal, 6 hasn't committed a crime like Miss Habernehl. 7 It's basically their words in that, that 17 8 transactions, that exact number, that's what 9 they're telling her, and they're saying if you 10 don't write that out and say that, we won't 11 charge you. We won't -- we won't put you in 12 jail, you won't go to jail. So she writes that. 13 It's not to a police officer. 14 What we want is the opportunity to go to 15 a hearing. We feel at a hearing, we will be able 16 to show what her conduct was, and that it was not 17 the level of third degree, and that she can 18 certainly be rehabilitated. 19 Additionally, we do not feel the 20 industry is at risk. We submitted a letter from 21 her PIP boss who indicates he's not only known 22 her, he is aware of the situation. 23 CHAIR KASSEKERT: I think your arguments 24 are probably better left to the actual hearing 25 once you get there. I think my concern would be 54 Item No. 9 1 if we're talking about receiving information from 2 the court, perhaps we should wait on a 3 determination of this issue until we -- 4 MR. BISCIEGLIA: May I respond? I don't 5 know if Mr. Lord is done. 6 MR. LORD: I'm done. 7 CHAIR KASSEKERT: Mr. Biscieglia. 8 MR. BISCIEGLIA: The Division would just 9 like to respond by saying Mr. Lord is correct. 10 It was a statement given to Dick's Sporting 11 Goods. 12 CHAIR KASSEKERT: Yes. I don't -- 13 MR. BISCIEGLIA: What I would like to 14 disagree upon is the notion that the conference 15 of May 9th was scheduled to allow the petitioner 16 to complete PTI. That's not the reason why this 17 conference was scheduled. 18 May 9th was the next scheduled 19 conference date between myself and the Commission 20 attorney. Usually these matters take one or two 21 conferences, and the first conference we're 22 talking about is going to be happening. By the 23 second conference, I believe the decision was A, 24 at the second conference, settlement offer would 25 be offered by the Division, and the decision 55 Item No. 9 1 would come down to Mr. Lord and his client as to 2 whether to accept that or go to a hearing, but 3 there was no mention of allowing PTI to complete, 4 and that conference being made for that specific 5 purpose. 6 And also, that the amount of money 7 involved in this case certainly does rise to the 8 level of a third degree theft by taking charge. 9 It was over $2500, the alleged amount. That's 10 it. 11 CHAIR KASSEKERT: Thank you. Let me ask 12 if -- go ahead, Commissioner Epps. 13 COMMISSIONER EPPS: Madam Chair, my 14 concern in this matter is that if we accept as 15 true Mr. Lord's representation that there's an 16 order that could be pending -- that could be 17 imminent, that order added to this record gives 18 us a more complete record to make a determination 19 as to what we want to do, even with respect to 20 the suspension because it puts it -- if there is, 21 in fact, a different order, that puts it in a 22 slightly different posture than it even is 23 currently, and the Division may or may not 24 continue to seek this course, but it puts the 25 matter in a completely different posture for the 56 Item No. 9 1 Commission. 2 So I would ask, respectfully ask that we 3 carry this matter to our next hearing. In that 4 interim, if we have received the order, that 5 would be a complete record for us to analysis 6 what, if anything, we want to do with respect to 7 the Division's motion, and the Division will have 8 plenty of time whether or not it has still desire 9 to make that motion; and if it is, we'll 10 entertain it at that point, but I think that with 11 the order being imminent, which would complete 12 the record as with -- at least with respect to 13 our analyzing this matter, we should carry it to 14 our next meeting. 15 MR. LORD: Mr. Epps, I believe I can have 16 that order for you today. I have a firm belief 17 that order has already been signed. 18 COMMISSIONER EPPS: I'm moving that we 19 carry it to the next meeting. 20 COMMISSIONER SOMMELING: I'll second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Aye.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 57 Item No. 10 1 CHAIR KASSEKERT: The motion carries. 2 (The Commission members vote unanimously 3 in favor of the motion.) 4 CHAIR KASSEKERT: Thank you. We'll carry 5 this to our next regularly scheduled meeting. 6 MR. LORD: Thank you. Thank you very 7 much. 8 MR. NANCE: Item Number 10, motion of the 9 Division of Gaming Enforcement for a temporary 10 prohibitory order concerning MFC Productions, 11 Inc. and Julius D. Feinstein. 12 Miss Frigen. 13 MS. FRIGEN: Madam Chair, Commissioners, 14 before we hear from the Division, let me ask 15 whether there is anyone here on behalf of either 16 the company, MFC Productions, Inc. or 17 Mr. Feinstein? 18 (No response.) 19 MS. FRIGEN: Apparently not. 20 For your consideration is the Division's 21 request for a temporary prohibitory order. 22 CHAIR KASSEKERT: Mr. Adams, good 23 morning. 24 MR. ADAMS: Good morning, Chair; good 25 morning, Commissioners. I'm here on behalf of 58 Item No. 10 1 Mr. McDonough who filed this motion along with 2 supporting papers. I think there is enough 3 before you to enter this appropriate order; and 4 unless you have any questions, I'm hopeful that 5 you will. 6 CHAIR KASSEKERT: Thank you. 7 Any questions? 8 COMMISSIONER SOMMELING: Madam Chair -- 9 COMMISSIONER EPPS: You're hopeful we'll 10 have questions. 11 MR. ADAMS: No, excuse me. 12 COMMISSIONER SOMMELING: Madam Chair, I 13 move we grant the Division of Gaming 14 Enforcement's motion and issue a temporary 15 prohibitory order concerning MFC Productions, 16 Inc. and Julius D. Feinstein pending further 17 order of the Commission. 18 COMMISSIONER EPPS: Second. 19 CHAIR KASSEKERT: The motion has been 20 made and seconded. All in favor? 21 (Aye.) 22 CHAIR KASSEKERT: Opposed? 23 (No response.) 24 CHAIR KASSEKERT: The motion carries. 25 (The Commission members vote unanimously 59 Item No. 11 1 in favor of the motion.) 2 CHAIR KASSEKERT: Thank you. 3 MR. NANCE: Item Number 11, petition of 4 Harrah's Operating Company, Inc., Marina 5 Associates, Atlantic City Showboat, Inc., Bally's 6 Park Place and Boardwalk Regency Corporation 7 requesting permission for Jennifer Shatley to 8 perform the duties and exercise the powers of 9 Project Vice President, Code of Commitment 10 pending plenary qualification. 11 Miss Myers? 12 MS. MYERS: Good morning, Chair and 13 Commissioners. A draft resolution has been 14 circulated to the parties. It's been revised to 15 reflect the proper title of Miss Shatley, which 16 is Program Vice President, Code of Commitment, 17 rather than Project. 18 Karen Wosnack is here on behalf of the 19 petitioner, and Ray Marquez on behalf of the 20 Division. 21 MS. WOSNACK: Good morning, Madam Chair, 22 Commissioners, Karen Wosnack on behalf of the 23 petitioners. We would ask you to adopt the 24 resolution as drafted. 25 CHAIR KASSEKERT: Mr. Marquez? 60 Item No. 11 1 MR. MARQUEZ: We agree. 2 CHAIR KASSEKERT: Any questions. 3 COMMISSIONER EPPS: Madam Chair, I move 4 first we amend the agenda and resolution to 5 strike the word "project" and insert the word 6 "program" before vice president; then I move that 7 we adopt the draft resolution and find Jennifer 8 Shatley temporarily qualified and authorize her 9 to assume the duties and exercise the powers of 10 Program Vice President, Code of Commitment for 11 Harrah's Operating Company, Inc., pursuant to the 12 conditions contained in N.J.A.C. 19:43-2.7 which, 13 among other things, require that she file a 14 PHD-MJ and New Jersey Supplemental by May 4th, 15 2006. 16 COMMISSIONER SOMMELING: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. This is a roll call vote. 19 MR. NANCE: Commissioner Sommeling? 20 COMMISSIONER SOMMELING: Yes. 21 MR. NANCE: Commissioner Epps? 22 COMMISSIONER EPPS: Yes. 23 MR. NANCE: Commissioner Fedorko? 24 COMMISSIONER FEDORKO: Yes. 25 MR. NANCE: Vice Chair Frulio? 61 Item No. 12 1 VICE CHAIR FRULIO: Yes. 2 MR. NANCE: Chair Kassekert? 3 CHAIR KASSEKERT: Yes. 4 MR. NANCE: The record will reflect the 5 motion carries unanimously. 6 Item Number 12, consideration of the 7 qualification of two individual qualifiers of 8 Harrah's Operating Company, Inc. 9 Miss Myers. 10 MS. MYERS: The same parties are here on 11 this matter as well. The Commission granted 12 temporary qualification to Gerald Einsohn on 13 September 21st, 2005, and to Kirk England on 14 October 19th, 2005, and a copy of the draft 15 resolution has been distributed to the parties. 16 CHAIR KASSEKERT: Miss Wosnack? 17 MS. WOSNACK: Thank you. We have nothing 18 to add except to ask that you adopt the 19 resolution as drafted. Thank you. 20 MR. MARQUEZ: Yes, we recommend the 21 granted relief. 22 CHAIR KASSEKERT: Any questions? 23 COMMISSIONER SOMMELING: No questions, 24 Madam Chair. 25 VICE CHAIR FRULIO: Move to adopt the 62 Item No. 13 1 draft resolution and find the following 2 qualifiers of Harrah's Operating Company, Inc. 3 plenarily qualified: Gerald Einshon, Vice 4 President and Associate General Counsel; and Kirk 5 England, Vice President of Design and 6 Construction. 7 COMMISSIONER FEDORKO: Second. 8 CHAIR KASSEKERT: The motion has been 9 made and seconded. This is a roll call vote. 10 MR. NANCE: Commissioner Sommeling? 11 COMMISSIONER SOMMELING: Yes. 12 MR. NANCE: Commissioner Epps? 13 COMMISSIONER EPPS: Yes. 14 MR. NANCE: Commissioner Fedorko? 15 COMMISSIONER FEDORKO: Yes. 16 MR. NANCE: Vice Chair Frulio? 17 VICE CHAIR FRULIO: Yes. 18 MR. NANCE: Chair Kassekert? 19 CHAIR KASSEKERT: Yes. 20 MR. NANCE: The record will reflect the 21 motion carries unanimously. 22 MS. MYERS: Thank you very much. 23 MR. NANCE: Item Number 13, proposed 24 publication of readoption of N.J.A.C. 19:51. 25 Miss Myers? 63 Item No. 14 1 MS. MYERS: Chapter 51, persons doing 2 business with casino licensees, is scheduled to 3 expire on August 10th, 2006; however, upon filing 4 of this notice with the OAL, the expiration will 5 be extended to February 6th, 2007. The rules are 6 before you today for your approval of the initial 7 publication of the readoption without amendment 8 in the New Jersey Register. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 VICE CHAIR FRULIO: Move to readopt for 12 publication without amendment. 13 COMMISSIONER FEDORKO: Second. 14 CHAIR KASSEKERT: The motion has been 15 made and seconded. All in favor? 16 (Aye.) 17 CHAIR KASSEKERT: Opposed? 18 (No response.) 19 CHAIR KASSEKERT: The motion carries. 20 (The Commission members vote unanimously 21 in favor of the motion.) 22 MR. NANCE: Item Number 14, petition of 23 Marina Associates and Atlantic City Showboat, 24 Inc. seeking temporary waiver of the requirements 25 of N.J.A.C. 19:45-1.42. 64 Item No. 14 1 MR. KELL: Good morning, Madam Chair. 2 Karen Wosnack is here on behalf of the 3 petitioner, Deputy Attorney General Kimmel for 4 the Division. 5 CHAIR KASSEKERT: Thank you. 6 MS. WOSNACK: Good morning. I have 7 reviewed the draft resolution and have nothing to 8 add. I do have some folks here if you have any 9 questions about this, the relief that they are 10 requesting. 11 CHAIR KASSEKERT: Let me ask before we 12 hear from Mr. Kimmel if there are any questions? 13 COMMISSIONER SOMMELING: No questions. 14 CHAIR KASSEKERT: Mr. Kimmel. 15 MR. KIMMEL: Good morning, Chair. I've 16 also had the opportunity to review the draft 17 resolution and have no objections to it being 18 adopted. I'd be happy to answer any questions. 19 CHAIR KASSEKERT: Thank you. 20 Any questions for Mr. Kimmel? 21 COMMISSIONER SOMMELING: No questions, 22 Madam Chair. 23 VICE CHAIR FRULIO: Move to adopt the 24 draft resolution and grant the temporary waiver 25 of the requirements of N.J.A.C. 19:45-1.42(o) 65 Item No. 15 1 subject to the condition in the resolution. 2 COMMISSIONER FEDORKO: Second. 3 CHAIR KASSEKERT: The motion has been 4 made and seconded. All in favor? 5 (Aye.) 6 CHAIR KASSEKERT: Opposed? 7 (No response.) 8 CHAIR KASSEKERT: The motion carries. 9 (The Commission members vote unanimously 10 in favor of the motion.) 11 MS. WOSNACK: Thank you very much. 12 MR. NANCE: Item Number 15, proposed 13 publication of amendments to N.J.A.C. 19:49-3.1, 14 3.2 and 3.3 and new rule N.J.A.C. 19:49-3.4 15 concerning junket compensation agreements. 16 Mr. Briliant. 17 MR. BRILIANT: Good morning, Madam Chair 18 and Commissioners. 19 The Casino Control Act was recently 20 amended to permit casino licensees to compensate 21 junket enterprises and junket representatives for 22 their services based upon the actual casino 23 gaming or simulcast wagering activities of a 24 patron. Such agreements are only lawful, 25 however, if they're filed with the Division of 66 Item No. 16 1 Gaming Enforcement prior to the conduct of any 2 junket governed by the agreement. The proposed 3 amendments and new rule before you now would 4 describe the manner in which junket compensation 5 agreements are to be prepared and filed with the 6 Division. 7 CHAIR KASSEKERT: Any questions for 8 Mr. Briliant? 9 COMMISSIONER SOMMELING: No questions, 10 Madam Chair. Move to approve for publication. 11 COMMISSIONER FEDORKO: Second. 12 CHAIR KASSEKERT: The motion has been 13 made and seconded. All in favor? 14 (Aye.) 15 CHAIR KASSEKERT: Opposed? 16 (No response.) 17 CHAIR KASSEKERT: The motion carries. 18 (The Commission members vote unanimously 19 in favor of the motion.) 20 MR. BRILIANT: Thank you. 21 MR. NANCE: Item Number 16, proposed 22 adoption of amendments to N.J.A.C. 19:47-14.9, 23 14.13, 14.13A and 14.15. 24 Mr. Mamolen. 25 MR. MAMOLEN: Good morning, Madam Chair, 67 Item No. 17 1 Commissioners. Before you is a matter for final 2 adoption with respect to poker irregularities 3 with the various stud poker games. 4 The first irregularity is with respect 5 to dealing cards to a folded hand where there is 6 no additional wager obligation. The second 7 irregularity has to deal with a hold card dealt 8 face up. We received one comment during the 9 comment period from the Division, which they did 10 not interpose an objection. 11 CHAIR KASSEKERT: Any questions? 12 VICE CHAIR FRULIO: Adopt as published. 13 COMMISSIONER FEDORKO: Second. 14 CHAIR KASSEKERT: The motion has been 15 made and seconded. All in favor? 16 (Aye.) 17 CHAIR KASSEKERT: Opposed? 18 (No response.) 19 CHAIR KASSEKERT: The motion carries. 20 (The Commission members vote unanimously 21 in favor of the motion.) 22 MR. NANCE: Item Number 17, proposed 23 adoption of amendment to N.J.A.C. 19:45-1.37b. 24 Mr. Mamolen. 25 MR. MAMOLEN: This matter again is before 68 Item No. 17 1 you for final adoption. It was published, as you 2 recall, in the alternative for designating colors 3 for penny slot machines. The Alternative A is 4 designated color gray; Alternative B was to use 5 the color white, which is the same color for the 6 malfunctioning light. 7 There's also included within the 8 proposal a recommendation that the nickel slots 9 also encompass two cent slot. Showboat commented 10 during the comment period and stated a preference 11 for Alternative A; Borgata is part of its general 12 overall comment on the future of denomination 13 slots. They forgo a need to encompass a range 14 for low denominational slots between the two cent 15 and nickel slots. 16 Again, this matter is before you for a 17 choice between option A, Alternative A. 18 CHAIR KASSEKERT: Choice of colors. 19 Any questions? 20 COMMISSIONER SOMMELING: No questions, 21 Madam Chair. 22 COMMISSIONER FEDORKO: Motion to adopt 23 Alternative B with minor substance changes. 24 VICE CHAIR FRULIO: Second. 25 CHAIR KASSEKERT: The motion has been 69 Item No. 18 1 made and seconded. All in favor? 2 (Aye.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: The motion carries. 6 (The Commission members vote unanimously 7 in favor of the motion.) 8 MR. NANCE: Item Number 18, proposed 9 publication and temporary adoption of amendment 10 to N.J.A.C. 19:47-14.9. 11 Mr. Mamolen. 12 MR. MAMOLEN: This is a matter before you 13 for publication and temporary adoption, and it 14 would increase the table maximum number of 15 players at seven card stud and all its 16 variations, high low, high low with an eight low 17 qualifier, and high only, and in addition to it 18 would increase from eight to nine the number of 19 maximum players, and would have a supplemental 20 common card procedure in the variance where 21 there's not enough individual cards left in the 22 deck to be difficult to place. 23 CHAIR KASSEKERT: I'll note this is an 24 item that came through the Wish List process. 25 So any questions? 70 Item No. 19 1 COMMISSIONER SOMMELING: No questions, 2 Madam Chair. Move to approve for publication and 3 temporary adoption. 4 COMMISSIONER FEDORKO: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Aye.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 (The Commission members vote unanimously 12 in favor of the motion.) 13 MR. NANCE: Item Number 19, proposed 14 adoption of amendment to N.J.A.C. 19:47-14.2. 15 Mr. Mamolen. 16 MR. MAMOLEN: Another matter for final 17 adoption which would simply decrease the sorting 18 frequency from one time every two hours to one 19 time every hour. One comment was from the 20 Division which did not interpose an objection. 21 CHAIR KASSEKERT: Thank you. 22 Any questions? 23 COMMISSIONER FEDORKO: Motion to adopt as 24 published. 25 VICE CHAIR FRULIO: Second. 71 Item No. 20 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Aye.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 (The Commission members vote unanimously 8 in favor of the motion.) 9 CHAIR KASSEKERT: Thank you. 10 We're now going to take a brief recess 11 in order to prepare for the consideration of Item 12 20, which is the issue dealing with RIH 13 Acquisitions and Resorts. 14 (Whereupon, the Commission recessed at 15 11:28 a.m.) 16 (Whereupon, the Commission resumed at 17 11:46 a.m.) 18 CHAIR KASSEKERT: We'll go back on the 19 record. 20 MR. NANCE: Item Number 20, application 21 of RIH Acquisitions New Jersey, LLC, holder of 22 interim casino authorization as to the Atlantic 23 City Hilton Casino for plenary qualification as a 24 casino licensee. 25 Mr. DiGiacomo? 72 Item No. 20 1 MR. DIGIACOMO: Madam Chair, 2 Commissioners, good morning. Mr. Gilbert Brooks 3 and Miss Patricia Wild for the petitioner, 4 Mr. Ray Marques for the Division of Gaming 5 Enforcement. 6 CHAIR KASSEKERT: Thank you. I have some 7 brief opening remarks before we proceed. 8 Today is the culmination of interim 9 casino authorization, a type of temporary 10 licensing, that RIH Acquisitions, better known as 11 the Hilton, started a year ago. 12 At this juncture, the Commission is 13 considering Hilton's request for the issuance of 14 an initial casino and casino hotel alcoholic 15 beverage license. 16 For casino licensure under Section 84 of 17 the Casino Control Act, Hilton needs to establish 18 by clear and convincing evidence four essential 19 affirmative criteria: Number One, good 20 character, honesty and integrity; Number Two, 21 financial stability, integrity and 22 responsibility; Number Three, the integrity of 23 its financial sources; and Number Four, business 24 ability and casino experience. 25 Additionally, under Section 86 of the 73 Item No. 20 1 Act, Hilton must establish that it does not 2 suffer from any of the negative disqualification 3 criteria, such as failure to provide required 4 information, conviction of a serious crime, 5 pending criminal charges, or association with 6 what the Act calls "Career Offenders" or "Career 7 Offender Cartels". 8 Further, Section 134B of the Act 9 prohibits the Commission from issuing any license 10 to any applicant who fails to agree to afford 11 Equal Employment Opportunity under an approved 12 Affirmative Action Program, and Section 134D 13 nullifies any license that the Commission issues 14 in violation of Section 134. 15 As for the CHAB license, the relevant 16 criteria are included in Section 103 of the Act 17 and Chapter 50 of the Commission's regulations. 18 Although, this is technically an initial 19 licensing matter, many of Hilton's individual 20 qualifiers are very familiar to the regulators 21 with a long history of good standing. Certainly, 22 the Commission will evaluate all the licensing 23 criteria, but we understand that the testimony 24 today will focus on finances. 25 Before hearing from the witnesses, there 74 Item No. 20 1 are also a number of exhibits that have been 2 premarked, and that Mr. Nance will now identify 3 for the record. 4 Mr. Nance. 5 MR. NANCE: The Commission has four 6 exhibits, C-1 through C4. 7 C-1 is the Entities and Qualifiers 8 Report dated April 17th, 2006; C-2 is the CHAB 9 Report dated April 19th, 2006; C-3 is the Equal 10 Employment and Business Opportunity Report dated 11 April the 11th, and C-4 are the Draft Resolution, 12 C-4A. 13 MR. DIGIACOMO: There's C-4, and then 14 C-4A through C-4C. 15 MR. NANCE: The Division of Gaming 16 Enforcement has two exhibits; D-1 dated April 17 5th, 2006 with regards to Petition Number 18 0930602, and D-2, letter dated April 6, 2006 to 19 Chair Kassekert from Tim Ficchi to the CHAB, 20 Alcoholic Beverage License. 21 The applicant, or the petitioner, has 22 submitted nine premarked exhibits which are 23 listed on the Exhibit List, it will be marked P-1 24 through P-9. 25 CHAIR KASSEKERT: Are there any 75 Item No. 20 1 objections to the admission of the exhibits, or 2 are there any sealing request? 3 MR. MARQUEZ: Madam Chair, I don't have a 4 copy of the exhibit list. 5 No objection, Madam Chair. 6 MR. BROOKS: No objection, Madam Chair. 7 We have withdrawn our sealing request. 8 CHAIR KASSEKERT: Thank you very much, 9 just make sure the Commissioners each get a copy 10 of this. 11 Hearing no objections, I will admit the 12 exhibits into evidence. 13 (Whereupon, Exhibits C-1 through C-3 14 (C-4, identification only); Exhibits D-1 through 15 D-2; Exhibits P-1 through P-9, were admitted into 16 Evidence.) 17 CHAIR KASSEKERT: The draft resolution 18 specifies the rulings that we are asked to 19 consider, some of which require the Division's 20 concurrence. 21 Mr. Marquez, does the Division concur on 22 those items? 23 MR. MARQUEZ: Yes, Madam Chair. In all 24 of the changes that were going on, revisions, I 25 neglected to expressly put in my written report 76 Item No. 20 1 as to the first and second term lenders, the 2 Division would have no problem with consenting to 3 a waiver of them as security holders. So I 4 wanted to put that expressly in writing then. 5 CHAIR KASSEKERT: Thank you. 6 Also, if there's nothing further to be 7 brought to us on Hilton's request to take one of 8 its employees off the list of individual 9 qualifiers, is the Division satisfied that we 10 should do so? 11 MR. MARQUEZ: That's correct. 12 CHAIR KASSEKERT: Thank you. 13 All right. There are also three 14 individuals that no longer are necessary 15 qualifiers, but for whom the Hilton seeks 16 statements of compliance as to their good 17 character and financial stability. 18 Unless there's more to be brought to us 19 on this matter, we can simply address those 20 compliance statements in the final vote. So 21 we'll move on. 22 Are there any other procedural matters 23 that need to be brought to our attention at this 24 time? 25 (No response.) 77 Item No. 20 1 CHAIR KASSEKERT: Seeing none, we're now 2 set for opening statements which the parties may 3 waive and elect instead to proceed directly to 4 testimony. 5 What's your preference, counsel? 6 MR. BROOKS: Madam Chair, we're going to 7 waive. I just would like to open by thanking the 8 Division and Mr. Marquez and his staff and the 9 Commission staff and Mr. DiGiacomo and everybody 10 who work with them in terms of handling this 11 application. 12 As usual, they did a magnificent job in 13 terms of preparing it and having it ready today 14 for the Commission's consideration, and Miss Wild 15 would like to introduce some of the people who 16 are here from the Hilton. 17 MS. WILD: Good morning, thank you. I 18 just want to note for the record several people 19 who are here, some will testify, others are here 20 in support of this application. 21 Roger Wagner is here, our Chief 22 Operating Officer; Anthony Rodio is the General 23 Manager of Atlantic City Hilton; Nick Amato is 24 our General Counsel, Senior Vice President; Eric 25 Matejevich is here, he is Senior Vice President 78 Item No. 20 1 of Finance, and Eric will be testifying on behalf 2 of the licensee -- the applicant, I should say; 3 Phil Juliano is here. Phil is our Assistant 4 General Manager at the Atlantic City Hilton and 5 Executive Vice President, and Laura Palazzo who 6 is Vice President and Chief Financial Officer at 7 the Atlantic City Hilton. Thank you. 8 CHAIR KASSEKERT: Thank you very much. 9 Mr. Marquez, any opening statement? 10 MR. MARQUEZ: None, Madam Chair. 11 CHAIR KASSEKERT: Then we'll just move to 12 testimony. 13 You may call your first witness. 14 MS. WILD: I'd like to call Roger Wagner, 15 please. 16 CHAIR KASSEKERT: You need to stand and 17 be sworn. 18 MR. NANCE: Please raise your right hand. 19 (Whereupon, ROGER WAGNER, having been 20 first duly sworn, testified as follow:) 21 MR. NANCE: Please state your name for 22 the record. 23 MR. WAGNER: My name is Roger Wagner. 24 MR. NANCE: Thank you. You may be 25 seated. 79 Item No. 20 1 CHAIR KASSEKERT: You may proceed. 2 3 DIRECT EXAMINATION BY MS. WILD: 4 Q. Good morning, Mr. Wagner. Could you 5 please tell the Commission what position you hold 6 at RIH Resorts LLC, parent company of the 7 Atlantic City Hilton? 8 A. Yes, I'm the Chief Operating 9 Officer. 10 Q. And to whom do you report? 11 A. I report to Nick Ribis, the CEO. 12 Q. And is it correct that you hold this 13 position of CEO with respect to several of the 14 sister properties of the Atlantic City Hilton? 15 A. Yes, all six properties that are in 16 our portfolio right now. 17 Q. Mr. Wagner, you're no stranger to 18 the Atlantic City marketplace having been a 19 qualifier here for other companies in the past, 20 but I think some of the Commissioners have not 21 had the chance to hear your background. 22 So if you would, just give a brief 23 statement of your background in the industry with 24 specific emphasis on New Jersey. 25 A. That will take a long time, I'll be 80 Item No. 20 1 brief. 2 I've been in this business all my life 3 since college and in 1983, I moved to New Jersey 4 where I became Senior Vice President of hotel 5 operations at the Claridge, later on became the 6 President of the Claridge, and then President of 7 Trump Castle, now Trump Marina. 8 Prior to my coming on with Resorts 9 Entertainment, I was the President and Chief 10 Operating Officer for Jack Binion's Horseshoe 11 Gaming Corporation. He sold that company to 12 Harrah's in 2004, and I started up with the small 13 consulting business that I operated for just 14 about one year called House Advantage, it's a 15 licensed entity here in New Jersey, too. 16 Q. Mr. Wagner, speaking of House 17 Advantage, could you give the Commission an idea 18 of what your involvement was at the Hilton when 19 you came to the Hilton and what your involvement 20 was? 21 A. Yes. In late March of 2005, Nick 22 Ribis called me one day in Las Vegas and asked me 23 to come over and talk to him about services I 24 might be able to provide with my colleagues at 25 House Advantage to take a look at the Atlantic 81 Item No. 20 1 City Hilton operations. He advised that the 2 company had agreed to purchase the Atlantic City 3 Hilton as one of the four casinos in the package 4 being sold off by Harrah's and Caesars, and that 5 unfortunately from the date of sale, the 6 operation had suffered terribly in revenue and 7 operating results. 8 He asked me and my colleagues to go in 9 and take a look at the operation, see if we can 10 come up with some recommendation for 11 improvements. 12 Q. Mr. Wagner, generally, what 13 percentage of your time do you spend on the 14 Atlantic City properties, both the Hilton and 15 Resorts? 16 A. Well, about half of our cash flow 17 right now is coming out of Atlantic City. So I 18 devote about half of my efforts towards the 19 Atlantic City properties when I'm here. Once 20 about every three weeks, I come to Atlantic City, 21 spend three to four days visiting both 22 properties. I try to stay at Hilton one trip, 23 and Resorts the other, be the in-house shopper, 24 if you will, of services and cleanliness, and 25 that kind of thing. I spend another week in 82 Item No. 20 1 Chicago and Tunica together, and a week in Las 2 Vegas generally. 3 Q. Mr. Wagner, it's been noted in the 4 public record and in the newspapers recently that 5 there's been quite a turn around with respect to 6 performance in Atlantic City Hilton. And could 7 you at this time give the Commission an idea of 8 some of the operational strategies that you set 9 in place and what with the help of management 10 team in Hilton implemented to permit those turn 11 around now. 12 A. I'd be delighted to give you a 13 synopsis of operations at the Hilton. 14 As a result of our recommendations from 15 House Advantage, Nick Ribis asked me to also go 16 out and see if we can develop an operational 17 outline for corporate office to get more 18 professional and strategic support to the 19 properties. 20 He believed his operation was too thin 21 operating out of New York City with only three or 22 four people. We gave him several recommendations 23 for what we thought could improve operations at 24 the Atlantic City Hilton, and two of them made 25 change of direction in operation which turned out 83 Item No. 20 1 to include the acquisition of some new management 2 talent. 3 Prior to my joining the company, 4 Atlantic City Hilton hired Tony Rodio to become 5 its president, and Phil Juliano to become the 6 Executive Vice President of Marketing and later 7 became also Assistant General Manager for the 8 company. Tony came in, assessed the operation, 9 took several, several weeks along with the 90 10 days of work that my group had put together, and 11 he streamlined the management team. He cut some 12 major expenses out of the operation, and we 13 carefully crafted a business plan with really 14 eight simple strategic objectives. 15 It was, first we wanted to accomplish 16 our business and financial objectives by 17 continuing to deliver superior value to our 18 customers in the form of excellent service, 19 liberal rewards and cash incentives to very 20 targeted patrons, great food offerings and a very 21 competitive odds limits and slot pay-off policy. 22 Secondly, we focused the design of all 23 of our marketing and operating programs to retain 24 the higher margin customers, thus justifying our 25 very liberal incentive program. 84 Item No. 20 1 Third, we've taken our 26 year old 2 facility, under nearly new condition, and at a 3 level that matches our reputation for excellence. 4 I believe we're the only property in town that 5 holds the Four Diamond Award. 6 With our team of technology experts, 7 we've embarked on the aquisition and creation of 8 technology that's helping us to provide us with 9 business intelligence at a very top level. We 10 just scratched the surface where we intend to be 11 at this time next year. 12 Fifth, we're making a good faith effort 13 to improve the diversity of our work force and 14 vendor business relationships. 15 Sixth, we're making strides in our 16 recruiting and retention capabilities, and we're 17 continuing to capitalize on the strength, the 18 depth and the tenure of our management employee 19 base to improve quality, productivity and 20 profitability. 21 Number seven, we'll continue to initiate 22 and refine our yield management initiatives in a 23 manner that will enable us to continually assess 24 and re-engineer all the business and marketing 25 processes that will increase our profitability, 85 Item No. 20 1 reduce cost, improve levels of quality and 2 service, insure data integrity, and improve our 3 research and analysis capabilities; and last but 4 not least, we'll maximize profitability while 5 balancing the margin productivity with market 6 share preservation and growth. 7 We're willing to give up a little margin 8 in efficiency in the short run to build a 9 positive market share back up. As an older 10 Atlantic City property, and with probably the 11 smallest gaming capacity, a limited room base, we 12 find that a gaming eccentric theme serves our 13 purposes best. While small, we have an 14 inordinate number of suites, excellent 15 restaurants and amenities that enable us to 16 achieve our theme. 17 To compliment this type of theme, in 18 December of 2005, we completed a 10 million 19 dollar construction project that provided our 20 Asian customer with luxury gaming room on the 21 second level of our facility, thus freeing up 22 space in the casino floor with the addition of 23 200 more slot machines. The project also included 24 the construction of a new poker room and the 25 construction of a bar with video poker machines 86 Item No. 20 1 in it. 2 Our first quarterly results point out 3 we're achieving most of the objectives in our 4 2006 plan so far. We're confident that we will 5 meet or exceed our plan profit objectives for the 6 balance of the year and going forward. In fact, 7 management has upped their projection for the 8 year at our finance conference last week in 9 Chicago, and has reported well that the Atlantic 10 City industry and growth of gaming, gaming win 11 for each of the first three months this year, 12 both in percentage growth as well as real total 13 dollar growth, 16 point eight million in growth; 14 I think Showboat is number two at 16 point two 15 million. So it's real dollars, not just 16 percentage. 17 We also increased our first quarter 2000 18 market share by 100 basis points over the same 19 quarter last year, but most importantly, our 20 EBITDA growth is 300 percent greater than what 21 was achieved under the prior owner, I think 22 that's a significant turn around. 23 I'm talking too much, excuse me. 24 Q. Mr. Wagner, when you're able to 25 resume your testimony, if you could give the 87 Item No. 20 1 Commission an idea, you talked about the 2 improvements you're made at the Hilton this year. 3 Maybe give them an idea of what the capital 4 improvements are planned for the upcoming year. 5 A. Yes, be happy to. 6 In addition to aggressive maintenance 7 cap-ex plan, if you've been in the Hilton, you 8 see it's really in nice shape, keep it that way, 9 but we have about 12 million dollars budgeted 10 this year for capital expenditure. We're going 11 to construct a new players club on the second 12 level looking out over the ocean, about 7,000 13 square foot facility. In the fourth quarter this 14 year right after summer's over, we'll start 15 construction. Hopefully, subject to DCA 16 approval, we will begin construction on a new 17 specialty room, restaurant, bar and lounge, one 18 on the second level where we can stage customers 19 that are waiting to get into one of our four 20 restaurants on the second level. 21 We have coffee shop renovations planned, 22 furniture is already in the warehouse for a 13 23 Penthouse suite renovation we're going to be 24 doing. We're going to do a few at a time so we 25 don't disrupt our high-end player, and we have 88 Item No. 20 1 200 new slot machines approved for purchase this 2 year, about 60 on order right now, to have in 3 place before Memorial Day. 4 Q. Thank you. 5 Mr. Wagner, the Atlantic City Hilton has 6 three other sister properties, so to speak. 7 Could you speak to the Commission about the 8 performance of those three other properties, more 9 or less, with an operational viewpoint rather 10 than a financial. 11 A. Sure. I think since the financial 12 stability of the AC Hilton is tied to the 13 financial success of the three other sister 14 properties that we purchased at the same time 15 under the same equity and financing umbrella, 16 it's important that you know how these properties 17 are doing as well. 18 When Colony Capital and Mr. Ribis 19 purchased the four gaming assets in April 2005, 20 they had expectations these four properties would 21 continue to perform as well, or better, than they 22 had done under their previous owners. They were 23 half correct. 24 We immediately began to see operating 25 and profitability improvements at the AC Hilton 89 Item No. 20 1 and the Bally's Tunica of Mississippi facilities 2 which were previously owned by Caesars. However, 3 the company underestimated the strength of the 4 Total Rewards Players Club and its ability to 5 redistribute loyal Harrah's customers to 6 different Harrah's facilities in its wide 7 portfolio casinos nationwide. 8 As such, revenues and profits declined 9 substantially in Chicago, Indiana, and in Tunica, 10 Mississippi, the two properties that had 11 previously been operated under the Harrah's 12 banner. 13 After completing a thorough analysis of 14 the customer data base, we were able to determine 15 what replacement customer targets we would have 16 to pursue in order to replace the business that 17 Harrah's had redirected to other Harrah's assets. 18 We installed new management teams and operating 19 systems. I'm happy to advise that we have 20 reversed the climbing business trends we 21 experienced in the first eight months of 22 ownership. We're now exceeding past Harrah's 23 revenues in our own budgeted expectations in the 24 first quarter at our Chicago property, and we're 25 slowly but surely making improvements to the 90 Item No. 20 1 revenue stream in our Resorts Tunica facility. 2 In Tunica, we're above budget in the 3 first quarter; yet, we still lag behind the level 4 of profitability that Harrah's experienced; 5 however, for the Tunica region, when you combine 6 Bally's and Tunica results combined, we're at 7 several million dollars ahead of our budget in 8 the first quarter. 9 We've achieved EBITDA results that are 10 very close to what the old two owners experienced 11 on a combined basis last year. By year end, we 12 expect to exceed the combined cash flow of the 13 previous owners. In fact, our goal for 2006 at 14 RIH, LLC is to achieve combined revenue and 15 operating profits at all four of the casinos, 16 which at a minimum, will match what was achieved 17 under the two previous owners before the sale was 18 announced. 19 Part of the reason for our success in 20 turning the Tunica property back to historical 21 numbers is the regional team of management that 22 we installed in place last December. We found 23 that by regionalizing the two Tunica assets under 24 one strategic management team, we're achieving 25 operating and financial efficiencies that we lack 91 Item No. 20 1 for two stand-alone casinos. 2 Q. Thank you. 3 Mr. Wagner, with respect to 4 regionalization, do you see any or do you 5 anticipate any change in the operational 6 structure of the two properties in Atlantic City? 7 A. Yes, we do. That leads me into our 8 plans to regionalize the management of our two 9 Atlantic City casinos. Not unlike Harrah's or 10 Trump Casino, we believe there are greater 11 efficiencies, synergies and marketing 12 opportunities to be exploited by establishing one 13 strategic management team to lead both Atlantic 14 City properties. 15 Our goal is to expand on the good work 16 of Audrey Oswell and her team over the past 17 several years, and the challenge for going 18 forward is to establish firmly a marketing 19 identity that is unique to itself at Resorts. 20 The old facility, by virtue of its age 21 and its design back in the days of cheap labor, 22 make it a very expensive place to operate 23 efficiently as well as maintain and clean. We 24 expect that over time, regional management 25 structure will enable us to streamline the 92 Item No. 20 1 administrative and management overhead in a way 2 that will allow us to redirect the large portion 3 of the savings down into the service departments 4 where we can put more people on the front line to 5 take care of our customers. 6 As you recall last year, the New Jersey 7 Casino Control Commission approved a similar 8 shared service concept for us. Unfortunately, 9 the implementation did not go smoothly, and we 10 regrouped by putting most of the shared 11 functioning back at the individual properties 12 until we can get our bearings. 13 The regional organizational structure 14 that we will be sending to the Casino Control 15 Commission for approval this week will involve a 16 very similar type of table of organization as to 17 what was approved last year. The new regional 18 structure will only involve the Atlantic City 19 casino. We will propose that the new regional 20 structure will be headed up by Anthony Rodio who 21 will serve as president and regional general 22 manager, and he will continue to serve in his 23 role as the chief gaming executive at the 24 Atlantic City Hilton. 25 The proposed structure will provide for 93 Item No. 20 1 the sharing of non-mandatory departmental 2 leadership to the highest level. The shared 3 organization will consist of the senior VP of 4 marketing, senior vice president of human 5 resources, and the senior vice president of 6 finance. The shared services will be supported 7 by adequate local staff at each property. With 8 strategic marketing oversight and senior regional 9 level, we believe we can better differentiate the 10 marketing position of our two Atlantic City 11 assets in a complimentary manner instead of a 12 competitive fashion. 13 With a single frame of reference, we can 14 better differentiate target customer segments to 15 our two casinos access to a greater spectrum in 16 the market. Simply put, the regional structure, 17 if approved by the Casino Control Commission, 18 will place marketing, finance activities and 19 human resources under central direction in both 20 casinos. Each Atlantic City casino will be 21 headed up by a VP chief gaming executive that 22 will report to the regional president and GM. We 23 have not identified the individual that will 24 undertake this role at Resorts yet, and Tony will 25 serve that role at the Hilton as well as new 94 Item No. 20 1 regional job. 2 Reporting to the property chief gaming 3 executive will be casino slots and gaming tables, 4 hotel, food and beverage department, casino 5 accounting, credit, internal audit, security, 6 computer operations. They will all report to the 7 property level people as required under the 8 regulation. 9 Q. Thank you. 10 Mr. Wagner, we presently have pending 11 before the Commission a petition for corporate 12 shared services. Our draft resolution 13 specifically exempts approval of that petition. 14 So I prefer not to go into great detail about 15 that, it would be inappropriate at this time, but 16 could you just generally express for the 17 Commission what you see the role is of a 18 corporate oversight management team in supporting 19 properties in Atlantic City? 20 A. Yes, I would. If approved, such a 21 shared services concept at corporate level will 22 enable us to share high level strategic services 23 and business intelligence among six of our 24 facilities. So if approved, Resorts will have 25 office corporate initiatives which will have 95 Item No. 20 1 significant impact, I believe, on the Hilton 2 resort. 3 Just to name a few and important 4 initiatives, the headquartered executive will 5 provide support to the casinos in each 6 jurisdiction include, and again subject to 7 regulatory approval wherever we operate, we will 8 implement the Mariposa Business Intelligence 9 system, software and data base warehouse in all 10 of our properties as soon as we have approval. 11 That's very important to our organization 12 overall. 13 We believe there are great opportunities 14 for a company to develop culture and do so 15 through global human resources initiative that 16 include core standards, compensation program, 17 benefits administration, training, especially 18 management systems that will enable us to track 19 the guests, and the employee satisfaction levels 20 throughout the company. And while computer and 21 casino finance operations are governed at the 22 independent casino level, we have a great 23 opportunity to use our talent at our corporate 24 office to guide global IT and finance 25 infrastructure, common system software policies, 96 Item No. 20 1 procedures, reporting formats and compliance 2 systems. 3 It should be noted that unlike some 4 other gaming companies, we do not operate our 5 casinos from the corporate office in New York or 6 Las Vegas. Our whole corporate team is to assist 7 individual casinos in their strategic planning 8 efforts, and then to conduct independent 9 monitoring of plans and standards to insure 10 accountability and responsibility to the business 11 plans. 12 Our casinos operate in a degeneralized 13 fashion that allows property or regional 14 management to make tactical decisions necessary 15 to react quickly in this very dynamic competitive 16 industry that we're in, especially here in New 17 Jersey. 18 One corporate initiative that is 19 foremost important to us is the role of our Cross 20 Property Player Club Card. Subject to approval 21 by the DEG and CCC, we expect to roll out this 22 new club program hopefully in June before the 23 summer season. This new card program will enable 24 our customers to use Resorts and Atlantic City 25 Hilton player club cards at anyone of our six 97 Item No. 20 1 casinos and enable us to distribute business from 2 the west to the mid-west back to Atlantic City 3 and vice-versa. It will give our customers the 4 ability to accumulate bank comp dollars that can 5 be redeemed at any casino in our portfolio. 6 It will have special regional cross 7 property benefits in Atlantic City in particular 8 designed to encourage loyal gaming play by our 9 patrons between the Atlantic City Hilton and 10 Resorts while expanding the menu of restaurants 11 and other amenities and services to customers of 12 both of our casinos. We're quite excited about 13 our prospect for the future in Atlantic City and 14 our new gaming company in general. 15 MS. WILD: Thank you, Mr. Wagner. 16 Members of the Commission, if you have 17 any questions, I'm sure Mr. Wagner will be happy 18 to answer those. 19 CHAIR KASSEKERT: Thank you. 20 We'll hear from the Division next on 21 cross-examination. 22 Mr. Marquez? 23 24 CROSS-EXAMINATION BY MR. MARQUEZ: 25 Q. Could you please help me out, 98 Item No. 20 1 describe relative to the AC Hilton the other 2 three properties that were acquired in terms of 3 size and amenity. 4 A. Yes. The Atlantic City Hilton and 5 the East Chicago Harrah's property that we bought 6 are equal size in revenue and EBITDA. They're 7 both targeted this year to do about 55 to 60 8 million dollars. My internal goals are a little 9 higher than the one Mr. Matejevich, we believe, 10 will achieve, and we'll achieve my goals. The 11 bonus is bigger. 12 The two small properties that we bought 13 in the process were the Bally's operation Tunica, 14 and the Harrah's facility in Tunica. Tunica, the 15 Harrah's facility, when Harrah's owned it was 16 number nine on a nine in its size and revenue 17 production. 18 Q. So once again, in terms of the AC 19 Hilton in terms of the amenities, it's what? 20 A. Atlantic City Hilton has 800 and 21 some rooms, 60 -- 62,000 square feet of casino 22 now. We've upped to about 2200 slot machines, 23 the table games and the poker room, we've got 24 five great restaurants, pretty nice showroom, we 25 do a lot of entertainment there. You're around 99 Item No. 20 1 here, I'm sure you see the ads. 2 We are -- we recently had the Sopranos 3 there in the month of March, and had a phenomenal 4 month hyping them the whole month. So we're 5 using entertainment as a draw to that end of the 6 boardwalk. 7 Q. What about, Bally's Tunica is much 8 smaller. 9 A. Bally's Tunica is a 200 room 10 facility, it has 900 slot machines. It's got a 11 buffet, that's the big producer, a little snack 12 bar, and a specialty room called The Barn. You 13 can imagine there's nothing healthy about the 14 food in there. 15 At the Tunica facility Resorts, it's a 16 very nice facility. Harrah's kept it up-to-date. 17 The slot machines in that place are 100 percent 18 teetotal, less than five years old on the 19 product, rooms are in good condition. There's 20 200 rooms. Again, they have a buffet, very nice 21 little steakhouse and a little snack bar. 22 Q. Now, the AC Hilton in 2005 did 23 EBITDA of about 31 million. 24 A. Correct. 25 Q. And you're saying now you're 100 Item No. 20 1 expecting to make around 55, 60; is that the 2 number? 3 A. My internal goal this year is to be 4 over 55. 5 Q. Well, I think Mr. Matejevich said 6 it's a little conservative. 7 A. He's a little more conservative. I 8 think management upped it to over 55 now. We're 9 going against last year's numbers that were very 10 bleak, that's why. Between the first quarter of 11 last year under the old ownership, and the fourth 12 quarter of last year, when a customer beat us out 13 of three point seven million dollars, and the 14 craps game held two percent, that lady luck 15 played against us in the fourth quarter, but the 16 concepts and the fundamental of the property 17 weren't in good shape in the fourth quarter. 18 Our results, the poor results were in 19 the first quarter of last year, second quarter 20 was bridging out, and the place was basically 21 turned around probably the middle of July. 22 Q. In terms of your description of 23 regionalization or of the joint services 24 resolution, I just want to make the record clear 25 you're not asking for them now. You're just 101 Item No. 20 1 describing what you're hoping to implement in the 2 future. 3 A. Yes. 4 Q. So that any grant of approval here 5 is not seen by you as okay, go forward because 6 the Commission blessed something today and must 7 be blessing that, too. 8 A. No. I just wanted to describe it in 9 general, and we'll be submitting upon completion 10 of writing this thing, and it's still moving a 11 little bit. Hopefully, by the end of this week, 12 we can submit it; and, you know, if it's concise 13 enough, we can maybe get a quick turn around. 14 Audrey Oswell has asked if she can leave 15 a little early to pursue her efforts. She said 16 she'll stay on until May. If and when she 17 decides to get a job opportunity, she can't stick 18 around, then we'll move our assistant GM in the 19 position to act as president under the current 20 structure. 21 Q. In the petition at Paragraph 103, it 22 mentions some of the things that AC Hilton, some 23 of which you mentioned, some of which you may not 24 have. I'd like you to go through this list with 25 me and say yes, it's been accomplished, or yes, 102 Item No. 20 1 we did that, or we can do that. 2 Let me just read it to you. With 3 specific reference to the AC Hilton, RANJ had 4 made the following progress: the addition of new 5 general manager as of June 1st; over two million 6 cut in payroll; restoration of customer volumes 7 to the levels that existed prior to the opening 8 of the Borgata; closing the EBITDA gap which for 9 the first quarter of 2005 year had been 7.7 10 million; second quarter 2005 year had been 5.9 11 million, the third quarter of 2005 year, 1.7 12 million; consistently maintaining a fair share 13 premium and win per square foot which ranked 14 second in the gaming market. 15 You began construction on a poker room 16 and table game room, which it says 250, but I 17 think you mentioned 200, slots, and five table 18 games to the main casino floor, design, 19 construction of new players club, and development 20 of plans to improve restaurant/entertainment 21 offerings including a new bar and lounge. 22 So it sounds like some of that has 23 already taken place, and some of it is in the 24 works. 25 A. That's correct, and the number of 103 Item No. 20 1 slot tables is a moving target every month as 2 they keep jockeying the floor. It gives more 3 opportunity to squeeze some more slots without 4 making it uncomfortable. We're going to be doing 5 that as quick as we can. 6 Q. Much of the cap-ex is expected to 7 occur later in 2006 though; right? 8 A. Yes. 9 Q. You kind of have to make your 10 projections to make all that happen eventually. 11 A. And we've budgeted to do that. 12 MR. MARQUEZ: I have no further 13 questions. 14 CHAIR KASSEKERT: Let me ask if any of 15 the Commissioners have questions? 16 Commissioner Frulio? 17 VICE CHAIR FRULIO: First of all, welcome 18 back to AC, Roger. 19 MR. WAGNER: Thank you. 20 VICE CHAIR FRULIO: Secondly, I'd like to 21 know as far as the strategic business plan that 22 you brought up, you said that the Hilton was 23 small. Do you have any long-term plans about 24 acquiring or developing plans so that you can 25 increase the gaming floor space or build a tower 104 Item No. 20 1 for more hotel rooms? 2 MR. WAGNER: Interesting you should ask 3 about that. Management at the property as early 4 as last week brought us a proposed master plan 5 for utilization of the adjoining property. We're 6 preparing to take that, with some modification 7 that the senior team looked at and said we like 8 this or that, back to Nick Ribis and Tom Barrack 9 probably the next 45, 60 days to see if there's 10 an opportunity to use the land right adjoining to 11 us. We've a lot of land down there, and the 12 greatest part of this purchase was acquiring the 13 land around the Hilton, very valuable. 14 VICE CHAIR FRULIO: Okay. 15 MR. MARQUEZ: I believe you bought five 16 acres. 17 MR. WAGNER: 12 acres? 18 CHAIR KASSEKERT: Commissioner Fedorko? 19 COMMISSIONER FEDORKO: Mr. Wagner, why do 20 you think Resorts Holdings did so bad in 2005? 21 MR. WAGNER: RIH Holdings, the Hilton? 22 One, I think we over estimated what we can do 23 with the properties. When Colony did their due 24 diligence on them, they had no idea the strength 25 of the Total Rewards system at Harrah's, I think 105 Item No. 20 1 as I didn't even when I was with Horseshoe. I 2 didn't really pay attention to it because we 3 punished them in all three markets with 4 Horseshoe. 5 So we didn't worry about them, but they 6 are -- it's the greatest thing Harrah's got going 7 for it, I think, besides our capital structure is 8 that distribution system, and they punished 9 Colony with it. 10 We have since found, you know, where we 11 have to go to replace that business. Tunica, for 12 instance, about 25 percent of the data base was 13 from Memphis, and about 70 percent of the 14 Horseshoe data base was from Memphis 30, 40, 50 15 miles away. 70 percent of the data base was from 16 over 120 miles away because an awful lot of data 17 base was stuffed into Tunica from St. Louis. It 18 was a major feeder market. 19 So we don't have that distribution 20 capability. We can't go out and just ask for it 21 back. We have to create new business, and it's 22 inch by inch, not foot by foot the way we're 23 doing it, but we're doing it. 24 COMMISSIONER FEDORKO: What kind of 25 assistance has Colony provided so far? Are they 106 Item No. 20 1 going to commit to further assistance in the 2 future? 3 MR. WAGNER: I think Colony is dedicated 4 to being in this business. They've invested a 5 lot of money in here, and Eric can talk to you 6 better about that when he testifies. I know Nick 7 Ribis, he wants to build a big gaming company, 8 and he's done quite a good job in a short period 9 of time. What was bought, you know, we doubled 10 the size in one year, and then doubled it, 11 tripled it the next year. So we had some growing 12 pains that we had to get out of, but I think 13 we're headed in the right direction, all six 14 properties. 15 COMMISSIONER FEDORKO: Okay. 16 CHAIR KASSEKERT: Let me ask you, you 17 presented a rosy picture, maybe rosier than 18 Eric's with respect to the future. 19 What are you going to do if your EBITDA 20 falls short? 21 MR. WAGNER: Well, we believe that we 22 have some flexibility, but we're going to have to 23 manage our cash carefully, and we're going to 24 have to time our capital spending. You can cover 25 up a multitude of sins in an avalanche of cash. 107 Item No. 20 1 If you have tight cash, you have to not make as 2 many mistakes. You have to think a little more 3 carefully, but you can't put your head under the 4 turtle shell either. 5 This is a business that requires a risk 6 and, you know, we have other jurisdictions come 7 on, and everything else. We have to defend 8 ourselves, I think we're in a good position to 9 defend, and I think we have to call on Colony, we 10 can call on Colony. We don't want to have to do 11 that. We want to make this company work on its 12 own merits. 13 CHAIR KASSEKERT: Is there anything in 14 particular you foresee doing with the Atlantic 15 City properties in anticipation of Pennsylvania 16 coming on board and perhaps Maryland, have 17 anything special planned? 18 MR. WAGNER: I think being part of 19 Atlantic City is a better destination now than it 20 was several years ago. It's a major -- it's 21 going to be major for us. If we decided tomorrow 22 to build a billion dollar project, we couldn't 23 get it opened in time. Maybe we could, I guess, 24 with Pennsylvania. 25 CHAIR KASSEKERT: We keep hoping that 108 Item No. 20 1 that -- 2 MR. WAGNER: You know, one of the things 3 we can provide as a smaller company is better 4 service, and loyalty is something that, you know, 5 if we can improve that. 60 percent of the 6 customers who are out there are at risk at any 7 minute even in the loyal operation; and in an 8 unloyal operation, 75 percent of them are at 9 risk. 10 So if we knock that down and make 11 customers like being here and staying with us, 12 and I think that's the importance of our cart 13 that we get in hopefully before the summer, it 14 will build loyalty that we keep people around 15 here. 16 There's something you give up if you go 17 to a slot parlor in Pennsylvania that doesn't 18 have anything else around it, it will feed those 19 people that need to go get their milk, but you 20 don't do your general grocery shopping at the 21 7-Eleven, you know. 22 CHAIR KASSEKERT: Thank you. 23 Commissioners Epps? 24 COMMISSIONER EPPS: I have a few 25 questions. 109 Item No. 20 1 One of the questions is early on when 2 you were setting forth your business plan, one of 3 the things you indicated was increasing your 4 comps, your table odds and your win percentages; 5 but discuss with me how that works in conjunction 6 with, for example, your need to increase your 7 whole, or that hit that you took on your whole in 8 the fourth quarter of last year, how do they work 9 together? 10 You need to increase your whole to help 11 your numbers, but you need to increase your odds 12 of a pay-out percentage to make it more 13 attractive to your more loyal players. How does 14 that work? 15 MR. WAGNER: That's a good question. You 16 have to balance your pricing structure and your 17 marketing structure to provide your customers 18 with playing time. So, you know, if you started 19 to see slot whole percentages around the industry 20 tighten up; and what's that doing? That's 21 charging the customers. It's not there very 22 frequently, doesn't give a darn about being 23 loyal, doesn't give a card in his hand, and it 24 charges him a higher price. 25 If you're a good loyal player, we'll 110 Item No. 20 1 send you something in the mail to redeem as a 2 bonus and to extend your playing time and brings 3 the value back, back down. We're looking at that 4 same kind of a problem in Las Vegas where we have 5 a conventional hotel where conventioneers don't 6 play very much. So you want to keep your pricing 7 structure up. 8 On the other hand, we appeal to, 10 or 9 15 percent of our customers are locals. They 10 don't want high whole percentages. So what we do 11 is send them in the mail enough rebates so they 12 play with our money and our machines, they have 13 the same kind of playing time. 14 COMMISSIONER EPPS: Okay. My next 15 question goes to the whole capital improvement 16 plan. You've had a pretty good first quarter, 17 but it seems to me that you're going to have to 18 have an incredible third and fourth quarter to 19 get to where you need to be, and you already 20 indicated that if your -- if it starts to turn 21 against you, you have to constrain some of that 22 cash, your capital expenditures, and some of 23 those things, a whole bunch of your cash. 24 That leads to my question, the push in 25 Atlantic City and the new kind of rule of the 111 Item No. 20 1 game seems to be gaming -- non-gaming amenities, 2 Borgata's coming on in the middle of the summer; 3 we assume the parent, Caesars', coming out in the 4 middle of the summer. 5 Are there -- apparently, there are no 6 plans at the Hilton to join that part of the 7 game. How do you avoid those new additions to 8 what is very popular in Atlantic City, how do you 9 avoid that having a negative impact on the 10 Hilton? 11 MR. WAGNER: I think we've got to jump on 12 their bandwagon and use those amenities to help 13 us attack people to town and to our facilities. 14 Fortunately, those operations are going to open, 15 we believe, in the summertime when it's hard to 16 find a room, it's hard to find a slot machine; 17 and as people get used to those facilities, we'll 18 grow the market more, and with our limited number 19 of room and space, we believe we'll not see a big 20 decline in business especially the onset in the 21 summertime. 22 Again, loyalty and, you know, the people 23 that come down in the gaming eccentric themed 24 property come to gamble; and while the other 25 amenities are nice, our idea is to advise them to 112 Item No. 20 1 play at what we make 90 percent of our revenue on 2 at the Hilton or Resorts, and we believe we'll be 3 successful with that. 4 We also believe that if we continue nine 5 to 10 to 12 months of very favorable trends, as 6 we believe we will, we will be able to 7 successfully refinance our capital structure into 8 a much more appealing kind of a structure, and 9 Eric will expand on that, I'm sure. 10 COMMISSIONER EPPS: Now, going along with 11 that, that line of discussion, Commissioner 12 Fedorko asked you about the adjoining properties. 13 In your tight physical constraints, is there 14 capital expenditure dollars available to develop 15 that property even if your Hilton executives come 16 to you with a favorable plan, is the financing or 17 the funding available to implement the plan? 18 MR. WAGNER: Well, under the current 19 structure, no, but I believe if we came up with a 20 program that Colony believed was a viable return 21 on investment for their type of read operation, 22 we can get whatever money we need to build 23 another structure. Might find a joint venture 24 partner as well. 25 COMMISSIONER EPPS: That's all I have 113 Item No. 20 1 right now. 2 CHAIR KASSEKERT: Commissioner Sommeling? 3 COMMISSIONER SOMMELING: Yes. Roger, 4 what areas of finance flexibility are available 5 if the operating Resorts fall short of your 6 focus? 7 MR. WAGNER: I think Eric can probably 8 give you a better idea of that. We have some 9 credit line flexibility. We've already gone to 10 Colony several times. They put a lot of equity 11 into this company, and have made, are ready to 12 make another injection where they need approval 13 from Indiana to make final injection, but we 14 don't want to have to go back to the well if we 15 don't want to. We rather get this into the 16 position where we can finance on our own, and 17 then the next time we go to them, we ask for half 18 billion dollar expansion. 19 COMMISSIONER SOMMELING: Rely primarily 20 on the capital of Colony basically. 21 MR. WAGNER: Colony is our fall back and, 22 you know, right now, we're going to consider cash 23 and spend it wisely. We'll prioritize cap-ex 24 expenditure. Fortunately, the property is in 25 pretty good shape. We'll be 100 percent 114 Item No. 20 1 teetotal. Our slot machine products are on a 2 five to six year replacement cycle, the goal will 3 be at five. So we're almost there. It's -- the 4 property's in pretty good shape capital wise. 5 COMMISSIONER SOMMELING: Has the bank 6 loan amendments that have been implemented, have 7 the bank loan amendment that's been implemented, 8 and why are they limited to margin of two March 9 of 2007? 10 MR. WAGNER: I'm going to defer that to 11 Eric, please. 12 COMMISSIONER SOMMELING: Okay. That's 13 all I have for now, Madam Chair. 14 CHAIR KASSEKERT: Let me ask one question 15 before we ask if there's any redirect. 16 Obviously, a year ago when we had 17 discussion about the employees and the situation 18 with respect to, you know, the buying of the 19 Hilton by Colony and Resorts and the combination, 20 how has -- how's this all impacted upon the 21 employees in terms of how are they doing, what's 22 the process, people been getting used to change 23 in the process? Just give us an update on the 24 employees. 25 MR. WAGNER: Certainly. I think, you 115 Item No. 20 1 know, the sale was received good and bad. A lot 2 of people don't like change. On the other hand, 3 I believe that at the end of the day, the Hilton 4 had been lost as a stepchild. It was going to 5 be -- it was being sold off, and everything else 6 was going to Harrah's. 7 When Tony came in, there was obviously 8 trepidation, as there usually is when change 9 takes place. 10 Today when you go down there, you'll see 11 the token rates are up. The business levels are 12 up. Instead of complaining that there's nobody 13 around here now, there's too damn many people 14 around here. You get that. 15 So once, they're complaining about that, 16 I don't mind. I love lines as long as they're 17 moving, and we got lines. Now, they're moving, 18 and that's the thing, important thing. 19 The great thing is that we get the 20 shared services thing on, we're going to add 21 people to human resources instead of subtracting 22 what happened last year. We'll have training 23 programs that we need to put in place, 24 supervisory level programs that need to be put in 25 place. 116 Item No. 20 1 We just conducted employee surveys 2 around all six properties by an independent 3 company in Chicago, and our scores were not as 4 good as we wanted them to be, but they also 5 pointed out where we have opportunities, and they 6 showed where, you know, you're half good here, 7 and you're really good here, and you're really 8 poor here, we can fix those, but we have to spend 9 time and effort to do it, and we're going to do 10 that. We're committed. 11 CHAIR KASSEKERT: Thank you. 12 Commissioner Sommeling? 13 COMMISSIONER SOMMELING: Roger, along the 14 similar lines before, you had mentioned player 15 rewards program you're instituting in terms of 16 all of the properties that you now have under 17 your umbrella. Is that something that's going to 18 be done in the long-term as you enhance your 19 customer base, built on the current customer 20 base, and how would that be tied in with all the 21 properties? Is that something you're looking 22 forward to doing in the short-term, in the 23 long-term, inch along? 24 MR. WAGNER: No, we're kind of inching 25 along in our success of building the local data 117 Item No. 20 1 base in Memphis, but our goal is to get this new 2 card system in place as quickly as possible, 3 capitalizing on millions of names we have in our 4 collective six property data base, make them more 5 loyal, let them move along the portfolio of 6 casinos instead of competitive casinos when they 7 visit outside the group, and give them an 8 incentive to use our other facility. 9 We've also built in, we're patenting a 10 program right now, process is different than 11 Harrah's, and one card, was it MGM? I don't 12 know. I don't want to disclose what it is now 13 yet, but when the guy comes home, he didn't 14 exhaust them while he's in Las Vegas, and our 15 program is set for that he comes back, wants to 16 come back to home. 17 COMMISSIONER SOMMELING: Thank you. 18 CHAIR KASSEKERT: Commissioner Fedorko. 19 COMMISSIONER FEDORKO: I have one more 20 question. 21 Mr. Wagner, every operator comes in here 22 talks about loyalty. When you focus on your 23 customers, is that the most important point that 24 you go after loyalty? I mean, you want people to 25 come back. 118 Item No. 20 1 MR. WAGNER: If we can get customers to 2 become loyal, it's not as expensive to take care 3 of them. You know, you can create a new 4 customer. It's six times as expensive to take 5 care of than the loyal customers, and then you 6 got the ones that skip around on you, will move 7 for a quarter and, you know, we have to go after 8 that, too, but if we can get a bigger proportion 9 of our customers to be loyal, we can -- we can 10 spend less money taking care of them in the long 11 run and actually take care of them better. 12 COMMISSIONER FEDORKO: Is there anyway, 13 you know, that your some time customers are going 14 to other properties other than the fact that 15 they're not at yours? 16 MR. WAGNER: They tell us. 17 COMMISSIONER FEDORKO: They do. 18 MR. WAGNER: Yeah, but with the new data 19 base system, Mariposa is particularly state of 20 the art, you can watch declining customers, 21 increasing customers, look at lifetime value of 22 customers, looking forward, project them out. We 23 can dissect them by age, gender, zip code, 24 everything, and you know, just with a mouse, you 25 can just swipe up and scratch out the ones that 119 Item No. 20 1 aren't becoming profitable with a certain 2 promotion you want to put out there with a 3 certain regimented amount, and you can pretty 4 much predict the profitability of a program; 5 whereas right now, in Colony, we're out there 6 blasting the shotgun around instead of a rifle. 7 COMMISSIONER FEDORKO: Borgata has been 8 very successful going after the 21 to 35 crowd. 9 Are you focusing on that at all? 10 MR. WAGNER: Our facilities probably 11 don't lend to that young a demographic which, by 12 the way, requires a lot of volume and a lot of 13 room, a lot of rooms to take care of that group, 14 but I think the target we're shooting at, at the 15 Atlantic City Hilton is the right target for us. 16 They're gamblers. That's what they want to do; 17 and at Resorts, the new regional team will, along 18 with local management, will come up with what 19 really makes sense for Resorts long-term. I 20 think we struggled there at Resorts. 21 COMMISSIONER FEDORKO: Okay. 22 CHAIR KASSEKERT: Anything on redirect? 23 MS. WILD: No, thank you. 24 CHAIR KASSEKERT: Mr. Marquez? 25 MR. MARQUEZ: No. 120 Item No. 20 1 CHAIR KASSEKERT: You may step down, 2 Mr. Wagner. Thank you. 3 You may call your next witness. 4 MR. BROOKS: We'll call Eric Matejevich. 5 (Whereupon, ERIC MATEJEVICH, having been 6 first duly sworn, testified as follows:) 7 MR. NANCE: Please state your name. 8 MR. MATEJEVICH: Eric Matejevich. 9 CHAIR KASSEKERT: Thank you. You may 10 proceed. 11 12 DIRECT EXAMINATION BY MR. BROOKS: 13 Q. Mr. Matejevich, you've testified 14 before the Commission on several occasions, but 15 would you briefly again state for the record your 16 position with Resorts International Holdings, 17 parent company of RIH Acquisitions, New Jersey? 18 A. Absolutely. I'm Senior Vice 19 President, Treasurer and Chief Financial Officer, 20 Resorts International. 21 Q. Now, when Hilton was acquired along 22 with the other facilities that Mr. Wagner talked 23 about, could you briefly describe for the 24 Commission the financing that was in place for 25 that acquisition? 121 Item No. 20 1 A. Sure. At the time, we had financing 2 in two separate bank trenches; a term loan B, and 3 then a second lien piece of term debt. The term 4 loan B was 985 or actually, let me take that 5 back, it was 635 million dollars. It was priced 6 at LIBOR plus 250. So it was very, very 7 attractive at the time. LIBOR was about two and 8 a half percent, and it was a seven year term loan 9 facility with minimal amortization, and then the 10 second lien piece of term debt was eight years, 11 and it was priced also attractively at LIBOR plus 12 575, which gave -- the leverage level there was 13 very, very attractive at the time, and then we 14 had a 75 million dollar revolver that also was 15 priced at LIBOR plus 250, and that was a five 16 year revolver. 17 Q. Now, after the companies were 18 acquired and operations began, were there any 19 difficulties in connection with the financings? 20 A. Yes. Our results did not meet our 21 projections; and starting in the September 22 quarter, it was necessary that Colony make an 23 equity infusion of approximately five million 24 dollars in order to meet our financial covenants, 25 which they did, and we subsequently then met. 122 Item No. 20 1 Q. So the primary difficulty that you 2 encountered were the financial covenants in those 3 credit facilities. 4 A. Yes, and that was an ongoing 5 problem, and I think I just misspoke, that that 6 was the June quarter, which was our first 7 measurement period. Then the September quarter 8 is where we had our first term technical default. 9 Q. Now, when you say "technical 10 default", what do you mean by that? 11 A. Technical default is a default in 12 one of the financial covenants and not -- it's 13 separate from a payment default. Payment 14 default, of course, is more, more serious, but we 15 have covenants such as fixed charge ratio 16 covenant as well as a first lien leverage ratio 17 and a total leverage ratio covenant, and it was 18 these leverage ratio covenants that we violated 19 in the September quarter. 20 Q. It wasn't any payment default, the 21 company was making payments when due. 22 A. That's correct. We've never had any 23 payment default of any nature. 24 Q. So you, when you entered these 25 difficulties, had the first lien facilities been 123 Item No. 20 1 paid down at all? 2 A. The first lien facilities was paid 3 done by 10 million dollars in the -- I think it 4 was the first week that we acquired the assets 5 because we had more cash than we deemed necessary 6 at the time. Of course, we couldn't have 7 foreseen the operating difficulties that we would 8 have in the subsequent future. 9 Q. And when you first encountered 10 difficulties with the financing covenants, did 11 you have cash balances at that point? 12 A. Yes. If I recall correctly, I think 13 the cash balance was 68 million dollars. 14 Q. Now, at some point, did you address 15 the problem of the covenants with the lenders? 16 A. We did. We addressed -- this was 17 after the September quarter when we recognized 18 that we're going to have a technical default. We 19 approached the lenders and said that this was 20 indeed going to be the case, and that the cure 21 for it, because we were able to use the 22 covenants, allowed us to use a certain amount of 23 equity capital in order to cure those defaults 24 and count that capital, capital as EBITDA, but in 25 this case, we needed more equity capital than the 124 Item No. 20 1 covenant allowed in order to cure. 2 Colony was certainly willing to put the 3 money in, but again, the covenant didn't permit 4 it. So we entered into negotiations with our 5 banks, and subsequently came to an agreement with 6 them in which -- you know, with these 7 discussions, there's always a give and a take, 8 and what we were able to get from them was this 9 covenant relief for the September quarter. We're 10 able to get relaxed fixed charge ratio thresholds 11 in and leverage ratio thresholds going forward, 12 so that it would be easier to meet; and for that, 13 what we had to do was re-bump up the interest 14 rate for them. 15 On the first lien piece, we had to pay 16 25 basis point amendment fee, that's a one time 17 fee, and we had bumped the interest rate on the 18 first lien to by 50 basis points. 19 So that loan was then at LIBOR plus 300; 20 and for the second lien piece of term debt, we 21 again had to pay 25 basis point amendment fee, 22 and then the bump in rate there was 125 basis 23 points, and what they then allowed us to do, they 24 waived those covenants, and they said that Colony 25 could put in 14 million dollars, which they 125 Item No. 20 1 subsequently did, and we used that to repay -- 2 well, the first lien holders had the option to 3 take that cash and pay on the first lien, but 4 what they gave us the ability to do is pay down 5 the more expensive second lien piece of term 6 debt, which is what we did. 7 Q. When were those amendments 8 accomplished, what time frame? 9 A. Actually, I can remember because it 10 was my birthday, November 30th, the amendments 11 became effective. 12 Q. Was there a subsequent amendment to 13 the credit facilities? 14 A. Yes, there was. When we -- as 15 Roger noted in his testimony, the fourth quarter 16 didn't necessarily go as we had planned, and it 17 was fairly far below our estimates. One of the 18 reasons was the table hold percentage at the 19 Atlantic City Hilton, but the other properties, 20 specifically Chicago, didn't necessarily perform 21 to expectations as well. 22 So around the January, end of January 23 time frame, as I had prepared the December 24 financials and realized that again, we would be 25 in violation of the amended covenants. And so I 126 Item No. 20 1 notified lenders, I believe, on February 2nd, 2 that that we would again be in breach of those 3 covenants and again triggered a technical 4 default, and the covenants, which we're in breach 5 of again, was the leverage covenants, and this 6 time, the fixed charge covenant ratio. And so we 7 entered into negotiations with the lenders. 8 Q. What was the consequence of those 9 negotiations? 10 A. That negotiation was more difficult, 11 as you can imagine, because it was our second 12 time at the table with these folks, and we 13 started the process again in the beginning of 14 February, and actually just wrapped it up in 15 March. March 24th, I believe, they finally 16 signed the amendment, which we agreed to, and the 17 terms of this amendment are that they forgive the 18 fixed charge and leverage covenants through 19 3/31/07, and they, in lieu of those covenants, 20 they put in place a minimum EBITDA covenant, 21 which is set at 90 percent of our plan. 22 I believe 90 percent of our plan is 100 23 and 13 point seven million for the year. That 24 test begins in the June time frame for the six 25 months end of June. So it's not -- basically, we 127 Item No. 20 1 can take 2005 and wipe it away and just move 2 forward. 3 And so now that we're performing, that's 4 something I feel very good about in being able to 5 meet that covenant come June time frame. So that 6 was one covenant, minimal EBITDA covenant, second 7 was minimal cap-ex requirement because they 8 wanted to insure that we weren't investing in the 9 assets as we should be, and that minimal cap-ex 10 requirement was set at 21.7 million. And then 11 the final covenant, if you will, is a minimal 12 cash requirement which, of course, we have 13 minimal cash requirements just to run the 14 business anyhow, and each regulatory body sets a 15 minimal cash threshold for our casinos, and this 16 is above that threshold. It's set at 25 million 17 dollars. And what we have to pay them for the 18 amendment is the first lien holders, no amendment 19 fees this time to either the first or the second, 20 but the interest rate on the first goes up 100 21 basis points. 22 So that moves from what was LIBOR plus 23 300 to LIBOR plus 400. We do have the option 24 with both interest rate increases, and I'll tell 25 you about the interest rate increase on the 128 Item No. 20 1 second in a second, but we have the option to PIK 2 those as opposed to paying them in cash. We can 3 talk about the consequences of that later. 4 So first lien now is LIBOR plus 400. 5 The second lien costs us an additional 300 basis 6 points. So that loan now moves to -- moved from 7 LIBOR plus 575 initially, moved to LIBOR plus 8 700, and then there was step-up in that, that 9 structure to begin with, because it was supposed 10 to be a bridge facility, which will be taken out. 11 So the first step-up occurred, I 12 believe, in late October by 50 basis points. So 13 then that one was at LIBOR plus 750; and with 14 this second amendment, it moved to LIBOR plus 15 1050, and a second step-up occurred in the 16 original structure actually in April. 17 So today, that loan is at LIBOR plus 11, 18 1100 basis points, or giving that LIBOR today has 19 moved from when we originally did our transaction 20 to about two and a half percent. Today, it's 21 five percent. It's about a 16 percent piece of 22 paper but again, to reiterate a point I made 23 earlier, the increase for the second amendment, 24 again 100 basis points on the first and 300 basis 25 points on the second, can all be made in 129 Item No. 20 1 Payment-in-Kind interest, PIK interest, as 2 opposed to cash paid interest. 3 Q. What's the benefit of PIK interest 4 as opposed to cash? 5 A. The benefit is that we get to 6 reserve and conserve cash during this period of 7 our improved operations, and can steer cash that 8 would go to pay interest in this case back into 9 our operations to improve them. 10 Q. Now, in connection with the second 11 amendment, did Colony have to do anything in 12 connection with the second amendment? 13 A. Yes, I'm sorry. I missed a fairly 14 significant portion of that second amendment, and 15 that's that the lenders asked that Colony infuse 16 50 million dollars into Resorts International 17 Holdings. It will be a note at the RIH Resorts 18 level for 50 million dollars. It will be 19 structured as a zero coupon note, and the money 20 then gets moved into the lower entities, Resorts 21 International Holdings equity, it will be used 22 immediately to pay down the second lien debt. 23 So today, our second lien debt is at 24 336.7 million and will be taking that down here 25 in fairly short order by 50 million. In 130 Item No. 20 1 addition, the lenders required Colony to post a 2 letter of credit of 10 million dollars to back 3 our revolver. 4 Our revolver, I say, originally was 75 5 million dollars. We've reduced that to 50 6 million dollars simply because we don't foresee a 7 need in the future for a 75 million dollar 8 revolver. We think 50 million dollars would be 9 fine; and initially, when the amendment becomes 10 effective, 10 million dollars of that revolver 11 will be available. 12 And would you like me to walk them 13 through the steps of the Keepwell? 14 Q. That's what's been commonly referred 15 to as Keepwell facility. 16 A. Yes, the Keepwell works in the 17 following fashion, and this is our response to if 18 the company needs capital in the future. 19 We have an untapped 10 million dollars 20 revolver at this point. And so we have the 21 ability to draw on that revolver as necessary. 22 The Keepwell comes into play on two dates; 9/30, 23 September 30th of this year, and March 31st of 24 2007. On those dates, to the extent that we've 25 drawn on that revolver, the letter of credit will 131 Item No. 20 1 be drawn upon in order to pay down that revolving 2 credit balance, and take it back to zero, 3 basically resetting it to zero. 4 And so that when the credit is drawn 5 upon would be infused as equity. And so it's a 6 way of, you know, keeping Colony out there and 7 responsible for another 10 million dollars of 8 potential equity needs. 9 We, by the way, don't foresee that need, 10 but it's nice to have that as a safety cushion, 11 if need be. 12 Q. Now, in connection with these 13 amendments or especially the second amendment, 14 what advantages does that create for the company 15 in terms of going forward basis? 16 A. I guess -- well, it creates an 17 advantage in that the lenders are basically off 18 our backs for, you know, significant period of 19 time, and what we believe and what my models 20 indicate is that if we hit the budget that I've 21 given the Commission, Division of Gaming 22 Enforcement, and obviously we internally believe 23 will be fairly far beyond that, I should be able 24 to refinance the company in the fourth quarter of 25 '06, or at the latest, the first quarter of 2007, 132 Item No. 20 1 but what the amendment really does is just give 2 us some breathing room with these banks so that 3 we constantly don't have these leverage ratio 4 over our heads. 5 Q. And the minimum EBITDA is an 6 advantage to the financing covenants that were in 7 place. 8 A. Minimal EBITDA is vastly superior to 9 the leverage scenarios. It's much easier to 10 comply with that. In fact, we're well on our way 11 thus far this year. 12 Q. And what have the results been in 13 2006 from that basis, EBITDA basis? 14 A. From an EBITDA standpoint, we're 15 doing very, very well. We for the first quarter 16 will post something close to 29, to slightly over 17 29 in EBITDA. That compares to a budget of 22.4. 18 So again, we're well in excess, and to 19 go back to that minimal EBITDA covenant where 20 it's set, the first measurement date will be June 21 30, and it will be set at 90 percent of our 22 budget. So, you know, if we're looking at today, 23 it would be set at 90 percent of the 22.4. So 24 we're very much in compliance. 25 Q. Now, you've mentioned several times 133 Item No. 20 1 that Colony has infused equity into the company. 2 What's Colony's total equity contribution at this 3 point to this company? 4 A. Colony's original equity 5 contribution, I'll come back, was 326 million 6 dollars when we closed this transaction, they 7 infused five million dollars subsequent to that, 8 and then 14 million dollars when we did our first 9 amendment. 10 So that took them to the 345 level and 11 now, with the additional 50 coming in, they'll 12 have 395 million of total equity in Resorts 13 International Holdings. 14 Q. Would it be fair to say when you 15 have needed Colony, they've been there in terms 16 of the need for equity? 17 A. Absolutely. 18 Q. Now, you mentioned this in terms of 19 one of the advantages to the second amendment. 20 Is the ultimate goal of the company to do 21 something else with the second lien term loan? 22 A. The ultimate goal of the company is 23 upon refinancing, which I mentioned plan to get 24 done late fourth quarter, or early first quarter, 25 the second lien will go away completely. My 134 Item No. 20 1 models indicate we'll take that out with high 2 yield piece of debt. As I'm sure you're aware, 3 the market has been very generous, the high yield 4 debt to gaming companies, because -- I think 5 largely because of the elasticity of demand here. 6 Given whatever the economic conditions are in the 7 country, gaming always seems to do fairly well. 8 So the high yield market, and to step 9 back, that's kind of my background. I was a high 10 yield analyst at Deutsche Bank, BT Alex Brown, 11 which became Deutsche Bank. So I know that 12 industry and that product very well. It's been 13 very kind to gaming. 14 So I think that where we'll be by year 15 end is approximately seven times lighter; and 16 right now, indications are that we can refinance 17 our debt at approximately eight and a half 18 percent given today's market and the demand for 19 gaming paper in the high yield market. 20 Q. So given your professional 21 experience, you're optimistic you'll be able to 22 refinance that debt. 23 A. I am very optimistic, yes. 24 Q. Now, the second amendment, the 25 change in the covenants, there's a term limit to 135 Item No. 20 1 that; is that correct? They expire some point in 2 time. 3 A. Yes. They expire on March 31st of 4 2007. So then the covenants would revert to 5 original levels at June 30 of 2007, assuming 6 again that I'm unable to refinance the company in 7 the fourth quarter, first quarter of '07. 8 Q. But the point is, you believe that 9 you'll be in a position well before that date to 10 refinance the company; correct? 11 A. That's correct. 12 Q. Have the lenders, when you've gone 13 back to lenders, you've done it twice, have they 14 been willing to work with you in terms of solving 15 the problem you've had in connection with the 16 credit facilities? 17 A. Oh, absolutely. 18 Q. Now, given your professional 19 experience and given your familiarity with the 20 circumstances here in Atlantic City, is it your 21 professional opinion that the Atlantic City 22 Hilton will have the ability to pay winning 23 wagers through the license term -- 24 A. Yes. 25 Q. -- given its present financial 136 Item No. 20 1 situation? 2 A. Yes. 3 Q. Is it your professional opinion that 4 the Atlantic City Hilton will be able to achieve 5 gross operating profit for the license term? 6 A. Yes. 7 Q. Is it your professional opinion that 8 the Atlantic City Hilton will be able to pay all 9 its taxes when due through the license term? 10 A. Yes. 11 Q. And is it your professional opinion 12 that the Atlantic City Hilton will be able to 13 make necessary capital and maintenance 14 expenditures when due through the license term? 15 A. Yes. 16 MR. BROOKS: I have no further questions 17 of Mr. Matejevich. 18 CHAIR KASSEKERT: Thank you. 19 Mr. Marquez? 20 21 CROSS-EXAMINATION BY MR. MARQUEZ: 22 Q. Thank you. 23 The first question that I have is 24 regarding who are you talking about when you say 25 Colony made various equity infusion? 137 Item No. 20 1 Specifically what company are you talking about? 2 A. Specifically, I might need a little 3 help with the structure chart, but I think it's 4 Colony RIH Holding, LLC entity in which Colony 6 5 and 7 make their investments through. 6 Q. So Colony 6 and 7 put those many 7 millions into that company. 8 A. Correct. 9 Q. Colony 6 is not putting more money 10 into this; right? 11 A. Are you specifically referring to 12 the 50 million that will be coming in? 13 Q. Right. 14 A. Actually, both Colony 6 and 7 have 15 lines of credit and initially, those lines of 16 credit will be drawn upon in order to make the 50 17 million dollar infusion. Both Colony 6 and 18 Colony 7 will distribute. 19 Q. So the fact that they each have, 20 say, a limitation of, say, 10 percent on what 21 they can invest in is not triggered by them 22 making more investments. 23 A. Exactly. The reason it's not 24 triggered in these days is because it's 25 structured as a debt piece of paper as opposed to 138 Item No. 20 1 an equity investment. 2 Q. And my question is, with regard to 3 the 50 million, in the draft note that I saw, 4 it's not -- in the draft note that I saw, it had 5 a due date that was one day before the end of 6 this license period, that's to say, it's July 7 17th -- or April 17th as opposed to April 18th. 8 That means that somebody has to pay back 50 9 million dollars to somebody else the day before 10 your license ends. 11 How will that be accomplished? 12 A. Again, I'll go back to refinancing. 13 In the refinancing that I described, part of the 14 refinancing proceeds would be used to take out 15 that whole piece of debt. So it's right in that 16 refinancing. 17 Q. So it hinges on your being able to 18 do refinancing, and you plan to do that in the 19 fourth quarter of 2006 or very latest, first 20 quarter of 2007. 21 A. That's correct. 22 Q. Because otherwise, you can't repay. 23 There was a target EBITDA that you had 24 in mind for being able to restructure at a 25 certain percentage rate that had been mentioned 139 Item No. 20 1 in our meetings. I wonder if you can break that 2 out as the target. 3 A. Sure. The target was 130 million 4 dollars. 5 Q. So you have to do a hundred 30 6 million EBITDA every year in order to refinance 7 at a percentage rate that is better than your 8 present structure, and you have to do that before 9 the end, the first quarter ends. 10 A. Actually, I just had a conversation 11 with Deutsche Bank yesterday, and it was very 12 much to that point in which I asked them, do I 13 have to report the a hundred 30 million before we 14 could attempt this transaction? And their 15 response to me was no. If you have three 16 quarters of fairly strong operations under your 17 belt, even on an LTM basis, you won't be under a 18 hundred 30 million, people will, what they call, 19 sell some Blue Sky, we believe the fourth quarter 20 of '06 will be much stronger than the fourth 21 quarter of '05, negatively in 2005. 22 Q. Thank you. What were those analyses 23 that lowered the -- 24 A. Specifically, the table -- Atlantic 25 City Hilton is probably the one I would point to 140 Item No. 20 1 first and foremost. 2 Q. That is, as Mr. Wagner indicated, 3 the result of one unfortunate event really. 4 A. Correct. 5 Q. In terms of dealing with the second 6 lien note holders that you like to buy down and 7 work down to the extent of 50 million, when you 8 make the next infusion, is that going to increase 9 the role being played by, say, Highland and some 10 of the other companies that negotiated very 11 strenuously with you -- 12 A. No. 13 Q. -- or some people that are bought 14 out? 15 Do you know where the 50 million dollars 16 is going? 17 A. We don't know, and quite frankly, 18 the lenders themselves have the option to tender 19 certain amounts of their paper or to not tender. 20 And so in the case of Highland, which you 21 mentioned specifically, they might not tender any 22 of their paper which would give a greater 23 percentage of the overall holdings. 24 Q. When you say you're optimistic you 25 can do the refinancing with Deutsche Bank and 141 Item No. 20 1 give you certain assurances, obviously, they've 2 been with you through these various problems that 3 you've experienced, and they don't give you any 4 paper or any written commitment or anything that 5 says to you yes, do this and you'll be okay. 6 They're saying to you if you achieve the 7 performance characteristics that you say you can 8 achieve; right? 9 A. That is correct. 10 Q. All right. So my problem I guess 11 then is that you do show a tendency to be a 12 little optimistic in your past, meaning not 13 viciously, but you didn't make your projections. 14 A. Correct. 15 Q. So why are they confident you're 16 going to make the projections in the future? 17 A. I think they're confident just based 18 upon our results thus far for '06. We've 19 reported two very, very strong months in March. 20 We also know what the results look like, and we 21 know that that's very strong. So I think they're 22 using that as a basis. 23 We told lenders in our first amendment 24 facility that we really thought '06 would be the 25 timing, which we had the most of our systems 142 Item No. 20 1 rolled out, and our marketing programs fixed, and 2 that we really hit 2006 and run with it, and 3 that's what we've done. 4 Unfortunately, the fourth quarter was, 5 you know, significantly below where we thought we 6 would be. 7 Q. So for 2006, your EBITDA forecast is 8 how much greater than it was? 9 A. So for 2006, EBITDA forecast is 10 122.2 is the forecast in that versus 11 approximately 92.1 for 2005. 12 MR. MARQUEZ: No further questions. 13 CHAIR KASSEKERT: Questions from the 14 Commissioners? 15 Commissioner Sommeling. 16 COMMISSIONER SOMMELING: You've answered 17 my question as Roger said you would. I'd like to 18 get that on the record, Roger, but I'd like to 19 know, you have a very optimistic outlook, which 20 is good for any business. 21 Should we have any concerns regarding 22 your covenant plans going forward that you say if 23 you can enlighten the Commission about? I'm just 24 asking you a general question. 25 MR. MATEJEVICH: No, I don't think you 143 Item No. 20 1 should have any concerns. I think that this 2 second amendment has fixed what were the key 3 impediments which were the leverage ratios. 4 COMMISSIONER SOMMELING: Thank you. 5 CHAIR KASSEKERT: Commissioner Epps? 6 COMMISSIONER EPPS: I have a few 7 questions. 8 Correct me if I'm wrong, last -- the 9 '05 EBITDA was 92. 10 MR. MATEJEVICH: 92.1. 11 COMMISSIONER EPPS: Okay. And -- 12 MR. MATEJEVICH: And I'll say that it's 13 audited. Audited results should be done any day 14 now. 15 COMMISSIONER EPPS: You said the 122 for 16 '06 is what, what does that represent? 17 MR. MATEJEVICH: That is our budget that 18 we've given the Casino Control Commission and the 19 Division of Gaming Enforcement. 20 I'll tell you internally, our thoughts 21 are that we can achieve slightly stronger than 22 that. 23 COMMISSIONER EPPS: But you've testified 24 earlier that you need to -- you need to hit your 25 target, you need to hit a target of 130 EBITDA to 144 Item No. 20 1 take care of some of the other things you have 2 planned for later in the year. 3 MR. MATEJEVICH: That was a number that 4 Deutsche Bank threw out as being kind of a target 5 number to reach in order to, you know, get the 6 refinancing done, but as I just said, you know, 7 if we're on that trajectory, if we produce three 8 quarters where our numbers are on budget, 9 slightly above budget, we should be able to sell 10 to investors the fact that, you know, this is a 11 changed company. We're doing significantly 12 better now, and here's what we look like in the 13 future. 14 COMMISSIONER EPPS: Based on historical 15 model, 40 million dollars of EBITDA growth is 16 significant in Atlantic City, isn't it? 17 MR. MATEJEVICH: Yes, it is, yes. 18 COMMISSIONER EPPS: And without adding a 19 tower or non-gaming amenity or many more things 20 that companies tend to add to have those 21 tremendous increases. 22 MR. MATEJEVICH: Agreed. 23 COMMISSIONER EPPS: You're confident 24 projecting you're going to do this. 25 MR. MATEJEVICH: We believed that 2005 145 Item No. 20 1 was a statistical anomaly, number one, prior to 2 our taking over the assets, and it probably makes 3 sense at this point to speak to the first quarter 4 of the Atlantic City Hilton. First quarter of 5 this year, it did 11.5 million in EBITDA. First 6 quarter of last year did 2.9. 7 Obviously, we weren't running it at the 8 time but, you know, that's part of it. Part of 9 it is the operations we took over. Without being 10 pejorative, the former owners weren't 11 necessarily -- how do I say this -- management 12 didn't necessarily have their finger on the 13 trigger. They didn't run the operations maybe as 14 efficiently as they had prior to our signing the 15 purchase agreement. 16 COMMISSIONER EPPS: Do you anticipate 17 that you'll show quarter after quarter nine 18 million dollar growth? 19 MR. MATEJEVICH: Well -- 20 COMMISSIONER EPPS: Because four, in this 21 case, are 36. 22 MR. MATEJEVICH: True, but again, we're 23 talking about the four casinos; right? Going 24 from 92 to one. 25 COMMISSIONER EPPS: I understand. Roger 146 Item No. 20 1 testified 50 percent of your -- you rely 50 2 percent on the Hilton for your growth. 3 MR. MATEJEVICH: True. The Hilton is a 4 big portion of it; however, we take a look at 5 Bally's Tunica, for instance. Bally's Tunica 6 last year did something like 12 and a half 7 million in EBITDA. This year, we should do, you 8 know, approximately 20, and maybe over 20 in 9 EBITDA at that property. 10 So it's a fairly significant gain, even 11 though that's a very, very small property. East 12 Chicago is a similar story with their growth 13 there, and it really was in a lot of -- this 14 occurred prior to Roger, but we didn't 15 necessarily capitalize on the transition the way 16 we thought we would. We felt we would hit the 17 ground running and take off, and as Roger said, I 18 think we underestimated the power of the total 19 rewards program, and that was one of the reasons 20 it took us sometime to get our marketing program 21 at a point where we can compete with them 22 effectively. 23 COMMISSIONER EPPS: Okay. You testified 24 to the first test being June, June of '06. 25 MR. MATEJEVICH: That's correct. 147 Item No. 20 1 I'm sorry, first test for the second? 2 COMMISSIONER EPPS: June time frame. 3 MR. MATEJEVICH: Oh, yes, for this year, 4 yes. 5 COMMISSIONER EPPS: What is that test? 6 MR. MATEJEVICH: That will be the minimal 7 EBITDA. 8 COMMISSIONER EPPS: And it's what? 9 MR. MATEJEVICH: 90 percent of -- I 10 don't recall off the top of my head. 11 COMMISSIONER EPPS: 90 percent of your 12 budget. 13 MR. MATEJEVICH: Yeah, 90 percent of our 14 budget. 15 COMMISSIONER EPPS: You testified that 16 you have an option of using PIK notes in the 17 financing structure, but is it true that using 18 the PIK notes add to your debt? 19 MR. MATEJEVICH: Absolutely. 20 COMMISSIONER EPPS: So instead of paying 21 cash, you add debt. 22 MR. MATEJEVICH: That's correct. 23 COMMISSIONER EPPS: So if you are forced 24 -- 25 MR. MATEJEVICH: It's billed over time. 148 Item No. 20 1 COMMISSIONER EPPS: If you're forced to 2 go to PIK notes, how does that impact your 3 ability to refinance that loan at the end of the 4 quarter? 5 MR. MATEJEVICH: That was in our 6 calculation. We had anticipated that we would 7 pay those additional amounts and in PIK, in 8 Payment-in-Kind interest as opposed to cash 9 paying interest. So when I say by the fourth 10 quarter or first quarter, I'm already calculating 11 that additional principal in my calculations. 12 COMMISSIONER EPPS: So your fourth 13 quarter '06, first quarter '07 refinancing, 14 you're hoping to get 8.7 -- 8.5 percentage rate. 15 MR. MATEJEVICH: That's correct. 16 COMMISSIONER EPPS: Which assumes adding 17 some PIK notes. 18 MR. MATEJEVICH: No. What that assumes 19 is that I take out the debt that has been PIK'ed. 20 So what I'll have, and what we plan to have is, I 21 think it's 490 million dollar term loan piece and 22 430 million dollar high yield piece, and both of 23 those would be completely cash pay, and the 24 reason the term loan is set that way is we 25 foresee paying down the term loan to its original 149 Item No. 20 1 leverage point, which was four times; and if 2 indeed, that's the case, then my interest rate on 3 that loan, I should be able to go back to lenders 4 and it reverts back to LIBOR plus 300, which is 5 again a fairly attractive rate, and that would be 6 around eight percent today, and then my high 7 yield piece would be priced at about eight and a 8 half percent. 9 COMMISSIONER EPPS: Okay. One last 10 question. You testified that you could go to 11 lenders with a fairly decent first three 12 quarters, and what you termed, blue sky for the 13 fourth quarter. 14 Is there a point in which the actual 15 productivity of the fourth quarter comes into 16 effect, or do they buy it based on a projection 17 and you just refinance without ever seeing what 18 actually happened in the fourth? 19 MR. MATEJEVICH: They would buy it based 20 on our projection at that point. 21 COMMISSIONER EPPS: So adverse conditions 22 like a harsh early winter in the fourth wouldn't 23 adversely affect when you turned that over. 24 MR. MATEJEVICH: No. Having said that, 25 if I'm not able to refinance the company in the 150 Item No. 20 1 first quarter of '07, then, of course, we're 2 going to take a look at those fourth quarter 3 results. 4 CHAIR KASSEKERT: Actually, that's what I 5 was going to ask. 6 Commissioner Fedorko? 7 COMMISSIONER FEDORKO: I have one 8 question. 9 I imagine I may have missed this, do you 10 anticipate anymore technical defaults in the 11 future? 12 MR. MATEJEVICH: I don't anticipate 13 anymore technical defaults. 14 COMMISSIONER FEDORKO: Okay. 15 VICE CHAIR FRULIO: No. 16 COMMISSIONER EPPS: There can't be any 17 technical default this year, right, because the 18 covenants are gone. 19 MR. MATEJEVICH: Right. There could be 20 -- there could be what are called small deed 21 defaults such as not filing your financials on 22 the day your financials are supposed to be filed, 23 but those are 30 day curable. You know, you turn 24 it in in a day or two, and that occurs. 25 COMMISSIONER EPPS: If you fail the June 151 Item No. 20 1 10th, is that a technical default? 2 MR. MATEJEVICH: Yes. If I failed the 3 June test, if I did not meet, yes. 4 COMMISSIONER SOMMELING: After March of 5 2007, all the covenants revert back. 6 MR. MATEJEVICH: Exactly. So the hope 7 is -- of course, the hope, the belief is, I'll 8 have it refinanced by that point. So those 9 covenants will be gone, and I'll have a whole new 10 structure in place, new capital structure. 11 CHAIR KASSEKERT: Anything on redirect? 12 MR. BROOKS: No. 13 CHAIR KASSEKERT: Mr. Marquez? 14 MR. MARQUEZ: Nothing, thank you. 15 CHAIR KASSEKERT: You may step down. 16 Any other witnesses? 17 MR. BROOKS: No, Madam Chair. 18 CHAIR KASSEKERT Mr. Marquez? 19 MR. MARQUEZ: No witnesses. 20 CHAIR KASSEKERT: Very good. 21 We'll now move to closing statements. 22 Division, would you like to make a 23 closing statement? 24 MR. MARQUEZ: I believe we've summed up 25 the requirements of qualification for a casino 152 Item No. 20 1 license in our written report. The only 2 adjustment to that, that needs to be made is with 3 regard to your understanding of the very latest 4 changes in the financing that was talked about in 5 the testimony of Mr. Matejevich, more equity, to 6 give the equity infusion and note. I don't 7 believe that causes us any problem, and the 8 Division, therefore, adheres to its original 9 suggestion or position or recommendation that 10 they do meet the financial stability requirements 11 of the Act in the upcoming year. 12 Beyond that, it's questionable. So 13 it's, a one year license would be our limit and, 14 therefore, given the constraints that have been 15 listed in terms of reporting and keeping us 16 abreast and requirements for additional financial 17 plan by early January at the very latest of next 18 year, I think we have no problem recommending to 19 you that the license be granted in those terms as 20 outlined in the resolution. 21 CHAIR KASSEKERT: Thank you, Mr. Marquez. 22 Mr. Brooks? 23 MR. BROOKS: Madam Chair, I would only 24 indicate in connection with the review of the 25 resolution, it does contain conditions related to 153 Item No. 20 1 the license, and we're prepared, the company's 2 prepared to accept those conditions, and we'd ask 3 for licensure subject to those conditions. 4 CHAIR KASSEKERT: Okay. I'm assuming, of 5 course, the Division agrees to the conditions and 6 supports those. 7 At this point, are there any other 8 matters that need to be brought to our attention? 9 MR. BROOKS: I don't believe so. 10 CHAIR KASSEKERT: Seeing none, we'll take 11 a recess. Thank you. 12 (Whereupon, the Commission recessed at 13 1:20 p.m. and commenced back in session at 1:55 14 p.m.) 15 CHAIR KASSEKERT: We'll go back on the 16 record. 17 In September of 2004, an affiliate of 18 Colony investors agreed to purchase four casinos, 19 two each from Harrah's Entertainment and Caesars 20 Entertainment. Significantly for us, the AC 21 Hilton was one of the Caesars properties being 22 sold. 23 Before closing that transaction, Colony 24 came to us seeking ICA, which we granted last 25 spring, along with permission for the new Hilton 154 Item No. 20 1 owners to succeed to the balance of the GNOC, 2 Corp. license term. Since that time, Hilton and 3 its holding companies have faced financial 4 challenges, but have successfully negotiated with 5 their lenders for modifications to the credit 6 facilities. 7 Now, Hilton is before the Commission for 8 an initial one year license. In assessing 9 financial stability, the Commission certainly 10 will evaluate it for the license period, but 11 obviously, it is not so confined. 12 In any event, more challenges loom for 13 the Hilton. Although, this year's first quarter 14 provides a glimmer of a positive uptrend, whether 15 Hilton will sustain that forward progress remains 16 uncertain. Fortunately, the height of the 17 Atlantic City season is approaching, which should 18 bode well for Hilton advancing and achieving 19 further advances. 20 Nevertheless, this year's last quarter 21 and next year's first quarter will remain a 22 concern. In that regard, the one year term 23 undoubtedly heightens our ability to scrutinize 24 and monitor the process. 25 Thus, the Division recommends as part of 155 Item No. 20 1 that review that Hilton provide us early next 2 year with a comprehensive financial plan likely 3 to involve some form of refinancing that 4 addresses its ability to meet its covenant tests 5 going forward. That condition as well as the 6 others that are recommended are certainly 7 appropriate. 8 In the near term, Colony has 9 demonstrated in the recent negotiations with the 10 lenders a continued willingness to infuse capital 11 as needed. I am satisfied that if Hilton and its 12 immediate holding company again face a cash flow 13 shortfall, the gap to be bridged should be 14 marginal and that sufficient flexibility should 15 exist for them to meet the challenge, especially 16 knowing of Colony's commitment to their continued 17 success. 18 Based upon the entire record of this 19 proceeding, I am satisfied that Hilton and its 20 affiliates have the wherewithal demanded under 21 our financial stability standard. Accordingly, I 22 move that the Commission adopt the proposed 23 resolutions, with the modifications noted on the 24 record, and grant an initial one year casino and 25 casino hotel alcoholic beverage license to RIH 156 Item No. 20 1 Acquisitions and issue statements of compliance 2 as to Ms. Morris, Mr. Oates and Riccio, all as 3 set forth in the findings and rulings, and 4 subject to the conditions in the resolutions, and 5 I so move. 6 Is there a second? 7 COMMISSIONER SOMMELING: Second. 8 CHAIR KASSEKERT: The motion has been 9 made and seconded. This is a roll call vote. 10 MR. NANCE: Commissioner Sommeling? 11 COMMISSIONER SOMMELING: Yes. 12 MR. NANCE: Commissioner Epps? 13 COMMISSIONER EPPS: Chair, just briefly, 14 I'm concurring with the result today. I was -- 15 I'm a little bit troubled that I had some 16 reservation in getting to my conclusion based on 17 the way that we got to where we are today, but in 18 light of the testimony, I'm confident that the 19 decision, the motion as presented, is the 20 accurate outcome. 21 So I will vote in concurrence with that 22 outcome. 23 CHAIR KASSEKERT: Thank you, 24 Commissioner. 25 MR. NANCE: Commissioner Fedorko? 157 Item No. 20 1 COMMISSIONER FEDORKO: Yes. 2 MR. NANCE: Vice Chair Frulio? 3 VICE CHAIR FRULIO: Yes. 4 MR. NANCE: Chair Kassekert? 5 CHAIR KASSEKERT: Yes. 6 MR. NANCE: The record will reflect the 7 motion carries unanimously. 8 CHAIR KASSEKERT: Going on to the public 9 portion. 10 Congratulations. 11 MR. NANCE: In accordance with Resolution 12 Number 05-12-14-19, the next closed session of 13 the Commission shall be held on Wednesday, May 14 3rd, 2006, at 9:15 a.m. in the Commission 15 offices. 16 It is now time for the public 17 participation portion of the meeting. 18 CHAIR KASSEKERT: Is there anyone from 19 the public who wishes to be heard? 20 (No response.) 21 CHAIR KASSEKERT: Seeing no one, I'll 22 declare this portion of the meeting closed. 23 COMMISSIONER SOMMELING: Motion to 24 adjourn. 25 VICE CHAIR FRULIO: Second. 158 Item No. 20 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Aye.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 (The Commission members vote unanimously 8 in favor of the motion.) 9 (Whereupon, the hearing was adjourned at 10 2:00 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 159 1 C E R T I F I C A T E 2 3 4 I, CHRISTINE STANCO, a Certified 5 Shorthand Reporter and Notary Public of the State 6 of New Jersey, do hereby certify that the 7 foregoing is a true and accurate transcript of 8 the stenographic notes as taken by and before me, 9 on the date and place hereinbefore set forth. 10 11 12 13 14 15 16 17 CHRISTINE STANCO, C.S.R. 18 LICENSE NO. XI00789 19 20 21 22 23 24 25