1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 07-04-04 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, April 4, 2007 10 Atlantic City Commission Offices 11 Joseph P. Lordi Public Meeting Room - First Floor 12 Tennessee Avenue and Boardwalk 13 Atlantic City, New Jersey 08401 14 10:35 a.m. to 12:32 p.m. 15 16 17 Certified Shorthand Reporter: Darlene Sillitoe 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 www.cipolloni-associates.com 2 1 B E F O R E : 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 MICHAEL A. FEDORKO, VICE CHAIR MICHAEL C. EPPS, COMMISSIONER 4 RALPH G. FRULIO, COMMISSIONER WILLIAM T. SOMMELING, COMMISSIONER 5 PRESENT FOR THE CASINO CONTROL COMMISSION: 6 DARYL W. NANCE, ADMINISTRATIVE ANALYST DANIEL J. HENEGHAN, PUBLIC INFORMATION OFFICER 7 OFFICE OF THE GENERAL COUNSEL: 8 DIANNA W. FAUNTLEROY, GENERAL COUNSEL/EXECUTIVE SECRETARY 9 LEONARD J. DIGIACOMO, ASSISTANT GENERAL COUNSEL MARY WOZNIAK, ASSISTANT GENERAL COUNSEL 10 STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL TERESA M. NAGENGAST, SENIOR COUNSEL 11 LON E. MAMOLEN, SENIOR COUNSEL BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 12 DIVISION OF GAMING ENFORCEMENT: 13 DEPUTY ATTORNEYS GENERAL JACK ADAMS, DEPUTY ATTORNEY GENERAL 14 JAMES ARMSTRONG, DEPUTY ATTORNEY GENERAL JAMES C. FOGARTY, DEPUTY ATTORNEY GENERAL 15 16 17 18 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S : 2 ITEM NO. 3 JOSEPH CORBO, ESQ. FOR: MARINA DISICTRIC DEVELOPMENT CO. 3 ITEM NO. 7 TERESA M. NAGENGAST, SENIOR COUNSEL 4 JACK ADAMS, DEPUTY ATTORNEY GENERAL 5 ITEM NO. 8 TERESA M. NAGENGAST, SENIOR COUNSEL JACK ADAMS, DEPUTY ATTORNEY GENERAL 6 DENNIS DALY, ESQ. FOR: IKON OFFICE SOLUTIONS, INC. 7 ITEM NO. 11 MARY WOZNIAK, ASSISTANT GENERAL COUNSEL 8 JACK ADAMS, DEPUTY ATTORNEY GENERAL PAUL O'GARA, ESQ. 9 FOR: HAMLET HOLDINGS, LLC, ET AL 10 ITEM NO. 12 LEONARD J. DiGIACOMO, ASSITSANT GENERAL COUNSEL 11 JAMES C. FOGARTY NICHOLAS CASIELLO, JR., ESQ. 12 FOR: MGM MIRAGE 13 ITEM NO. 13 LEONARD J. DiGIACOMO, ASSITSANT GENERAL COUNSEL 14 JAMES C. FOGARTY NICHOLAS CASIELLO, JR., ESQ. 15 FOR: MGM MIRAGE 16 17 18 19 20 21 22 23 24 25 4 1 AGENDA PUBLIC MEETING NO. 07-04-04 2 APRIL 4, 2007, 10:35 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of public 9 10 4 March 21, 2007, and special March 15, 2007 2 Applications for employee and casino 5 Service industry licenses: 18 applications for intitial and/or 11 11 6 renewal of casino key and casino employee licenses 7 11 applications for intitial and/or 11 11 renewal of casino key and casino 8 employee licenses Applications for renewal of casino 9 Key employee licenses and for qualification: Kimberly A. Coker, Vice President 12 12 10 of Finance for Boardwalk Regency Corporation Mary R. Kramer, Vice President of 12 12 11 Design and Construction for RIH Acquisitin, NJ, LLC, and Resorts International Hotel, Inc. 12 3 Petition of Marina Disctrict Development 13 15 Company (d/b/a Borgata Hotel Casino & Spa) 13 for the issuance of a temporary casino key employee license to Andrew Schlesinger 14 pursuant to NJSA 5:12-89(e) and to permit him pursuant to NJAC 19:43-2.6 to assume 15 the duties and exercise the powers of Vice President, General Manager of teh Water Club 16 without first having been found qualified (PRN 0750701). 17 4 Stipulations of settlement and consent Agreements: 18 a) Leonard J. Coleman, Sr. (06-0103-EA) 15 17 b) Girish N. Hasijia (06-0620-EA) 15 17 19 c) Darnell A. Kelly (07-0103-EA) 15 17 D) Leon L. Richardson (06-0291-ER) 15 17 20 e) Tithi Syed (06-0438-RC) 15 17 f) Eric B. Rollins (06-0580-EA) 15 17 21 g) Karl M. Harrison (06-0423-ER) 15 17 h) Shawn M. Jenkins (06-0424-ER) 15 17 22 i) Tara J. Lewis (06-0287-ER) 15 17 j) Ernest M. Mason (06-0465-ER) 15 17 23 k) Samuel Jean (06-310-RC) 15 17 l) James F. Murphy, Jr. (06--579-EA) 15 17 24 m) Bonita L. Edwards (07-0002-ER) 15 17 n) Sheryll Y. Jackson (06-0196-ER) 15 17 25 o) Patricia A. Juarez (06-0170-ER) 15 17 5 1 CONTINUED AGENDA PUBLIC MEETING NO. 07-04-04 2 APRIL 4, 2007, 10:35 a.m. ITEM PAGE VOTE 3 5 Petitions for early reapplication: 4 a) James D. Smith (07-0031-RA) 18 20 b) David G. Neewilly (06-0514-RA) 18, 50 67 5 6 Stipulation of settlement in application adj. of Mariahilda Rivera-Irizarry for a casino 6 key employee license and for qualification (06-0513-EA) 7 7 Proposed adoption of opinion in Petition 24 25 of SD for removal from the voluntary 8 self-exclusion list (07-0110-LI) 8 Petition of Ikon Office Solutions, 25 50 9 Inc., for waiver of qualification of Steel Partners, II, LP (PRN 2120606) 10 9 Petitions of LGC Wireless, Inc., for adj. Waiver of qualifcation for: 11 a) Mayfield Fund (PRN 2220601) b) Crystal ventures (PRN 2210601) 12 c) Intel Capital Corporation (PRN 2020606) 13 d) Omers Administration Corporation (PRN 2020607) 14 10 Joint petition of RIH Acquisitions, adj. LLC, NJ and Resorts International Hotel, 15 Inc., for approval of a Second Amended and Restate Joint Servies Agreement 16 (PRN 0600601) 11 Amended Petition of Hamlet Holdings, 73 111 17 LLC, Hamlet Merger, Inc., TPG Hamlet Holdings, LLC, TPG Hamlet Holdings B, 18 LLC, Apollo Hamlet Holdings, LLC, and Apollo Hamlet Holdings B, LLC, for 19 certain declaratory rulings (PRN 0300701) 12 Petition of MGM MIRAGE for a waiver of 68 72 20 the qualification requirement for Merlina Gallegos as its Vice President-Corporate 21 Philanthropy (PRN 0680706) 13 Petition of MGM MIRAGE for a waiver 68 72 22 of the qualification requirement for Debbie Hottensen as its Vice President-Corporate 23 Strategy (PRN 9680707) 24 25 6 1 CONTINUED AGENDA PUBLIC MEETING NO. 07-04-04 2 APRIL 4, 2007, 10:35 a.m. ITEM PAGE VOTE 3 14 Proposed temporary adoption of amendments 111 113 4 to NJAC 19:45-1.12 and NJAC 19:46-1.18; authorization of a test for card changing 5 at least once every 48 hours for Blackjack, Mini-baccarat, Spanish 21, and Double 6 Attack Blackjack 15 Applications for suspension: 7 a) Ricardo Garcia (07-0170-RC) 21 23 b) Edgard Guerrero (07-0171-RC) 21 23 8 c) Ever Turcios (07-0172-RC) 21 23 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 1 E X H I B I T S : 2 ITEM NO. DESCRIPTION EVD 3 ITEM NO. 2 4 EL-1 Remand for hearings 18 license X applications 5 EL-2 Grant 11 licenses X 6 ITEM NO. 8 7 Affidavit X 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (Exhibits retained by Commission.) 25 8 1 (Public Meeting 07-04-04 was commenced 2 at 10:35 a.m.) 3 MR. NANCE: I'd like to read an opening 4 statement: 5 This is to advise the general public 6 that in compliance with Chapter 231 of the 7 Public Laws of 1975 entitled the "Open Public 8 Meetings Act," the New Jersey Casino Control 9 Commission on October 16th, 2006, filed with 10 the Secretary of State at the State House in 11 Trenton an annual meeting schedule. On October 12 16th, copies were mailed to the Press of 13 Atlantic City, the Newark Star Ledger. 14 Members of the press will be permitted 15 to take photographs, and we would ask that this 16 be done in a manner which is not disruptive or 17 distracting to the Commission. 18 The use of cellular telephones in the 19 public meeting room while the Commission is in 20 session is prohibited. 21 Any members of the public who wish to 22 address the Commission will be given the 23 opportunity to do so before the Commission 24 adjourns for the day. 25 Please stand for the Pledge of 9 ITEM NO. 1 1 Allegiance. 2 (The flag salute was recited.) 3 CHAIR KASSEKERT: Good morning. 4 MR. NANCE: Good morning. 5 The matters discussed in closed session 6 were: 7 Employee and enterprise licensing 8 matters. 9 The Commissioners approved the March 10 21st, 2007, closed session minutes. 11 Litigation update regarding: 12 Warren Lackland and Lewis M. Springer, 13 Jr., versus State of New Jersey and the Casino 14 Control Commission; 15 Wirtz versus Casino Control Commission 16 and the Division of Gaming Enforcement; 17 Gloria Ford versus State of New Jersey, 18 Casino Control Commission, et al.; 19 Tyron J. Floyd versus the Casino Control 20 Commission and Sands Hotel Casino; 21 Husain versus the Casino Control 22 Commission, et al. 23 And in the matter of petition of SD for 24 removal from the voluntary self-exclusion list. 25 Item No. 1, ratification of the minutes 10 ITEM NO. 1 1 of March 21st, 2007, public meeting. 2 VICE CHAIR FEDORKO: Motion to approve. 3 COMMISSIONER FRULIO: Second. 4 CHAIR KASSEKERT: The motion has been 5 made and seconded. All in favor? 6 (Ayes.) 7 CHAIR KASSEKERT: Opposed? 8 COMMISSIONER SOMMELING: Madame Chair, 9 I'll abstain on the March 15th 10 CHAIR KASSEKERT: Is it the March 15th 11 meeting? 12 MR. NANCE: I'm going to -- we're going 13 to do that separately. 14 CHAIR KASSEKERT: Separately? Okay. 15 MR. NANCE: Ratification of the special 16 meeting of March 15th, 2007. 17 VICE CHAIR FEDORKO: Motion to approve. 18 COMMISSIONER FRULIO: Second. 19 CHAIR KASSEKERT: The motion has been 20 made and seconded. All in favor? 21 (Ayes.) 22 CHAIR KASSEKERT: Opposed? 23 COMMISSIONER SOMMELING: I abstain. 24 CHAIR KASSEKERT: Very good. Motion 25 carries. 11 ITEM NO. 2 1 MR. NANCE: Item No. 2, application for 2 employee and casino service industry licenses. 3 This agenda item will be entered as Exhibit 4 List 1 and 2. 5 Exhibit List 1 consists of 18 6 applications for initial and/or renewal of 7 casino key and casino employee licenses. 8 The Division has objected to licensure. 9 COMMISSIONER FRULIO: Motion to remand 10 for hearings. 11 VICE CHAIR FEDORKO: Second. 12 CHAIR KASSEKERT: The motion has been 13 made and seconded. All in favor? 14 (Ayes.) 15 CHAIR KASSEKERT: Opposed? 16 (No response.) 17 CHAIR KASSEKERT: The motion carries. 18 MR. NANCE: Exhibit List 2 consists of 19 11 applications for initial and/or renewal of 20 casino key and casino employee licenses. 21 The staff and the Division have 22 recommended that these licenses be granted. 23 COMMISSIONER FRULIO: Motion to grant 24 applications. 25 VICE CHAIR FEDORKO: Second. 12 ITEM NO. 2 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Ayes.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 MR. NANCE: For consideration are the 8 following applications for renewal of casino 9 key employee licenses and for qualification: 10 For Kimberly A. Coker, Vice President of 11 Finance for Boardwalk Regency Corporation and 12 Mary R. Kramer, Vice President of Design and 13 Construction for RIH Acquisition, New Jersey, 14 LLC, and Resorts International Hotel, Inc. 15 Staff and the Division has recommended 16 that these applications be granted. 17 COMMISSIONER FRULIO: Motion to grant 18 key license renewals and for qualification. 19 VICE CHAIR FEDORKO: Second. 20 CHAIR KASSEKERT: Motion is made and 21 seconded. This is a roll call vote. 22 MR. NANCE: Commissioner Sommeling? 23 COMMISSIONER SOMMELING: Yes. 24 MR. NANCE: Commissioner Epps? 25 COMMISSIONER EPPS: Yes. 13 ITEM NO. 3 1 MR. NANCE: Commissioner Frulio? 2 COMMISSIONER FRULIO: Yes. 3 MR. NANCE: Vice Chair Fedorko? 4 VICE CHAIR FEDORKO: Yes. 5 MR. NANCE: Chair Kassekert? 6 CHAIR KASSEKERT: Yes. 7 MR. NANCE: The record will reflect that 8 the motion is unanimous. 9 Item No. 3, Petition No. 0750701 of 10 Marina District Development Company is 11 requesting the issuance of a temporary casino 12 key employee license to Andrew Schlesinger 13 pursuant to NJSA 5:12-89(e) and to permit him 14 pursuant to NJAC 19:43-2.6 to assume the duties 15 and exercise the powers of the Vice President, 16 General Manager of the Water Club without first 17 having been found qualified. 18 CHAIR KASSEKERT: Good morning, Mr. 19 Corbo. 20 MR. CORBO: Good morning, Chair 21 Kassekert, Commissioners. 22 This is our petition. I want to 23 introduce to our new Vice President and General 24 Manager of the Water Club, Andrew Schlesinger. 25 I think it's a rather routine petition, but as 14 ITEM NO. 3 1 is our custom, I wanted to bring Mr. 2 Schlesinger as a new Vice President, key 3 licensee, and qualifier, provided that you so 4 rule, here to meet you. 5 He will be the General Manager of the VP 6 of the Water Club, which as you know, is under 7 construction, 800-room luxury hotel tower. Mr. 8 Schlesinger's background will fit nicely into 9 that, 30-year veteran in the hospitality field, 10 having worked for such companies as 11 Intercontinental, Four Seasons, Ian Schrager, 12 Mondrian Hotel in Las Angelos, New York, Miami. 13 And, again, just wanted to bring him here to 14 greet you all. 15 CHAIR KASSEKERT: Thank you. Appreciate 16 that. 17 Good morning, Mr. Schlesinger. 18 MR. SCHLESINGER: Good morning. 19 CHAIR KASSEKERT: Any questions? 20 COMMISSIONER SOMMELING: No questions, 21 Madame Chair. 22 COMMISSIONER FRULIO: Motion to grant 23 temporary key license and qualification. 24 VICE CHAIR FEDORKO: Second. 25 CHAIR KASSEKERT: Motion is made and 15 ITEM NO. 4 1 seconded. This is a roll call vote. 2 MR. NANCE: Commissioner Sommeling? 3 COMMISSIONER SOMMELING: Yes. 4 MR. NANCE: Commissioner Epps? 5 COMMISSIONER EPPS: Yes. 6 MR. NANCE: Commissioner Frulio? 7 COMMISSIONER FRULIO: Yes. 8 MR. NANCE: Vice Chair Fedorko? 9 VICE CHAIR FEDORKO: Yes. 10 MR. NANCE: Chair Kassekert? 11 CHAIR KASSEKERT: Yes. 12 MR. NANCE: The record will reflect that 13 the motion is unanimous. 14 MR. CORBETT: Thank you very much. 15 CHAIR KASSEKERT: Thank you and 16 congratulations. 17 MR. SCHLESINGER: Thank you. 18 MR. NANCE: Item No. 4, stipulation of 19 settlement and consent agreements. When I call 20 your name, please come forward, stand behind 21 this middle table, spreading across the room so 22 that you may be seen: 23 Leonard Coleman, Sr., Girish Hasija, 24 Darnell Kelly, Leon Richardson, Tithi Syed, 25 Eric Rollins, Karl Harrison, Shawn Jenkins, 16 ITEM NO. 4 1 Tara Lewis, Ernest Mason, Samuel Jean, James 2 Murphy, Jr., Bonita Edwards, Sheryll Jackson, 3 and Patricia Juarez. 4 CHAIR KASSEKERT: Has everyone whose 5 name has been called come forward at this time? 6 I'm going to ask that you each state 7 your name for the record, starting with your 8 you, sir. 9 UNIDENTIFIED MALE: I'm here for her. 10 CHAIR KASSEKERT: Your name? 11 MS. SYED: Tithi Syed. 12 CHAIR KASSEKERT: Thank you. 13 MS. JACKSON: Sheryll Jackson. 14 MR. ROLLINS: Eric Rollins. 15 MR. RICHARDSON: Leon Richardson. 16 MR. COLEMAN: Leonard Coleman, Sr. 17 MR. HASIJ: Girish Hasija. 18 MS. LEWIS: Tara Lewis. 19 MR. MASON: Ernest Mason. 20 MR. JENKINS: Shawn Jenkins. 21 MS. EDWARDS: Bonita Edwards. 22 CHAIR KASSEKERT: Thank you. 23 I'm going to ask in a moment -- we're 24 going to vote in a moment on the stipulations 25 which you've agreed to with the Division of 17 ITEM NO. 4 1 Gaming Enforcement. I'm going to ask at this 2 point if any of you wish to be heard on your 3 matter. You do not have to say anything if you 4 don't want to. 5 Does anyone wish to be heard? Okay. 6 Seeing no one -- 7 Mr. Ingis? Anything to add? 8 MR. INGIS: No, Madame Chair. 9 CHAIR KASSEKERT: Mr. Armstrong, 10 anything to add? 11 MR. ARMSTRONG: No, Chair. 12 CHAIR KASSEKERT: Thank you. 13 Any questions? 14 COMMISSIONER SOMMELING: Move to approve 15 the stipulations, Madame Chair. 16 VICE CHAIR FEDORKO: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Ayes.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: The motion carries. 23 Thank you very much for coming. Good 24 luck. 25 FROM THE FLOOR: Thank you. 18 ITEM NO. 5 1 FROM THE FLOOR: Have a good day. 2 MR. NANCE: Item No. 5, petition for 3 early reapplication for James B Smith and David 4 G. Neelwilly. 5 Miss Frigen? 6 MS. FRIGEN: Let me ask. I don't see 7 them here, but let me ask whether James Smith 8 is present or represented here today? He 9 apparently is not here. 10 For your consideration is his petition 11 seeking permission to reapply early for a 12 license, registration and/or noncredential 13 hotel employment. 14 The Division has interposed an objection 15 to this petition in its entirety. 16 CHAIR KASSEKERT: Thank you. 17 Mr. Armstrong? 18 MR. ARMSTRONG: Thank you, Chair and 19 Commissioners. 20 You have our letter of February 8th of 21 this year. The Commission denied Mr. Smith 22 licensure on January 6th, 2004, based on our 23 objection to his application primarily because 24 he failed to disclose an arrest in California 25 for aggravated assault with a deadly weapon, a 19 ITEM NO. 5 1 disqualifying offense. 2 We recommend you deny his petition. 3 It's our position that he's only be 4 disqualified now for a little over three years. 5 The law calls for a five-year disqualification. 6 Under the issue of section 86b nondisclosure, 7 you can't show rehabilitation from it. And we 8 would recommend you deny the petition at this 9 time and not waive the disqualification for or 10 grant any relief. 11 CHAIR KASSEKERT: Thank you. 12 Any questions. 13 COMMISSIONER SOMMELING: No questions, 14 Madame Chair. 15 CHAIR KASSEKERT: Well, since the 16 Applicant's not here, anyone care to make a 17 motion? 18 VICE CHAIR FEDORKO: I'm going to make a 19 motion, Madame Chair, to deny Mr. Smith 20 permission for early application since he has 21 chosen not to be here. 22 CHAIR KASSEKERT: Is there a second? 23 COMMISSIONER FRULIO: Second. 24 COMMISSIONER SOMMELING: Second. 25 CHAIR KASSEKERT: The motion has been 20 ITEM NO. 5 1 made and seconded. All in favor? 2 (Ayes.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: The motion carries. 6 MS. FRIGEN: Next we would have David 7 Neewilly. Let me also ask whether Mr. Neewilly 8 is present or represented? He, too, is not 9 here today. 10 For your consideration is his petition 11 for early reapplication, and the Division is 12 also objecting to it in its entirety. 13 CHAIR KASSEKERT: Thank you. 14 Mr. Armstrong? 15 MR. ARMSTRONG: Thank you, Chair. 16 Commissioners. 17 You have our letter of January 25th of 18 this year recommending that you deny this 19 petition as well. 20 You found Mr. Neewilly disqualified on 21 September 15th of 2004. That's less than three 22 years of disqualification. Based on our 23 recommendation that he be denied -- he be 24 revoked because of the disturbance he caused at 25 Bally's back in 2004. Since then, as our 21 ITEM NO. 15 1 letter details, he was charged four times for 2 compulsory school attendance. He also owes 3 over $400 in fines currently. 4 It's our position there is insufficient 5 evidence in this record to sustain any relief 6 that he's requesting at this time and that he 7 be denied his petition. 8 Thank you. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 COMMISSIONER SOMMELING: No questions, 12 Madame Chair. 13 VICE CHAIR FEDORKO: Madame Chair, I 14 make the same motion to deny Mr. Neewilly's 15 petition for early reapplication since he has 16 not come here. 17 COMMISSIONER FRULIO: Second. 18 CHAIR KASSEKERT: The motion has been 19 made and seconded. All in favor? 20 (Ayes.) 21 CHAIR KASSEKERT: Opposed? 22 (No response.) 23 CHAIR KASSEKERT: The motion carries. 24 MR. NANCE: For your consideration Item 25 No. 15, application for suspension for Ricardo 22 ITEM NO. 15 1 Garcia, Edgard Guerrero, and Ever Turcios. 2 MS. FRIGEN: Okay. Let me ask for the 3 record whether Mr. Garcia, Guerrero, or Turcios 4 is present or represented in the meeting room 5 today? Apparently not. 6 These are applications for suspension 7 brought by the Division. 8 CHAIR KASSEKERT: Mr. Armstrong, you may 9 proceed. 10 MR. ARMSTRONG: Thank you, Madame Chair, 11 Commissioners. 12 You have our complaint of March 28th. 13 We're seeking revocation of their registration. 14 On March 19th they were arrested at their 15 employment at the Borgata. The Ocean City 16 Police have charged all three of them were with 17 aggravated assault in the second degree. 18 Charges are right now pending in grand jury in 19 Cape May County. And because of the 20 seriousness of these charges, we ask that their 21 credentials be suspended while our 22 investigation seeking revocation of their caes 23 are pending. 24 CHAIR KASSEKERT: Thank you. 25 Any questions? 23 ITEM NO. 15 1 COMMISSIONER SOMMELING: No questions, 2 Madame Chair. 3 CHAIR KASSEKERT: Mr. Armstrong, let me 4 just clarify. We have not received yet the 5 arrest record or any other documentation from 6 the court? 7 MR. ARMSTRONG: That's correct, Chair. 8 Nor -- yeah. The Division hadn't, either. As 9 is their policy. 10 CHAIR KASSEKERT: Okay. 11 MR. ARMSTRONG: Not while the 12 investigation is still going on and the matter 13 hadn't been presented to the Cape May County 14 Grand Jury. 15 CHAIR KASSEKERT: Thank you. 16 Any questions? 17 COMMISSIONER SOMMELING: No questions, 18 Madame Chair. 19 VICE CHAIR FEDORKO: I'm going to make a 20 motion to grant the applications for suspension 21 based upon the existing record. 22 COMMISSIONER SOMMELING: Second. 23 CHAIR KASSEKERT: The motion has been 24 made and seconded. All in favor? 25 (Ayes.) 24 ITEM NO. 6-7 1 CHAIR KASSEKERT: Opposed? 2 (No response.) 3 CHAIR KASSEKERT: The motion carries. 4 MR. ARMSTRONG: Thank you. 5 MR. NANCE: Item No. 6, has been 6 adjourned. 7 Item No. 7, proposed adoption of the 8 opinion in petition of SD for removal from the 9 voluntary self-exclusion list. 10 Miss Nagengast? 11 MS. NAGENGAST: Good morning, Chair and 12 Commissioners. 13 As you know, this matter is currently 14 pending before the New Jersey Superior Court 15 Appellate Division. Pursuant to Court Rule 16 2:5-1(b) the Commission is entitled to issue a 17 written opinion clarifying its decision denying 18 Petitioner's motion which had been heard at the 19 January 17th, 2007, public meeting. 20 The opinion that you have you before 21 today isn't formally adopted. It will be filed 22 with the court later. 23 CHAIR KASSEKERT: Thank you. 24 Any questions? 25 COMMISSIONER SOMMELING: No questions, 25 ITEM NO. 8 1 Madame Chair. 2 VICE CHAIR FEDORKO: Fedorko motion to 3 adopt the Commission's opinion. 4 COMMISSIONER FRULIO: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Ayes.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 MR. NANCE: Item No. 8, petition of Ikon 12 Office Solutions, Inc., for waiver of 13 qualification of Steel Partners, II, LP. 14 Miss Nagengast? 15 MS. NAGENGAST: Chair and Commissioners, 16 Mr. Daly is here on behalf of the Petitioners, 17 and Jack Adams on behalf of the Division. 18 CHAIR KASSEKERT: Thank you. Good 19 morning, Mr. Daly. 20 MR. DALY: Good morning, Chair, 21 Commissioners. 22 (There is a microphone malfunction.) 23 MR. DALY: This does not comport well 24 for my client. 25 COMMISSIONER FRULIO: It says it all. 26 ITEM NO. 8 1 MR. DALY: I didn't touch it. 2 MR. NANCE: There you go. 3 MR. DALY: Commissioners, you recall 4 last time I was here the microphone worked, and 5 you were gracious enough to give me at the end 6 of the argument additional time to come forward 7 with some additional materials that might bear 8 on the several petitions for waiver of 9 qualification that were then pending in two 10 separate matters, LGC Wireless, as well as this 11 current matter, Ikon Office Solutions. 12 LGC Wireless, as you know, has 13 essentially asked to withdraw from the process 14 because we were unable to come up with any 15 documentation that might have even addressed 16 the concerns that various Commissioners had 17 expressed, primarily Commissioner Epps, 18 regarding the investors' ability to control the 19 licensed applicant. 20 Both LGC and Ikon felt that they had 21 gone as far as they could go with respect to 22 asking their investment owners to supply 23 additional documentation, so LGC confronted 24 with what I described as the Gordian knot that 25 was created by the fact that your regulations 27 ITEM NO. 8 1 on the one hand require disclosure but their 2 agreements -- the investment companies' 3 agreements with their investors -- require that 4 they not disclose the individuals created this 5 Gordian knot, if you will, that they simply 6 could not untie. 7 With respect to Ikon, I have just 8 received -- excuse me -- last night, an 9 affidavit from counsel. Excuse me. Counsel 10 for Ikon, which I'd like to put into the record 11 if I may, Chair. It's very brief. It's less 12 than a full page, and I can summarize it quite 13 succinctly. If you would allow me, I would 14 have it marked into evidence and distributed. 15 CHAIR KASSEKERT: Sure. And do you have 16 a copy for me? 17 Thank you. 18 MR. NANCE: Mark that as A-1. 19 MR. DALY: A-1? He's going to mark it 20 as A-1, I think. 21 CHAIR KASSEKERT: Thank you. 22 MR. DALY: Can you two share? 23 COMMISSIONER FRULIO: Story of my life. 24 CHAIR KASSEKERT: (Reviewing.) Let me 25 just ask if there's any objection to the 28 ITEM NO. 8 1 admission of this document so that we can have 2 it admitted as part of the record? 3 MR. ADAMS: No objection, Chair. 4 CHAIR KASSEKERT: Okay. Seeing none, 5 A-1 is moved into the record. 6 Go ahead, Mr. Daly. 7 MR. DALY: Thank you, Chair. 8 I offer this affidavit primarily in 9 response to Commissioner Epps' concerns that 10 were expressed the last time we argued this 11 matter that we need to show not just an 12 intention not to control the company on the 13 part of the investment owners but also the 14 inability to exercise that measure of control. 15 I don't know that this gets us all the way 16 there, Commissioners, but I think it does add 17 to the record to this extent. 18 What you now have is evidence that in 19 the five years that Ikon has been partly owned 20 by Steel, which is the time that the counsel 21 has been employed at Ikon, they have never 22 voted other than with the management slate. 23 That is the import of the recitation contained 24 in the affidavit, that each director who's ever 25 been elected there has received a minimum of 95 29 ITEM NO. 8 1 percent of the vote. Since in this time frame 2 Steel has had plus or minus ten percent -- 3 right now it's just under 10. It's been as low 4 as 8 and as high as 10.5, I believe. They've 5 not advocated any other directorship. So I 6 think that while, again, I don't -- I'm not 7 contending that it gets you all the way there, 8 Commissioner Epps, to saying there is 9 absolutely no ability, I think when you put 10 together their present intention as indicated 11 in the exhibit -- or the affidavit that was 12 filed by an officer of Steel to the effect that 13 they have no intention of ever exercising that 14 ability to control and that if, in fact, that 15 ever changes, they will provide you with 30 16 days' notice, certainly sufficient time for the 17 Commission to call its licensed applicant Ikon 18 forward and tell them that that company must 19 either qualify or they must cease doing 20 business with the casinos. I think that gives 21 you that added measure of comfort that you need 22 not be concerned about an unqualified owner 23 controlling an otherwise qualified casino 24 service industry. 25 I would also like to turn briefly, if I 30 ITEM NO. 8 1 may, to the arguments -- the regulatory 2 arguments that I advanced wherein I suggested 3 to you that if you look at the overall 4 structure of the Act, you see -- and I don't 5 think there's much argument on this point -- 6 that there's a sliding scale of scrutiny that 7 is applied to various licensees and other 8 participants in the industry. So that you have 9 the highest level of scrutiny reserved for the 10 most significant players in this industry, 11 casino licensees are regulated far more 12 strictly than anyone else. Gaming companies, 13 gaming-related CSIs are regulated far more 14 strictly than nongaming reg -- nongaming 15 companies. 16 What -- that overall approach to 17 regulation is carried forth in many ways in the 18 regulations, but it's not carried forth in 19 certain of the regulation, including those that 20 are at issue here. When we look at the 21 institutional investor provision, for example, 22 the regulation that adopted into the CSI 23 structure system of regulation, the business of 24 institutional investors simply incorporated the 25 statutory references, and the statutory 31 ITEM NO. 8 1 references to waiver of those investors. I 2 suggest to you that it would have made more 3 sense to have, again, some kind of sliding 4 scale that recognized that you don't have to be 5 as concerned about institutional investors in 6 nongaming companies as you do in casinos or in 7 gaming-related casino related industries, that 8 the regulations do not accommodate that 9 approach at all. 10 More importantly, because I do believe 11 that the better argument here is that you can 12 see your way clear to waive qualification of 13 Steel because it lacks actual control, 14 predicated on the documents that I've already 15 alluded to. And also the fact that the 16 regulations do give you that authority to 17 waive -- waive the qualifications of those who 18 lack control, but yet the regulation, as we 19 look at it today, applies with the same and 20 equal force to gaming-related companies as it 21 does to nongaming-related companies. So we've 22 sort of lost the sense of that sliding scale of 23 scrutiny. And I suggest to you that you can 24 get that back, if you will. 25 First of all, I do believe that the 32 ITEM NO. 8 1 entire regulatory apparatus needs to be looked 2 at anew as it applies to nongaming companies. 3 I agree with the Chair's remarks in that regard 4 last time. But I don't think that while we're 5 waiting that process that companies such as 6 Ikon should bear the brunt and not be allowed 7 to continue to do business while the 8 regulations are drafted and adopted. 9 There is one regulation which does 10 follow that sliding scale of scrutiny that I 11 talked about as it relates to nongaming 12 companies, and it's the regulation that 13 identifies who, in fact, has to be a qualifier. 14 And it really gets to the essence of what this 15 case is all about. If it were a gaming-related 16 company, it would have to qualify all the 17 owners above the line of the licensee. All the 18 companies that might be above it. Imagine a 19 corporate chart, and I know you've seen many of 20 these corporate organizational charts, some of 21 which are more complicated than others. But 22 imagine one that simply has three levels; the 23 licensee, a holding company, and a holding 24 company above that. That contains the actual 25 owners of the company, the real people that 33 ITEM NO. 8 1 control everything. In that circumstance, if 2 it's a gaming-related company, your regulations 3 would require you -- require the applicant to 4 file on behalf of the applicant the 5 intermediate holding company, and the ultimate 6 apparent. In nongaming CSIs, however, that's 7 not the case. You only go up one level. 8 The point of all this is it would be a 9 simple matter to avoid this whole process of 10 capturing people like Steel and other investors 11 if all the applicant company did was drop a 12 subsidiary. You'd be looking at the subsidiary 13 as the applicant, and then the holding company, 14 in this case, Ikon, and you would never get to 15 Steel. 16 I suggest to you that a regulatory 17 structure that that -- that is so formulated 18 that it would be that easy to avoid having 19 Steel qualify should suggest to you that 20 there's something wrong with the structure that 21 you have now. If we can get around it that 22 easily. And I could have told the client all 23 you have to do is drop a sub and you don't have 24 to worry about who might buy your stock. 25 Remember that Ikon is a publicly traded 34 ITEM NO. 8 1 company. It cannot control who buys its stock. 2 It can, however, control who has to be a 3 qualifier if it's a nongaming company by the 4 simple expedient method of dropping a sub 5 beneath it. 6 To me, that whole process is ludicrous. 7 It suggests that there is no real regulatory 8 purpose to requiring the investors in companies 9 such as this to be qualified. 10 Now, to undo all that, only you can 11 untie this particular Gordian knot, you have to 12 go through a formal adoption of regulatory 13 process. And what I'm asking you to do is in 14 the interim -- I suggest that you do that. I 15 urge you to do that as quickly as possible. 16 Because, again, given the popularity of this 17 type of investing structure that we went 18 through last time, and that you'll see again 19 and again as you go forward on this matter and 20 others, you need to tweak your regulations to 21 deal properly with that so that your casinos 22 and your CSIs that you regulate are not 23 deprived of what is otherwise a very viable 24 financing mechanism and one that's becoming 25 increasingly common in all industries, and 35 ITEM NO. 8 1 certainly going to be here in the casino 2 industry. But until you can do all that, you 3 have to be creative and come up with some other 4 way, I think, of not befalling individual 5 companies, perfectly good companies like 6 Ikon -- and, unfortunately, LGC, but it's too 7 late for them -- for having to go to the 8 Hobson's choice of either somehow buying out 9 these investors who won't cooperate or giving 10 up their business with Atlantic City casinos. 11 But that's the situation that you put them at 12 right now, unless, of course, you told me I 13 could go ahead. I wouldn't do this, because I 14 think there's some ethical concerns here, while 15 the matter is pending. But if you would 16 authorize it, I'd go back and tell the company 17 right now to just drop a sub, and look where 18 you get? It's just a ludicrous situation. 19 But I will tell you that, having learned 20 from this case, going forward I would not 21 advocate that any applicant for a casino 22 service industry nongaming license that is a 23 public corporation make an application. 24 Because, again, you are always putting yourself 25 at risk that some -- someone who will purchase 36 ITEM NO. 8 1 your stock, and you have no control over that, 2 and they will refuse to cooperate. Or they 3 will put a gun to your head, which I think 4 you've seen in other cases, of the licensed 5 applicant, demand more money from them. To me, 6 is -- it serves no valid regulatory process 7 and, in fact, undermines the integrity of the 8 whole system. 9 That's all I have. 10 CHAIR KASSEKERT: Let me ask before we 11 hear from Mr. Adams, questions first? Or do 12 you want to hear -- 13 COMMISSIONER EPPS: Well -- 14 CHAIR KASSEKERT: -- from the Division 15 first? 16 MR. ADAMS: Madame Chair, as you know, 17 Mr. McDonough filed a letter, and we did not 18 oppose the relief initially sought here. One 19 of the questions I had coming here this 20 morning, I think has already been answered in 21 this affidavit, that apparently they are under 22 ten percent. They fluctuated near the 23 ten-percent level from time to time. There are 24 other investors, as you are aware, in this case 25 that have significant percentages of this 37 ITEM NO. 8 1 company. 2 From my initial review of the company 3 itself, it appears that the in-house people do 4 not have a significant interest by way of stock 5 in the company. 6 Is that correct, Mr. Daly? 7 MR. DALY: That's generally correct. 8 Probably the single largest shareholder 9 in-house is the 401-K. 10 MR. ADAMS: Right. 11 MR. DALY: Which holds approximately 12 12 percent. 13 MR. ADMAS: Which is the 401-K of the 14 company itself. 15 MR. DALY: Right. The employee. 16 MR. ADAMS: Right. The employee. 17 So it does appear to be one of those 18 cases where you have a company that's 19 publically traded. It's operated by 20 individuals, the CEO, CFO, and the regular 21 officers, the board of directors, and these 22 major shareholders out there, one of which is 23 the subject of this petition, apparently are 24 content to allow that to exist and go forward. 25 So I think, as expressed by Mr. McDonough, we 38 ITEM NO. 8 1 didn't see a problem in this particular 2 instance with the waiver. 3 But if you have any questions, I'd be 4 happy to answer them. 5 CHAIR KASSEKERT: Commissioner Epps? 6 COMMISSIONER EPPS: Well, the problem 7 that I have is I didn't tie the Gordian knot. 8 I mean, you were directing like to my concerns. 9 But I didn't create the knot. I inherited it. 10 When I got here, it was what existed. 11 The issue is, and it still remains is 12 not -- is that the standard is not -- their 13 intent or their past practice or whatever. The 14 issue is whether or not they have the ability 15 to control. And that's what this turns on. 16 And I can't change that. And so that -- that's 17 where we still come down to the difficulty. 18 It's not intent or practice or performance, or 19 we're satisfied. We won't touch it. We 20 promise. That's not the standard, and that's 21 where we have a difficulty in this case. 22 And if we deviate now, then it becomes a 23 case-by-case analysis based on whatever 24 promises the next company comes and presents to 25 us. And it becomes a more -- it seems to me, a 39 ITEM NO. 8 1 more slippery slope. 2 A second comment I have is -- and I 3 would be interested to see what your thoughts 4 on this is -- nongaming-related CSIs for a long 5 time when gaming was reg -- became a regulated 6 industry in New Jersey was the key area that 7 everyone was concerned that we had to protect 8 to keep organized crime out. Because the 9 theory has always been organized crime is not 10 going to walk in the front door. They're going 11 to sneak in the back door through CSIs and 12 things of that nature. So the standard is a 13 little bit -- somewhat tough on that side to 14 prevent those type of things happening where 15 you don't have them on the gaming-regulated 16 side or what we ordinarily call the front door. 17 So it seems to me that that may have been a 18 primary concern on the CSI side of the 19 licensing process. 20 And then the other thing is, I guess, I 21 would like -- I guess I would enjoy for you to 22 enlighten me further on the concept of dropping 23 the subs that you're suggesting that we don't 24 get to follow the money further up even if they 25 do drop a sub as to what the source of that 40 ITEM NO. 8 1 money is? 2 MR. DALY: I'm suggesting that your 3 regulatory process, as it now exists, does not 4 follow the money that far up with regard to 5 nongaming casino service industries. 6 COMMISSIONER EPPS: No ability to follow 7 them up, you suggest -- 8 MR. DALY: No. You always have the 9 ability to call anybody forward that you want. 10 You can always denominate any company, any 11 entity, any person who is connected with any 12 licensee to be a qualifier. But you do not 13 require them to file upfront for qualification. 14 That's the issue that we're talking about here. 15 And I -- if I can return for a moment to 16 the point about the original purpose of the 17 concern about mob-related companies coming in 18 through the back door, that's true. That 19 certainly was in the minds of everybody. You 20 can glean that just from looking at the statute 21 itself, in that it talks about the only 22 nongaming-related CSIs that gain mention in the 23 Act with the exception of the shop owners that 24 are on premises, and I think that was a 25 separate concept, are those companies that were 41 ITEM NO. 8 1 traditionally considered to be front 2 organizations, front companies for organized 3 crime; linens supplies, vending machines, 4 concrete, construction companies. Those are 5 the ones that are listed there. And I'm 6 suggesting to you that that's what the 7 legislature was telling you, and not with a 8 wink/wink, either. They are the ones to watch 9 out for, to be sure. 10 But those were different times. The 11 industry has matured since then. You have 12 public companies now. Ikon is a public 13 company. Ikon is not the kind of a company 14 that Joe Mobster buys stock in. And, 15 certainly, he's not the kind of company that 16 goes to a high-level financial player like -- 17 this -- like -- 18 Who am I talking about here? 19 COMMISSIONER EPPS: Steel. 20 MR. DALY: Steel. Thank you. 21 -- Steel Partners to invest in. 22 COMMISSIONER EPPS: And I understand 23 that. And I'm not suggesting that -- I mean, 24 I'm not suggesting that that is the case in 25 this particular instance. But what I'm saying 42 ITEM NO. 8 1 is in times that are changing, we still have to 2 be mindful of where the money is coming from, 3 which are our primary source. And as times 4 change and people get sophisticated, maybe it's 5 not Joe Mobster but Joe Shady Money person can 6 be more sophisticated, and we have to be ever 7 vigilant of more sophisticated financial 8 shenanigans, if you will, for lack of a better 9 term. And I'm not suggesting that this is that 10 case. I'm just saying that we have to be 11 careful as we move forward on every case before 12 we create an opening through which someone else 13 can come in. And then we look around and say, 14 oh, we did that. 15 So what I'm suggesting is that maybe it 16 does need to be looked at and restructured, but 17 I think that we have to tread carefully as we 18 go to that ultimate end. And what we do here, 19 if we do as you suggest, might open a door that 20 we don't yet want to open before we can do it 21 in a more structured fashion. That's just my 22 concern. 23 MR. DALY: But with all due respect, how 24 does it open a door? You are requiring -- if 25 you grant the relief that I seek here, 43 ITEM NO. 8 1 everybody else that wants to come through the 2 same door has to come here and convince you and 3 convince the Division of Gaming Enforcement 4 that there's no need to be concerned about this 5 particular company. 6 COMMISSIONER EPPS: But what, then, is 7 the bright line standard that -- is it just 8 enough to say, well, we promise. We don't 9 intend to do it. Or we're satisfied with the 10 way we're doing it? Is that the way we do it? 11 MR. DALY: No. My suggestion is you 12 engage in a complete revamping with regulations 13 as they deal with nongaming companies. You 14 look at that as a whole. 15 COMMISSIONER EPPS: But your interim 16 solution -- 17 MR. DALY: In the interim, I think you 18 have to be creative and allow companies such as 19 this that are caught in this Gordian knot 20 situation -- whether you created it or whoever 21 created it -- it's there. And it's driving 22 them out of the industry to no gainful purpose 23 that I can see other than to maintain the 24 integrity of regulations that shouldn't be 25 there in the first place as it relates to this 44 ITEM NO. 8 1 kind of a situation. 2 You need -- you need to protect the 3 industry from those circumstances that you 4 described, but you don't need to protect them 5 from companies that are publicly traded and 6 that are dealing with investment companies that 7 are professional investment companies that deal 8 only with the highest level investors. They 9 have their own -- this is getting off on a 10 separate tack. And you'll hear more about this 11 later. But there's an industry standard that's 12 at play here with the private equity companies 13 where they do far more due diligence than most 14 state regulators -- and I won't say this one -- 15 but certainly most. Those company police 16 themselves. 17 And it may be that you can come to the 18 conclusion that at least with regard to 19 nongaming companies -- I won't jump all the way 20 to the casinos or gaming-related companies. 21 That's not before you now. But at least for 22 nongaming-companies, perhaps we don't need all 23 this heavy apparatus to determine whether or 24 not this company is a front or not or whether 25 or not, even it has Joe Salobby investitated, 45 ITEM NO. 8 1 whose money we don't want. I don't know why 2 you really care about that, quite frankly, if 3 it's just an investment strategy, and it's a 4 not nice person. You care about who -- the 5 people who control this industry, the people 6 who can siphon money off from this industry. 7 That's what you care about. And that's what 8 your regulations, I think, ought to be 9 structured to prevent ever getting in here. 10 And in this one instance, I can show you 11 that by the mere mechanism of dropping a sub, 12 if you think that guys bad, you're not going to 13 find him. And if your answer to that is, well, 14 then, we'll license everybody the same high 15 level that we do with casino licensees, well, 16 then you've just run afoul of that whole 17 sliding scale scrutiny approach that the 18 legislature deemed was appropriate, and that's 19 why they drafted the Act the way they did. 20 CHAIR KASSEKERT: I guess my concern is 21 if the standard in the regulations is a 22 demonstration of its inability to control, I 23 don't think we've gotten there yet. And I 24 can't -- I can't see, you know -- I agree with 25 Commissioners Epps. I think it's preemptive to 46 ITEM NO. 8 1 start waiving this without a clear and open 2 look at the regulations. And, as I said the 3 last time this matter was before us, if the 4 regulations should be changed, if they require 5 reexamination, then I think we do that in a 6 thoughtful and concise way and not sort of open 7 the door halfway, and then maybe later move 8 forward or maybe not move forward. And I'm 9 concerned that this would, you know -- would 10 establish a precedent. 11 Let me ask if any of the other 12 Commissioners have any other questions? 13 Mr. Adams, anything else to add 14 MR. ADAMS: Yeah. The only other 15 comment I would have, I suppose, in that regard 16 is, because I looked at this with that same 17 thought process is that this particular 18 company, in light of the other shareholders 19 that I mentioned, some of whom may qualify for 20 waivers in their own right, for other reasons 21 because we're out of the institutional 22 investor -- 23 CHAIR KASSEKERT: Sure. 24 MR. ADAMS: -- I mean, if this was an 25 institution investor, we wouldn't even be here 47 ITEM NO. 8 1 arguing this. 2 CHAIR KASSEKERT: That's true. 3 MR. ADAMS: So I'd like to take the 4 tack, because there's a catchall waiver under 5 our regs that, well, okay. They're not 6 institution investors, but what are they really 7 doing? What have they been done? Where do 8 they really fit in this whole picture here? 9 And, as I said, I came out to this picture 10 where the in-house people, the people actually 11 running Ikon, the publicly traded company, they 12 apparently are doing that, and the 13 stockholders, whoever they are, all of these 14 other stockholders, are content with that. And 15 when I say "all" the other stockholders, I'm 16 talking about, obviously, the ones that vote as 17 are referenced in this type of an affidavit. 18 So does this one individual company that's not 19 in the institutional investor category really 20 have an ability to control this particular 21 applicant? 22 And we looked at the other ones out 23 there as well as how it's, apparently, going as 24 a practical matter. How it's being operated. 25 And I think we were content enough to say that 48 ITEM NO. 8 1 we didn't have to have this company qualified. 2 As far as this sticking in a sub, you 3 know we have come to you on many occasions with 4 nongaming CSIs when we've seen these not just 5 one sub, many layers. 6 CHAIR KASSEKERT: Uh-huh. 7 MR. ADAMS: And we have come to you and 8 said we have to go up. And you do have that 9 ability. And many, many times you have said 10 yes. Go ahead. Make that person come in. 11 Sometimes you said no. So I'm not worried 12 necessarily -- 13 CHAIR KASSEKERT: Uh-huh. 14 MR. ADAMS: -- about that. We're going 15 to try to look to see exactly what 16 Commissioners Epps said. Where is that money 17 really coming from, and who's doing it? 18 It's a close call here. I think you can 19 do it. But it's up to you. 20 CHAIR KASSEKERT: Okay. 21 Any other questions? 22 COMMISSIONER SOMMELING: No questions, 23 Madame Chair. 24 CHAIR KASSEKERT: Are we ready to move 25 forward? 49 ITEM NO. 8 1 Commissioners Epps? You need -- 2 COMMISSIONER EPPS: I'm fine. 3 CHAIR KASSEKERT: Ready? Okay. 4 Do we have a motion? 5 COMMISSIONER EPPS: I'm going to move 6 that we deny the petition of Ikon Office 7 Solutions, Inc. I find Steel Partners, II, LP, 8 is not an institutional investor as defined by 9 NJSA 5:12-27.1, nor has it demonstrated its 10 inability to control Ikon Office Solutions, 11 Inc., which would warrant a waiver of 12 qualification pursuant to NJAC 19:51-1.4(b)(4). 13 Further, Steel Partners, II, LP, must 14 file the appropriate qualifyer form in 15 connection with Ikon Office Solutions, Inc., 16 license renewal application no later than May 17 4th, 2007. 18 And if they fail to do so, Ikon will be 19 prohibited from conducting any direct or 20 indirect business as of May 4, 2007, and must 21 cancel all existing contracts by May 18th, 22 2007. 23 COMMISSIONER SOMMELING: Second. 24 CHAIR KASSEKERT: The motion has been 25 made and seconded. All in favor? 50 ITEM NO. 5 1 (Ayes.) 2 CHAIR KASSEKERT: Opposed? 3 (No response.) 4 CHAIR KASSEKERT: The motion carries. 5 Thank you. 6 MR. DALY: Thank you. 7 MR. NANCE: For your consideration I 8 would like to recall Item 5B, petition for 9 early reapplication in David G. Neewilly. 10 CHAIR KASSEKERT: Mr. Neewilly, can you 11 come forward, and Mr. Armstrong again. 12 I think we need to first have a motion 13 to vacate the denial before we hear that 14 matter. Is there a motion? 15 VICE CHAIR FEDORKO: I'll make that 16 motion. 17 COMMISSIONER FRULIO: Second. 18 COMMISSIONER SOMMELING: Second. 19 CHAIR KASSEKERT: The motion has been 20 made and seconded. All in favor? 21 (Ayes.) 22 CHAIR KASSEKERT: Opposed? 23 (No response.) 24 CHAIR KASSEKERT: The motion carries. 25 And now we'll reconsider this matter. I 51 ITEM NO. 5 1 understand the gentleman was over at the cage 2 and not -- he was at least in the building; 3 correct? 4 MS. FRIGEN: That's correct. 5 CHAIR KASSEKERT: Thank you. 6 MS. FRIGEN: That's correct. And I 7 verified that with the cage area. 8 For your consideration again is Mr. 9 Neewilly's petition seeking permission to 10 reapply early for a license registration and/or 11 noncredential hotel employment. 12 As indicated earlier, the Division is 13 objecting to this petition in its entirety. 14 Mr. Neewilly is here today, I imagine to go 15 forward before the Commission and indicate why 16 he thinks his petition should be granted. 17 CHAIR KASSEKERT: Mr. Neewilly, what 18 would you like to tell us today? 19 And you need to stand first and be sworn 20 in. 21 22 DAVID NEEWILLY, was duly sworn to 23 testify in this matter. 24 25 MR. NANCE: Please state your name for 52 ITEM NO. 5 1 the record. 2 MR. NEEWILLY: David Neeweilly 3 MR. NANCE: Thank you. You may be 4 seated. 5 CHAIR KASSEKERT: What would you like to 6 tell us today? 7 MR. NEEWILLY: I came purposely to 8 appeal to the Commission to reconsider the 9 decision so that I can get my license back. 10 In a case like, I wrote certain letters 11 to the Commissioners telling them that I'm a 12 family member going into the casino of Bally's 13 and at this holiday it was not a plan for me to 14 disrupt the area. I went there normally like 15 people going into the casino to play in spare 16 time and get a drink. But when I find out 17 myself that our investigator and security came 18 to me to put me out of there, my response was I 19 had some money in the machine and also my bag. 20 They didn't give me my bag and my money, and 21 they refused and asked me to get out. 22 In that time when I looked, they called 23 the state police to get me out of there, and I 24 found myself outside. I left my bag in there 25 and even the money. I didn't get it back. 53 ITEM NO. 5 1 And they on the court date, I went to 2 court, and they said you had this holiday in 3 the place. I said it's not to my concern, but 4 I really went in there and I play. I got a 5 drink there. But they said I was disturbing, 6 yelling at the security. To my surprise, they 7 said why you were guilty of it, and give me a 8 fine for $130, which I paid. And it stopped me 9 from going around Bally's property for one 10 year. And also what I did. 11 And then after that, I decided to 12 stay -- asked the Commission to reconsider the 13 decision to get my license back. And they said 14 I should write a letter before the court 15 meeting for me, that I should write a letter 16 and get some -- find other people in the 17 community. Well, as a refugee from Africa, I'm 18 not knowing so many people to write about me or 19 in the community. I see all the people I knew 20 were working for the State. And when I asked 21 them to write a letter to the Commissioner, 22 they said well conflict of interest. They are 23 working for the State. They cannot write to 24 the Commission. So at the time I had nobody to 25 do this for me. 54 ITEM NO. 5 1 So it took another time, when I get a 2 letter like they denied me, or they said they 3 revoke my license on that issue. I decided to 4 come back to write -- ask them to write another 5 letter. Well, some other people that I been 6 working with during the time of my revoke. 7 CHAIR KASSEKERT: Okay. You know what? 8 I understand what you did. I guess my question 9 really goes towards the fact that you've been 10 charged four other times. Mr. Armstrong, 11 brought that out in his argument, for 12 different. And I'd like to hear about those 13 issues about. 14 MR. NEEWILLY: Okay. Well, is the high 15 in the place it was not myself. My kids they 16 didn't go to school. For some set of time they 17 were suspended from school. And they hired a 18 committee to call me in the court, which I went 19 and clarified because the kids were suspended 20 from school. That caused them to have more 21 days out of the school. And they said, well, 22 okay. Since, said it that way, we'll fine you 23 for that. And which I still paying some of the 24 fines. 25 I'm a father of nine children. And all 55 ITEM NO. 5 1 of them -- I mean, some of them are giving -- 2 now some are in detention for their own 3 behavior. And they have -- 4 Iwas surprised last letter was sent to 5 me from the Commission that I had all these 6 things. The only thing that I know of which 7 was my fault was I had a car unregistered 8 vehicle on my premises, which somebody give me. 9 And at the time I was not able to furnish 10 either the license and the insurance. So I had 11 a car in my yard. And I asked him to get it 12 out immediately. I called the tow people and 13 didn't even use it. And that have -- I have on 14 unregistered vehicle on my premises. That's 15 one of the case against me. 16 But the rest of it, all the other cases 17 were my kids, who didn't go to school for their 18 own -- or, like, fighting in school. And then 19 they have been suspended and the case before 20 me. But it was not myself getting here to 21 violating the system that I have any cases on 22 me. 23 CHAIR KASSEKERT: Okay. Let me ask if 24 any of the Commissioners have any other 25 questions? 56 ITEM NO. 5 1 COMMISSIONER SOMMELING: No questions, 2 Madame Chair. 3 CHAIR KASSEKERT: Commission Epps? 4 COMMISSIONER EPPS: Mr. Fogarty, to 5 begin with -- 6 No, I'm sorry. Not Mr. Fogarty. 7 CHAIR KASEKKERT: Mr. Armstrong. 8 COMMISSIONER EPPS: What is your name? 9 MR. ARMSTRONG: Mr. Armstrong. 10 COMMISSIONER EPPS: That's what I meant. 11 CHAIR KASSEKERT: There's a resemblance 12 between you and Mr. Fogarty. 13 COMMISSIONER FRULIO: Yeah. Look at 14 him. 15 COMMISSIONER EPPS: The underlying 16 conduct was that disorderly conduct in the 17 casinos -- 18 MR. ARMSTRONG: Yes. 19 COMMISSIONER EPPS: -- some years ago. 20 And he went to a hearing, and he was -- 21 MR. ARMSTRONG: No. I don't think there 22 was a hearing. He never availed himself of the 23 process. 24 COMMISSIONER EPPS: So we revoked -- 25 MR. ARMSTRONG: So by letter order he 57 ITEM NO. 5 1 was revoked. 2 COMMISSIONER EPPS: By letter order for 3 failing to even entertain the process. 4 MR. ARMSTRONG: Right. 5 COMMISSIONER EPPS: And we did that in 6 '04? 7 MR. ARMSTRONG: Yes. September 15th. 8 COMMISSIONER EPPS: Why is it that, in 9 your opinion, he can't have an established that 10 by this point he's someone that we should 11 consider giving a shot to get back in? Because 12 of the pending -- I mean, the intervening 13 actions? Is that the basis? 14 MR. ARMSTRONG: That's part of it. Our 15 position is that the standard here is you have 16 to be convinced that if we went to a hearing 17 right now, he would more than likely prevail. 18 That's under the regulations. I don't think 19 the record would support that. 20 We have three letters from where he 21 works now from people. None of them mention 22 anything how he lost his registration in the 23 first place what the underlying issue is, so 24 who knows if they know even know about that. 25 He has those four subsequent charges, on 58 ITEM NO. 5 1 which he still owes fines, some of them. It's 2 our position that -- the standard -- this 3 record doesn't even meet the standard that he 4 established the regulations. And if that's the 5 case, you should deny. 6 The order should have some meat to it. 7 You issued an order back in 2004 after he 8 failed to address our complaint. He failed to 9 avail himself of the due process he was 10 entitled to back then. He hasn't established a 11 record here in this petition, at least that's 12 the Division's position, that should convince 13 you, sway you if we went to a hearing this 14 afternoon on it, that he would more than likely 15 prevail on any of it, and particularly for a 16 license or registration. 17 COMMISSIONER EPPS: Okay. Mr. Neewilly, 18 do you understand what he just said? There's a 19 process here. You have an opportunity to come 20 forward, argue why you should be able to stay 21 or why you should get back. The first time you 22 had that opportunity you didn't even avail 23 yourself to the process. 24 MS. FRIGEN: I just want to clarify for 25 the record just a little bit. 59 ITEM NO. 5 1 COMMISSIONER EPPS: Okay. 2 MS. FRIGEN: He initially requested a 3 hearing. He came in for one conference. And 4 at that conference, my understanding is that 5 they asked him to come back and submit 6 reference letters. And he was explaining 7 earlier, I think due to his inability to get 8 those references letters, I think at that point 9 he then did not come back for the proceedings, 10 and he was found abandoned. 11 I just didn't want the record to suggest 12 that he didn't request a hearing at all. There 13 was limited interaction at the beginning, but 14 then he failed to pursue the proceedings. 15 Just wanted to clarify that. 16 COMMISSIONER EPPS: So there there come 17 a point where you no longer came before us to 18 seek our intervention in your matter to give 19 you a shot. 20 MR. NEEWILLY: Yeah. 21 COMMISSIONER EPPS: I guess you felt you 22 couldn't meet it, the standard, and so you just 23 decided to take whatever we handed down? Is 24 that how it happened? 25 MR. NEEWILLY: No. Not just taking 60 ITEM NO. 5 1 that. But when I came for that meeting, and 2 they asked me to get a reference letter from 3 five persons, or five persons who knows me. 4 And I as a refugee from elsewhere, people would 5 not even write about you or refer you to 6 anybody where they don't know about you. So 7 there were, I guess, stuck. I couldn't 8 accomplish that because there were nobody who 9 would -- only people I knew at the time were 10 all working for the State. At the county 11 building, I have more than five, even the 12 casino that I working, they were saying they 13 couldn't write a letter for me because it is 14 conflict of interest. So that way, I guess 15 when I came back to say I couldn't get any 16 letter. And then they say on that reason you 17 have to revoke the license. 18 And then when they revoke, I waited for 19 some time again, and I write or call. To see 20 whether they said you could write a letter. So 21 I wrote. And people who knew me later, who I 22 been with like working with them, and people 23 that I knew, they living here, I asked them for 24 the references. And then they get three person 25 wrote a letter for me, myself. Number one, to 61 ITEM NO. 5 1 explain myself. But I mean, I didn't get set 2 down the person that I didn't want to address 3 myself to the Commission. 4 COMMISSIONER EPPS: Okay. 5 CHAIR KASSEKERT: Mr. Armstrong, I'm 6 assuming your position is the same? 7 MR. ARMSTRONG: Yeah. Yes, Chair. Just 8 because he showed up, it's not going to change 9 our position. Of course, it's entirely up to 10 you. 11 CHAIR KASSEKERT: True. 12 Any other questions? 13 Commissioner Fedorko? 14 VICE CHAIR FEDORKO: I guess the problem 15 I have with this is, I'm looking at these 16 charges, and I don't know. I mean, he just 17 doesn't strike me as being -- 18 MR. ARMSTRONG: I agree. But that's -- 19 the Division's position is that's incidental to 20 what we're here for this morning. It's whether 21 or not this petition is, you know, convincing 22 to you that -- what are we hearing right now, 23 would he prevail? 24 Our position is, you know, based 25 primarily on the subsequent charges albeit 62 ITEM NO. 5 1 they're not -- I well, I guess, it's depending 2 on your perspective, I guess thinking about 3 you're a parent, the reason the children -- 4 they could be considered serious charges. But 5 they are summary offenses. 6 But it's that and compounded with the 7 fact that he hadn't paid the fines. He has an 8 a pattern of, if not disrespect, a lack of care 9 for authority. I don't know. You know, if 10 you're convinced that this record merits that 11 he receive some kind of satisfaction here this 12 morning, then that's your call. Our position 13 is the record doesn't meet its standards under 14 the regulations. 15 CHAIR KASSEKERT: Mr. Neewilly, what 16 about the fines that you still owe? 17 MR. NEEWILLY: I'm paying them. 18 CHAIR KASSEKERT: You are paying them? 19 MR. NEEWILLY: Yes, I am. 20 CHAIR KASSEKERT: How are you paying 21 them? Do you have a wage execution? 22 MR. NEEWILLY: Before I have nothing to 23 do. I'm not working. 24 CHAIR KASSEKERT: Uh-huh. 25 MR. NEEWILLY: And they asked me to pay 63 ITEM NO. 5 1 $50 a month. I think one was 800 something for 2 two other kids and the other one was about 300. 3 I think I paying that 400-something-dollar with 4 me. And when I work, if I -- caused me to file 5 in chapter 13 because I would lose my home. 6 And, you know, up to this time I did get this 7 charge from the family because I was paying 8 money. And even paying the county for my food 9 stamp. When I got here, they gave me food 10 stamps. And I tried to work in the casino and 11 do home health aid. They said I'm working two 12 jobs. 13 CHAIR KASSEKERT: Not food stamps. 14 MR. NEEWILLY: Make me to stop paying 15 the food stamps and Medicaid. And give 16 everything to me. So I -- 17 CHAIR KASSEKERT: How much more do you 18 have left to pay? Do you know? 19 MR. NEEWILLY: Excuse me? 20 CHAIR KASSEKERT: How much more do you 21 have left to pay? 22 MR. NEEWILLY: I think about 400-some- 23 dollar. 24 CHAIR KASSEKERT: Four-hundred-some 25 dollars left to pay? 64 ITEM NO. 5 1 MR. NEEWILLY: Yeah. To pay the fund, 2 done with the fund. 3 CHAIR KASSEKERT: To be completely -- 4 MR. NEEWILLY: Yeah. I did it. I pay 5 everything off. And now only the charge is 6 remaining for here. 7 COMMISSIONER EPPS: Mr. Neewilly, when 8 you worked in the industry, what did you do? 9 MR. NEEWILLY: Where? What I did in the 10 casino? When I working Trump Marina, I was 11 doing the EVS cleaner. And when I went to 12 Borgata, I was doing heavy porter. Trump 13 Marina, later on decided to into slot 14 attendant. And I work there for some time 15 before I left and went to Borgata. 16 CHAIR KASSEKERT: Miss Frigen, you're 17 shaking your head. Does that -- 18 MS. FRIGEN: The only one I had. Oh, I 19 take that wrong. He did have an inactive -- he 20 does have an inactive license. But I'm 21 thinking a slot attendant would have required a 22 21. 23 CHAIR KASSEKERT: Right. 24 MS. FRIGEN: And we revoked the 25 registration. 65 ITEM NO. 5 1 CHAIR KASSEKERT: Right. 2 MS. FRIGEN: But that's because the 3 casino employee license it wasn't active at the 4 time the Division filed the complaint. 5 CHAIR KASSEKERT: I mean, I don't 6 necessarily have a problem with the 7 registration or the noncredential hotel 8 employee, but I do have a problem, I think, 9 with granting a casino employee license at this 10 point. Because I think that is a higher 11 standard. 12 And I also, you know -- you can't pay 13 your fines if you can't get a job and work, 14 it's sort of a self-fulfilling prophecy. So I 15 don't know what the other Commissioners feel, 16 but I do have a concern about granting the 17 casino employee license, granting his 18 permission to reapply early for that. 19 COMMISSIONER EPPS: Madame Chair, can we 20 recess? 21 MR. ARMSTRONG: Madame Chair, if I could 22 interject here. 23 CHAIR KASSEKERT: Sure. 24 MR. ARMSTRONG: Our response is 25 Petitioner, in regard to application for early 66 ITEM NO. 5 1 reapplication -- 2 CHAIR KASSEKERT: Application. Right. 3 MR. ARMSTRONG: The standard of waiver 4 is in the interest of justice. That's also 5 within your prerogative. 6 CHAIR KASSEKERT: Yeah, 7 MR. ARMSTRONG: If you decide you wanted 8 to waive the disqualification to allow him to, 9 I guess, in this case get a new registration, 10 that's also within your purview. 11 COMMISSIONER SOMMELING: No questions, 12 Madame Chair. 13 CHAIR KASSEKERT: You want a recess? 14 COMMISSINOER EPPS: Yeah. 15 CHAIR KASSEKERT: Commission Epps would 16 like a recess. 17 Sorry Mr. Fogarty, I know you were 18 trying to get out of here a little bit faster. 19 We'll take a short recess. 20 (A recess was taken from 11:34 a.m. to 21 11:44 a.m.) 22 CHAIR KASSEKERT: Thank you. We'll go 23 back on the record. 24 Commission Fedorko, I think you have a 25 motion. 67 ITEM NO. 5 1 VICE CHAIR FEDORKO: Madame Chair, I'm 2 going to make a motion to grant Mr. Neewilly 3 permsission to reapply early for a casino 4 employee license and casino service employee 5 registration and/or to work as a noncredential 6 hotel employee conditioned upon his signing two 7 wage executions consent agreements addressing 8 his fines for two disqualifying matters. 9 COMMISSIONER EPS: Second. 10 COMMISSIONER FRULIO: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 I just want to put a couple remarks on 18 the record about this case. 19 You know, understanding this, Mr. 20 Neewilly, will give you the ability to reapply 21 early. Obviously, you still have to go through 22 the process. The Division can object to your 23 reapplication. You will have your -- the 24 ability to make your arguments. I encourage 25 you to make sure you stay part of that process, 68 ITEM NO. 10-13 1 and you don't abandon it again. Because that's 2 very important. 3 And I think, you know, my vote -- I have 4 a concern because, obviously, a casino employee 5 license is a higher standard to meet than a 6 credential or a registration. But given the 7 circumstances, and given the fact that we are 8 just granting you permission to reapply early, 9 I feel comfortable with that, and I feel 10 comfort with the process taking its course. 11 So with those remarks, thank you for 12 coming and good luck, and make sure you stay 13 part of the process. 14 MR. NEEWILLY: Thank you. 15 CHAIR KASSEKERT: Okay? 16 MR. NANCE: Item No. 9, petition of LGC 17 Wireless, Inc., for waiver of qualification has 18 been withdrawn at the request of Petitioner. 19 Item 10 has been adjourned. 20 For your consideration I would like to 21 call Items 12 and 13, petition of MGM MIRAGE 22 for waiver of a qualification requirement for 23 Merlinda Gallegos as its Vice President, 24 Corporate Philanthropy. 25 And petition of MGM MIRAGE for waiver 69 ITEM NO. 12-13 1 of the qualification requirements of Debbie 2 Hottensen as its Vice President of Corporate 3 Strategy. 4 Mr. Digiacomo? 5 MR. DiGIACOMO: Good morning, Madame 6 Chair, Commissioners. 7 Mr. Nicholas Casiello, Jr., on behalf of 8 the Petitioner. Mr. James C. Fogarty for the 9 Division of Gaming Enforcement. 10 All these matters, although a separate 11 vote will be called for each of them, are being 12 called together because the subject matter they 13 addressed and statutory provisions have 14 tremendous overlap. 15 And I've shared with counsel for the 16 parties a draft of the resolutions in each 17 instance, and I believe that they are prepared 18 to consent on their form and entry. 19 CHAIR KASSEKERT: Mr. Casiello? 20 MR. CASIELLO: Madame Chair, 21 Commissioenr, good morning. 22 Yes. That's correct. We have received 23 draft resolutions on both petitions, and both 24 draft resolutions are fine with me. 25 And I am glad that we're going to 70 ITEM NO. 12-13 1 address these at the same time because there 2 are some similarities in the two petitions. 3 First of all, with respect to both of 4 these individuals, their functions are 5 remaining the same. These are simply title 6 changes. They've been given vice president 7 titles. Okay? 8 In both cases, of course, MGM MIRAGE is 9 not directly involved in the management of 10 Borgata. It is essentially a passive investor 11 to a great extent. So, therefore, these 12 individuals will not have any ability or 13 involvement in the affairs of Borgata. 14 I also wanted to note that we certainly 15 recognize that if MGM MIRAGE were to directly 16 be involved in the operation of a casino, the 17 situation might be different. But here, as I 18 said, they are only passive investor for the 19 most part. And we also recognize that if MGM 20 MIRAGE should become directly involved in the 21 operation of a casino, that you may want to 22 revisit the issue of this -- or these in any 23 other waivers that the Commission has 24 previously granted. 25 And that's all I have to say. 71 ITEM NO. 12-13 1 CHAIR KASSEKERT: Thank you. 2 Mr. Fogarty? 3 MR. FOGARTY: Yes. We submitted letters 4 on both individuals, both dated March 20, 2007, 5 not objecting to the waivers for both 6 individuals. 7 And I'll made special note of Mr. 8 Casiello's representations he just made on the 9 record. All the more reason why I'd recommend 10 that you waiver these two individuals. 11 And I've seen both copies of both draft 12 resolutions and have no objection to their 13 entry. 14 CHAIR KASSEKERT: Thank you. 15 Any questions? 16 COMMISSIONER SOMMELING: No questions, 17 Madame Chair. 18 COMMISSIONER FRULIO: Madam Chair, on 19 Item No. 12, I move we adopt the draft 20 resoloution and waive the qualification 21 requirement pursuant to NJSA 5:12-85d(1) as to 22 Merlinda Gallegos in her capacity as Vice 23 President-Corporate Philanthropy. 24 CHAIR KASSEKERT: Second? 25 VICE CHAIR FEDORKO: Second. 72 ITEM NO. 12-13 1 CHAIR KASSEKERT: Motion is made and 2 seconded. This is a roll call vote. 3 MR. NANCE: Commissioner Sommeling? 4 COMMISSIONER SOMMELING: Yes. 5 MR. NANCE: Commissioner Epps? 6 COMMISSIONER EPPS: Yes. 7 MR. NANCE: Commissioner Frulio? 8 COMMISSIONER FRULIO: Yes. 9 MR. NANCE: Vice Chair Fedorko? 10 VICE CHAIR FEDORKO: Yes. 11 MR. NANCE: Chair Kassekert? 12 CHAIR KASSEKERT: Yes. 13 MR. NANCE: The record will reflect that 14 the motion is unanimous. 15 CHAIR KASSEKERT: Thank you. 16 And now Item 13? 17 COMMISSIONER FRULIO: And now Item No 18 13, I move to adopt the draft resolution and 19 waive the qualification requirement pursuant to 20 NJSA 5:12-85d(1) as to Debbie Hottensen in her 21 capacity as Vice President-Corporate Strategy. 22 VICE CHAIR FEDORKO: Second. 23 COMMISSIONER SOMMELING: Second. 24 CHAIR KASSEKERT: Motion is made and 25 seconded. This is a roll call vote. 73 ITEM NO. 11 1 MR. NANCE: Commissioner Sommeling? 2 COMMISSIONER SOMMELING: Yes. 3 MR. NANCE: Commissioner Epps? 4 COMMISSIONER EPPS: Yes. 5 MR. NANCE: Commissioner Frulio? 6 COMMISSIONER FRULIO: Yes. 7 MR. NANCE: Vice Chair Fedorko? 8 VICE CHAIR FEDORKO: Yes. 9 MR. NANCE: Chair Kassekert? 10 CHAIR KASSEKERT: Yes. 11 MR. NANCE: The record will reflect that 12 the motion is unanimous. 13 MR. CASIELLO: Thank you, Commissioners. 14 MR. DiGIACOMO: Thank you. 15 CHAIR KASSEKERT: Thank you. 16 MR. NANCE: Item No. 11, amended 17 petition of Hamlet Holdings, LLC, Hamlet 18 Merger, Inc., TPG Hamlet Holdings, LLC, TPG 19 Hamlet Holdings B, LLC, Appolo Hamlet Holdings, 20 LLC, and Apollo Hamlet Holdings, LLC, for 21 certain declaratory rulings. 22 Miss Wozniak? 23 MS. WOZNIAK: Good morning, Chair, 24 Commissioners. 25 I have distributed a revised draft 74 ITEM NO. 11 1 resolution to the parties. That would be dated 2 April 2nd. 3 And Mr. O'Gara is here on behalf of the 4 Petitioners and Mr. Adams for the Division. 5 CHAIR KASSEKERT: Good morning, Mr. 6 O'Gara. 7 MR. ADAMS: Good morning. 8 MR. O'GARA: Should I tell you about 9 this? 10 VICE CHAIR FEDORKO: That is why you're 11 here; right? 12 MR. O'GARA: Yeah. There's a little 13 private equity this morning. 14 This is the first of -- there are two 15 petitions pending here now. This is the first 16 of them. The second is a petition for ICA, and 17 I think it's somewhat instructive. Would be I 18 think -- it's the first time you'll publicly 19 hear something about this structure. And I 20 think it is probably worth your while. At 21 least, I'll take the chance that it's worth 22 your while, for you to understand a little bit 23 about what looks very complex. And very often 24 complexity is driven by the regulations of the 25 government, not in an attempt to obfuscate 75 ITEM NO. 11 1 something by anyone. And there's a chart which 2 was attached to Jack's report. And I helped 3 create that chart with Jack. I think "helped" 4 is a fair term. 5 CHAIR KASSEKERT: But you didn't color 6 it in like Miss Wozniak did. 7 MS. WOZNIAK: I just prettyied it up. 8 MR. O'GARA: I am, in fact, the head of 9 the group that came up with the 10 triangle-trapazoid-square-oval configuration. 11 (Laughter.) 12 MS. WOZNIAK: True. 13 MR. O'GARA: If you take this chart, 14 it's testifying to look at this. And I would 15 suggest to you a starting point is, there's a 16 company called down there called Harrah's 17 Entertainment. 18 (Laughter.) 19 MR. O'GARA: And what we're about to do 20 in the series of transactions affects above the 21 line and below the line. What we're going to 22 talk about today is above the line. But that 23 ICA petition, that's a large part of what we're 24 talking about, what happens below the line. I 25 think it is instructive if you have an overview 76 ITEM NO. 11 1 of that. Below the line, Harrah's 2 Entertainment isn't going to change. There's a 3 merger agreement in which two entities -- all 4 these little things up here represent two 5 entities, two funds. One is Apollo VI, and the 6 other is TPG V. Apollo and TPG are both 7 private equity funds. Each of them has in 8 excess of $35 billion in capital. They solicit 9 this money in various funds. There's an Apollo 10 I, a II, a III, a IV, a V, and a VI. There's 11 TPG V and VI. It's that fund and that fund is 12 going to from its investors, from its limited 13 partners who, in fact, are largely institutions 14 and governments, and they are both foreign and 15 domestic. They represent the largest companies 16 in America. They represent the pension funds 17 of many states, one of them which is publicly 18 disclosed investor is CALPERS, which is a 19 California Public Employment Retirement System. 20 They also represent the return of foreign 21 capital to the United States. In fact, 22 governmental units or the same people who buy 23 your treasury bills, which are issued by the 24 United States of America, invest into these 25 vehicles into American companies and 77 ITEM NO. 11 1 international investment. 2 Below the line, TPG V and Apollo VI have 3 entered into an agreement to acquire Harrah's 4 Entertainment. There's a little company 5 Harrah's Merger, Inc. What will happen is when 6 the $90 a share to each shareholder merges with 7 Harrah's Entertainment, Harrah's Entertainment 8 will survive, but with the governing of Merger 9 Corporation which means that it will have -- 10 CHAIR KASSEKERT: Hamlet. 11 MR. O'GARA: Hamlet. And Hamlet will be 12 called -- Hamlet Merger will become Hamlet 13 Entertainment, and all the public stock that 14 presently exists will be -- each shareholder 15 receives $90, there will be a new stock issued. 16 There's going to be two classes of stock, 17 voting and nonvoting. The voting stock carries 18 100 percent of all the control to affect 19 anything that happens in Harrah's 20 Entertainment. That will be issued to a 21 company called Hamlet, LLC. Hamlet, LLC, will 22 get no economic interest in Harrah's 23 Entertainment. It simply will have the vote. 24 It is owned by the people whose names are 25 there. They are, in fact, the senior officials 78 ITEM NO. 11 1 of both TPG and Apollo. Three of them 2 represent the sole owners of TPG and Apollo. 3 The economic interests will be 4 represented by two classes of stock, a common 5 and a preferred, nonvoting. They will then go, 6 proportionally by the amount of money they put 7 in, to TPG and Apollo. Now, they don't go 8 directly because you see all those little funds 9 underneath. And each of those means when an 10 investor came to Apollo or TPG, they received 11 documentation saying you invest in Apollo Fund 12 V, and we'll invest in a range of investments. 13 And the conditions are that, number one, you 14 give us the money, and we have absoloute 15 control with respect to how it's invested and 16 how those constituent companies will be run. 17 And when, if, and as we'll make decisions with 18 respect to how we'll dispose of interests in 19 the companies. And for that you will pay us an 20 annual fee. And at the conclusion of the 21 investment, which generally these funds have a 22 ten-year run, you will get the return, as well 23 as any return of capital which comes along 24 during the fund. And after you're paid your 25 return, of the additional return, we will get a 79 ITEM NO. 11 1 percentage of that. That's called our carried 2 interest, what you always hear as the "carry." 3 So that's the agreement they make. And, in 4 fact, it's given to these managers, and thee 5 managers are people who run Apollo or TPG. 6 The funds don't invest directly for a 7 number of reasons. Number one, various tax 8 structures mean that various foreign funds will 9 want to invest through one vehicle because of 10 taxation will be different from them than 11 taxation for some other entities. Various 12 pension funds, either private or public, come 13 from another because they're treated 14 differently with respect to tax and gains. So 15 that partnership becomes a taxable entity. 16 And each of them is an alternative 17 investment vehicle of Apollo V -- Apollo VI or 18 TPG V. If you read their agreements, they 19 always say it be through this vehicle, or AIV, 20 and these are the AIVs. 21 To further complicate it, there's these 22 things called blockers on there. And, you 23 know, it sounds like something somebody 24 invested to cause trouble. The Internal 25 Revenue Code says to foreign investors, there 80 ITEM NO. 11 1 are certain taxes we don't mean to subject you 2 to under section 515, but if you invest, in one 3 fashion you will be subject to them. If you 4 invest in another fashion, what is called a 5 blocker entity, you won't be subject to them. 6 So, accordingly, there's blockers built in. So 7 to the certain entities who are not intended to 8 be subject to US tax take advantage of those 9 provisions through the blocker entities. And 10 they often result in multiple series LLCs, in 11 which these things are self-multiplying to 12 create the LLC that's necessary. 13 But, in fact, those monies is coming 14 from those folks, the two funds. And the 15 voting stock goes to the -- to the six 16 individuals there who will then go on to the 17 board of Harrah's Entertainment when the 18 transaction is consumated. And they will be 19 the directors. They will not be the executive 20 officers. In fact, the executive officers will 21 remain the same as they are. These are not 22 people who have -- who run companies. It's 23 not-- this is not a new experience, I think, 24 for you or -- and there's a historical record. 25 I mean, Apollo and TPG own iconic companies 81 ITEM NO. 11 1 around the world, and they run none of them 2 day-to-day. They will serve on the board of 3 directors. 4 The reason they do that with their 5 portfolio companies is that direction and that 6 management expertise of managing money is why 7 people and institutions are willing to give 8 them the money. Because historically by doing 9 it this way, they have done well, and they've 10 liked the returns. 11 So you'll have Harrah's Entertainment, 12 which will now have the two classes of stock, 13 the voting and the nonvoting. And the voting 14 is over there at Hamlet, LLC, which is the 15 holding company. And the nonvoting which are 16 the funds in holding companies. And then the 17 various structures of them. And we've seen 18 your resolution. We generally find favors with 19 the way you treat these people. We think it's 20 appropriate. 21 But I think I would be less than candid 22 if I didn't tell you that when you look through 23 all of this, and we have now submitted a 24 significant number of documents to both the 25 Division and the Commission, and we've made 82 ITEM NO. 11 1 available to the Division massive number of 2 documents and document rooms which are located 3 in Ft. Worth, Texas, and New York. And there 4 is an inexorable conclusion here. And that is 5 that these funds do not -- all these companies, 6 these lines, have general partners. And they 7 are very often just a company that passes 8 something through. And in the end, there are 9 only three people who matter here. Apollo does 10 belong to Leon Black. And TPG does belong to 11 Bonderman and Coulter. Bonderman and Coulter. 12 In fact, that is how it works. And they, then, 13 have the various people who have roles in this. 14 But, ultimately, the responsibility and, in 15 fact, the equity ownership of both the 16 management of Hamlet and the oversight of the 17 economic interest of Hamlet is vested in those 18 individuals through those entities. 19 Below the line, what will happen is that 20 all your casino licensees will remain similar 21 to what they are. Some of these casino 22 licensees will, in fact, be participating in 23 CMBS financing, which means they'll be creating 24 PROPCOs. They're a bit different than what 25 you've seen because here the credits are such 83 ITEM NO. 11 1 that the OPTCOs won't be borrowing. The 2 PROPCOs will borrow on their own without 3 guarantees from the OPTCOs. And they'll just 4 be real estate loans to CSIs. There will be 5 no -- nothing other than a lease back and 6 forth. 7 Harrah's will remain, as defined by the 8 Casino Control Act, a publicly traded company. 9 It will have publicly traded classes of debt. 10 It will have a bond debt and also have credit 11 line represented by both credit agreement, 12 which will have a term loan, and a revolver, 13 which will be undrawn at closing. So things 14 will be the same down there. And up here 15 you'll have this structure now. 16 How is it different from what you see 17 now, and are the people any different? And I 18 think it goes to something that Mr. Epps was 19 talking about. Presently Harrah's 20 Entertainment has shareholders. If one of them 21 owns five percent or more, they have to 22 qualify. In this instance, no one owning any 23 nonvoting stock, which has no rights, will own 24 five percent. There's not going to be a 25 five-percent holder of the limited partners. 84 ITEM NO. 11 1 They just own a limited partnership interest. 2 And it's what I would describe as a derivative 3 equity security. That is, they own an interest 4 which represents an undivided interest in so 5 many shares of nonvoting Harrah's stock. No 6 one's will rise to five percent. You will in 7 this instance know who they are because, in 8 fact, you'll know who the limited partners are. 9 They don't won't be able to vote. Their 10 investment is committed for a period of time. 11 To withdraw from these limited partnerships is 12 not something which is easily done. One agrees 13 to the term of the investment. The securities 14 themselves can't be lent, can't be the subject 15 of cash swaps. Can't be the subject of 16 over/under agreements. So you'll know exactly 17 where the economic interest is. 18 With the voting interest, it's a hundred 19 percent in Hamlet Holdings, LLC, so the that 20 six people voting will be, in fact, the six 21 people you qualify. They don't have any type 22 of rights in addition to other equity holders, 23 i.e., like someone who has some kind of debt 24 instrument and has certain rights in 25 liquidation or certain rights with respect to a 85 ITEM NO. 11 1 lien. They are simply shareholders without a 2 vote, and if things went south, we all know 3 where they stand in the line. Generally it 4 forms in front of them. 5 And so you have some stability to that. 6 It brings this form of capital, which is 7 already here in the form of at least two of our 8 licensees. And we're hopeful that, as you go 9 through the process with both TPG and Apollo 10 that many of the questions you have will be 11 answered. I know there's one that everyone 12 asks me, and that's where do they get these 13 people? And how do they find them? And how do 14 they know who they are? In many of the cases, 15 about 80 percent of the investors in Apollo and 16 TPG are investors in every fund. Those that 17 started in I subscribe to II, III, IV, V, and 18 VI. Each of them signs -- and I invite you 19 when the time is appropriate and the Division 20 has the time -- the subscription agreement when 21 they bring their money to the table. 22 It is not something which is generally 23 sold to the public. There are requirements 24 beyond the requirements that are imposed by 25 law. The legal requirements are that you have 86 ITEM NO. 11 1 to be a qualified investor, and you have to 2 have a certain net worth. They impose 3 additional requirements as to both net worth 4 and liquidity. And they then get a series of 5 representations and information, which they 6 investigate. They are subject to the 7 anti-money-laundering laws. They are subject 8 to the regulations of comptrollers of currency. 9 And, in fact, go through a due diligence with 10 respect to investors, including foreign 11 investors, in which there are certain 12 registrations and certain information which 13 they have to obtain. And there's certain 14 things they inform the foreign investors and 15 certain things -- how they have to freeze the 16 accounts if certain things happen from where 17 they came from. 18 So it's a pretty sophisticated 19 procedure. These are people that do this and 20 have done it with companies which presently are 21 regulated by the comptrollers of the currency. 22 They have airlines that have financial 23 requirements imposed by the FAA. They have 24 defense contractors, DOD. And, in fact, the 25 full spectrum of companies both North America 87 ITEM NO. 11 1 and worldwide that they trade. 2 I hope that if you have questions, 3 you'll ask them. I mean, we've tried to be 4 forthcoming with your staff and the Division. 5 I think with the information, and we've moved a 6 lot of it along. And we're hopeful we'll get 7 this this structural piece and then we can move 8 on. 9 I'd be remiss if I didn't say anything. 10 Mr. Adams references in his report something 11 which, to me at this moment, probably doesn't 12 make a great deal of difference as to whether 13 I'm denominated a financial source or whether 14 I'm waived. Because I have information here 15 that indicates these people are qualified as 16 financial sources sitting in a data room right 17 now. But I think long-term, as you look at the 18 capital markets and what's coming here, that 19 there's some wisdom in examining what he says. 20 We've all -- I was part of the first 21 financial group that came in here and tried to 22 do a private equity deal, and it was called 23 DLJMB III and because of what they were, the 24 kind of financial source was all that it was 25 available because it was bank money coming down 88 ITEM NO. 11 1 through what's called a ground lease, buy lease 2 bank, but these private equity funds bring 3 their money from a variety of sources. And 4 when they do, we've said financial sources. 5 But if we look at what, in fact, they are 6 getting, I think what Mr. Adams said is, they 7 are getting nonvoting equity. And equity is 8 not what it is. I mean, it's not debt. It's 9 not kind of a loan. It's not financing 10 anything. They are the equity investors in 11 this company. 12 And the fund they have an interest in is 13 getting stock, pretty clearly the same stock 14 everybody else has out there that we've always 15 called "equity." And, as such, they are kind 16 of a derivitive equity holder. I mean, they 17 don't actually hold the shares, but they hold 18 the partnership interest which you can divide 19 into some of the shares and see the percentage 20 of what it is. 21 And they might be or more appropriately 22 denominated that way going forward. If we can 23 look at it that way, it's an alternative worth 24 looking at, because I think it affords somewhat 25 equal treatment with everybody across the board 89 ITEM NO. 11 1 with equity, and in terms of as time goes on, 2 if you look at what do you know about them? 3 And who they are, and you can kind of get a 4 comfort level that you know an awful lot more 5 about these people than you do about who owns 6 Harrah's Entertainment today. You have no way 7 of knowing who owns Harrah's Entertainment. 8 It's trading economically, as we speak. 9 Clearly no one files until they get to five 10 percent. Clearly, people cash swap this stuff 11 out. Clearly, people rent the votes in the 12 stock. We've seen that. You know, I mean 13 that-- there have been these remarkable vote 14 totals for some things. And all those things 15 you've taken cognizance of. But if you look at 16 this, I think it's an alternative you may look 17 at as you look at going forward how you 18 interpret this and deal with changes to it as 19 to what the nature of the security is. Because 20 it seems more appropriately an equity security 21 than some kind of debt security that's your 22 financial source for. I mean, the definition 23 clearly could encompass -- anybody buying 24 common stock could be a financial source 25 because they put money in it. But the more 90 ITEM NO. 11 1 specific definition going forward may be 2 something worth looking at and talking about, 3 because I think this is probably not the last 4 type of derivitive investment you'll see that 5 comes into the casino industry in New Jersey. 6 But I just offer that to you as 7 something that's food for your thought. 8 Clearly, we can go forward this way, and I 9 think we will comfortably. I think we very 10 nearly have an ICH application in. We have a 11 trust agreement now. And we look forward to 12 going through Dr. Adams' examination of the 13 business that's been conducted and, ultimately, 14 coming back here at a point in time and having 15 all the final financing documents. Although 16 you have many of them right now, and having the 17 authority to close the transaction. 18 So thank you. 19 CHAIR KASSEKERT: Thank you. 20 Let me ask if there are any questions 21 of Mr. O'Gara? 22 VICE CHAIR FEDORKO: I just have one 23 question. I feel a lot more comfortable with 24 knowing that they do due diligence in looking 25 at these intvestors, but let me ask you this. 91 ITEM NO. 11 1 Is there something in the contract that they 2 would sign, an investor, if on down the road 3 they did something illegal and were convicted 4 of a crime, what happens then? 5 MR. O'GARA: I'm somewhat hesitant to 6 quote from it, because, you know, we've 7 submitted -- the Commission has seen this 8 document. It's 63 pages long. It's called a 9 "subscription agreement" for whichever the 10 funds, the ones I'm referring to. It has any 11 number of circumstances in which even under 12 circumstances which you might choose not to 13 they can redeem them at. 14 Ultimately, my clients are capitalists. 15 If you choose to leave voluntarily, they will 16 exact a price. You signed up for ten years. 17 Much like the Casino Control Act. If they 18 chose to ask you to leave, you're not going to 19 make a profit, you know. Any concerns you have 20 about whether or not you would have to build 21 that in. People who are as every bit as good 22 at it as you are have built it. Yeah, there 23 are provisions whereby -- because there's 24 foreign investors. There are -- there's always 25 a possibility when foreign capital comes into 92 ITEM NO. 11 1 something that the United States of America 2 could have some kind of territorial financial 3 relationship with that entity, and could have 4 to freeze those accounts. People here sign 5 waivers understanding if that happens, this 6 account will be frozen. They also sign and 7 indicate there are circumstances under which, 8 by reason of law, they have to be removed from 9 the investment. 10 And that's all delineated. I can 11 represent to you that the investment agreement 12 itself -- it's called a "subscription 13 agreement." And like most things here, when 14 you apply, you fill out an application. In 15 this case you make representations and 16 warranties authorized people have to sign, and 17 you have to give data and information about 18 sources of funds, about status of what you are, 19 your understanding of this. And that, then, 20 when it's completed entitles you to wire money 21 on the call date for the money, and you receive 22 a limited partnership interest. 23 But, yeah, you have to sign that 24 agreement, and it provides -- and you'll have 25 it for your examination. There's no question 93 ITEM NO. 11 1 of that. 2 VICE CHAIR FEDORKO: Thank you. 3 COMMISSIONER SOMMELING: Mr. O'Gara, 4 does that same application, that same scrutiny 5 apply to the foreign investor entities as well? 6 MR. O'GARA: Oh, yeah. Everybody comes 7 in the same. I think -- and, again, I invite 8 your attention to it, but if you look, they 9 start off with -- let's assume the Fedorkos 10 were applying along with the pension -- the 11 trustees of the pension fund of the State of 12 New Jersey and the People's Republican. 13 CHAIR KASSEKERT: He is the pension fund 14 of the State of New Jersey. 15 MR. O'GARA: Each of them completes 16 certain general information. There is then 17 specific information regarding the individual 18 in which you certify you are an eligible 19 investor. You certify that you have the means. 20 You certify as to certain financial statements. 21 With respect to the governmental unit, you have 22 to certify that you have the fiduciary right to 23 do things. You have to certify that the facts 24 that, in fact, certain ARISA things have been 25 done. With respect to the foreign government, 94 ITEM NO. 11 1 you have to not only certify all of the things 2 that are permitted by the law of the country, 3 but that it's -- you know, the investment fund 4 is here in the United States. And there's 5 additional protections about the relationship 6 of the person making the investment to what's 7 called a "senior government official." The 8 person signing cannot -- except in the case of 9 certain Middle Eastern countries where blood 10 relationship has led to positions, and there's, 11 in fact, provision for that. It has to be a 12 governmental official, not the brother-in-law 13 of this guy. And it's all defined. And you 14 then have to indicate certain things about your 15 tax status and how it would be affected in the 16 United States. And they have all this 17 information, and they have the ability then not 18 only to examine it, but to look into it. 19 I spoke yesterday to somebody at 20 Apollo -- no -- TPG, and their habit has been 21 to do this due diligence with each person as 22 they come in. They get the updated form. If 23 it is a return investor, there's no change in 24 the information, they just verify it. If it's 25 a new investor, they then send it over to look 95 ITEM NO. 11 1 at it anew. But, as I said, 85 percent of 2 these people -- much of this diligence was done 3 just like it would have been for Harrah's. You 4 know, when they got here, and it just gets 5 updated, they come over and over each time. 6 So, yeah, it's every investor. 7 And, largely, the investors in this 8 fund, I don't even know if it's split evenly 9 domestic and foreign. There's a significant 10 amount of foreign investors. This this should 11 not be a surprise. I think it's a goal of our 12 country to have some of this money returned 13 here, if we lose in the trade balance. And, in 14 fact, this foreign -- I say foreign -- and 15 foreign governmental and pension investment is 16 probably 85 percent. And there's university 17 endowments, that kind of thing. Plus publicly 18 funded. 19 COMMISSIONER SOMMELING: Thank you. 20 CHAIR KASSEKERT: Any other questions? 21 COMMISSIONER EPPS: I have a stock 22 question. 23 MR. O'GARA: Sure. 24 COMMISSIONER EPPS: How does the stock 25 grow? 96 ITEM NO. 11 1 MR. O'GARA: How does the stock grow? 2 COMMISSIONER EPPS: The value of the 3 stock increase. 4 MR. O'GARA: Oh. I think the way 5 private equity works is that they select 6 investments in which they think that the price 7 they're paying for the company is one which is 8 either the company is either undervalued in the 9 public marketplace, or they think it's fair 10 value, and there's a great deal of potential. 11 They then -- they don't run these companies, so 12 they think that the management that the 13 company's got in place can cause that kind of 14 growth. They are able to control the costs. A 15 number of costs, in terms of just trying to 16 respond to quarterly public markets and 17 earnings and ups and downs, they all go away. 18 I mean, they've got a plan, and it's ten years, 19 they don't have to, you know, respond to some 20 of that. And they have a belief that they pick 21 segments where there's growth in them and 22 companies where there's strength in them and 23 that they can take the whole of that and make 24 the whole better. Or else cause the whole to 25 be made into parts which are more valuable. 97 ITEM NO. 11 1 There's a number of ways they do it with 2 various companies. I mean, historically, I 3 think TPG's original investment that was, in 4 fact, effective in this state was they owned 5 Continental Airlines, which they acquired. And 6 subsequently after seven years, they retained 7 an interest but took public, and the growth of 8 that stock was in the neighborhood of 700 9 percent or -- 10 COMMISSIONER EPPS: So I -- I mean, just 11 to understand it, when this transaction closes, 12 Harrah's Entertainment, which is publicly 13 traded on the market -- 14 MR. O'GARA: Yeah. 15 COMMISSIONER EPPS: -- will come off. 16 MR. O'GARA: Yeah. Be deregistered. 17 COMMISSIONER EPPS: So it will be 18 deregistered. 19 MR. O'GARA: Yes. 20 COMMISSIONER EPPS: The asset will have 21 to do what it does to increase the value, and 22 then become attractive -- 23 MR. O'GARA: Right. 24 COMMISSIONER EPPS: Some other stand and 25 at some later time, it could possibly go. 98 ITEM NO. 11 1 MR. O'GARA: Oh, yeah. If the general 2 convention of private equity is with these 3 companies, you either sell the asset to someone 4 who wants to pay more for it than you did, or 5 you take it public. 6 COMMISSIONER EPPS: Right. All right. 7 MR. O'GARA: And that would be in this 8 case. And during the course of it, there can 9 be returns of capital. We have a preferred 10 stock which has a PIC, which is pay-in-kind. 11 But they could have a -- Harrah's had X-amount 12 in the financial covenants, and they paid it 13 back to the funds -- the funds are putting $7 14 billion in equity. Let's say at the end of the 15 two years, they put a billion, billion return 16 and six out there, and then there comes a point 17 in time they sell an asset. They pay down that 18 debts. They increase that. At the day when 19 they sell it, to the degree that they get more 20 than $7 billion back, that's gain. 21 Now, you have to have some time value of 22 money. But if, in fact, they were to sell it 23 for $30 billion, there would be some $23 24 billion in gain that would be returned to the 25 investors. 99 ITEM NO. 11 1 The other thing I should note is that in 2 each of these, as I said, it's the funds. And 3 they all have these various ways that come 4 down. The little ones here that say "FOF." 5 That stands for "friends or family." And that 6 means that that is how TPG and Apollo put their 7 money in. 8 Most people won't invest in these funds 9 just because they think you're good. They like 10 to see some of your money in it, too. So there 11 are requirements that they co-invest, and so 12 the entities -- and, in fact, Mr. Black and Mr. 13 Bonderman and Mr. Coulter will have money in 14 through those funds, and they will enjoy the 15 return the same way. 16 These two funds both do not take an a 17 carried interest until there's been a return of 18 capital. 19 COMMISSIONER EPPS: Just one more 20 question at the risk of prolonging this any 21 further. 22 If you look at the chart -- 23 MR. O'GARA: Yeah. 24 COMMISSIONER EPPS: Apollo Management 25 IV, LP. 100 ITEM NO. 11 1 MR. O'GARA: Right. 2 COMMISSIONER EPPS: Has an arrow coming 3 to it, which I understand from the legend is a 4 management agreement. 5 MR. O'GARA: Uh-hum. 6 COMMISSIONER EPPS: But they also have a 7 arrow coming out of it coming into Apollo 8 Hamlet Holding, LLC, to the third power. 9 MR. O'GARA: With a footnote. Yeah. 10 COMMISSIONER EPPS: Oh, footnote. All 11 right. 12 MR. O'GARA: Yeah. 13 COMMISSIONER EPPS: My question is, how 14 does that work? Apollo Management IV, LP, 15 manages -- 16 MR. O'GARA: Well, I think that one of 17 the things that -- and this is subject -- Jack 18 will know this at the end. I think that many 19 of these entities are recreated for reasons of 20 liability purposes and tax purposes and 21 management agreement fee purposes. I don't 22 think that people go from office to office when 23 they management it or do it through one entity 24 or another. Ultimately, the people -- if, in 25 fact, the people who you deal with are in all 101 ITEM NO. 11 1 these entities. And, in fact, those 2 relationships are created to allow for, you 3 know, various things to happen financially 4 among the entities. And so that one separate 5 from the other for liability purposes. But I 6 don't think the management of anything is any 7 different because, you know, they have a 8 manager that goes to another manager. I think 9 it's just done for another purpose, which is 10 probably dictated by a lawyer. 11 COMMISSIONER EPPS: Okay. 12 MR. ADAMS: There's no breakdown at this 13 point as to what they're going to have. 14 MR. O'GARA: Yeah. I mean, they 15 don't -- 16 COMMISSIONER EPPS: That's okay. I 17 don't think I'm going to get any clearer than I 18 am now so. 19 MR. O'GARA: There was at one time here, 20 and Mr. Adams will tell you, there was a 21 company here which, in fact, had a certain role 22 in just filing certain things for foreign 23 investors. It was a German company. And one 24 of the original founders of Apollo was in the 25 car company, and because of the way it was 102 ITEM NO. 11 1 structured, it appeared that he actually owned 2 something that Leon owned. So rather than try 3 to explain that, we just iced the company. 4 Because, in fact, it appeared for a tax 5 deferred reason, he had an ownership interest, 6 and he doesn't. 7 It's all going to lead, Commissioner, to 8 a conclusion that many of these entities are 9 serial. One stands on top of the other and 10 performs no specific function. And, in fact, 11 the management is done at a specific one. And, 12 very frankly, the management of money doesn't 13 require much. The management of the investment 14 is going to be over where the voting stock is, 15 and that's with these guys. 16 CHAIR KASSEKERT: Any other questions? 17 Mr. Adams? 18 MR. ADAMS: Thank you, Chair, 19 Commissioners. 20 I guess the way I wanted to start out 21 was -- and I'm going to jump on something Paul 22 said -- currently we have Harrah's 23 Entertainment, a publicly traded company with 24 its shareholders, and those individual 25 shareholders, many of whom I think Mr. O'Gara 103 ITEM NO. 11 1 was referencing, we probably know nothing about 2 or never will know anything about, have been 3 owners of Harrah's for whatever length of time. 4 They've never had to qualify, even though they 5 were technically qualifiers because they were 6 waived. 7 And I don't think anybody has taken any 8 issue -- at least not that I'm aware of -- with 9 the fact that from that perspective, from a 10 qualifier perspective, if you look at those 11 limited partners, the ones we've been talking 12 about as the new equity owners in Harrah's 13 Entertainment, Inc., which is going to be 14 nonpublicly traded, that they are waivable, and 15 they will be waived in that status under 85c, 16 d, or E, however you ultimately apply it. 17 So if that's true, and you agree with 18 that -- which I hope you do -- I don't think 19 it's that far a leap to then say those same 20 limited partners in this structure don't have 21 to qualify as financial sources. 22 Everybody's looking at me. Any 23 questions? 24 COMMISSIONER EPPS: You're talking. 25 MR. ADAMS: Any comments? 104 ITEM NO. 11 1 COMMISSIOENR EPPS: Not yet. 2 COMMISSIONER SOMMELING: Continue. 3 VICE CHAIR FEDORKO: I'm waiting for you 4 to say "Gordian knot." 5 MR. ADAMS: With all due respect -- 6 where is he? No. I'm not using that 7 terminology. 8 Certainly, I think what's troubled my 9 agency, and from your perspective in prior 10 conversations, is, geez, it sounds like he's 11 saying different now on behalf of the Division 12 than the Division did in some other cases, the 13 cases that I reference in my response, Resorts 14 and Atlantic City Hilton. And I think that's 15 probably true. 16 But I looked at it from a perspective of 17 we're looking at these equity people here, 18 these limited partners, and this is just one 19 part of this deal, as you know. There's going 20 to be $25 billion worth of other debt people 21 out there that are -- that is going to make 22 this whole transaction go. 23 Now, why do I say that? I don't say 24 that because I'm looking for any sympathy. 25 We're going to have financial sources we're 105 ITEM NO. 11 1 going to have to deal with in that situation, 2 and a lot of them. 3 So with that as the big backdrop here, 4 and Mr. O'Gara has mentioned, for example, 5 CALPERS. Well, since the California pension 6 system may be in on this deal as an equity 7 limited partner, does this commission and do 8 we, as a corresponding agency, need to have 9 that institution qualified as a financial 10 source in this transaction if there's a way 11 where we can say that's not needed, it's not 12 necessary? And I just use them as one example 13 because I think New Jersey is going to be in on 14 this. I'm not positive about that, but it's 15 out there. And there's quite a number of them 16 there are going to be out there. And, of 17 course, that would take more time, more effort 18 to go through. 19 I looked at the statute and, certainly, 20 I was very much, you know, made aware of 21 obviously what happened in the past with these 22 other instances. And I just focused on the 23 language that's in 85d and how it makes 24 reference to e, and it gives you this -- this 25 tool, what I consider to be here a tool, to be 106 ITEM NO. 11 1 applied potentially not in just this case where 2 we're talking about a $31 billion deal, in 3 other cases that are going to come down the 4 pike. And I just thought that if there's a way 5 that we can get by the idea that we have to 6 qualify all the equity participants, in this 7 case the limiteds, then we should take 8 advantage of it. 9 And that's really what it boils down to 10 here. And that's the guts of my argument, is 11 that if there is something that we can take 12 advantage of as regulators which makes it a 13 little bit easier for us in a sense that we're 14 going to have a bunch of people to qualify, 15 anyway, in this whole transaction, then let's 16 do it. 17 And I tried in my head -- and that's why 18 I started out talking about those shareholders 19 with Harrah's Entertainment, Inc., the 20 publically traded company, you know, those 21 people basically were waived. We've had other 22 publically traded companies where those 23 shareholders are waived, and we did not make 24 them, nonetheless, even though they were waived 25 in that status, qualify as financial sources. 107 ITEM NO. 11 1 Now, is publically traded, which is now 2 out of the statute, that important given this 3 scenario? I don't think it is. I say that for 4 a couple of reasons. It's clear to me that the 5 language they put in there envisioned this -- 6 this -- this noncorporate situation that you 7 would have these new types of vehicles, these 8 private equity investors have come up with. 9 Most of the time limited partnerships, limited 10 liability companies, they are not corporations. 11 Okay. So they're not corporations. I don't 12 think that that ties our hands, necessarily, to 13 say that we still can't go forward just like we 14 did with a lot of those public shareholders of 15 Harrah's Entertainment, Inc., or other big 16 publically traded corporations who are holding 17 companies with respect to our licensees here. 18 And we've waived them. And we didn't turn 19 around and say they still have to qualify as 20 financial sources. 21 So where does that -- where does that 22 lead us? That leads us to, these are people, 23 as Mr. O'Gara has mentioned, who essentially 24 have less by way of rights or power -- powers 25 than those other people who were stockholders 108 ITEM NO. 11 1 of the publically traded company. They don't 2 have any vote. Their whole gain in this thing 3 is tied up with the general partners and/or the 4 managers, and they can't control anything. 5 On top of that, as I understand this 6 transaction, you know, the money, as Mr. O'Gara 7 mentioned, that they are putting up, you know, 8 they put it up. As a general investment, 9 period. And the bulk of that -- nobody has 10 said this in writing. It's not definitive. 11 I'm suggesting to you, the bulk of that money 12 is going to wind up paying off the former 13 shareholders of Harrah's Entertainment. 14 Now, there's not enough there to cover 15 it all, but I think the figure I've seen is 16 either 17 or $18 billion for the current 17 shareholders, because the rest is debt. And 18 given the fact that we're going to be involved 19 heavily with a lot of debt people out there as 20 it is who truly are potentially financial 21 sources, I just felt that there is enough 22 maneuver room the way the statute is, you know, 23 constituted. And with what we've done with the 24 corporations that we could apply in this 25 particular instance and not require them to 109 ITEM NO. 11 1 have to qualify as financial sources. 2 Other than that, any questions, I'd be 3 happy to try to answer them. 4 CHAIR KASSEKERT: Well, I certainly 5 appreciate your arguments, Mr. Adams. I -- you 6 know, this, obviously, is a new road that we 7 are going down. We have dealt with private 8 equity in a more limited sense before. And 9 while, you know, it's certainly, you know, the 10 argument about CALPERS pension fund is 11 compelling, we're dealing with a lot of other 12 entities here that I -- you know, that I 13 think-- I think need to go through the process. 14 And I think you -- while you make an eloquent 15 argument, I think at this point I'll -- you 16 know, I'll be prepared to make a motion with 17 respect to these matters. 18 Let me just say before I make that 19 motion -- let me just ask if any of the other 20 Commissioners have any other questions? 21 Thank you, Miss Wozniak, for all the 22 work that she has put into this. She really -- 23 I don't know that I would have understood it 24 had she not laid it out as succinctly as she 25 did. And I don't mean to make fun of her 110 ITEM NO. 11 1 colored charts, but that helped me a great 2 deal. Believe me. 3 But before I make the motion, I just 4 want to clarify the limited scope of the 5 matters before us today, because as you both 6 noted, we are just starting this process. 7 These are preliminary matters. And today the 8 Petitioners are seeking rulings as to the 9 qualification requirements in the Act by the 10 various Apollo and TGP entities and investors 11 in connection with their pending application 12 for interim casino authorization. 13 I emphasize that the Commission is not 14 ruling on the qualification of any of these 15 persons at this point. That will come later, 16 obviously. 17 That said, I move to adopt the draft 18 resolution and, one, deny the request for a 19 ruling that the qualification of the entity 20 qualifiers is waivable pursuant to NJSA 21 5:12-85; and, two, with that exception, to 22 grant the rulings requested in the amended 23 petition. 24 Is there a second? 25 COMMISSIONER SOMMELING: Second. 111 ITEM NO. 14 1 VICE CHAIR FEDORKO: Second. 2 CHAIR KASSEKERT: Motion is made and 3 seconded. This is a roll call vote. 4 MR. NANCE: Commissioner Sommeling? 5 COMMISSIONER SOMMELING: Yes. 6 MR. NANCE: Commissioner Epps? 7 COMMISSIONER EPPS: Yes. 8 MR. NANCE: Commissioner Frulio? 9 COMMISSIONER FRULIO: Yes. 10 MR. NANCE: Vice Chair Fedorko? 11 VICE CHAIR FEDORKO: Yes. 12 MR. NANCE: Chair Kassekert? 13 CHAIR KASSEKERT: Yes, 14 MR. NANCE: The record will reflect that 15 the motion is unanimous. 16 CHAIR KASSEKERT: Thank you. 17 MR. NANCE: Item No. 14, proposed 18 temporary adoption of amendments to NJAC 19 19:45-1.12 and NJAC 19:46-1.18, authorization 20 of a test for cards changing at least once 21 every 48 hours for blackjack, mini-baccarat, 22 and Spanish 21, and Double Attack Blackjack. 23 Mr. Mamolen? 24 MR. MAMOLEN: Madame Chair and 25 Commissioners, this matter is before you for 112 ITEM NO. 14 1 both temporary adoption and test authorization. 2 I think you are thoroughly familiar with 3 the proposed amendments as well as the 4 conditions that are set forth in the proposed 5 amendments. 6 Very briefly, as a condition for 7 permission to use cards up to 48 hours, a 8 casino licensee will generally have to use 9 these cards in a table -- at a table that is in 10 continuous operation use, at least six decks 11 while dealing the respective games. In 12 addition, there's a requirement that any table 13 at which these cards are in -- are used will 14 not be subject to a revised plan of 15 supervision. 16 Further, there's a requirement of post- 17 inspection sampling. As I note in the staff 18 memo, both -- well, the Taj Mahal, which was 19 the Petitioner for this relief, has reviewed 20 both the conditions and the regulation as well 21 as the parameters that are proposed by staff 22 for any test. No objection has emanated from 23 Taj Mahal. 24 CHAIR KASSEKERT: Thank you. 25 Any questions? 113 ITEM NO. 14 1 COMMISSIONER FRULIO: Madame Chair, move 2 to approve for temporary adoption and authorize 3 a test to commerce on or before April 20, 2007. 4 VICE CHAIR FEDORKO: Second. 5 CHAIR KASSEKERT: The motion has been 6 made and seconded. All in favor? 7 (Ayes.) 8 CHAIR KASSEKERT: Opposed? 9 (No response.) 10 CHAIR KASSEKERT: The motion carries. 11 MR. MAMOLEN: Thank you. 12 MR. NANCE: In accordance with 13 Resolution No. 06-12-13-20, the next closed 14 session of the Commission shall be held on 15 Wednesday, April 18th, 2007, 9:15 a.m, in the 16 Commission offices. 17 It is now time for the public 18 participation portion of the meeting. 19 CHAIR KASSEKERT: Is there anyone from 20 the public that wishes to be heard? 21 Seeing no none, I will declare this 22 portion of the meeting closed and entertain a 23 motion to adjourn. 24 COMMISSIONER SOMMELING: Motion to 25 adjourn. 114 1 COMMISSIONER FRULIO: Second. 2 CHAIR KASSEKERT: The motion has been 3 made and seconded. All in favor? 4 (Ayes.) 5 CHAIR KASSEKERT: Opposed? 6 (No response.) 7 CHAIR KASSEKERT: The motion carries. 8 (Public Meeting 07-04-04 was adjourned 9 at 12:32 p.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 115 1 2 C E R T I F I C A T E 3 4 5 I, DARLENE SILLITOE, a Certified 6 Shorthand Reporter and Notary Public of the 7 State of New Jersey, certify that the foregoing 8 is a true and accurate transcript of the 9 proceedings. 10 11 12 I further certify that I am neither 13 attorney, of counsel for, nor related to or 14 employed by any of the parties to the action; 15 further that I am not a relative or employee of 16 any attorney or counsel employed in this case; 17 nor am I financially interested in the action. 18 19 20 DARLENE SILLITOE CSR 21 License No XI01023 22 23 Dated: April 10, 2007 24 My Commission Expires on July 10, 2009 25 ID No 2062871