1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 Petition of Adamar of New Jersey, Inc., (Adamar) 6 for renewal of its casino license and other matters 7 (PRN 2140705, 2910706, 2910708) 8 Volume 2 9 - - - - - - - - - - - - - - - - - - - 10 11 Wednesday, November 21, 2007 12 Atlantic City Commission Offices 13 Joseph P. Lordi Public Meeting Room - First Floor 14 Tennessee Avenue and Boardwalk 15 Atlantic City, New Jersey 08401 16 12:56 a.m. to 5:05 p.m. 17 18 19 Certified Court Reporter: Darlene Sillitoe 20 - - - - - - - - - - - - - - - - - - - - - - - - - - - 21 ATLANTIC CITY COURT REPORTING, LLC 22 CERTIFIED SHORTHAND REPORTERS AND VIDEOGRAPHERS 23 1125 ATLANTIC AVENUE, SUITE 416 24 ATLANTIC CITY, NEW JERSEY 08401 25 (609) 345-8448 www.accourtreporting.com 2 1 I N D E X : 2 WITNESS: Direct Cross Redirect Recross 3 4 WILLIAM J. YUNG, III 5 By Mr. O'Gara 46, 67 6 By Ms. Maher 53 7 8 JOHN G. JACOB 9 By Mr. O'Gara 70 125 10 By Ms. Flaherty 78 126 11 12 MARK GIANNANTONIO 13 By Mr. Levenson 129 209 14 By Ms. Maher 154 15 16 17 18 19 20 21 22 23 24 25 3 1 E X H I B I T S : 2 Commission No. Description EVD 3 C-1 Entities and Qualifiers Report, 11-16-07 X C-2 CHAB License Report, 11-20-97 X 4 C-3 EEBOP, 11-9-07 X 5 Division No. Description EVD 6 D-1 Division Report X D-2 DGE Report to Commission X 7 D-3 DGE Financial Report to Commission X D-4 DGE to Commission X 8 D-5 DGE Sworn Statement of Fred Buro, 9-25-07 X D-6 DGE Sworn Statement of William J. Yung, III, X 9 9-27-07 D-7 DGE Sworn Statement of Donna More, 10-1-07 X 10 D-8 DGE Sworn Statement of Tama Hughes, 10-2-07 X D-9 DGE Sworn Statement of Michael S. Lyons, X 11 10-5-07 D-10 DGE Sworn Statement of William J. Yung, III, X 12 9-27-07 D-11 Memorandum, 8-29-07, Richard Iannacone to X 13 Richard Carretta, Richard Handzo D-12 E-mail, 9-5-07, Ted Mitchel to George Clark X 14 D-13 DGE Memorandum, 10-5-07, Richard Iannacone X to Wendy Way 15 D-14 DGE Memorandum, 8-14-07, Richard Iannacone to Richard Carrettare 16 D-15 DGE Memorandum, 8-14-07, Michael Scotten to Richard Iannacone 17 D-16 DGE Memorandum, 8-14-07, Lauren Massara to Richard Iannacone 18 D-17 Fred Buro Interview Outline by Thomas Hollinger, 8-14-07 19 D-18 Casino Services Agreement, 1-3-07 X D-19 Service Agreement, 1-3-07 X 20 D-20 Letter, 4-17-07, Lynne Kaufman to X Dorothy Turi 21 D-21 Letter, 9-18-07, MaryJo Flaherty to Lynne X Kaufman 22 D-22 Letter, 5-2-07, William J. Yung, III, to X Len DiGiacomo and Dorothy Turi 23 D-23 Letter, 7-23-07, Larry King to Dorothy Turi X D-24 E-mail, 3-9-07, Dorothy Turi to Antoinette 24 Hill D-25 DGE Interview Report, 8-6-07, Joseph X 25 Stratman 4 1 2 Division No. Description EVD 3 D-26 Revised Agenda, 6-7-07, Indiana X Gaming Commission 4 D-27 LexisNexis Article, 9-13-07 X D-28 Evansville Courier and Press, 9-13-07 X 5 D-29 Evansville Courier and Press, 8-12-07 X D-30 Letter, 9-23-07, William J. Yung, III, to X 6 Lonna Willingham D-31 Chart of Violation Numbers/Chart of X 7 Violations D-32 Louisiana Gaming Control Board Notice of X 8 Recommendation of Administrative Action, 12-27-05 9 D-33 Louisiana Gaming Control Board Notice of X Recommendation of Administrative Action, 10 3-8-06 D-34 E-mail, 5-9-06, Kelly Duncan to Vivian Raby X 11 D-35 Louisiana Gaming Control Board Notice of X Decision and Order, 6-20-06 12 D-36 Louisiana Gaming Control Board Notice of X Decision and Order, 8-15-06 13 D-37 Louisiana Gaming Control Board Order, X 10-17-06 14 D-38 Letter, 1-26-06, Nevada Gaming Control Board X to William J. Yung, III, 15 D-39 Park Cattle Company's Amended Counterclaim, X 6-15-07 16 D-40 DGE Interview Report, 1-11-07, X Re: Marvin Cato 17 D-41 DGE Interview Report, 7-11-07, X Re: Charles Cato 18 D-42 Rainbow Capital Requirements Ownership X Information 19 D-43 Letter, 3-20-07, William J. Yung, III, to X Marvin Cato 20 D-44 Letter, 8-7-02, Thomas A. Ryder to Ken Ibsen X D-45 Letter, 10-9-02, Paul S. Pilecki to Thomas X 21 A. Ryder D-46 Letters, 11-1-02, Paul S. Pilecki to Thomas X 22 A. Ryder D-47 Consent to Assessment of Civil Money Penalty X 23 5-23-03, Re: Greenville Riverboat D-48 Letter, 5-27-03, Alma Angotti to Paul X 24 Pilecki D-49 Copy of Check 100475160, Huntington X 25 National Bank 5 1 CONTINUED: E X H I B I T S : 2 Division No. Description EVD 3 D-50 DGE Investigation Report, 9-10-07 X D-51 DGE Investigation Report, 8-16-07 X 4 D-52 Commission Opinion, 7-13-83, Re: Bally's X Manufacturing Corp. 5 D-53 Letter, Guy S. Michael to Mitchel Schwefel X D-54 Legal Representation Agreement, 2-19-07 X 6 D-55 Letter, 12-28-06, John J. Mercun to Len X DiGiacomo and Raymond J. Marquez 7 D-56 Letter and petition, 6-1-07, Lynne Kaufman X to Commission 8 D-57 Letter, 6-1-07, Dorothy Turi to Hon. Linda X M. Kassekert 9 D-58 Letter and Amended Petition, Lynne Kaufman X to Commission 10 D-59 Letter, 6-14-07, Dorothy G. Turi to Hon. X Linda M. Kassekert 11 D-60 E-mail, 7-10-07, to Commission X with attachments 12 D-61 DGE Qualifier Report, 10-30-07 X 13 Applicant's No. Description EVD 14 A-1 Equal Employment Business Opportunity Plan X A-2 E-mail, 2-15-07, Tama Hughes to Bruce Ladd, X 15 Re: Response to 2-14-07 Inquiry A-3 E-mail, 2-22-07, Tama Hughes to Bruce Ladd, X 16 Re: Followup on 2-14-07 E-mail A-4 E-mail of 2-22-07, Bruce Ladd to Tama Hughes,X 17 Re: Acknowledges Receipt of E-mail A-5 E-mail of 3-9-07, Bruce Ladd to Tama Hughes, X 18 Re: Provide List A-6 E-mail of 3-9-07, Tama Hughes to Bruce Ladd, X 19 Re: List of Expected Terminations A-7 Expected Terminations X 20 A-6 Letter e-mailed of 3-15-07, Dianna X Fauntleroy to Tama Hughes, Re: Proposed 21 Terminations, Casino Division A-7 E-mail of 3-15-07, S. Cooper to Tama Hughes, X 22 Re: Letter Proposing a Termination A7a E-mail of 3-29-07, Bruce Ladd to Tama Hughes,X 23 Re: FYI A-9 E-mail of 3-15-07, Tama Hughes to Fred Buro, X 24 Re: Revised that Tama Will Contact Ms. Fauntleroy 25 6 1 CONTINUED: E X H I B I T S : 2 Applicant's No. Description EVD 3 A-10 E-mail of 3-29-07, Bruce Ladd to Tama Hughes, X Re: "Please don't forget my stats" E-mail 4 A-11 E-mail of 3-30-07, Rose Williams to Tama X Hughes, Re: Numbers 5 A-12 E-mail Series of 3-30-07, Chris Costanzo to X Tama Hughes, Re: HR Metrics Grid 6 A-13 E-mail of 3-30-07, Chris Costanzo to Tama X Hughes, Re: HR Metrics Grid 7 A-14 E-mail of 3-30-07 from Tama Hughes to Bruce X Ladd, Re: Two-monthly Update Summary Report 8 A-15 E-mail of 4-2-07 from Tama Hughes to Scott X Griffin, Re: RIF Breakdown 9 A-16 E-mail of 4-2-07, Tama Hughes to Bruce Ladd, X Re: With Attached Memo Detailing Breakdown 10 In Staff Reduction A-17 E-mail of 4-3-07, Tama Hughes to Bruce Ladd, X 11 Re: Explanation for Discrepancy A-18 E-mail of 4-4-07, Tama Hughes to Bruce Ladd, X 12 Re: Self Report A-19 E-mail of 4-30-07, Tama Hughes to Bruce Ladd, X 13 Re: Limousine Services A-20 Letter of 5-3-07, Bruce Ladd to Mike Lyons, X 14 Re: Approval of Amended Security Submission A-21 E-mail of 5-4-07, Tama Hughes to Bruce Ladd, X 15 Re: RIF A-22 E-mail of 5-15-07, Tama Hughes to Carol X 16 Defoor, Re: Notice of Upcoming Terminations A-23 E-mail of 5-17-07 from Tama Hughes to Carol X 17 Defoor, Re: Notice of Upcoming Terminations A-24 E-mail of 5-17-07 from Tama Hughes to Carol X 18 Defoor, Re: Hotel Cage A-25 E-mail of 5-25-07 from Tama Hughes to X 19 Dorothy Turi Re: Qualifier Information A-26 Letter of 5-31-07, Tama Hughes to Chair X 20 Kassekert Re: Proposed Terminations, Slot Department 21 A-27 Letter of 5-25-07, Tama Hughes to Dorothy X Turi Antoinette Hill, Re: Qualifier Information 22 A-28 E-mail of 6-1-07, Carol Defoor to Tama X Hughes, Re: Two Month Update Summary Report, 23 HR Metrics Grid A-29 E-mail of 6-1-07, Tama Hughes to Carol X 24 Defoor, Re: Two Month Update Summary Report, HR Metrics Grid 25 7 1 CONTINUED: E X H I B I T S : 2 Applicant's No. Description EVD 3 A-30 E-mail of 6-1-07, Carol Defoor to Jim X Fehon/CCC, Re: Two Month Update Summary 4 Report, HR Metrics Grid A-31 E-mail of 6-1-07, Tama Hughes to Carol X 5 Defoor, Re: Breakdown of Terminations by Reason, Total 804 6 A-32 E-mail of 6-5-07, Tama Hughes to Carol X Defoor, Re: Termination Numbers Explanation 7 About HR Metrics Grid Numbers A-33 E-mail of 6-7-07, Tama Hughes to Dorothy X 8 Turi, Re: Qualifier letters A-34 E-mail of 6-12-07, Tama Hughes to Carol X 9 Defoor, Mitch Schwefel, Rich Handzo, Re: Staff Reductions 10 A-35 E-mail of 6-21-07, Carol Defoor to Tama X Hughes, Re: Rumors of Layoffs 11 A-36 E-mail of 6-27-07, Tama Hughes to Carol X Defoor, Mitch Schwefel, Dianna Fauntleroy, 12 Re: AC Press Letter A-37 E-mail of 7-3-07, Tama Hughes to Carol X 13 Defoor and George Homa, Re: Self Report, Task Force Personnel and Response 14 A-38 E-mail of 7-3-07, Tama Hughes to Carol X Defoor and George Homa, Re: Task Force Summary 15 A-39 E-mail of 7-6-07, Tama Hughes to Carol X Defoor, Mitch Schwefel, Richard Handzo, 16 Re: RIF advisement A-40 E-mail of 7-6-07, Tama Hughes to Carol X 17 Defoor, Mitch Schwefel, Richard Handzo, Re: RIF 18 A-41 E-mail of 7-18-07, Tama Hughes to Carol X Defoor, Mitch Schwefel, Richard Handzo, 19 Re: RIF Advisement A-42 E-mail of 7-18-07 Tama Hughes to Carol X 20 Defoor, Mitch Schwefel, Richard Handzo, Re: RIF 21 A-43 E-mail of seven 20 seven, Tama Hughes to X Carol Defoor, Andy Fiorentino, Mario 22 DeGuiseppe, Re: Slot Tech Impact Analysis A-44 E-mail of 7-20-07, Tama Hughes to Carol X 23 Defoor, Mitch Schwefel, Rich Handzo, Re: Revised RIF advisement 24 A-45 E-mail of 7-20-07, Tama Hughes to Carol X Defoor, Mitch Schwefel, Rich Handzo, 25 Re: Reductions 8 1 CONTINUED: E X H I B I T S : 2 Applicant's No. Description EVD 3 A-46 E-mail of 7-20-07, Tama Hughes to Carol X Defoor, Re: Slot Tech Impact Analysis 4 Undertaking and Assignment A-47 E-mail of 7-24-07, Tama Hughes to Fred Buro, X 5 Re: Rumors of Reduction A-48 E-mail of 8-6-07, Tama Hughes to Dianna X 6 Fauntleroy, Re: Tropicana Slot Tech Impact Study A-49 E-mail Series of 8-7-07, Re: Impact Study X 7 Submission A-50 E-mail of 8-7-07 Tropicana to submission, X 8 Re: August 7th Tropicana Atlantic City Proposed Department Layoffs and 2007 FTEs 9 A-52 E-mail of 8-10-07, Dianna Fauntleroy to Tama X Hughes, Re: Potential Department Layoffs 10 A-53 E-mail Series of 8-10-07, Dianna Fauntleroy, X Re: Potential Department Layoff, Clarification 11 A-55 E-mail Series of 8-14-07, Re: Qualifier X Notification 12 A-56 E-mail of 8-18-07, Tama Hughes to Dianna X Fauntleroy, Re: Proposed Staff Reductions 13 Security-Relief Rovers A-57 E-mail of 8-18-07, Dianna Fauntleroy to X 14 Tama Hughes Re: Reply proposed security Reductions 15 A-58 E-mail of 8-18-07, Tama Hughes to Dianna X Fauntleroy, Re: Reply to Item 34 16 A-59 E-mail of 8-18-07 Dianna Fauntleroy to X Tama Hughes, Re: Reply to Item 35 17 A-60 E-mail and letter of 8-18-07, Tama Hughes X to Dianna Fauntleroy, Re: Proposed 18 Tropicana Security Department Reductions A-61 E-mail Series of 8-23-07, Dianna Fauntleroy X 19 to Tama Hughes, Re: Tropicana Security Staffing Violation 20 A-62 E-mail 8-29-07, Tama Hughes to Dianna X Fauntleroy, Re: Request for meeting to 21 A-63 E-mail and Letter 9-5-07, Tama Hughes to X Dianna Fauntleroy, Re: Proposed Reductions 22 A-64 E-mail Series of 2-22-07, Tama Hughes to X Bruce Ladd, Re: Revised RIF List 23 A-65 E-mail 2-27-07, Tama Hughes to Bruce Ladd, X Re: Staffing Reduction Advisory 24 A-66 E-mail of 8-20-07, Tama Hughes to Carol X Defoor, Re: Tropicana Security Staffing 25 Violation 9 1 CONTINUED: E X H I B I T S : 2 Applicant's No. Description EVD 3 A-67 E-mail of 5-3-07, Len DiGiacomo to Lynne X Kaufman, Re: Morgan and Brugler 4 A-68 E-mail of 5-3-07, Len DiGiacomo to Lynne X Kaufman, Re: Brugler 5 A-69 E-mail 5-10-07, Lynne Kaufman to Dorothy X Turi, Re: Audit Committee 6 A-70 E-mail of 5-15-07, Guy Michael to Dorothy X Turi, Re: Tropicana Confirmations/Status 7 A-71 E-mail 6-14-07, Lynne Kaufman to Dorothy X Turi, Re: Audit Committee 8 A-72 E-mail of 6-14-07, Lynne Kaufman to Dorothy X Turi, Re: Audit Committee 9 A-73 E-mail of 6-14-07, Dorothy Turi to Lynne X Kaufman, Re: Audit Committee 10 A-74 E-mail of 6-14-07, Dorothy Turi to Lynne X Kaufman, Re: Audit Committee 11 A-75 E-mail of 6-18-07, Len DiGiacomo to Lynne X Kaufman, Re: Audit Committee 12 A-76 E-mail of 6-19-07, Dorothy Turi to Lynne X Kaufman, Re: Audit Committee 13 A-77 Chart, Second Level Casino Floor Plan X A-78 Photograph X 14 A-79 Photograph X A-80 Chart, Tropicana Termination/Turnover X 15 Summary 1-31-7 to 10-31-07 16 17 18 19 20 21 22 23 24 25 (Exhibits retained.) 10 1 (The proceedings were recommenced at 2 12:56 p.m.) 3 CHAIR KASSEKERT: Thank you. 4 We'll go back on the record since we 5 adjourned from our previous meeting and 6 continue with Item No. 10. 7 MR. NANCE: Item No. 10, petition of 8 Adamar of New Jersey, Inc., for renewal of its 9 casino license and casino alcoholic beverage 10 matter and other matters; 11 Consideration of the application of 12 Tropicana Casinos and Resorts, Inc., for 13 plenary qualification as a the holding company 14 of Adamar, New Jersey, Inc. 15 CHAIR KASSEKERT: Okay. At this point 16 before we bring Mr. Yung back, let me just ask 17 if there are any procedural matters that need 18 to be brought to our attention at this time? 19 Mr. O'Gara? 20 MR. O'GARA: No, ma'am. 21 CHAIR KASSEKERT: Miss Maher? 22 MS. MAHER: No. Thank you. 23 CHAIR KASSEKERT: Could we recall Mr. 24 Yung to the stand, please? 25 Mr. Nance, do we need to reswear him or 11 WILLIAM J. YUNG, III 1 the proviso that he's under oath from 2 yesterday. 3 MR. NANCE: Yes. 4 CHAIR KASSEKERT: Okay. Very good. 5 THE WITNESS: Okay. 6 CHAIR KASSEKERT: You can have a seat, 7 Mr. Yung. 8 I think we begin now with questions from 9 the Commissioners? 10 VICE CHAIR FEDORKO: Mr. O'Gara? 11 CHAIR KASSEKERT: I'm sorry? Well, 12 we're going to do questions next, and then 13 we'll go back to redirect. 14 Commissioner Epps? Questions? 15 VICE CHAIR FEDORKO: We'll wait. 16 COMMISSIONER EPPS: Mr. Yung, yesterday 17 you testified and you were questioned about 18 your ownership of Marriotts. I think you said 19 that Marriott set standards for the hotels and 20 the franchisees have to follow in those 21 standards. Is the accurate? 22 THE WITNESS: Yes, sir. 23 COMMISSIONER EPPS: Okay. Who sets the 24 standards for your casino operation? 25 THE WITNESS: To be honest with you, I'm 12 WILLIAM J. YUNG, III 1 not so sure I really know what has been set up 2 here. I really don't know. I don't set them. 3 But I don't know if there is such a rating 4 system or something that we use at this 5 property. 6 COMMISSIONER EPPS: Well, I wasn't -- 7 actually, I wasn't referencing this property in 8 particular. You own several casino properties 9 separate from your hotels. What are or how do 10 you set standards for your operations in your 11 casino properties that are not part of larger 12 chains where the standards are dictated by the 13 company? 14 THE WITNESS: Right. We -- you know, I 15 think the main way that we do the -- do the 16 standards is such that we -- we react to the 17 complaints that the people have. I don't 18 believe we have set a specific standard for any 19 of our independent properties. 20 COMMISSIONER EPPS: Okay. Now, going 21 back to your testimony about entering New 22 Jersey. You suggested that you were 23 apprehensive about entering New Jersey or the 24 Atlantic City casino market because you had 25 union concerns that you said weren't 13 WILLIAM J. YUNG, III 1 necessarily concerns in Las Vegas. But when 2 you testified, you seemed to refer to 3 construction concerns like, you spoke to 4 construction -- to difficulty Tropicana had 5 during its construction. So were your concerns 6 from the construction trades or other unions? 7 Which unions were you referencing when you said 8 you had union concerns? 9 THE WITNESS: Right. I had concerns 10 primarily about the operating unions. I just 11 said as an anecdote that the problems 12 that Tropicana had here, Aztar had here when 13 they were building the things were construction 14 union problems. You know, and it just seemed 15 like it -- from my impression, it fit the 16 pattern like it was a tough place to do 17 business because of the unions. 18 COMMISSIONER EPPS: But so your concern 19 was unions in general, not any specific union 20 as you looked to enter the New Jersey market? 21 Because at the time you weren't doing any 22 construction or Tropicana wasn't doing any 23 construction. So construction unions -- the 24 building trades probably wouldn't have been a 25 concern. So that's why I'm trying to 14 WILLIAM J. YUNG, III 1 understand what your union concerns were. 2 THE WITNESS: Right. The -- you know, 3 we did the rooms there, obviously, with union 4 construction. We had no problems with it. 5 We're doing the casino with no problems and the 6 restaurants, no problems. I think a lot of it 7 has to do with who the union contractor is. 8 But when we came here we realized, you know, 9 initially that -- you know, we had no concerns 10 about the construction union simply because we 11 really weren't going to do any major 12 construction right away. So my primary 13 concern -- the only reason I meant -- mentioned 14 the construction unions was the fact that 15 the -- as an anecdotal comment, the problems 16 that Aztar had when they were building the 17 property. 18 COMMISSIONER EPPS: Okay. Now, you 19 indicated that the impact of Pennsylvania and 20 the smoking ban hurt revenues and drove further 21 layoffs. Have those layoffs allowed Tropicana 22 to realize a turnaround in your revenue 23 decline. 24 THE WITNESS: We have not acquired a 25 revenue turnaround yet. 15 WILLIAM J. YUNG, III 1 COMMISSIONER EPPS: Okay. And a 2 significant number of your layoffs occurred 3 early on in your tenure with this new company, 4 Tropicana. Is that fair to say, the first 30, 5 60 days. 6 THE WITNESS: Yes. 7 COMMISSIONER EPPS: Ninety days, maybe. 8 THE WITNESS: Yes. That's correct. 9 COMMISSIONER EPPS: And that would have 10 been the first quarter of this year, pretty 11 much? 12 THE WITNESS: Yes, sir. 13 COMMISSIONER EPPS: Now, your decline -- 14 do you know what the decline was in that first 15 quarter consistent with the layoffs? 16 THE WITNESS: Not right offhand I don't. 17 No. 18 COMMISSIONER EPPS: Single digit? Two, 19 four percent? Could that be fair? 20 THE WITNESS: I don't know exactly what 21 it was, but it was less than the second 22 quarter. 23 COMMISSIONER EPPS: Okay. Do you know 24 what the declines in the second and third 25 quarter were? 16 WILLIAM J. YUNG, III 1 THE WITNESS: The -- yes. The -- I 2 believe the second quarter was about 14 3 percent, I believe. 4 COMMISSIONER EPPS: Okay. So after the 5 significant layoffs, your decline increased. 6 And I thought your testimony was that you 7 thought that because of the layoffs you could-- 8 you could do layoffs to generate a turnaround, 9 but you're actually -- the change went the 10 opposite direction. You laid off people, and 11 you saw a greater decline in your revenues. 12 Do you have any explanation? Or how do 13 you view that? 14 THE WITNESS: Yes. I -- yes. I don't 15 believe that the layoffs had anything to do 16 with the decline in business. The decline in 17 business had -- was primarily due to the 18 marketing efforts and the actual -- the 19 dismissal of player development people who 20 should never have been dismissed. 21 COMMISSIONER EPPS: Okay. Now, earlier 22 you also referred to a -- you seem to suggest 23 was a staged sick-out by the union. How do we 24 know that that's what happened, that there was 25 a staged sick-out? 17 WILLIAM J. YUNG, III 1 THE WITNESS: I think Mark can explain 2 it to you better when he testifies, but my 3 understanding is that on several shifts, 4 especially during the weekends, most of the 5 employees that are required to clean the casino 6 did not, called out sick. And it continued on 7 for -- he can explain to you more, but I think 8 it continued on for a couple months. 9 COMMISSIONER EPPS: Now, if you I 10 understand you, these employees were in the 11 casino public areas? 12 THE WITNESS: Yes, sir. 13 COMMISSIONER EPPS: Okay. And then I 14 believe you testified that the maids came to 15 your aid to relieve the situation? 16 THE WITNESS: Yes. 17 COMMISSIONER EPPS: Aren't the maids and 18 the public area attendants in the same union? 19 THE WITNESS: Yes. 20 COMMISSIONER EPPS: Is there strange to 21 you that there would be organized work action 22 but the same union would come to your aid? 23 THE WITNESS: I think it was an 24 organized action by the cleaners. 25 COMMISSIONER EPPS: So you mean a 18 WILLIAM J. YUNG, III 1 subgroup of the union? 2 THE WITNESS: Yes. Uh-huh. 3 COMMISSIONER EPPS: Okay. Now, I think 4 in your -- when we started talking about your 5 capital expenditures or your plans for capital 6 expenditure, you talked about the work on the 7 rooms and the work on the casino floors you 8 planned to do. And you put it somewhere in the 9 area of 30 -- $30 million. Is that fair? 10 THE WITNESS: When we're finished in 11 February, it would be about $30 million. 12 COMMISSIONER EPPS: Now, are there other 13 expenditures anticipated for 2010? Or is that 14 pretty much it? 15 THE WITNESS: Through 2010? I don't 16 know. We haven't gone out that far. We're 17 just trying to stabilize the situation right 18 now. I -- I can tell you through 2008 there 19 won't be any more. After we're completed with 20 this. It's so disruptive to the businesses. 21 And right now we have half of our restaurants 22 shut down. We only -- I think right now -- I 23 think we only have, like, 500 seats in the 24 whole casino because two restaurants are being 25 totally remodeled. So, and we have about one 19 WILLIAM J. YUNG, III 1 third of half of the casino shut down through 2 remodeling. So at some point we just have to 3 stop the disruptions and let the thing run 4 normally, and the disruptions are part of our 5 downturn, also. 6 COMMISSIONER EPPS: Okay. If you 7 assume-- assume with me, if you will, that that 8 is the extent of the capital expenditures 9 you'll do -- just using my example through 10 2010, that would break out to about $10 million 11 a year in capital expenditures. For the size 12 of your property, do you think that's a 13 significant number? 14 THE WITNESS: Well, I don't think you 15 can say it that way. I don't -- you know, I 16 think for us to plan what we're going to do 17 right now when we're just finishing the first 18 major construction, I don't know what we're 19 going to do next. I don't know what we need to 20 do. I think the property's in pretty good 21 shape right now. 22 And I don't think it's fair to say that 23 $10 million a year when we just spent $30 24 million is a fair characterization. I think 25 you need to let us go and get organized and 20 WILLIAM J. YUNG, III 1 get-- get the thing stabilized, and then we'll 2 see what else we have to do. 3 COMMISSIONER EPPS: Okay. In Q2 or 3 of 4 next year, you're going to have new towers at 5 Borgata, Harrah's, and the Taj. With what 6 you've indicated, rooms and restaurants and 7 improvements on the casino floor, do you think 8 that's enough to keep you competitive with 9 those new attractions? 10 THE WITNESS: Yes. 11 COMMISSIONER EPPS: And then in 2010 or 12 '11 there's going to be added competition as 13 proposed with Pinnacle and Revel -- 14 THE WITNESS: Uh-huh. 15 COMMISSIONER EPPS: And potentially an 16 MG MIRAGE project. 17 THE WITNESS: Uh-huh. 18 COMMISSIONER EPPS: How do you see 19 Tropicana getting itself to be in a position to 20 be competitive in that new environment? 21 THE WITNESS: Well, obviously, we have 22 to stay competitive, and we'll do whatever it 23 takes for us to stay competitive. 24 COMMISSIONER EPPS: But -- so you have 25 no idea exactly what you'll do. You'll -- 21 WILLIAM J. YUNG, III 1 THE WITNESS: No, Commissioner. I'm 2 just trying to get through the situation we 3 have right now. I -- I can't think out three 4 years from now. I have to think out what 5 was -- what's happening now. 6 COMMISSIONER EPPS: Okay. Let's turn to 7 the debt ratio covenants. Do I understand your 8 testimony to say that what actually occurred 9 was a miscalculation? 10 THE WITNESS: What I said is -- what 11 could -- we could have easily cured the debt 12 ratio covenant breach by -- but there was -- we 13 miscalculated a number that I think that could 14 easily have been -- we could have paid down 15 some cash and met the covenant. But I think if 16 you would address that to John Jacob, who is 17 our CFO, I think he can explain it much more 18 detailed than I can. 19 COMMISSIONER EPPS: Do you know what's 20 being done to address it? Or should we -- 21 THE WITNESS: I think he's the guy to 22 talk to about it. 23 COMMISSIONER EPPS: Okay. Now, you'll 24 probably give me the same answer, but the 25 covenants were designed to be a little bit more 22 WILLIAM J. YUNG, III 1 stringent as you going forward. Do you have 2 plans to address the more stringent covenant? 3 THE WITNESS: I think, again -- I think 4 he can answer that much better than I can. 5 COMMISSIONER EPPS: Okay. You testified 6 yesterday that when you came in and you began 7 to look at cuts at Tropicana, you did not have 8 a plan to eliminate high salaries. 9 THE WITNESS: No. I don't believe I 10 said that. I -- not exclusively high salaries. 11 We eliminated quite a few high salaried people. 12 COMMISSIONER EPPS: But yesterday when 13 Ms. Maher asked you if you targeted people who 14 make $150,000 or more, you said no, that wasn't 15 your plan. 16 THE WITNESS: That's true. That's what 17 I said. That is true. 18 COMMISSIONER EPPS: But in your sworn 19 interview with the Division when they asked you 20 if you targeted people higher than $150,000, I 21 don't want to mischaracterize it, but your plan 22 was to go after the high salary guys, $150,000 23 and above? 24 THE WITNESS: Well, we went after the 25 people that weren't necessary -- that we felt 23 WILLIAM J. YUNG, III 1 weren't necessary in the management structure. 2 And there were a lot of people in that 3 management structure that made that kind of 4 money that we didn't feel like we needed. And 5 so we did go after those people. 6 COMMISSIONER EPPS: I'm still not clear 7 what the distinction is where you said you 8 didn't go after high-salary people, but then 9 you said that is who you went after. Could 10 you -- 11 THE WITNESS: Well, we went after 12 everybody who we felt like we did not need to 13 run the -- run the property properly. They 14 were high-salaried people, and they were 15 lower-salaried people. 16 COMMISSIONER EPPS: Okay. So at some 17 point did it change? 18 THE WITNESS: No. It was always that 19 way. 20 COMMISSIONER EPPS: Okay. 21 When asked about some of the regulations 22 involved in operating a New Jersey casino, your 23 answer was often that you weren't familiar with 24 regulations or some of the rules, and you 25 referred those to your counsel. I have a 24 WILLIAM J. YUNG, III 1 couple questions with that. Is she your only 2 counsel for all of your casino operations 3 wherever you are? 4 THE WITNESS: No. Generally we have a 5 local counsel in every jurisdictions we're in. 6 COMMISSIONER EPPS: But as your company 7 you only have her on are there other people in 8 Columbia Sussex that are counsel to you on 9 regulatory issues? 10 THE WITNESS: Just Donna. Uh-huh. 11 COMMISSIONER EPPS: Okay. And so it's 12 her responsibility to be mindful for Columbia 13 Sussex of all the regulatory issues in each 14 jurisdictions where you have casino operations? 15 THE WITNESS: Well, I think she relies 16 on the local counsel we have, also. 17 COMMISSIONER EPPS: Now, and you rely on 18 her for your knowledge, so you don't 19 necessarily maintain knowledge or understanding 20 of the various jurisdictions where you operate 21 a company -- you simply rely on her? 22 THE WITNESS: Yes, sir. 23 COMMISSIONER EPPS: Now, do you -- do 24 you function that way in your noncasino 25 properties as well? In jurisdictions where 25 WILLIAM J. YUNG, III 1 there are regulations or whatever involving 2 your hotel operations, not a casino, do you 3 familiarize yourself with the regulations in 4 various jurisdictions in more detail than you 5 do in the casino jurisdictions? 6 THE WITNESS: In the hotel business, you 7 know, we have various levels of management. We 8 have a vice president of hotel operations, and 9 then he has eight regional vice presidents that 10 each take care of about ten hotels. To be 11 honest with you, there really aren't any 12 regulations in hotel business. 13 COMMISSIONER EPPS: I guess I'm more 14 specifically referring to you. Is your 15 understanding on the hotel side more in-depth 16 than your understanding on the casino side? 17 THE WITNESS: Well, I -- as far as 18 regulations go? You know, like I say, the 19 casino side is the only side that has 20 regulations, you know, and the hotels have no 21 regulations. 22 COMMISSIONER EPPS: Okay. But a lot of 23 your answers yesterday seem to be that you 24 didn't know or you weren't familiar with a lot 25 of the issues that were raised, particularly on 26 WILLIAM J. YUNG, III 1 the casino side. 2 THE WITNESS: Uh-huh. 3 COMMISSIONER EPPS: Is that a personal 4 decision that you don't just involve yourself 5 in those areas? 6 THE WITNESS: Well, you know, I have a 7 lot of people that report to me. There's a 8 various levels of -- of managers who are paid 9 to do those things. We operate over 80 10 properties. We have over almost 40,000 11 employees. I mean, I can't get down and do -- 12 I can't -- I can't answer every complaint. I 13 can't know every regulation. I can't do it 14 all. Okay? We are a lean company, but we're 15 not that lean, and we have to delegate some of 16 this work to other people. I don't know every 17 answer. I'm... 18 COMMISSIONER EPPS: Okay. With respect 19 to hiring people and people that you bring 20 under you in your table of organization or 21 within your company, is there a due diligence 22 process that you guys engage in to determine 23 who you are hiring or who you are about to 24 engage in business with so you have some 25 confidence that these are people that you want 27 WILLIAM J. YUNG, III 1 to be engaged in business with? 2 THE WITNESS: Well, if you are referring 3 to in the casino business to make sure whoever 4 we're dealing with are honest people and not 5 so-called dirty people as far as being 6 criminals or mob related or something like 7 that, we basically always deal with -- we only 8 deal with people who are basically approved by 9 the various gaming commissions. 10 COMMISSIONER EPPS: Okay. Now, what is 11 your independent due diligence process? What 12 process do you go through to make yourself 13 confident that a business partner you may have 14 or someone you may hire within your company is 15 someone that you can be confident that you will 16 get through an evaluation process or a 17 licensing process with? 18 THE WITNESS: Well, I only have one 19 partner, and that was the one in Greenville. I 20 have no other partners. When we hire somebody, 21 the HR department that we have runs credit 22 checks on them, runs police checks on them, and 23 does various things to make sure that they're 24 suitable for hiring. 25 COMMISSIONER EPPS: All right. Now, in 28 WILLIAM J. YUNG, III 1 the last year, your business strategy in 2 Atlantic City, at least seemed to have been, to 3 reduce staff in order to make a revenue 4 turnaround. We've talked about that a little 5 bit briefly here this morning. Your 6 competition didn't seem to have taken that same 7 tack. Is that just a business decision? How 8 do you distinguish your choice of making 9 layoffs as a way to turn around revenue as 10 opposed to other companies who didn't choose to 11 reduce staff in order to see that turnaround? 12 THE WITNESS: We did not reduce staff to 13 turn around business. We basically reduced the 14 staff to get our costs in line with the 15 reduction and the amount of business. We 16 basically focused on that, and we didn't want 17 to get into the big buy of business wars that 18 some of the casinos have got deny into. 19 I think that we're at the point right 20 now where we have to change that decision. We 21 have to -- since, you know, we're basically 22 where we're we want to be with employee level. 23 We're going to have to go out, and in order to 24 get this business back, we're going to have to 25 go out and start buying some business to get 29 WILLIAM J. YUNG, III 1 the revenues back. To at least what the market 2 is. We're definitely -- we definitely didn't 3 spend enough to try to keep some of that 4 business that we lost. 5 There were, again, some of the other 6 reasons were -- is that the gentleman who was 7 running the thing got rid of about six of our 8 highest producer player development on his own 9 and brought in his friends who brought in no 10 business, and that accounts for almost a third 11 of our downturn, and that is one of the reasons 12 he was terminated. 13 COMMISSIONER EPPS: Okay. Now, your 14 competitors have not experienced major revenue 15 losses compared to the revenue losses that 16 you've experienced. 17 THE WITNESS: Correct. 18 COMMISSIONER EPPS: And you suggest that 19 is because they, you say, buy the business and 20 you up to this point haven't done that? Does 21 that make up the difference? 22 THE WITNESS: I think it's three things. 23 Number one is, clearly I think the market is 24 down about seven percent. You know, that's -- 25 we lost about another seven percent on stupid 30 WILLIAM J. YUNG, III 1 business decisions. And we probably lost 2 another four or five percent because we 3 wouldn't buy the business, you know. And I 4 think that's why we're down. 5 And in the last -- last day or two, 6 we've got one of those player development 7 persons back, and we're supposed to find out 8 today about two other ones coming back. And 9 we're going to start a campaign to try to get 10 back these customers who did leave, and we're 11 going to make a concerted effort with that and 12 starting -- I think it starts this Sunday. 13 CHAIR KASSEKERT: When you say "buy 14 back" you mean comps? 15 THE WITNESS: Yes. Uh-huh. 16 COMMISSIONER EPPS: I think that's all I 17 have. 18 CHAIR KASSEKERT: Okay. Sort of taking 19 off a little bit about what Commissioner Epps 20 was talking about, and you may have answered 21 this question already, there's a lot of 22 discussion when you came to Atlantic City. And 23 I think you and I even discussed here about 24 your philosophy towards the gaming business and 25 how you make gaming business work. And I think 31 WILLIAM J. YUNG, III 1 we discussed at the time how Atlantic City is a 2 very different market from some of the other 3 markets. And we talked a little bit about your 4 philosophy. There was a lot of discussion 5 about the issue of comps, that it wasn't your 6 philosophy to do that. As a result of this 7 experience in Atlantic City, have you changed 8 your philosophy? 9 THE WITNESS: Yes. Yeah. It's 10 completely different in it is such a player 11 relationship business that -- 12 CHAIR KASSEKERT: Uh-huh. 13 THE WITNESS: You know, I've learned the 14 lesson the hard way. And -- yeah. It is such 15 a player relation business. We're actively out 16 trying to -- in addition to the ones we've 17 lost, we're trying to hire some other player 18 development people, and that's just the way it 19 is here. And we made a big mistake. 20 CHAIR KASSEKERT: I want to talk a 21 little bit about as it relates to New Jersey. 22 Some of the things that have gone on in other 23 jurisdictions and ask you to think a little 24 prospectively rather than retrospectively. 25 And, obviously, in the Division's report they 32 WILLIAM J. YUNG, III 1 have raised issues about issues and violations 2 that have occurred in other jurisdictions. You 3 know, in Indiana with problems with an 4 unsecured count room, for example. Louisiana. 5 There was some violations in Nevada, and, 6 obviously, we've had some here in New Jersey. 7 How is that impacted and what would you do in 8 the future to assure us and give us a comfort 9 level about ongoing compliance issues and 10 regulatory issues? Because, obviously, you 11 know, all of our jurisdictions are concerned 12 about those kinds of issues, especially when it 13 comes to ensuring that the proper taxes are 14 collected and the programs that, you know, get 15 those taxes, you know, get them accounted for 16 properly. 17 THE WITNESS: Uh-huh. 18 CHAIR KASSEKERT: What will you do going 19 forward in terms of compliance? 20 THE WITNESS: Well, I think the main 21 thing that we have to do -- and I think Donna 22 can speak to it much better than I can -- is 23 to-- I think she can explain to the new -- the 24 new compliance techniques that we're 25 instituting. And all I can do is tell you that 33 WILLIAM J. YUNG, III 1 I'm sure Donna and her staff will work very 2 diligently to make sure that the violations are 3 kept to an absolute minimum and to do the best 4 we can. You know, I think she can speak to 5 that much better than I can. 6 CHAIR KASSEKERT: Fair enough. 7 Commissioner Fedorko? 8 VICE CHAIR FEDORKO: Good afternoon, Mr. 9 Yung. 10 THE WITNESS: Good morning. 11 VICE CHAIR FEDORKO: Yesterday when you 12 were testifying both with your attorney and the 13 Division, a lot of the times they would say to 14 you, you make all the decisions, and you said 15 yeah. With 80 hotels or 80 properties and 16 40,000 employees, how much can you get involved 17 in the day-to-day operation of your business? 18 THE WITNESS: Well, you know, I -- you 19 know, I'm a more of a hands-on guy than I think 20 most CEOs. But, you know, I have a -- I have a 21 cadre of about, you know, six or eight people 22 that report to me, and then it goes down into 23 the 38,000 people that we have. So I make the 24 major decisions. I'm responsible for the major 25 decisions. So but as far as making all the 34 WILLIAM J. YUNG, III 1 decisions, I -- I probably make -- I make all 2 the major decisions, but there are a lot of 3 other decisions that I have -- don't even know 4 about that are being made, you know. 5 VICE CHAIR FEDORKO: In reading the 6 Division's report, D-1, on page 21 there's a 7 statement by Fred Buro. And he said that the 8 decision to realize 30 to $40 million in 9 payroll savings requiring staffing cuts of 7 to 10 800 employees predated the takeover of the 11 property; is that right? 12 THE WITNESS: We -- I think we had 13 scheduled, I think it was -- we were hoping to 14 get, as we said in the prospectus that we 15 handed out to everybody, $58 million for the 16 whole Aztar Corporation, of which I think 25 17 was in the home office. And that would leave I 18 think -- what is that, 25? It would leave 33 19 million over the other five properties is the 20 number that we came up with. 21 VICE CHAIR FEDORKO: But that was before 22 you acquired Tropicana? 23 THE WITNESS: Yes. That was during the 24 road show we came up with that number. 25 VICE CHAIR FEDORKO: This is my eighth 35 WILLIAM J. YUNG, III 1 year on this Commission. With all of the 2 licensing hearings that I've had, I've sat 3 through, I have never seen such negative press 4 as I have with you. Why do you think that is? 5 THE WITNESS: I -- you know, it's very 6 discouraging to see the newspaper article this 7 morning. It's -- you know, we have a lot of 8 good employees. All our employees are good. 9 You know, union, nonunion, they all work very 10 hard, you know. And newspaper articles -- I 11 mean, we were getting -- you know, I think when 12 Mark gets done today, he's got to go back and 13 call a lot of high rollers that are cancelling 14 their reservations, you know, for this weekend. 15 The impact of the union's activities to kill 16 our business is really working, and they-- you 17 know, so they ought to be proud of that. 18 You know, it's -- you know, we're going 19 to do the best to get through this. And, you 20 know, I -- it's almost like it's the first 21 community that I've ever come to that tries to, 22 instead of developing jobs, is trying to get 23 rid of jobs. You know? And it's -- I've never 24 seen that before, so. 25 VICE CHAIR FEDORKO: That's all I have. 36 WILLIAM J. YUNG, III 1 CHAIR KASSEKERT: Commissioner Frulio? 2 COMMISSIONER FRULIO: Yeah. 3 Mr. Yung, you said before that the 4 layoffs would lower costs, and that was a 5 business decision, I guess. But didn't you 6 realize that it would cause lower revenue due 7 to reduction of services which, in turn, causes 8 a loss of customers? Did you at some point say 9 to yourself, there's something deadly wrong 10 with the mathematics here? 11 THE WITNESS: I firmly believe that our 12 layoffs that we made and our reductions in no 13 way affected the service. As I stated before, 14 our service at the property is absolutely a lot 15 better -- it's a lot better now than it was 16 when we took over. 17 COMMISSIONER FRULIO: Okay. Then, do 18 you agree that you and your competitors have 19 lost some revenue due to smoking ban and the 20 Philadelphia coming onboard? And but why is it 21 that your property has suffered severely a lot 22 more losses than they? 23 THE WITNESS: Well, I think it's like I 24 said before, it's not only Philadelphia, but 25 it's also we made a lot of poor business 37 WILLIAM J. YUNG, III 1 decisions on player development people. 2 And the other -- the other thing is that 3 we didn't go out and buy the business. And 4 that was probably a mistake. We should have -- 5 we should have tried to buy some business. But 6 we're going back after it starting now, and you 7 know, go back and buy some business and get 8 some more player development people hired. 9 COMMISSIONER FRULIO: I don't mean to 10 think that you have a crystal ball or whatever, 11 but if you do get relicensed, what would your 12 strategies be, like marketing strategies to try 13 to get the customer back? 14 THE WITNESS: Right. 15 COMMISSIONER FRULIO: To lift those 16 revenues? 17 THE WITNESS: Well, another reason why 18 the business was down -- and I forgot -- was 19 the disruptions on the floor. You know, we 20 had-- we had about a third of our casino floor 21 down in the -- geez, I think it was till -- we 22 had it down until June when we got everything 23 completed. So disruption was another part of 24 it. The business strategy is now, is to get 25 the thing -- the rest of the renovation done by 38 WILLIAM J. YUNG, III 1 the first of March. We're going to get more 2 player development people, and we're going to 3 go out and buy some business. And, you know, 4 that's basically what it is. 5 COMMISSIONER FRULIO: Thank you. 6 CHAIR KASSEKERT: Commissioner 7 Sommeling? 8 COMMISSIONER SOMMELING: Mr. Yung, I 9 know you just said that you expect completion 10 of your new projects to be around March the 1st 11 of '08. 12 THE WITNESS: Correct. 13 COMMISSIONER SOMMELING: And I'm 14 assuming that because those areas are not 15 completed and up and running now that you'll 16 need additional staff once they are completed 17 in order for those areas to function? 18 THE WITNESS: Well, what is -- what is 19 happening right now is the casino's being 20 renovated and the restaurants being renovated. 21 Basically the restaurants, we've basically kept 22 the people on and while the renovations going 23 on. And as soon as the renovations is done -- 24 done, they will just go back to their jobs. 25 But-- actually, the renovations will not bring 39 WILLIAM J. YUNG, III 1 it any more employees in. The employees will 2 come back when the business comes back. And 3 that's when we'll be able to rehire. 4 COMMISSIONER SOMMELING: And we talked a 5 little bit about, and Commissioner Frulio just 6 alluded it to just a few moments ago, marketing 7 strategies for the casino for the future. Do 8 you have some people onboard at the present 9 time that are putting together a plan, a 10 specific plan as to how you're going to market 11 the property? 12 THE WITNESS: Yes, sir. We do. Mary 13 Tindall and Mark Gianntonio will again explain 14 that. But, yeah, we've -- we sat down over the 15 last week and come up with a plan to basically 16 super size all our offers. And, you know, 17 another thing that was done is under the 18 present -- under Fred's reign was that he 19 lowered the comp rate from, I think, 11 percent 20 to eight or seven or eight percent. And we 21 lost business that way. So, yeah. We're going 22 to correct all those things and pretty much get 23 it back to where it was and hire more 24 development people. Yeah. 25 COMMISSIONER SOMMELING: And speaking of 40 WILLIAM J. YUNG, III 1 hiring, I know that when you had your 2 year-round annual work force in place -- 3 THE WITNESS: Uh-huh. 4 COMMISSIONER SOMMELING: -- that 5 constitutes the bulk of your employees, but do 6 you intend as other casinos have done, 7 including the Tropicana during the past, hire 8 additional personnel during the peak months? 9 THE WITNESS: Yeah. I think we had 10 hired an extra 2 or 300, 400 people. I don't 11 know the exact number, but there is definitely 12 more put on during that period. 13 COMMISSIONER SOMMELING: And do you 14 intend to run the property as a full-fledged 15 property; that is, offering your customers all 16 of the customary amenities that people now 17 experience in Atlantic City casinos such as, 18 you know, the casino itself is a superior 19 hotel, retail availability, the entertainment 20 for your customers, is all that in the scheme 21 of Tropicana's new plan for operation? 22 THE WITNESS: Yes. 23 COMMISSIONER SOMMELING: And, lastly, 24 going back to the question of the audit 25 committee. Have you been thoroughly versed on 41 WILLIAM J. YUNG, III 1 what is required in the audit committee as to 2 the terms of as to what it is required under 3 New Jersey regulation? 4 THE WITNESS: No, I haven't. 5 COMMISSIONER SOMMELING: Is that going 6 to be -- is that issue going to be visited and 7 recompense -- is that issue going to be 8 revisited, and are you going to have an audit 9 committee as has been suggested? 10 THE WITNESS: Yes. I think Donna More 11 can address that issue. But, yeah, we're going 12 to have whatever is required by the New Jersey 13 gaming Commission. 14 COMMISSIONER SOMMELING: That's all, 15 Chair. 16 CHAIR KASSEKERT: Thank you. 17 Commissioner Epps? 18 COMMISSIONER EPPS: I need you to go 19 back to an answer you gave us just a minute 20 ago. You said that the community -- and I'll 21 let you say it. 22 THE WITNESS: Uh-huh. 23 COMMISSIONER EPPS: But what I heard 24 from you is this community seems to -- you 25 never have seen a community that wanted to 42 WILLIAM J. YUNG, III 1 eliminate jobs more than create jobs. Can you 2 please explain that to me. 3 THE WITNESS: Well, I think maybe I 4 misspoke. Maybe I should have said the 5 negative publicity that's surrounding this 6 relicensing or this licensing is, you know, in 7 such a manner that it sends messages, I think, 8 to other businesses who want to come here that 9 you have to be aware of some of the negative 10 things that may happen to you here such as the 11 very -- the negative press. The -- some of the 12 union activities that I think are unfair and 13 unnecessary. So but that's what I meant. 14 COMMISSIONER EPPS: I mean, it -- I'm 15 not going to say it's fair, but isn't it a fair 16 statement that a lot of the reaction that has 17 come to you has been as a result of the 18 business decisions that you've made? 19 THE WITNESS: I think that the reaction 20 has come from the union that way. Yes. 21 Uh-huh. 22 COMMISSIONER EPPS: When -- before you 23 entered the Atlantic City market, were you 24 familiar with the Atlantic City environment 25 what goes on here? What Atlantic City is like? 43 WILLIAM J. YUNG, III 1 Did you familiarize yourself with the 2 jurisdiction that you were entering? The 3 community, Atlantic City itself. Not the 4 business necessarily, but the community that 5 you were coming to be a corporate neighbor in. 6 THE WITNESS: Well, you know, I've been 7 to Atlantic City many times. I mean, I didn't 8 go around and visit neighborhoods or anything 9 like that or talk to a whole lot of people, if 10 that's what you mean. 11 COMMISSIONER EPPS: Well, that's not 12 necessarily what I mean. What I'm asking is, 13 did you have an idea of what you were entering 14 into when you decided to enter the Atlantic 15 City market. 16 THE WITNESS: Yeah. I -- yeah. I knew 17 it was going to be a tough -- it was going -- 18 it was not going to be an easy road to hoe. 19 COMMISSIONER EPPS: And the reason I ask 20 that is because -- and I'm not familiar with 21 some of the other jurisdictions that you're in, 22 but -- and I don't know how they differ, and 23 they may be -- there may be -- other than Las 24 Vegas, you may be in places where casino 25 operations happen to exist, but in New Jersey, 44 WILLIAM J. YUNG, III 1 casino operations and tourism is what we do. I 2 mean, Atlantic City, that's what happens here. 3 And I think there's a culture or an expectation 4 of a casino operation that does what we do. 5 And granted everybody makes business decisions, 6 but I think the expectation has been kind of to 7 do -- to have that as your interest as opposed 8 to, you know, profit or some other business so. 9 Sure, everybody wants to make a project. But 10 generating this engine, which is the casino 11 industry, is what happens here. It is the 12 industry. 13 THE WITNESS: Uh-huh. 14 COMMISSIONER EPPS: And so I'm wondering 15 if you had an appreciation for that entering 16 this market? 17 THE WITNESS: Oh, absolutely. I mean, 18 Atlantic City would be -- I mean, it was -- 19 well, you know. It was very depressed. And 20 until the casinos have revitalized much of 21 Atlantic City. It's very important to it. I 22 mean, it's -- I guess the gaming -- the gaming 23 is the number one industry probably in New 24 Jersey, so it's very important in New Jersey 25 and Atlantic City. And I understand that. 45 WILLIAM J. YUNG, III 1 COMMISSIONER EPPS: Okay. 2 CHAIR KASSEKERT: Okay. Commissioner 3 Fedorko? 4 VICE CHAIR FEDORKO: Mr. Yung, it's been 5 a tough year for the casinos so far here in 6 Atlantic City. Do you see anything in any of 7 your data that would indicate that maybe we've 8 hit rock bottom here and now we're going to 9 start going back up again? 10 THE WITNESS: Well, you know, I -- well, 11 from -- if I'm correct, I think there's still a 12 couple more casinos to open in Philadelphia. 13 And the only hope is they'll fire off of one 14 other than taking much from here. I don't 15 think we're going to get hit with a -- you 16 know, seems to me like logically it's still 17 going to go down a little bit further, a couple 18 more points, I would think, with the other new 19 casinos open. But nothing like it's been 20 already. And you know, it's hard to know how 21 much, really, is the smoking ban. That's a 22 hard thing to figure out. You know, that's 23 part of it. 24 VICE CHAIR FEDORKO: Thank you. 25 CHAIR KASSEKERT: Any other questions? 46 WILLIAM J. YUNG, III - redirect 1 Anything on redirect? 2 MR. O'GARA: Yeah, if I might. 3 CHAIR KASSEKERT: Sure. Okay. 4 5 REDIRECT EXAMINATION BY MR. O'GARA: 6 Q. Just a couple of things. And yesterday 7 in your examination by the Director she asked you 8 about hotels and resorts and if you viewed operating 9 hotels and experience. Among those hotels, are any of 10 them what we would call quote-unquote resort hotels; 11 meaning they are not primarily used just for overnight 12 occupancy? 13 A. Yes, they are. 14 Q. And where are they located? 15 A. Well, we have a Westin resort in the 16 Cayman Islands. We have a Westin resort in St. 17 Martin. A Marriott resort in Hilton Head Island. We 18 have another resort in -- Marriott in Myrtle Beach. 19 Marriott in Hutchinson Island in Florida. We have one 20 out in Santa Monica, and we have a Marriott in Buttes 21 (phonetic) resort in Phoenix, yeah. 22 Q. And these are denominated within the 23 Marriott brand or the Westin brand as resort hotels as 24 opposed to hotels. As they advertise in or promote 25 them? 47 WILLIAM J. YUNG, III - redirect 1 A. Yes. They have the full amenities, you 2 know. A lot of the places, you know, all of them have 3 spas. We have beaches. We have, you know, various 4 other things. And some of the places it's, you know, 5 boat rides or something. We have the Sanibel Island 6 resort that we just bought. And, so, yes. We have 7 many Resorts. And it's a full-fledged resorts. 8 Q. Let me move on with -- there's something 9 I think you just spoke with. It may have been 10 Commissioner -- I don't recall which of the members of 11 the Commission. But we talked about a number. I 12 think maybe it was Commissioner Frulio or -- wrong. 13 Commissioner Fedorko -- about a number that -- 14 VICE CHAIR FEDORKO: People get us mixed 15 up all the time. 16 (Laughter.) 17 MR. O'GARA: Thanks. 18 Q. A certain amount of savings you knew 19 would be realized through Phoenix and -- 20 A. Uh-huh. 21 Q. Just so we understand, what did Aztar 22 have in Phoenix? I mean, it wasn't an operation of 23 any type, was it? 24 A. No. They -- they just had -- the way 25 Aztar ran their operations, every casino was totally 48 WILLIAM J. YUNG, III - redirect 1 independent and did whatever they wanted. And 2 basically it was just overhead in Phoenix that, you 3 know, they did no accounting or anything. 4 Q. It was just corporate -- literal 5 corporate -- people like Mr. Haddock and other senior 6 executives? 7 A. Right. 8 Q. And costed out at 25 million bucks? 9 A. Yes. 10 Q. Let me turn now to something else the 11 Director asked you about with respect to your 12 relationship, in Mississippi. And you indicated 13 Mississippi is the only place you have a partner? 14 A. That's correct. 15 Q. And, in fact, there is allusion in some 16 Missouri materials about both your partner and about a 17 prior partner he had or prior association he had with 18 something called "Premiere." Was Premiere a part of 19 this deal when you got into it? 20 A. No. 21 Q. And you never had any associations with 22 that? 23 A. I never heard of Premiere. No. 24 Q. With respect to the Messrs. Cato, I 25 believe were their name. Do you know, are they 49 WILLIAM J. YUNG, III - redirect 1 licensed by the Mississippi Gaming -- or qualified or 2 hold a credential from the Mississippi Gaming 3 Commission? 4 A. Yeah. Both of them are licensed. 5 Q. And were they licensed the whole time 6 you were dealing with them? 7 A. I don't think the younger Cato was 8 licensed, but he recently got licensed. 9 Q. All right. And in that regard, have you 10 always felt that as a matter of someone in this 11 business in a jurisdiction comfortable dealing with 12 someone who is licensed by the commission in that 13 jurisdiction? 14 A. Yes. 15 Q. With respect to the Grant Thorton 16 matter, so there's -- I want to make sure there's no 17 confusion. That was a matter in which Grant Thorton 18 approached you. They were marketing tax advice 19 people? 20 A. Correct. 21 Q. And during the course of the litigation 22 you've had with Grant Thorton, are you the only person 23 who received similar advice who had disallowed 24 deductions by the IRS? 25 A. No. I think there were several -- 50 WILLIAM J. YUNG, III - redirect 1 several parties. 2 Q. And when you became -- you had advice 3 from your attorney and your accountants and as well as 4 an opinion from their attorneys and you determined to 5 do this? 6 A. Yes. I did. 7 Q. Have you had any tax accounting 8 training, or were you just -- 9 A. No. I don't. Uh-uh. 10 Q. And when you were notified by the IRS 11 and after you found out, you satisfied fully all the 12 obligations, and with the exception of the 13 calculations of interest and what's going on? 14 A. Yes. 15 Q. And you instituted the litigation 16 against Grant Thorton? 17 A. Yes. 18 Q. And you have declined to sign a secrecy 19 agreement with them so that you can't discuss this 20 with anyone? 21 A. That's right. 22 Q. Now, there was a question I think just 23 asked one of the Commissioners about -- Commissioner 24 Epps -- about legal staff and whatever. At the 25 property here in New Jersey, do you have a lawyer, a 51 WILLIAM J. YUNG, III - redirect 1 full-time lawyer who is the lawyer for Adamar 2 Tropicana of New Jersey? 3 A. Yes. 4 Q. And with respect to what we'll call your 5 "corporate headquarters" located in northern Kentucky, 6 Miss More is your general counsel at the Tropicana 7 Entertainment? 8 A. Yes. 9 Q. And has she recently also hired another 10 lawyer who will be joining her? 11 A. Yes. 12 Q. With respect to the player development 13 people, you said you are making a change. These are 14 people who previously worked there who you are 15 bringing back, who you think that they can add 16 something to the property? 17 A. Oh, it's -- yes. It's -- it's like a 18 third of our loss on the players that were terminated. 19 The player development people that were terminated. 20 Q. And -- 21 MR. O'GARA: Can I just take one moment, 22 Chair? 23 CHAIR KASSEKERT: Sure. 24 (Conferring.) 25 Q. The last thing I want to inquire you, 52 WILLIAM J. YUNG, III - redirect 1 you were asked by the Commissioners, you understand 2 that there are obligations with respect to compliance 3 and audit committee and independent supervision and 4 certain departments in Tropicana here in New Jersey. 5 I mean, you've been told that? 6 A. Yes. 7 Q. And you, the CEO, is it your intent that 8 you want to comply with that? 9 A. Absolutely. 10 Q. Are you hands-on going to organize that? 11 Or is somebody responsible for doing that who reports 12 to you? 13 A. No. I -- it would seem to me like Donna 14 will be the one doing that. 15 Q. And you expect it to be done? 16 A. Absolutely. 17 Q. And you expect it to be done when you 18 got in this business; correct? 19 A. Yes. 20 Q. You said that you're kind of hands-on, 21 but you have 40,000 -- 38,000, 40,000 employees and 22 people who report to you. To the degree they have 23 their obligations and they don't meet them, is it your 24 intention to hold them accountable? 25 A. Yes. 53 WILLIAM J. YUNG, III - recross 1 MR. O'GARA: I have no other questions. 2 CHAIR KASSEKERT: Miss Maher, redirect? 3 MS. MAHER: Thank you. 4 CHAIR KASSEKERT: Recross. I'm sorry. 5 6 RECROSS-EXAMINATION BY MS. MAHER: 7 Q. Just a few things, Mr. Yung. 8 A. Yes. 9 Q. I want to address the debt level with 10 you in just a few questions. As of June 30th of 2007, 11 did the Tropicana have 512.7 million with an 12 additional -- 13 CHAIR KASSEKERT: Excuse me, Miss Maher, 14 could you just speak a little bit louder? 15 MS. MAHER: I'm sorry. 16 CHAIR KASSEKERT: Thanks. 17 MS. MAHER: Usually I don't get that 18 request. 19 CHAIR KASSEKERT: He's -- today is his 20 birthday, and he's getting older so. 21 (Laughter.) 22 FROM THE FLOOR: Happy birthday. 23 MS. MAHER: I'll start over. 24 Q. As of June 30th is 2007, did the 25 Tropicana have a 512.7 million with an additional 13.2 54 WILLIAM J. YUNG, III - recross 1 million in accrued interest owed to CSE Holdings, 2 which is a subsidiary of Columbia Sussex? 3 A. I have no idea. 4 Q. You're not aware of that? 5 A. No. 6 Q. Who would have that or be familiar with 7 that information? 8 A. I think John Jacob may be familiar with 9 it, but I am sure -- 10 Q. I'm going to ask you a couple follow-up 11 questions, and just to see. And, if not, we'll throw 12 that to him. Are you aware there was an approximate 13 additional -- or was it an original approximately 360 14 million of that amount and an additional 144 million 15 borrowed at the closing related specifically to the 16 Aztar merger? 17 A. You'd have to ask him. I don't know. 18 Q. So you're not aware of that. Okay. 19 Are you aware are there any payments on 20 that debt that are going to be made during the 21 forecast period? 22 A. You'd have to ask him that. 23 Q. Okay. So you're not familiar with any 24 of that at all? 25 A. That's right. 55 WILLIAM J. YUNG, III - recross 1 Q. All right. I want to follow up on one 2 of the things that you said in response to -- I 3 believe it was Commissioner Fedorko's question. You 4 indicated that you were quote-unquote where you want 5 to be with employee levels right now; is that correct? 6 A. Yes. 7 Q. And you recall answering one of the 8 questions and making that response? 9 A. Yes. Uh-huh. 10 Q. I want to refer you back to an issue 11 regarding the management service agreements. Are you 12 familiar with the management service agreements that 13 the Tropicana has with Aztar and that Columbia Sussex 14 has with Aztar? 15 A. No 16 Q. You're not familiar that Tropicana has a 17 casino services agreement with Aztar through which it 18 provides services to Aztar's subsidiaries? 19 A. I don't know the -- no. I'm not -- 20 there may be one, but I don't know what the details 21 are. 22 Q. Okay. And there's also one with 23 Columbia Sussex which deals with services as well. To 24 provide hotel services to Aztar? 25 A. There may be one, but I don't know the 56 WILLIAM J. YUNG, III - recross 1 details. 2 Q. Okay. Are you -- and is it correct that 3 in May of 2007 you confirmed in writing with outside 4 counsel's representation that these agreements that 5 you had would not be implemented in New Jersey and 6 would not be effective until approved by the 7 Commission? 8 A. I'm sorry. I can't remember that. 9 Q. Okay. You don't recall confirming that 10 in writing? 11 A. Somebody may have put something in front 12 of me that I signed, but I don't -- I don't recall 13 doing that. No. 14 Q. You're not familiar with the management 15 services agreements at all? 16 A. No, I'm not. 17 Q. You talked initially about some 18 consolidation. 19 A. Yes. 20 Q. Consolidation of services? 21 A. Yes. 22 Q. Do those relate at all to the management 23 services agreement? 24 A. I don't know. 25 Q. What are you talking about when you talk 57 WILLIAM J. YUNG, III - recross 1 about consolidation then? 2 A. What I was talking about is typically 3 when we do a hotel and casino that we bring in -- we 4 centralize the accounting, purchasing, payroll 5 functions into the home office and don't do them at 6 the property. 7 Q. Okay. And are these done through 8 management services agreements with -- for instance at 9 Columbia Sussex in the home office? Is that how 10 that's accomplished? 11 A. I don't know. 12 Q. You don't know at all how that's 13 accomplished? 14 A. No. 15 Q. When you do these consolidation of 16 services, does that take jobs away from the facilities 17 in question? For instance, if you consolidated 18 services from the Tropicana Atlantic City facility, 19 payroll, accounting, things of that nature, would that 20 eliminate jobs at the Tropicana facility? 21 A. If it was allowed to be done, it would. 22 Yes. 23 Q. And how -- what do you mean by if it was 24 allowed to be done? 25 A. Well, I don't believe it's permitted in 58 WILLIAM J. YUNG, III - recross 1 New Jersey, so. 2 Q. Well, if these management service 3 agreements were approved, would it be your 4 understanding that it would be allowed? 5 A. Well, I guess if they're approved, 6 they're allowed. Yes. 7 Q. All right. Are you planning to submit 8 them to the Commission for further approval or for 9 approval? 10 A. I don't know what the plan is right now, 11 to be honest with you. 12 Q. So you don't know if you're going to 13 continue your progress or interest in consolidating 14 these services and taking positions away from the 15 Tropicana Atlantic City? 16 A. I'd like to think about that a little 17 bit longer. 18 Q. So the answer is you don't know. 19 A. Yes. 20 Q. But it's possible? 21 A. It's possible. 22 Q. And further jobs could be eliminated? 23 A. Yes. 24 (Conferring.) 25 MS. MAHER: Thank you. 59 WILLIAM J. YUNG, III 1 CHAIR KASSEKERT: Any other questions? 2 Commissioner Epps? 3 COMMISSIONER EPPS: Yeah. A couple 4 questions based on the redirect and cross. The 5 player development people that you referred to, 6 the players who left as a result, do you have 7 any idea that you guys track? Do you know 8 where they went? 9 THE WITNESS: I think some of these 10 gentlemen are going to be up later will tell 11 you. But I know where one of them was going, 12 to the Hilton. And I don't know where the 13 other two that were -- look like we're going to 14 get back -- I don't know where they went. 15 COMMISSIONER EPPS: Not the employees. 16 The players that -- because you suggested the 17 employers -- 18 THE WITNESS: Oh. 19 COMMISSIONER EPPS: The players 20 apparently left your company. 21 THE WITNESS: Right. 22 COMMISSIONER EPPS: Where did the 23 players go? 24 THE WITNESS: Where they went to play? 25 COMMISSIONER EPPS: Do you know? 60 WILLIAM J. YUNG, III 1 THE WITNESS: What I can tell -- no. I 2 don't know exactly where they went to play. 3 But I can tell you that when we were only able 4 to keep like a third of their players with us, 5 you know, most of them went with them. I don't 6 know where they went. 7 COMMISSIONER EPPS: Now, are they with-- 8 is it your understanding that they were -- they 9 weren't playing at Trop because Trop was their 10 favorite place. 11 THE WITNESS: Right. 12 COMMISSIONER EPPS: Just because their 13 guy was there. 14 THE WITNESS: That's correct. 15 COMMISSIONER EPPS: And so you think if 16 you get that guy back -- 17 THE WITNESS: Right. 18 COMMISSIONER EPPS: -- they'll come back 19 with them? 20 THE WITNESS: Right. 21 COMMISSIONER EPPS: Okay. The 22 intercompany debt question, I believe, is a 23 matter between Columbia Sussex, which is you; 24 right? 25 THE WITNESS: Right. 61 WILLIAM J. YUNG, III 1 COMMISSIONER EPPS: And Aztar, which is 2 you? 3 THE WITNESS: Right. 4 (Laughter.) 5 COMMISSIONER EPPS: But you don't know 6 the terms of the agreement? 7 THE WITNESS: No. 8 COMMISSIONER EPPS: And then the 9 management services agreement between your two 10 companies, you don't know the substance of 11 those agreements, either? 12 THE WITNESS: No. Simply because it 13 really didn't make any difference to me. It's 14 in one pocket or the other. You know, I never 15 went in to get the details of it. It is a 16 legal type document that was done for some 17 legal reason, and I didn't -- you know, I've 18 got enough other things to do that I just leave 19 it up to the attorneys and the accountants to 20 do that. 21 COMMISSIONER EPPS: And with all due 22 respect -- 23 THE WITNESS: Uh-huh. 24 COMMISSIONER EPPS: -- what is it that 25 you do that you don't concern yourself with 62 WILLIAM J. YUNG, III 1 these things? 2 THE WITNESS: What do I do? 3 COMMISSIONER EPPS: Yes. 4 THE WITNESS: Okay. Well, what I do is 5 we -- I'm totally involved in the operation of 6 the hotels, and I'm also in -- and I clearly 7 monitor what's going on at the casinos. And 8 I-- I -- I think if you talk to any of the 9 employees that are to come up here later, I 10 think you'll find out I'm totally involved in 11 most everybody's job that I deal with. It's 12 not that I'm an absentee owner. Believe me, 13 I'm at work six days every week. 14 COMMISSIONER EPPS: And I don't doubt 15 that. The reason I ask the question is -- but 16 there seems to be a lot of areas that are 17 specific to this process that it's crucial for 18 you to establish to us that you, being the 19 company, understand and are handling and 20 managing that you have clearly told us that you 21 don't know. Even such that a document that is 22 controlling potentially, a direction of the 23 company was placed before you and you signed 24 it, and you may not even know what it said. 25 THE WITNESS: Well, you know, certainly 63 WILLIAM J. YUNG, III 1 that could possibly be because I sign about a 2 hundred documents a day. 3 COMMISSIONER EPPS: Without knowing or 4 understanding the documents? 5 THE WITNESS: I trust the people who -- 6 COMMISSIONER EPPS: Trust the people 7 under you? 8 THE WITNESS: When they place these 9 documents in front of me to sign that they're 10 doing the right thing. I can't read every 11 everything and do -- I can't do everything. 12 COMMISSIONER EPPS: Okay. 13 CHAIR KASSEKERT: Anything else? 14 Commissioner Sommeling? 15 COMMISSIONER SOMMELING: Mr. Yung, I 16 would assume that you would know what the 17 debt-to-equity ratio is for your whole company? 18 You'd have an idea what that figure was? 19 THE WITNESS: Of Tropicana? 20 COMMISSIONER SOMMELING: Well, Tropicana 21 is one, but on both sides of the ledger. 22 THE WITNESS: Well, I think that, you 23 know, we -- I, you know -- with the Columbia 24 Sussex thing, it's so all capitalized, I never 25 really paid any attention to it. It's got 64 WILLIAM J. YUNG, III 1 plenty of money and everything. And the 2 debt-to-equity ratio on Tropicana I'm aware of. 3 The covenants. 4 COMMISSIONER SOMMELING: That's all. 5 CHAIR KASSEKERT: You testified and 6 we've talked a little bit about your change in 7 philosophy, hopefully a change in regulatory 8 compliance. 9 THE WITNESS: Uh-huh. 10 CHAIR KASSEKERT: Are there any other 11 changes that as a result of this hearing and 12 this experience in Atlantic City you think 13 you're going to do with your company moving 14 forward that you can tell us about today? 15 THE WITNESS: Well, obviously, the most 16 important thing that we have to do right now is 17 to try to stabilize the ship. I mean, it -- we 18 have -- we've got to get more business back. 19 You know, I think we're a good corporate 20 citizen. And, you know, I obviously -- we -- I 21 think we have good employee morale. And, you 22 know, I think the main thing is to get the -- 23 for the company's sake to get the, you know, 24 the bed bugs and everything else, headlines out 25 of the people's minds so that we can, you know, 65 WILLIAM J. YUNG, III 1 maintain all our jobs here and be a very 2 successful company. 3 CHAIR KASSEKERT: What about you 4 personally? As the CEO? 5 THE WITNESS: In this community? 6 Well, I think that I need to be -- I'm 7 typically here about every three or four weeks. 8 And I probably am going to be coming here more 9 often to make sure everything is running right. 10 Although I'm sure with the people we have in 11 place now that it's going to be done right. 12 Uh-huh. 13 CHAIR KASSEKERT: Thank you. 14 Commissioner Sommeling? 15 COMMISSIONER SOMMELING: Mr. Yung, I 16 just have one more question with respect to the 17 employees. 18 Now, at some point down the road, 19 Tropicana is going to be negotiating with the 20 unions. We have unions in Atlantic City. 21 THE WITNESS: Right. 22 COMMISSIONER SOMMELING: In the casinos. 23 I'm assuming that you don't do those 24 negotiations personally. 25 THE WITNESS: No, I don't. 66 WILLIAM J. YUNG, III 1 COMMISSIONER SOMMELING: But who would 2 be doing those negotiations on behalf of 3 Tropicana? 4 THE WITNESS: Probably a -- a labor 5 lawyer in town. I don't know who it would be. 6 COMMISSIONER SOMMELING: No one from 7 your staff? Someone would have to be -- 8 THE WITNESS: Well, yeah. I'm sure Mark 9 would be -- Mark, the general manager, will be 10 involved in it. And I'm sure Donna will be 11 involved in it in some cases, and I'll be 12 involved in it, also. 13 COMMISSIONER SOMMELING: And this is 14 something that casinos in Atlantic City have 15 gone through since -- almost since day one, the 16 process of negotiating with the unions as they 17 grew in Atlantic City along with the casinos. 18 THE WITNESS: Uh-huh. 19 COMMISSIONER SOMMELING: So really, in 20 reality, that's no surprise to you that we have 21 strong unions on this side of the gaming 22 venues. 23 THE WITNESS: No. No. It's no 24 surprise. 25 COMMISSIONER SOMMELING: And I imagine, 67 WILLIAM J. YUNG, III - redirect 1 casino -- besides your legal staff, that you'd 2 have other people that would be involved in the 3 union negotiations from the union, the 4 employees represent -- the representatives of 5 the union employees within Tropicana. 6 THE WITNESS: Well, I'm sure the union 7 will bring some of those people involved in it 8 on their side, yeah. 9 COMMISSIONER SOMMELING: And you're all 10 set to go forward with this when the time 11 comes? 12 THE WITNESS: Yes. 13 CHAIR KASSEKERT: Anything else, Mr. 14 O'Gara. 15 MR. O'GARA: Yeah. Just one thing. 16 Because I think I may have misunderstood 17 Commissioner Epps. I didn't get the same 18 answer that he didn't get. 19 20 REDIRECT EXAMINATION BY MR. O'GARA: 21 Q. With respect to the note you're being 22 asked about, if Tropicana owes Columbia Sussex money, 23 and it's on certain terms, you're aware that you -- 24 some of your money got lent to this Trop deal? 25 A. That's correct. 68 WILLIAM J. YUNG, III - redirect 1 Q. And you know roughly how much money 2 you're owed? 3 A. I know roughly what it is. Yeah. 4 Q. And you're aware of that, and you're 5 aware there are terms of that, and you on both sides 6 of the deal have the right to modify those terms if 7 you had to or whatever else has to be done? 8 A. That's correct. 9 Q. But as to the exact agreement itself, 10 you're not familiar with the details of those loan 11 agreements or the schedules or how things are put? 12 A. That's correct. 13 Q. But you know it's you that owes you 14 money, and that money's there, and you control what 15 happens with respect to it 16 A. That's correct. 17 Q. Okay. 18 MR. O'GARA: Thank you. 19 CHAIR KASSEKERT: Miss Maher? Anything 20 else? 21 MS. MAHER: No. Thank you. 22 CHAIR KASSEKERT: Mr. Yung, you may step 23 down. 24 Mr. O'Gara, you can call your next 25 witness. 69 1 MR. O'GARA: Yeah. I don't know how to 2 tell you this, but I think my next witness went 3 to the little boys' room. Donna is going to go 4 get him. 5 (Laughter.) 6 (A brief pause was taken.) 7 CHAIR KASSEKERT: We can go back on the 8 record. 9 Mr. O'Gara? 10 MR. O'GARA: Yeah. 11 CHAIR KASSEKERT: Oh, I thought you 12 might have left. 13 MR. O'GARA: No problem. 14 Mr. Nance, I think you need to swear the 15 witness. 16 17 JOHN G. JACOB, was duly sworn to testify 18 in this matter. 19 20 MR. NANCE: Please state your name for 21 the record. 22 THE WITNESS: John Jacob. 23 MR. NANCE: Thank you. You may be 24 seated. 25 CHAIR KASSEKERT: You may proceed. 70 JOHN G. JACOB - direct 1 DIRECT EXAMINATION BY MR. O'GARA: 2 Q. Mr. Jacob, you're chief financial 3 officer of Tropicana Entertainment? 4 A. That's correct. 5 Q. And how long have you had that job? 6 A. Since August of this year. 7 Q. Okay. And you are located -- your 8 office is located where, and where do you work? 9 A. Kentucky. 10 Q. And you directly report to Mr. Yung? 11 A. Correct. 12 Q. And you're familiar, then, with the 13 financial affairs of Tropicana Entertainment? 14 A. That's correct. 15 Q. And you also have some familiarity with 16 the relationship it has with financial affairs of 17 Columbia Sussex Corporation? 18 A. Correct. 19 Q. And you've had a chance to see and you 20 were part of the information that is embodied in the 21 Division report on financial matters? 22 A. Uh-huh. Yes. 23 Q. All right. Before we get to that, let 24 me turn first to something that Mr. Yung testified 25 about in questioning about you, and that is what is 71 JOHN G. JACOB - direct 1 referred to as the event of default and the 2 consequences in terms of the covenant of the credit 3 agreement or the term loan with respect to Tropicana. 4 You are familiar with that? 5 A. I am. 6 Q. Okay. First of all, can you tell us 7 what, in fact, was -- what precipitated this event of 8 default? What was it, and what was the covenant that 9 was violated? 10 A. Okay. Well, we have two primary 11 financial covenants in our credit agreement. One is a 12 leverage test, which is a calculation of debt to 13 profitability. And the other one is an interest 14 coverage ratio that just measures really, again, our 15 profitability or relationship to our interests 16 expense. And going into the third quarter, the first 17 covenant was 7.50 times for leverage and 1.50 coverage 18 for interests. And based on the performance of the 19 company, we knew that it would be a tight test. That, 20 you know, we felt we would make it, but we would just 21 sneak by. And one of the ways that we were going to 22 help make that happen was to actually pay down some 23 debt at the end of September. And, in fact, we made a 24 $40 million debt pay-down. And as we went through the 25 closing process for the third quarter -- you know, 72 JOHN G. JACOB - direct 1 some of the numbers changed. We were putting together 2 our final or revised S4. Some of the numbers actually 3 in the second quarter turned up unfavorably in terms 4 of profitability result. And at the end -- 5 unfortunately, you know, the last Monday, the day we 6 were going to issue our compliance certificate, we 7 also found out that some of the cost savings numbers 8 that we were going to include in profitability as 9 permitted under our loan agreement were overstated by 10 about $2 million. So we immediately made that 11 correction. And when we filed our compliance 12 certificate with Credit Suisse, you know, we were 13 underneath the covenant. And I think it's been 14 previously stated, had we known that on September 15 30th, we could have paid down debt another $15 million 16 and been in compliance. 17 Q. All right. As a result of that, does 18 that mean you have had discussions with Credit Suisse? 19 A. Yes. Last week we initiated discussions 20 with Credit Suisse, who is the administrative agent 21 for our credit facility. 22 Q. And was that negotiation -- were those 23 negotiations with respect to modifying the covenant 24 and correcting the existence in the event of default? 25 A. That's correct. 73 JOHN G. JACOB - direct 1 Q. And, number one, are they amenable to 2 these discussions? 3 A. Yes. Yes. 4 Q. And have you begun the discussions, 5 initiated them? 6 A. We have initiated the discussions. One 7 of the first steps that the company is engaged in is 8 to actually perform a reforecast of the business, and, 9 you know, with a high degree of confidence. And then 10 upon putting that forecast together, negotiate with 11 the lenders on, you know, a set of covenants that, you 12 know, the company could live under and, you know, 13 return to focusing on operating the business. 14 Q. So you had indicated in your testimony 15 that you thought you would get by this covenant. Does 16 that mean when you look to the fourth quarter, it 17 would probably be another, let's try to get by kind of 18 thing? 19 A. Certainly it was going to be tight 20 through the fourth quarter. And, quite honestly, it 21 was going to require, you know, a significant 22 improvement in operational performance as we went into 23 the first quarter of next year, and the covenants 24 themselves actually tightened. 25 Q. So these discussions with respect to, 74 JOHN G. JACOB - direct 1 number one, considering the marketplace and what 2 you've seen has happened, forecasts, and then 3 covenants that will make it able for the company to 4 realistically meet these on a long-term? 5 A. That's correct. 6 Q. And has the bank indicated a willingness 7 and amenability to those discussions? 8 A. Yes. 9 Q. And do you have a -- you're a banker. 10 So are you confident, highly confident, whichever of 11 those bank words you want to use, that you'll be able 12 to reach a resolution? 13 A. Yes. I'm confident. 14 Q. All right. And do you anticipate a time 15 table it takes to get that done? 16 A. Well, I think, you know, putting the 17 forecast together, you know, negotiating a change in 18 pricing, you know, all of that, I would estimate it 19 would probably be most if not the remaining of the 20 fourth quarter and, you know, for the -- from the 21 company's standpoint, since we're not in need of 22 utilizing the revolver on our credit facility, there's 23 certainly no sense of urgency or anything on that. 24 And I think you have the holidays coming in. So I 25 think it will just, you know, take the balance of this 75 JOHN G. JACOB - direct 1 quarter. 2 Q. And what we'll then see is an amended 3 credit agreement test modified so that looking at 4 realistically where you see you are today and 5 forecasting based on that, the company has no problems 6 with the covenant test? 7 A. That's correct. 8 Q. And maintains its revolver? 9 A. Uh-huh. That's right. 10 Q. And at present you have sufficient cash 11 in the company that you don't feel you need to have 12 the revolver in the next few weeks? 13 A. That's correct. 14 Q. Okay. When you say you have to give 15 them new forecasts, what will you be doing in the way 16 of forecasting. What will you be trying to achieve 17 here? 18 A. Well, I think in looking at some of the 19 previous forecasts and so forth, I'm not sure we had 20 fully reflected in some of the influences and the 21 effects that, you know, Bill has talked to previously. 22 So I think, for us, we're going to have to go back and 23 really reforecast from the bottom up, property by 24 property, and make sure that, you know, those items 25 are highly achievable you know, taking the pluses and 76 JOHN G. JACOB - direct 1 the minuses and then, you know, be able to support 2 that and submit that to our bank group. 3 Q. Share them with everybody here. By that 4 I meant the Commission and the Division not 5 necessarily everyone in the building. 6 A. Yes. Obviously, that could have an 7 effect on, you know, bottom prices and everything else 8 in the market. So we'd want to be careful. 9 Q. In terms of the preparation of the 10 forecasts that were given to the Commission and 11 Division, were you involved in the direct preparation 12 of those forecasts? 13 A. Not in the direct preparation, but I did 14 look over the final result. 15 Q. And with respect to those, do you feel 16 that they contain some degree of optimism that perhaps 17 isn't warranted? 18 A. Certainly in hindsight that would seem 19 to be the case. But at the time, in looking at prior 20 year results, looking at the forecast that was used to 21 kind of set the covenants and so forth, it didn't seem 22 like a lot of the assumptions or a lot of the 23 projected results seemed unreasonable at the time. 24 Q. And what you've looked at so far in '07, 25 does that indicate to you that the performance was 77 JOHN G. JACOB - direct 1 less than the forecast? 2 A. Yes. 3 Q. And, again, what do you attribute it to 4 being lower than the forecast? 5 A. I think, you know, a combination of 6 issues, one of which was the fact that when the 7 covenants were originally set the forecasts were 8 originally set, the company was intending to make a 9 Casino Queen acquisition. That certainly would have 10 helped the results of the company. 11 I think the effects on revenue from 12 competition in several of our jurisdictions, not to 13 mention Atlantic City, you know, has had a negative 14 influence on that. Especially in an industry are 15 where, you know, the margin on any kind of incremental 16 revenue is just so high that it had a magnifying 17 effect on profitability. 18 Q. As you look forward to discussions with 19 the bank and towards the questions you'll answer from 20 anybody else here, are you satisfied that both 21 Tropicana Entertainment and Adamar's company here has 22 the ability to, you know, meet all its payrolls, pay 23 all its taxes? 24 A. I do. 25 Q. And sufficient funds to maintain its 78 JOHN G. JACOB - cross 1 casino operations? 2 A. Yes. 3 Q. And sufficient liquidity to deal with 4 things that might happen that we can't anticipate if 5 there would be storms and you were shut for two days 6 and those kind of things, you have the liquidity to 7 deal with all that? 8 A. We do. 9 Q. And your relationship with your bank, 10 you've discussed with us, you were able to discuss the 11 terms of these covenants, and they're willing to and 12 negotiate with you and arrive at covenants that work 13 for them and work for you? 14 A. That's correct. 15 MR. O'GARA: I don't have any other 16 questions. 17 CHAIR KASSEKERT: Mary Jo? Are you -- 18 MS. FLAHERTY: Yes. I'm sorry. 19 CHAIR KASSEKERT: Ms. Flaherty, you may 20 proceed. 21 MS. FLAHERTY: Okay. Thank you, 22 Commissioners. 23 24 CROSS-EXAMINATION BY MS. FLAHERTY: 25 Q. Mr. Jacob, good afternoon. 79 JOHN G. JACOB - cross 1 A. Good afternoon. 2 Q. I would like to address with you first 3 the submissions with regard to the renewal. With 4 regard to those, why was Tropicana unable to meet 5 Division's August 1st deadline for the submission of 6 the information for the renewal? 7 A. I believe that, you know, pulling the 8 information together from all the different properties 9 reforecasting it, while at the same time, you know, 10 trying to meet some of its, I can say almost newly 11 public requirements, put quite a strain on the entire 12 organization and in particular the finance 13 organization. And it was really a matter of trying to 14 balance, you know, all the balls without submitting 15 something that we didn't, you know, feel highly 16 confident in terms of the quality of the document so. 17 Q. As the process continued, did you -- 18 were you informed by your staff that there were some 19 gaps and inconsistencies in the information that had 20 come to us? 21 A. I knew that they were working and 22 responding to some concerns. 23 Q. Uh-huh. Why weren't the final forecasts 24 completed until late October of this year in terms 25 of -- 80 JOHN G. JACOB - cross 1 A. I think based on getting the 2 information, getting it incorporated, having -- you 3 know, getting files signed off from everyone, that 4 took longer than anticipated. And, again, that timing 5 was kind of real time with us approaching the third 6 quarter and looking at our credit agreement and 7 evaluating and spending a lot of time in, you know, 8 what kind of debt pay-down should be done. So we had 9 many, many priorities. But certainly that was one 10 that was a high priority to us, and we should have 11 been able to get it to you on a more timely basis. 12 Q. What steps have you taken to ensure that 13 there will be timely complete submissions in the 14 future? 15 A. Well, I think one of the first steps we 16 took -- and this occurred about a month after I 17 joined -- in evaluating our staff within the Tropicana 18 finance group at corporate who would be the group to 19 submit that, it was clear to me that there had been 20 some turnover, some -- some terminations for cause, 21 and the company had some severe staffing shortages. 22 And in a probably two-month time period we hired a 23 comptroller and three or four accountants, and what is 24 really a five- or six-accountant department, and so we 25 really staffed up as soon as we, you know, sat down 81 JOHN G. JACOB - cross 1 and looked at what our needs were. And were able to 2 bring in some quality -- quality staff. 3 Q. And that's the side of the staff for the 4 connection with the resorts side of the company? 5 A. Yes. 6 Q. And what assurances can you give as to 7 future compliance in terms of -- in terms of you and 8 your reaction to requests and our needs? 9 A. Yeah. I guess the assurance I can give 10 is that we consider it the -- you know, the highest 11 priority, you know, the utmost importance. And we 12 believe now that we're staffed accordingly that we can 13 meet our commitments. And if we find any indication 14 that that's not the case, then we'll go out and add 15 more resources to our department. 16 Q. Okay. Now, did the Tropicana Atlantic 17 City forecast 28 million reduction in costs and 18 expenses for 2007? 19 A. That sounds -- I know there were 20 reductions, but if it was 28 million. 21 Q. Okay. Of that amount, would that have 22 included 17.7 million in reduction in payroll for 23 2007? 24 A. Payroll would have been the majority of 25 it. Yes. 82 JOHN G. JACOB - cross 1 Q. As of August of this year, had Trop AC 2 instituted operational changes which resulted in a net 3 reduction in personnel of 678 employees, according to 4 the financial analysis? 5 A. That number sounds approximately right. 6 Yeah. 7 Q. Is that number of employees accurate? 8 A. I would have to go back to the sheet 9 that we're using, but -- because I -- we tend to track 10 dollars and not talent in our group. 11 Q. But in terms of the actual staffing at 12 the casino and the changes from the period of time 13 from January to August, is the 678 number, in terms of 14 a net reduction, accurate? 15 A. I don't think I have the information to 16 say that for sure. 17 Q. Does that conflict with other reduction 18 in force numbers that have been supplied to the 19 Commission and Division? For example, yesterday the 20 testimony with regard to A-80? 21 A. I -- I don't have a basis to say one way 22 or the other. On that count. 23 Q. Well, I believe that A-80, which is the 24 chart that was submitted during the course of Mr. 25 Yung's testimony, show that there were approximately 83 JOHN G. JACOB - cross 1 900 employees as a reduction in force. 2 A. On a actual basis. Okay. 3 Q. And that would have been for a slightly 4 longer period because that chart went to October; is 5 that correct? 6 A. (No verbal response.) 7 Q. Now, would the net decrease of that 8 number of employees as reflected in the information 9 that you submitted, represent approximately $22.7 10 million in salaries? 11 A. That sounds approximately correct. 12 Q. Okay. And as a result, is that how much 13 in salaries was saved for 2007 at the Tropicana AC? 14 A. I think it depends on when those -- 15 those reductions were actually put in place. 16 Q. But that was -- that was what you 17 forecasted; right? So do you know if you met the 18 forecast for the year? 19 A. I believe on the reductions that we came 20 in close to that number, but some of it was, I think, 21 pushed out. 22 Q. I'm not sure. Can you explain that? 23 A. In terms of the timing and what we were 24 expecting as it relate -- compared to some of the 25 calculations we did for our credit committee -- or 84 JOHN G. JACOB - cross 1 credit facility compliance. I just think the timing 2 of some of it was later. 3 Q. Longer than you anticipated? 4 A. Longer than we thought. Yeah. 5 Q. Do you know a firm number with regard to 6 layoffs at the Trop AC for 2007 at this point? 7 A. I would go with the numbers supplied -- 8 Q. That number -- 9 A. -- to the Commission. 10 Q. -- in A-80 or the number that was in the 11 financial forecast? 12 A. I would go on a actual head -- or actual 13 employee basis with the A-80. 14 Q. Okay. Which would be the number that 15 was in A-80? 16 A. Yes. That. 17 Q. Okay. 18 To your knowledge, are there any further 19 staff reductions planned at this time? 20 A. Not to my knowledge. 21 Q. Now, is there a $292 million note 22 payable from Adamar, which operates the Trop AC, to 23 Aztar? Does that remain a liability on the books? 24 A. I'm not certain. 25 Q. So you're not -- aware of that 85 JOHN G. JACOB - cross 1 obligation or how it's been reclassified? 2 A. I'm not. 3 Q. Did Trop AC meet its forecast for the 4 first nine months of 2007? 5 A. It did not. 6 Q. Were the actual net revenues 7 approximately 11.8 million lower than forecasts? 8 A. That sounds too low, actually. 9 Q. Okay. Was -- would that -- I believe 10 that that was what your forecast stated, though. 11 A. Okay. 12 Q. And do you think you did better than 13 what the forecast says? 14 A. No. I think we did worse than what the 15 forecast was. 16 Q. Okay. Was gross operating profit for 17 Trop AC lower than forecasted for 7.4 million for that 18 period? 19 A. For the nine months? 20 Q. Yes. For the nine months. 21 A. That sounds too low. I think we missed 22 by a little bit more than that. 23 Q. Okay. Does it, therefore, appear 24 unlikely that Trop AC will be able to achieve its 25 forecasted net revenues and GOP for 2007? 86 JOHN G. JACOB - cross 1 A. That's correct. 2 Q. For the whole year? 3 And for the first nine months of 2007, 4 was gross operating profit below the 2006 level? 5 A. Yeah. I believe it was. Yes. 6 Q. Okay. Now, are costs and expenses at 7 Trop AC projected to decrease for 2008 because the 8 operational changes will be in effect for the entire 9 year? 10 A. Yes. I believe it is. And some of that 11 is just because when we looked at '07, we kind of 12 baked in some of the cost savings, a factor year to 13 year, we're showing improvements off that base. 14 Q. And a large amount of that savings will 15 be in salaries as well over the prior year? 16 A. Correct. 17 Q. Now, as a result of the significant 18 reduction in staffing, as well as the inability to 19 meet forecasts for the first nine months of 2007 as 20 shown by the actual net revenue and GOP, isn't it 21 questionable whether Trop AC can maintain and grow its 22 revenue and GOP to the levels that had been forecasted 23 for the entire period? 24 A. I defer some of that to Kevin or Mark, 25 but we are going through a reforecast to evaluate that 87 JOHN G. JACOB - cross 1 very issue. 2 Q. But you don't think that you'll meet the 3 forecasts that you have submitted to us? 4 A. Certainly not for this year. And I 5 think we'd have to evaluate next year as well. 6 Q. Will Trop AC be able to achieve its 7 forecasted cash flow to moderations for this year in 8 that the results for the first nine months were lower 9 than expected? 10 A. I wouldn't expect that. 11 Q. Is excess cash at Trop Atlantic City 12 upstreamed to Aztar into its cash management system? 13 A. It is. 14 Q. Now, for 2007 will Tropicana AC spend 15 34.6 million for capital expenditures, mostly to 16 complete the hotel rooms that have been discussed as 17 well as the casino floor? 18 A. I believe it will. It depends a little 19 bit on what rolls over into 2008. The project in 20 total is about $30 million, and I think through nine 21 months at this property, we had -- we had spent about 22 15. So I think it will be somewhere between -- 23 yeah -- 15 to 25 million through the end of the year. 24 Q. And I think the number that I had as of 25 June was 13.1 million on the renovations. Would that 88 JOHN G. JACOB - cross 1 be correct? 2 A. That sounds about right. Yeah. 3 Q. And similar has been done since the end 4 of summer to bring us up to -- 5 A. Right. Or else there's been some other 6 money spent on capital. 7 Q. Now, when was the current refurbishment 8 of the Tropicana in terms of the hotel rooms and its 9 casino floor planned? Was that under the prior owners 10 or was that under the current -- 11 A. I -- I don't know. 12 Q. -- management? 13 A. -- the answer to that. 14 Q. Now, are capital expenditures forecasted 15 to decline in 2008 at the Tropicana AC and to be 16 primarily for maintenance? 17 A. Yeah. And I think -- and we've had a 18 wide variety of investor questions on this as well. 19 Q. Uh-huh. 20 A. We have between the completion at 21 Atlantic City and some of the specific property -- or 22 projects that are our other jurisdictions, I think we 23 have about 30 million of specific either maintenance 24 or improvement projects planned that have been 25 identified. Other than that, you know, we -- we've 89 JOHN G. JACOB - cross 1 been estimating two percent maintenance -- two percent 2 of revenue maintenance Capex, kind of in our 3 forecasting more recently, absent the identification 4 of more specific larger projects. It's really a 5 matter of, you know, having, you know, operations 6 identify those. And as they do, we'll bake them into 7 the forecast. 8 Q. Okay. Now, for 2009 and 2010, there 9 was-- for 2009 a decline in the Capex expenditures -- 10 you know, expenditures that were forecasted and for 11 2010 they were about at same as what you said for '9. 12 Do those amounts represent about 1.5 percent of the 13 net revenues in each of those years? 14 A. That's correct. 15 Q. What was the thought -- and I think you 16 just explained the thought process for that. Now, 17 were those figures well below what Trop AC has spent 18 for its Capex in terms of historical standards? 19 A. I don't know the answer to that. 20 Q. Okay. Now, for the five-year period 21 ending December 31st, 2010, would Trop AC's actual and 22 forecasted expenditures to be a total of approximately 23 6.9 percent of actual forecasted net revenue for that 24 five-year period? 25 A. Uh-huh. 90 JOHN G. JACOB - cross 1 Q. Now, for that -- now, for the four-year 2 period that's going to end December 31st, 2010, is 3 Tropicana AC forecasting that it's going to upstream a 4 significant amount of funds in each year to Aztar and 5 ultimately to Trop Entertainment; is that correct? 6 A. That's correct. 7 Q. Now, most of those funds go to pay 8 acquisition debt? 9 A. Correct. 10 Q. Can those results, the intention to 11 upstream those large amounts of money in each year, be 12 achieved in light of these significant staffing 13 reductions? 14 A. I believe the staffing reductions that 15 were consistent with, you know, the cost actions that 16 were assumed in the take, and I believe that would 17 contribute to ultimately the profitability and hence 18 the cash flow available to upstream. 19 Q. How about the low level of capital 20 expenditures forecasted for 2010? Would that impact 21 on your ability to meet the forecasted debt 22 repayments? 23 A. Certainly a lower Capex level would make 24 more cash available. 25 Q. But how would it affect the business in 91 JOHN G. JACOB - cross 1 terms of being able to draw customers in to reference 2 the revenues that you have if you have lower Capex? 3 A. Well, I think the way we are looking at 4 Capex was just trying to take an estimate of what the 5 maintenance Capex was. In terms of specific, you 6 know, property improvement spending, we were adding 7 that in as we became available to it. Or we -- we 8 became aware of it. 9 Q. Now, have you made any changes to the 10 forecasted capital expenditures since you submitted 11 the forecast to the Division? 12 A. Not for this property. 13 Q. Did Tropicana and Tropicana 14 Entertainment know about the regulatory requirement 15 relating to capital expenditures to establish 16 financial stability? 17 A. Not until after the fact. 18 Q. Are you now aware of the Commission's 19 financial stability regulations mandating the five 20 percent of net revenue for capital expenditures be 21 made as a minimum requirement? 22 A. We are. 23 Q. And how did you learn of that 24 requirement? 25 A. I think when it was brought to our 92 JOHN G. JACOB - cross 1 attention as it related to this document. 2 Q. Now, can you explain why you weren't 3 previously aware of that requirement? 4 A. Well, to be honest, in my instance, I'm 5 new to the industry, so it really is my oversight. 6 Q. And how do you intend to address the 7 regulatory requirements with regard to Capex in terms 8 of the Commission's regulation? 9 A. Well, I believe first and foremost, you 10 know, as it relates to the forecast, certainly it's -- 11 yeah. It's an easy enough change. It's really 12 probably spending more time more closely with the 13 property and the general manager and the VP of finance 14 here, and make sure that we do a better job 15 identifying, you know, specific projects that they may 16 have planned. 17 Q. Okay. And in that regard, what was the 18 input of the Tropicana Atlantic City into the 19 submitted forecasts? 20 A. I believe the profitability forecasts, 21 the revenue forecasts was initially submitted by all 22 of our properties. And I think, you know, there were 23 certain costs savings that were added into that 24 product. I think as it relates to the Capex 25 specifically, we tried to get some of the specific 93 JOHN G. JACOB - cross 1 current projects we are aware of in and then try to 2 put something in that reflected, you know, some level 3 of maintenance capital required. 4 Q. Can you describe the nature and extent 5 of any of the discussions that you had with Trop AC 6 financial personnel with regard to the projects? 7 A. I can't specifically. 8 Q. Would that mean that you didn't really 9 have any discussions with them? 10 A. No, I didn't. I'm certain that people 11 who worked with me -- 12 Q. Okay. 13 A. -- worked for me did. 14 Q. Did you have -- have you had any 15 discussions regarding the capital expenditure needs of 16 the Trop of Atlantic City with the financial and 17 operational personnel in preparing to appear here or 18 in preparing with regard to this proceeding? 19 A. I haven't specifically as it relates to 20 this proceeding, but I do have discussions as the need 21 arises as specific projects, you know, come up and we 22 go through the internal approval process. 23 Q. Do you also discuss the staffing needs 24 with them in terms of the financial impact of that? 25 A. Yeah. I'm aware of the staffing levels 94 JOHN G. JACOB - cross 1 in our organization. Yeah. 2 Q. Now, did Tropicana Entertainment also 3 have a net loss for 2007 of approximately $7.5 4 million? 5 A. Correct. 6 Q. And was that primarily a result of the 7 net interest expense on the debt used to finance the 8 merger? 9 A. Yes. 10 Q. And will the loss be greater than 11 forecasted for the full year in light of the results 12 from for the first nine months of 2007 at Trop 13 Atlantic City? 14 A. Yes. 15 Q. Now, for 2008 EBITDA projected to 16 increase due to significant reductions in operating 17 expenses including at the Trop AC? 18 A. The rollover affected some of the 19 actions taken this year. Yes. That's a contributor. 20 Q. Now, for the years of the forecast, 2006 21 through 2010, are 48.6 percent and then later on going 22 down to 44.6 percent of Trop Entertainment's net 23 revenues to be generated by Trop Atlantic City? 24 A. That sounds right. Yes. 25 Q. So during the forecast period, Trop AC 95 JOHN G. JACOB - cross 1 remains the most significant component of Trop 2 Entertainment's operations. Would that be correct? 3 A. Correct. 4 Q. Now, for the years of the forecast, does 5 cash flow from operations expected to increase at each 6 year in terms of Tropicana Entertainment's operations? 7 A. Correct. 8 Q. And for the years of the forecast, which 9 end December 2010, does Trop Entertainment expect to 10 make substantial payments on the term loan? 11 A. Yes. 12 Q. And can you give us a percentage amount 13 of approximately how much of those payments will be 14 funded by Trop Atlantic City? 15 A. Well, certainly I think it would -- the 16 easy answer is what -- you know, it's percentage 17 relationship of its profitability, EBITDA, I think 18 would translate to its inherent EBITDA pay-down. 19 Q. And what would that be? 20 A. Probably be in that 48 percent range. 21 Q. Okay. Now, is there any interplay with 22 regard to staffing reductions whether the Tropicana 23 Atlantic City or Tropicana Las Vegas or the operation 24 in Indiana and the funds available to pay down 25 acquisition debts? 96 JOHN G. JACOB - cross 1 A. I'm sorry. Could you repeat that? 2 Q. Yes. Is there any relationship between 3 the staffing reductions at Tropicana Atlantic City as 4 well as Tropicana Las Vegas and Indiana in terms of 5 its operation and funds available to pay down 6 acquisition debt? 7 A. No. 8 Q. Now, during the five-year period ending 9 December 2010, does Tropicana Entertainment forecast 10 payments on any of its debt other than the term loan, 11 which has net borrowings of approximately $1.3 billion 12 at this point? 13 A. No. I think it would -- it would focus 14 on paying off the term loan. 15 Q. And is the vast majority of the term 16 loan amount related to the acquisition of Aztar? 17 A. Yes. 18 Q. And is it correct that no interest will 19 be paid on the senior subordinated notes that were 20 issued with regard to the acquisition during the 21 forecast period? 22 A. Are you -- 23 Q. The 960 million? 24 A. Interest is being paid on that. 25 Q. Okay. But no other payments will be 97 JOHN G. JACOB - cross 1 made? 2 A. No. 3 Q. Okay. And is it correct that you 4 forecast no borrowings under the revolver during the 5 projected time period? 6 A. That's correct. 7 Q. Now, does Tropicana Entertain forecast 8 an increase in its cash balance as of the end of this 9 year? 10 A. I'd have to turn to that -- I would -- 11 let me find that. 12 It appears that versus where we were 13 from the end of September to where we projected here 14 to be at the end of December that it would -- it would 15 be pretty -- pretty flat -- 16 Q. Okay. 17 A. -- to where we are now. 18 Q. How about 2006 to 2007? 19 A. I -- looking at this, it would suggest 20 that it's a significant increase in cash. 21 Q. Now, for the years 2008, 2009, 2010 does 22 the Tropicana forecast that it will have relatively 23 minimal Capex expenditures at all of its properties, 24 pretty much maintenance? Would that be accurate? 25 A. Well, I think -- I think our issue right 98 JOHN G. JACOB - cross 1 now is, we've put in two percent of revenue purely 2 kind of a maintenance Capex. 3 Q. Uh-huh. 4 A. And it's -- because I think, as Bill had 5 mentioned earlier, we haven't really taken a step back 6 and tried -- attempted to forecast our big projects. 7 And, you know, we may not even know what they are at 8 this point in time. So what we've tried to do is put 9 a placeholder in for what we know we're going to spend 10 on just, you know, purely maintenance, maintenance 11 related items. 12 Q. Now, where would the funding for any 13 other project come from? Would that reduce the amount 14 that you would pay down on the debt that you planned? 15 Or would you have additional borrowings to do any 16 major construction? 17 A. Well, I think we'd have to evaluate 18 where we are at that given point in time. Obviously, 19 we would have to make any mandatory pay-downs on the 20 term loan. Absent that, we probably would want to use 21 our own cash flow to fund Capex. But if it was a -- 22 if it was a timing issue and, you know, we wanted the 23 project to get done and, you know, we had, you know, 24 revolver availability, obviously, we would consider 25 that as well. 99 JOHN G. JACOB - cross 1 Q. Now, I have some questions with you with 2 regard to your management arrangements. Management 3 fee arrangements. 4 A. Okay. 5 Q. Now, there are no projected management 6 fees to be paid under the forecasts in terms of the 7 Tropicana Atlantic City operation. Would that be 8 correct? 9 A. That's correct. 10 Q. Now, there had been an agreement that 11 was entered January the 3rd, 2007, which is not 12 effective and that related to Tropicana Entertainment 13 and went through Aztar to Tropicana AC. Now, was that 14 agreement based upon a proportion of its net operating 15 revenues compared to other owned or managed properties 16 or operations? 17 A. I -- I don't recall the exact 18 calculation on it, but I believe it was related to the 19 centralization of shared services. 20 Q. Now, is there also another agreement 21 that had been in effect with regard to management with 22 Columbia Sussex that related to Tropicana Atlantic 23 City? 24 A. Not that I'm aware of directly. 25 Q. And you wouldn't be aware of the fee 100 JOHN G. JACOB - cross 1 that was to be paid under that agreement? 2 A. Of -- well, the one agreement I'm 3 thinking of, I think the fee could have possibly have 4 been, I think somewhere in the range of $40,000 a 5 month. 6 Q. So approximately half a million dollars 7 a year? 8 A. Yeah. 9 Q. Now, was Tropicana Atlantic City to pay 10 approximately 50 percent of the management fees 11 charged by Columbia Sussex to Aztar subsidiaries as 12 under that agreement? Would that be accurate based on 13 that -- 14 A. I don't have -- I would have to go back 15 and look. I'm not familiar. 16 Q. Now, if the casino services management 17 agreements do become effective in New Jersey, does it 18 intend that the various operations would be relocated 19 to Kentucky? 20 A. I think -- I think the one that was 21 being evaluated was in -- in -- similar to other 22 properties, whether it would make sense to move some 23 shared services like accounts payable, some payroll 24 function and centralize those in Kentucky. 25 Q. Now, has any decision been made in that 101 JOHN G. JACOB - cross 1 regard whether you want to pursue that? 2 A. No. In my time here, we've had so many 3 other issues to look at that we've -- we haven't even 4 addressed that. 5 Q. Okay. Moving on to some property 6 issues. Have you agreed to sell the Vicksburg, 7 Mississippi, property? 8 A. We have. 9 Q. And can you provide details as to that 10 sale, the amount of debt to be paid down, the amount 11 of proceeds which will be realize with that? 12 A. Yeah. I think the gross proceeds are 35 13 million. I don't know exactly what kind of commission 14 we're paying on that, but whatever the net amount is 15 will go correctly to pay down our term loan. 16 Q. The term loan. And how will the 17 Vicksburg sale affect loan guaranties and the ability 18 to service your debt going forward? 19 A. Well, I think, you know, they have a 20 certain, you know, trailing 12 months EBITDA 21 performance that when we go to reset covenants, we'll 22 make certain is adjusted out upon the -- you know, the 23 time of sale. Which, I think, we believe is sometime, 24 you know, by the middle of next year. 25 Q. The Vicksburg recently loaned Tropicana 102 JOHN G. JACOB - cross 1 Entertainment several million dollars under those 2 guaranties; is that correct? 3 A. That would just -- yeah. That would be 4 the -- probably the upstreaming of whatever cash flow 5 they generated. 6 Q. But you did that in the loan format 7 rather than a direct upstream; correct? 8 A. I'd have to go back and check on that. 9 Q. Now, in regards to there's been some 10 mention of the sale of the Quarter. Can you set forth 11 what your plans might be in that regard? 12 A. Well, I think what we've said to our 13 lender base is that, you know, being where we are with 14 our credit agreement that we would evaluate, you know, 15 all options available to us to, you know, either 16 generate compliance or now, you know, move to solve, 17 you know, our amendment process. So I think we would 18 evaluate everything. 19 Q. Do you view it as likely, a likely 20 occurrence? Or not? 21 A. Specifically as it relates to the 22 Quarter? 23 Q. Yes. 24 A. In my opinion? 25 Q. Yes. 103 JOHN G. JACOB - cross 1 A. No. 2 Q. And would a sale have an impact on 3 earnings of the Tropicana Atlantic City? 4 A. The sale of the Quarter? 5 Q. Yes. 6 A. It would. 7 Q. And, in your view, how would it affect 8 the operation of the Tropicana Atlantic City? 9 A. I don't have a view on that. I'm not 10 close enough to the operations. 11 Q. Would it affect -- the sale of the 12 Quarter, would that affect your ability to service 13 debt? The term loan? 14 A. It would, but conversely you'd have less 15 debt to service from the proceeds of the sale. 16 Q. Do you know what the construction costs 17 of the Quarter was? 18 A. I do not. 19 Q. Now, there was also mention yesterday of 20 the possible addition of a new tower. Are you aware 21 of discussions with regard to that at the Tropicana 22 Atlantic City? 23 A. I've heard that discussed, yeah. 24 Q. And would you know how many rooms would 25 be estimated in terms of the potential new tower? 104 JOHN G. JACOB - cross 1 A. I don't. 2 Q. And would you have any idea of the cost 3 of construction of the tower in terms of what you'd be 4 considering? 5 A. No. 6 Q. And my next question would be, if you 7 know the answer, would the rooms that would be 8 constructed be sufficient to produce revenues to pay 9 the cost of the construction of the rooms? Would that 10 be your goal? 11 A. Certainly. 12 (Laughter.) 13 Q. Now, on August 30th of 2007, did Moody's 14 Investors Service credit rating agency downgrade a 15 number of its ratings related to Tropicana 16 Entertainment's long-term debt? 17 A. I believe that's right. Yes. 18 Q. And was that based on Moody's assessment 19 of Tropicana's Entertainment creditworthiness? 20 A. That's correct. 21 Q. And did the change in the ratings result 22 from Tropicana Entertainment's having a higher 23 leverage ratio and a lower interest coverage ratio 24 than having projected at the time when the ratings 25 were assigned? 105 JOHN G. JACOB - cross 1 A. That's correct. 2 Q. Now, can you explain how the ratings 3 were affected in terms of the performance over the 4 period since the acquisition of Aztar? 5 A. Well, I believe in looking at how the 6 covenants were originally set and recognizing that 7 Casino Queen acquisition didn't go through, so, you 8 know, right off the block, I think that, you know, 9 operating performance wasn't where, you know, it was 10 originally projected to be. The fact that the company 11 did not perform up to, I guess, the implicit forecasts 12 that were in the covenants -- 13 Q. Uh-huh. 14 A. -- in the first half of the year. And 15 then with our call in the -- you know, for the second 16 quarter, I think Moody's December accumulated all that 17 information, looked at really not our current 18 covenants, but the step down in covenants at the end 19 of the first quarter and projected out that they 20 thought that there was a, you know, higher degree of 21 risk that the company wouldn't meet those covenants. 22 And I think that's what led to their downgrade. 23 Q. So it was the fact that you didn't 24 acquire the Casino Queen and the performance at your 25 various facilities, including Atlantic City Trop? 106 JOHN G. JACOB - cross 1 A. Yeah. In terms of being tied to our 2 covenants. Yes. 3 Q. Uh-huh. Now, I know that Mr. O'Gara's 4 asked you about this, and as set forth in our 5 financial analysis, the Tropicana Entertainment's 6 total debt ratio for 2007 was going to be close to the 7 maximum permitted under the credit facility. And, as 8 noted, you wound up violating the covenants; correct? 9 A. (No verbal response.) 10 Q. Now, specifically, how could you have 11 avoided the noncompliance? What would it have taken 12 in terms of dollar amount to pay down? 13 A. On September 30th this year, we paid 14 down debt $40 million. If we had paid debt down $55 15 million, we'd be in compliance right now. 16 Q. And you discussed the actions that 17 you've taken in light of the technical default, and 18 what right now is the status of negotiations? Where 19 were you with the lenders? 20 A. Well, we've had an initial discussion 21 with Credit Suisse, our administrative agent. Our 22 first step now is to go back and prepare a new 23 forecast, a highly competent forecast, really for the 24 next three years with a strong focus on the rest of 25 '07 and 2008. And with that go back and negotiate 107 JOHN G. JACOB - cross 1 with them for covenants relating to, obviously, there 2 will be some kind of pricing adjustment in terms of 3 the spreads that we pay. And that's -- we're in the 4 early stages of that process. 5 Q. So you anticipate that there will be an 6 amendment to your current agreement with the lenders? 7 A. I do. 8 Q. And do you think that the lenders will 9 require certifications going forward? 10 A. In terms of covenant compliance and so 11 forth? 12 Q. Yes. 13 A. Yes, I do. 14 Q. And do you believe that the tests will 15 be more stringent given your need to meet regarding 16 your financial situation? 17 A. I don't think it will be as tight as it 18 is now. No. 19 Q. And that's something you'll negotiate 20 for? 21 A. Correct. 22 Q. And what options would you pursue to 23 remain in compliance on a continuing basis with regard 24 to your covenants? 25 A. Well, I believe, you know, assuming that 108 JOHN G. JACOB - cross 1 the covenants that exist will be similar to the ones 2 that exist now. But, you know, primarily leverage and 3 coverage, I think, you know, our -- our greatest 4 opportunities in that are over time to evaluate will, 5 you know, debt pay-downs, you know, makes sense in 6 order to, you know, stay within a leverage -- a 7 leverage test. I think we will continually evaluate 8 asset acquisitions or asset divestitures if, yeah, 9 it's something that makes sense from an operational 10 standpoint and also makes sense from a -- from a, you 11 know, covenant compliance standpoint. 12 Q. Could you also make capital 13 contributions, if necessary? 14 A. Certainly. 15 Q. And what flexibility do you have with 16 regard to borrowings under the revolver in terms of 17 the covenants? At what level would the borrowings 18 still be available to you without further affecting 19 your covenants at this point? 20 A. Well, at this moment, there -- our 21 revolver is not available to us. But once this, you 22 know, is reset, I would expect that our full facility, 23 however that's defined, will be available to us. 24 Q. Now, with regard to some of the 25 intercompany debt questions, I want to go over those 109 JOHN G. JACOB - cross 1 with you. Mr. Yung's referred them to you. 2 A. Uh-huh. 3 Q. As of June 2007, did Tropicana have 4 approximately $512 million with an additional $13 5 million in accrued interest owed to CSC Holdings, 6 which is a subsidiary of Columbia Sussex? 7 A. Yes. That sounds correct. 8 Q. Now, was most of that money, $360 9 million, you know, originally with regard to the 10 acquisition, and at the time of closing an additional 11 $144 million, basically incurred as a result of the 12 Aztar acquisition? 13 A. Correct. 14 Q. And so that would be the -- by far the 15 vast majority of these intercompany debts? 16 A. That's correct. 17 Q. Are any payments on that debt to be made 18 during the forecast period through 2010? 19 A. I don't believe so. No. 20 Q. And will the debt continue to accrue 21 interest? 22 A. It will. 23 Q. And are the interests in principal 24 payments due on those loans to mature in 2018? 25 A. I believe 2018 is correct. 110 JOHN G. JACOB - cross 1 Q. And is Tropicana's plan that the debt 2 eventually will be paid through distributions 3 upstreamed through Tropicana Entertainment? 4 A. Yes. I think there's a certain leverage 5 test or level that we have to meet before we could 6 even contemplate that. 7 Q. Okay. And is there any problem in 8 keeping these loans on the books for that period of 9 time without payment? 10 A. I don't believe so. 11 Q. Now, are you aware of recently submitted 12 information in a quarterly report to the Commission 13 and Division? 14 A. On? 15 Q. With regard to the performance of the 16 Tropicana Atlantic City, its quarterly report? 17 A. Okay. 18 Q. Have you been advised of an error with 19 respect to that submission? 20 A. Not that comes to mind. 21 Q. All right. Then you couldn't describe 22 it for us; correct? 23 (Laughter.) 24 Q. If you're not aware of it? 25 A. Is there an amount? I mean -- 111 JOHN G. JACOB - cross 1 Q. $19 million? 2 A. Oh. Oh. There -- I know that 3 adjustment was made, and I -- I guess what threw me is 4 I'm not sure I would have characterized it as an 5 error, but I believe that -- 6 Q. Uh-huh. 7 A. That during the first year after an 8 acquisition, there's a variety of opening balance 9 sheet adjustments that get made, and one of the things 10 that was pushed down to Atlantic City, I believe, is 11 an amortization of intangibles such as customer list 12 and so forth. The reason why it doesn't register more 13 highly with me is being a noncash issue would fall 14 outside our EBITDA performance definition. And, 15 obviously, the last couple weeks we've been very 16 EBITDA performance focused. 17 Q. Okay. It wasn't a problem, though, when 18 it was initially submitted? It showed up above the 19 EBITDA line, the cost of services? 20 A. Oh, that may be. And then it moved 21 below it? 22 Q. Right. 23 A. Yeah. Okay. 24 Q. Now, has that situation been corrected? 25 A. Yeah. I believe that we're all in 112 JOHN G. JACOB - cross 1 agreement how it should be classified going forward. 2 Q. So you're satisfied that this type of 3 problem won't occur again? 4 A. We've put as many controls in place as 5 we can to avoid it. 6 Q. Now -- now, I understand that there are 7 certain arrangements whereby tax liabilities relating 8 to what would eventually flow up to Mr. Yung might be 9 reimbursed by some of Tropicana Entertainment or its 10 affiliates. Would that be accurate? 11 A. I believe that we have the ability to 12 move cash upward to meet tax obligations. 13 Q. Now, are those amounts reflected in the 14 forecast? 15 A. I know at one point there was some -- 16 some omission of that. Or either that or we had just 17 included it in the overall cash amount available to 18 flow upward. 19 Q. And how would those funds flow? 20 A. I think they would flow with, you know, 21 the rest of -- the rest of the cash. And really 22 it's -- once it was up at the Tropicana Entertainment 23 level, I believe what happens is we make specific 24 requests on behalf of, you know, Mr. Yung or any tax 25 liabilities and move it in installments then. 113 JOHN G. JACOB - cross 1 Q. Okay. And where would those funds 2 originate? 3 A. Well, I think they would originate at 4 the properties. 5 Q. And does that affect your financial 6 flexibility in any way? The use of those proceeds for 7 those tax reasons? 8 A. I don't believe so. 9 Q. Now, does Tropicana Las Vegas service a 10 $440 million loan? 11 A. Does Tropicana -- 12 Q. Las Vegas? 13 A. Yes. 14 Q. It services the $440 million loan? 15 A. Yes. 16 Q. Is the Tropicana Las Vegas to be 17 redeveloped? 18 A. The company has plans to redevelop. 19 Q. And can you describe the redevelopment 20 plans from a financial point of view? 21 A. Well, I think that, you know, there's an 22 overall project cost. I think that has yet to be 23 finalized. And, you know -- upon, you know, getting 24 full plans and costs that we, the company, would have 25 to go out and, you know, finance a significant portion 114 JOHN G. JACOB - cross 1 of that, in part to take out the existing $440 million 2 loan and then the cost to redevelop. 3 Q. But that's going to be a major project 4 with multibillion dollar investment; correct? 5 A. I believe that's right. 6 Q. And is the Tropicana Las Vegas operation 7 or its debt or the debt on its property reflected on 8 Tropicana Entertainment's consolidated results? 9 A. Yes. 10 Q. It is? 11 A. On Tropicana Entertainment? 12 Q. Yes. 13 A. Yes. 14 Q. Now, will the financing arrangements for 15 the Tropicana Las Vegas project rely in any way on the 16 Atlantic City operations? 17 A. I don't believe so. 18 Q. As a result of the redevelopment of the 19 Tropicana Las Vegas and the related debt which would 20 be incurred, will Tropicana Las Vegas be able to 21 upstream funds to Tropicana Entertainment or 22 Tropicana? 23 A. I think that will depend on what that 24 final capital structure looks like for that deal. But 25 I would assume that it would be tapped into that 115 JOHN G. JACOB - cross 1 specific project. 2 Q. And so you're not really anticipating 3 any large degree of funds to come from Tropicana Las 4 Vegas for the foreseeable future for this three- or 5 four-year period. Would that be accurate? 6 A. I think whatever funds came from Las 7 Vegas would be used to service the other specific 8 debt. 9 Q. The debt on the property which is going 10 to be redeveloped? 11 A. Correct. 12 Q. And based on that situation, will 13 Tropicana Atlantic City continue to carry the burden 14 of funding the debt payments related to the Aztar 15 acquisition? 16 A. Certainly it will continue the burden 17 in-- yeah -- in the sense of the percentages that were 18 laid out here. 19 Q. Approximately 44, 47 percent? 20 A. Correct. That's correct. 21 MS. FLAHERTY: That's all I have. 22 Thank you, Commissioner. 23 CHAIR KASSEKERT: I think we're just 24 going to take a brief ten-minute break. 25 THE WITNESS: Thank you. 116 JOHN G. JACOB 1 (A recess was taken from 2:56 to 3:26 2 p.m.) 3 CHAIR KASSEKERT: We'll go back on the 4 record. 5 We'll now move to questions from the 6 Commissioners. 7 Commissioners Eps? 8 COMMISSIONER EPPS: Yes. I'll start 9 with the covenant issue and your discussions 10 with Credit Suisse regarding the renegotiating 11 the covenants going forward. 12 You said that you're going to submit to 13 them new forecasts? 14 THE WITNESS: That's correct. 15 COMMISSIONER EPPS: Would they be 16 different than the forecasts that you submitted 17 to us that -- which we're reviewing now? 18 THE WITNESS: Yes, Commissioner, it 19 would. 20 COMMISSIONER EPPS: So that these are 21 going to change? 22 THE WITNESS: That's right. 23 COMMISSIONER EPPS: You're going submit 24 them to us as well? Will we get copies of the 25 new forecasts? 117 JOHN G. JACOB 1 THE WITNESS: I believe that's our 2 intention. 3 MR. O'GARA: Certainly. 4 THE WITNESS: Simultaneously, 5 Commissioner. 6 COMMISSIONER EPPS: Now, you suggested 7 that the process, once you submit your new 8 forecasts that you work out the terms of the 9 covenants, we'll take some time, but 10 potentially the rest of the fourth quarter. Is 11 there another covenant test between now and 12 then? 13 THE WITNESS: No. There's one at 14 December 31 that would be due on March 31. 15 Consistent with our public reporting 16 requirements. 17 COMMISSIONER EPPS: Would your new 18 arrangement make that one go away? 19 THE WITNESS: That's correct. 20 COMMISSIONER EPPS: Okay. 21 THE WITNESS: I think the time frame of 22 the reporting will be similar. I believe the 23 covenant level will change. 24 COMMISSIONER EPPS: So it would be the 25 new covenant that would be reportable? 118 JOHN G. JACOB 1 THE WITNESS: That's correct. 2 COMMISSIONER EPPS: Okay. Your 3 forecasts show year-over-year EBITDA growth. I 4 think you testified earlier that you're not 5 likely to hit '07. 6 THE WITNESS: That's correct. 7 COMMISSIONER EPPS: Are you confident 8 that you will hit '08 and the others going 9 forward. 10 THE WITNESS: I believe we'll be very 11 confident of the numbers that we put forth in 12 our new forecasts. 13 COMMISSIONER EPPS: New forecasts. 14 THE WITNESS: Reflecting kind of the 15 realities of where we are now and some of the 16 revenue and profit leverages that we have to 17 generate the business forward. 18 COMMISSIONER EPPS: Okay. There was 19 significant increase projected between '07 and 20 '08, but as we get -- heard from Mr. Yung, 21 there's no significant changes to your 22 facility, particularly in Atlantic City, that 23 are projected to have happen other than the 24 rooms and casino restaurant events that you're 25 going through now. How do you anticipate 119 JOHN G. JACOB 1 hitting that? Or how did you anticipate 2 hitting that forecasts with no other changes? 3 THE WITNESS: Well, I believe the 4 biggest levers would have been, you know, some 5 increase in revenue while at the same time 6 getting the rollover full year effect of the 7 cost reductions that have been enacted. 8 COMMISSIONER EPPS: So those factors, 9 you would think it would be enough to meet that 10 target? 11 THE WITNESS: I believe so. Yes. 12 COMMISSIONER EPPS: Based on the 13 testimony, it doesn't seem that you have very 14 many capital expenditure plans that are 15 significant beyond maintenance other than 16 something potentially in Las Vegas. Is that 17 fair to say? 18 THE WITNESS: I believe we haven't 19 identified any other than the, you know, five 20 or six currently that we have in the process. 21 And by that I mean, you know, big projects 22 beyond just, you know, typical maintenance. 23 Beyond that we've had discussions on Las Vegas. 24 But really in terms of going into 2008, 2009, 25 we have not sat down with the properties and 120 JOHN G. JACOB 1 really gone through in a lot of detail any big 2 projects they have coming forward. We will. 3 We just haven't done that as part of our 4 budgeting process yet. 5 COMMISSIONER EPPS: Now, if you are able 6 to do that, that changes both your forecasts 7 and your -- and your Capex plans and all of 8 that. And that, I guess, it would be 9 resubmitted to us as well? 10 THE WITNESS: That's correct. 11 COMMISSIONER EPPS: Okay. The 12 intercompany note that we've discussed, that 13 potentially could carry out through -- what 14 term? 15 THE WITNESS: 2018? 16 COMMISSIONER EPPS: Okay. 2018. And 17 you indicated that what was -- how was that 18 going to be paid? 19 THE WITNESS: Well, I know the way it's 20 structured right now is it has -- it accrues 21 interest, and I think at some point in the 22 future, if we were able to get below a certain 23 leverage level, which I think was four times on 24 our, you know, credit facility that we might 25 have the opportunity to pay down on that. But 121 JOHN G. JACOB 1 right now our credit facility would prohibit 2 that. And in any event, the whole thing comes 3 due at maturity. So there's no mandatory 4 payments before then. 5 COMMISSIONER EPPS: Should we be 6 concerned about unpaid interest over that long 7 period of time? What is the liability? 8 Potential liability? Do you know? 9 THE WITNESS: I haven't calculated it 10 out, but certainly it would be, you know, a 11 relatively large number given that it started 12 at 500, 512 million. 13 COMMISSIONER EPPS: But you don't think 14 we should be concerned about that, all that 15 interest accruing all that length of time? 16 THE WITNESS: I believe looking at the 17 forecast, I think the value of the Tropicana 18 entity would certainly suggest that there's 19 value to, you know, pay that obligation back. 20 COMMISSIONER EPPS: I believe that you 21 testified that part of the reason for the 22 covenant event was that the cost savings 23 weren't quite realized as originally projected. 24 THE WITNESS: That's correct. 25 COMMISSIONER EPPS: What was the source 122 JOHN G. JACOB 1 of that cost savings? 2 THE WITNESS: Well, specifically, our 3 credit agreement allows us to take cost savings 4 actions that occurred in 2007 and treat them as 5 if they had occurred on January 1st. So, for 6 example, if we had took an action on June 30th 7 for a million dollars, they would allow us to, 8 for covenant reporting purposes, add, you know, 9 250,000 to the first quarter and $250,000 to 10 the second quarter as if that -- you know, 11 event had happened on January 1st. 12 In the case of our September compliance 13 calculations, we had assumed that we had 14 approximately -- I think the number was, you 15 know, $17 million in these types of add-backs 16 permissible under the agreement. And what we 17 came to find out was that some of the cost 18 savings actions we had taken, which are 19 primarily position eliminations, we actually 20 had hired back or are going to hire back. So 21 we excluded them from the calculations. And 22 that, you know, we were so tight to the 23 covenant that that $2 million moved us from 24 right above the covenant to right below it. 25 COMMISSIONER EPPS: So you didn't lay 123 JOHN G. JACOB 1 off enough people? 2 THE WITNESS: No. We classified 3 positions as having been eliminated that were 4 actually either hired back or were going to be 5 hired back. So we took them off the list of 6 cost savings. 7 COMMISSIONER EPPS: Well, if you had 8 effectuated more layoffs or kept them off the 9 books, then you would have met your covenant 10 that you anticipated as cost saving? 11 THE WITNESS: If we had taken up more 12 cost savings actions, yeah. The number would 13 be higher and, you know, we wouldn't have had 14 the adjustment. 15 COMMISSIONER EPPS: So when you set up 16 your loans or these arrangements early on in 17 your process, you anticipated that there would 18 be significant staff reduction which would 19 allow you to save money? 20 THE WITNESS: Yeah. I believe in the S4 21 in the road show there were always some 22 assumptions. I think Bill had mentioned some 23 numbers earlier related to the Phoenix 24 headquarters and so forth that they knew would 25 occur, and they wanted to set the covenants 124 JOHN G. JACOB 1 such that, you know, they could, you know, 2 incorporate that into our performance. 3 COMMISSIONER EPPS: Some of those were 4 Atlantic City positions; correct? Anticipated? 5 THE WITNESS: I believe some of them 6 were. Yes. 7 COMMISSIONER EPPS: And these were 8 anticipated before you actually took over 9 management of the actual company to make an 10 assessment as to what your needs actually were. 11 Is that fair to say? 12 THE WITNESS: You know, I can't really 13 say that exactly. I wasn't here. But 14 certainly they were included in the S4 -- 15 COMMISSIONER EPPS: In the road show. 16 THE WITNESS: -- that was filed in June. 17 COMMISSIONER EPPS: Well, they are also 18 included in the road show going to -- 19 THE WITNESS: Yeah. In broad terms, 20 yeah. There were some savings assumed in the 21 road show. That's correct. 22 COMMISSIONER EPPS: So there were some 23 savings assumed in the road show as a result of 24 cutting staff before you took over management 25 of the company to determine whether or not in a 125 JOHN G. JACOB - redirect 1 management or an operating function they could 2 actually be sustained? 3 THE WITNESS: I believe that the road 4 show that was -- yeah. It was in December of 5 '06. The presentation. 6 COMMISSIONER EPPS: I don't think I have 7 anything. 8 CHAIR KASSEKERT: Any questions? 9 Commissioner Fedorko? 10 VICE CHAIR FEDORKO: No. 11 CHAIR KASSEKERT: Commissioner 12 Sommeling? 13 COMMISSIONER SOMMELING: No. 14 CHAIR KASSEKERT: Anything on redirect? 15 MR. O'GARA: Just one thing. 16 CHAIR KASSEKERT: Sure. 17 18 REDIRECT EXAMINATION BY MR. O'GARA: 19 Q. The loan that Commissioner Epps referred 20 to, the Columbia Sussex and the intercompany loan, the 21 company that lent the money is entirely owned by Mr. 22 Yung? 23 A. That's correct. 24 Q. And the company that borrowed the money 25 is entirely loaned owned by Mr. Yung? 126 JOHN G. JACOB - recross 1 A. That's correct. 2 Q. So while it's due in 2018 with accrued 3 interest, Mr. Yung can in his sole discretion, if he 4 has to, waive any conditions or do whatever has to be 5 done with respect to one company or the other. That's 6 solely his decision. 7 A. Correct. 8 Q. There's no other creditor? 9 A. No. 10 MR. O'GARA: Okay. Thank you. 11 CHAIR KASSEKERT: Ms. Flaherty? 12 Anything on recross? 13 MS. FLAHERTY: Yes. Just one question. 14 CHAIR KASSEKERT: Sure. 15 16 RECROSS-EXAMINATION BY MS. FLAHERTY: 17 Q. With regard to the negotiations with 18 Credit Suisse, do you anticipate there will be an 19 increase in the interest spread as a result of that? 20 A. I do. 21 Q. And what would be the impact in terms 22 financially of the company and it's license and 23 forecasts? 24 A. Well, I believe the impact will be 25 whatever that spread is will have an effect on the 127 JOHN G. JACOB - recross 1 $1.3 billion of debt outstanding under the credit 2 agreement currently. And, obviously, that will be 3 something that we factor into our forecasts and any 4 future, you know, debt pay-downs that we agree to with 5 our creditors. 6 Q. Do you agree the effect of that will be 7 significant? 8 A. Yeah. I think it would be significant. 9 Q. Can you give us any details in which 10 way? 11 A. Well, you know, what we're asking -- 12 what we're talking about now has yet to be negotiated. 13 So I don't know that I really want in this forum to go 14 any further than that. 15 MS. FLAHERTY: Okay. Thank you. 16 CHAIR KASSEKERT: Anything else? 17 Commissioners? 18 CHAIR KASSEKERT: You may step down. 19 THE WITNESS: Thank you. 20 CHAIR KASSEKERT: You can call your next 21 witness. 22 MR. O'GARA: I just need a moment. 23 CHAIR KASSEKERT: Sure. 24 MR. O'GARA: You're done with me. I 25 mean, you get another witness, but you're done 128 1 with me for a while. 2 MR. LEVENSON: That's the good news. 3 The bad news -- 4 CHAIR KASSEKERT: The bad news is it's 5 you. 6 MR. O'GARA: I didn't want to give you 7 the other half. 8 CHAIR KASSEKERT: You made it so simple. 9 MR. LEVENSON: Starting to sweep out 10 there. 11 CHAIR KASSEKERT: I know. 12 MR. LEVENSON: A lot of dust out there, 13 I noticed. 14 Mark Giannantonio, please. 15 CHAIR KASSEKERT: Mr. Giannantonio, Mr. 16 Nance will swear you in. 17 18 MARK GIANNANTONIO, was duly sworn to 19 testify in this matter. 20 21 MR. NANCE: Please state your name for 22 the record. 23 THE WITNESS: Mark Giannantonio. 24 MR. NANCE: Please spell your name for 25 the record. 129 MARK GIANNANTONIO - direct 1 THE WITNESS: G-i-a-n-n-a-n-t-o-n-i-o. 2 MR. NANCE: Thank you. 3 CHAIR KASSEKERT: You may proceed, Mr. 4 Levenson. 5 6 DIRECT EXAMINATION BY MR. LEVENSON: 7 Q. Mr. Giannantonio, without scaring 8 anybody with this question, where were you born? 9 A. In this city; Atlantic City. 10 Q. And did you matriculate all through the 11 Atlantic City school systems? 12 A. St. Michael's and then Atlantic City 13 High School. 14 Q. Did you graduate from Atlantic City 15 High? 16 A. Yes. 17 Q. With better grades than my son just got 18 today? 19 A. I hope so based on the question. 20 VICE CHAIR FEDORKO: Well, what are 21 they? 22 MR. LEVENSON: What are they? Actually, 23 advance placement Latin he got an A, but I'm 24 stopping there. 25 Anyway. 130 MARK GIANNANTONIO - direct 1 Q. And you continued on locally in college? 2 A. Yes. 3 Q. You went to Stockton College? 4 A. Correct. 5 Q. And am I correct -- we'll go through 6 this kind of quickly, your background, if we might. 7 You actually started in Resorts as a room service 8 waiter. 9 A. That's correct. Well, I was a -- while 10 in Stockton I was a room service waiter. 11 Q. Okay. And then you after you finished 12 college, you stayed in the industry? 13 A. Yes. 14 Q. And you went to Golden Nugget, 15 Tropicana, did a short stint at Trump Marina, came 16 back to Tropicana. And how long have you now been to 17 Tropicana the last time? 18 A. Going on 20 years. 19 Q. And without going through all your jobs 20 at Tropicana -- because I know you've had a lot of 21 different jobs as you moved up the chain -- in year 22 2000 did you become the Vice President of the Hotel 23 Operations and Marketing Administration? 24 A. That's correct. 25 Q. And then when the new -- Mr. Yung took 131 MARK GIANNANTONIO - direct 1 over and his company, did you become the executive 2 Vice President of Operations? 3 A. Yes. 4 Q. Okay. And, more recently, what are you 5 now? 6 A. President and COO. 7 Q. And when did that occur? 8 A. In August. Middle of August. 9 Q. August of this year? 10 A. Yes. 11 Q. 2007. 12 Now, previous to your taking on that 13 position, what was the structure at Tropicana as far 14 as the leadership at the property? 15 A. At my level there were two positions. 16 Fred Buro was the president, and I was the Executive 17 Vice President of Operations. Essentially, Fred 18 oversaw the casino and all the aspects of the casino, 19 and I oversaw hotel, food and beverage, and noncasino 20 departments. 21 Q. So, actually, even though there was 22 different titles, you were Executive Vice President, 23 and he was Chief Operating Officer that was in charge 24 of the casino side, and you were in charge of the 25 hotel side? 132 MARK GIANNANTONIO - direct 1 A. Yes. 2 Q. Then you both -- or each reported up, 3 eventually, to Mr. Yung; is that correct? 4 A. Yes. 5 Q. Now, since August of 2007 when you 6 became the President and COO, is there the same type 7 of organization? Or now are you basically -- not 8 basically -- are you in charge of the casino side and 9 the hotel side? 10 A. Yes, I am. 11 Q. And is that consistent with the way that 12 you understand the other casinos in town operate? 13 A. That's correct. 14 Q. And just give us a moment on basically 15 the table of organization from yourself locally up to 16 Mr. Yung. How does it go on -- 17 A. Sure. I report up to two individuals, 18 Bob Little on the casino side, and Jim Barracca on the 19 hotel side. They, in turn, report up to two people 20 who report to Mr. Yung. 21 Q. Who are those two people that report to 22 Mr. Yung. 23 A. On the casino side is Kevin Preston. 24 The hotel side is Stan Clayton. 25 Q. And then Mr. Yung is, obviously, at the 133 MARK GIANNANTONIO - direct 1 top? 2 A. Right. 3 Q. Now, we've heard a lot about layoffs. 4 We've heard a lot about problems that were occurring 5 in the casino, in the hotel, and the whole project 6 with regard to the union and the like. Since you're 7 really the first witness that's taken the stand that's 8 there on site every single day, probably more days 9 than you want to recall, tell us about what was going 10 on, from your vantage point, as a result of union 11 activities and the layoffs? 12 A. Well, you know, I guess any time a 13 company takes over another company, and particularly 14 at the magnitude and size and scale that was involved 15 here, you know, it's not really an easy process for 16 the people that are involved with it. There tends to 17 be some anxiety on the ground at the properties. And 18 you know, what's in it for me? Or you know, am I 19 going to be here when it's all said and done? And 20 that's the reality of it. I'm sure many of you were 21 aware of that. 22 The reality of it was overall, you know, 23 it was -- it was a difficult period of time. We've 24 made -- it's never easy making reductions. And, I 25 guess, from my vantage point, the frustration has 134 MARK GIANNANTONIO - direct 1 been, I guess, the inaccuracy of how things have been 2 reported. And that's why, you know, we kind of wanted 3 to get that information out yesterday as to what was a 4 layoff, what was a resignation, voluntarily, what was 5 a termination, and then what was the add backs, 6 because I think there were so many numbers thrown 7 around here. 8 You know, we -- we evaluated -- and this 9 is how I feel. Mr. Yung and the people that I 10 reported to evaluated every department very carefully 11 and certainly looked where we could, without affecting 12 service, streamlining the operation. You know, call 13 it right size. And in many, many cases we've actually 14 improved our operations, and I can certainly get into 15 that. In the case of, for example, the public area 16 staff, we didn't -- there wasn't a reduction day one. 17 It took months and analysis to figure out, what are we 18 going to do with the operation here? And, I mean, the 19 fact of the matter is, you know, to read about in 20 today's Press something so egregious as to bed bugs 21 which, of course, was one case, and it was never 22 substantiated. There was not a case of bed bugs in 23 that guest room. And these other allegations that -- 24 that occurred back in March, it's very difficult as an 25 operator to continue to try to motivate a staff of 135 MARK GIANNANTONIO - direct 1 3700 and move forward as you're moving forward taking 2 three steps back. 3 So just getting back to the public area 4 department, we did make cuts in public areas, and it 5 was through -- after very detailed analysis. And I 6 was involved with those analysis. And, essentially, 7 the analysis went as -- as follows. You know, we've 8 looked at the amount of square footage that someone 9 cleans, and we basically said, okay, we think we can 10 have somebody do more square footage. It's basic, you 11 know, mathematics. In addition, we knew that the 12 smoking ban had been implemented, which I can tell 13 you, from a cleanliness standpoint helped us 14 instantly. You didn't have ashes all over the slot 15 machines and cigarette butts all over the place and 16 things of that nature. 17 Secondly, while we knew going into it, 18 we knew it was going to be difficult even for the 19 management in the department, when you're accustomed 20 to managing in a certain way, it is very difficult in 21 any case when you're making changes to -- for managers 22 to just automatically go from X amount of employees to 23 X amount of employees and think that we're not going 24 to have problems. Clearly, the one thing that we did 25 not anticipate is the -- I guess, is the degree of 136 MARK GIANNANTONIO - direct 1 call-outs that we received at the property on a busy 2 Saturday night. You know, whatever the staff was 3 scheduled, there were Saturdays in the very beginning 4 that we had almost half of staff call out. I know 5 that that's been refuted, but that's the reality. I 6 was on the ground, and I lived with it. 7 I know that it took a little time for 8 employees to get accustomed. You know, we make it 9 very basic. We tell people to find dirt and clean it. 10 And, you know, there were some people that were 11 accustomed to look at a slot machine. They were 12 cleaning the chrome that was already beautifully 13 shined, and they were still doing it. So we had to 14 kind of correct those individuals and train them and 15 provide the better equipment and things of that 16 nature. 17 And then the other thing that we didn't 18 anticipate was the degree of -- and I'm certainly not 19 pinpointing figures, but the degree of sabotage here 20 at the property where we had urinals filled with sand. 21 I mean, I don't think our customers were filling our 22 urinals with sand. Or toilet paper rolls that were 23 jammed into commodes. I mean, I'm pretty sure -- I 24 don't think it was the customers that were doing it. 25 Q. In any event, before these layoffs, you 137 MARK GIANNANTONIO - direct 1 were not suffering sand in urinals and toilet paper 2 rolls down toilets? 3 A. Correct. 4 Q. And when -- just, and I'm not going to 5 belabor this, but just so the Commission is clear. 6 When someone was cleaning the clean and shiny chrome, 7 was there dirt that was right there that wasn't being 8 taken care of? 9 A. There was. Yeah. And, you know, it 10 took some time. And, you know, after a bit of time, 11 we really started to get it -- the one thing that 12 helped us was that as we were experiencing so many 13 call-outs and so many people out for various reasons, 14 we had a support staff from the housekeeping 15 department to come in. And the reality of it is, once 16 we were able to attain -- I'll use the term FTE, but 17 in this case 81 FTE, 81 FTEs or 81 40-hour shifts or 18 81 40-hour period, once we were able to attain that, 19 we were -- we were able to keep the place clean. And 20 it took a little while. It took some weeks to get 21 that done. And you know, certainly it was a very 22 rough period of time. We got a lot of bad press. We 23 got a lot of bad publicity. I know the morale was 24 low. 25 But the reality of it is it's behind us, 138 MARK GIANNANTONIO - direct 1 and we need to move forward and forge ahead because we 2 do have 3700 employees that come in every day that 3 really work their rear ends off to make it the 4 finest-- I believe in my heart the finest 5 establishment in Atlantic City. 6 Q. All right. And just to clean up this 7 one area -- no pun intended -- clean up this one area. 8 But with half the staff, cleaning staff, 9 calling out, obviously a cleanliness issue arises when 10 you have half the number of people that are supposed 11 to come in on a particular Saturday night and clean, 12 and they are not there? 13 A. Yeah. I mean, you have to then 14 prioritize what's going to get done. You know, you 15 may not pick up the trash as frequently, but you try 16 to get the bathrooms as clean. We had some crisis 17 periods of times where, you know, we just all tried to 18 pitch in and tried to get the job done. 19 Q. Now, there were -- they are a part of 20 this record -- is some 71 customer complaints. You 21 reviewed them, I'm sure, did you not? 22 A. I did. 23 Q. And did you go back and recently check 24 how many of those 71 customers have come back to the 25 Tropicana? 139 MARK GIANNANTONIO - direct 1 A. Yeah. Essentially it was 71 accounts 2 tied to 66 complaints from the period of March through 3 August. And I just want to put things in context. 4 That's 66 written complaints on -- during that time 5 frame 369,000 plus room nights. To give you a little 6 feel for how many people we have at the property on a 7 daily basis, it's about 12,000 people daily. So, you 8 know, I've been -- I've overseen the hotel for, I 9 guess, seven or eight years. And, you know, the 10 numbers -- except for those few weekends that we had 11 or periods of times where we really had some 12 difficulty, the numbers were -- are really minuscule. 13 If you put things in context of the big picture. 14 The fact is based on these 66 15 complaints, I checked every single account. These 16 were customers that were casino customers. I checked 17 their account. About 93 percent never wavered in 18 their frequency to the property. As a matter of fact, 19 so, in other words, if they complained March 17th, and 20 they came two times a week for every week or whatever 21 their frequency was, it just continued to be that way 22 up until the last week or whenever I checked it. The 23 other seven percent, it appears that we may have lost. 24 Which I'm not so sure -- I mean, could just be a 25 normal pattern as well, but -- 140 MARK GIANNANTONIO - direct 1 Q. Okay. The Quarter. Fantastic. It's 2 beautiful. It's a great place to shop. A great place 3 to eat. I assume you would agree with that? 4 A. Yes. 5 Q. However, it's been in the papers, it's 6 been said publicly that the attraction of the Quarter 7 and then the casino and its fluidity to move people 8 from the Quarter to the casino basically is something 9 that you believe needed improvement; is that correct? 10 A. That's correct. 11 Q. Okay. Why don't we just -- we have a 12 casino floor plan here that we can take a look at. 13 MR. LEVENSON: And each of the 14 Commissioners have a copy of this, a small 15 rendition. It is difficult to see. 16 CHAIR KASSEKERT: Is this part of the 17 Division's report or -- 18 MR. NANCE: Did you move that in? 19 CHAIR KASSEKERT: It's one of your 20 exhibits? 21 MR. O'GARA: It's -- 22 MR. LEVENSON: It's an exhibit. 23 MR. NANCE: A-77. That wasn't move in. 24 MR. LEVENSON: Pardon me? 25 MR. NANCE: It wasn't move in. 141 MARK GIANNANTONIO - direct 1 MR. LEVENSON: All right. I offer A-77. 2 MS. MAHER: No objection. 3 CHAIR KASSEKERT: No objection. Thank 4 you. 5 With no objection, we'll move that into 6 evidence. 7 MR. LEVENSON: Oh, I'm sorry. I thought 8 you all had it. 9 CHAIR KASSEKERT: That's okay. 10 COMMISSIONER EPPS: Simple as that is. 11 MR. LEVENSON: See this one letter, and 12 the one that's in front of you. That's the 13 trick. Why don't I -- 14 A. This will put into context the 30 15 million in capital expenditure. 16 MR. LEVENSON: Should we put it closer 17 to you? 18 COMMISSIONER EPPS: No. No way. 19 (Laughter.) 20 CHAIR KASSEKERT: I'm fine. 21 A. The reality of it is when we built the 22 Quarter and spent the 260 million that it took to 23 build the Quarter Aztar had made a decision not to 24 renovate the casino floor. For right or for wrong, 25 the bottom line is, when we opened the Quarter, you 142 MARK GIANNANTONIO - direct 1 walked into the Quarter. You saw the beauty of the 2 Quarter and the excitement. But then you walked into 3 the casino, and you were just -- you were sent back 4 into the '80s. So what Mr. Yung has provided and what 5 we began immediately was we renovated the south tower 6 rooms, 500 rooms in the south tower. 7 Q. When was the last time they were 8 renovated? 9 A. They were never renovated. 10 Q. Never. So that goes back to what year? 11 A. '88 or something like that. So those 12 rooms started January. They ended Memorial Day 13 weekend. At the same time we were renovating the 14 south tower casino, and just to give us a guys of a 15 point of, this here is Tango's Lounge. 16 MR. LEVENSON: Excuse me. Commissioner 17 Epps has a question. 18 COMMISSIONER EPPS: Where was the 19 Quarter? 20 THE WITNESS: The Quarter is over here. 21 COMMISSIONER EPPS: Okay. 22 A. This is the layout of the casino. 23 Q. That's an important question. I'm 24 sorry. I should ask that. Why don't you show them -- 25 give them an idea -- 143 MARK GIANNANTONIO - direct 1 A. Carmine's is over here, and you are 2 walking down and -- 3 COMMISSIONER EPPS: That's the -- 4 THE WITNESS: Okay. Here you're walking 5 through the Quarter, and you hit Tango's 6 Lounge? Everybody familiar with Tango's. And 7 here's the fountain. 8 CHAIR KASSEKERT: Uh-huh. 9 A. If you come through here, and you walk, 10 this is where the all palm trees are. This is the 11 south tower casino. It's the highest grossly slot 12 area that we have. And, frankly, it just looked like 13 it was the 1970s. So we did a full renovation on that 14 area, began in January and opened, I guess, it was 15 around June. 16 Q. Would -- sorry. 17 A. Total, total renovation in four phases. 18 No question it had an impact on our revenue at the 19 time. But we had to get it done. I think Mr. Yung 20 saw the need for it, as many of us did. 21 Q. You said no question it had an impact on 22 revenue, meaning while you were under construction a 23 negative impact? 24 A. Correct. 25 Q. Now, what is now there in that spot? 144 MARK GIANNANTONIO - direct 1 A. Well, it's slot machines, but it's 2 totally renovated. It looks more like the Quarter 3 now. 4 The other things we have currently going 5 is are our Seaside restaurant, which is about 350 6 seats, we closed that right after Labor Day and 7 totally -- total gut of the restaurant and renovation. 8 So that's that will be open, hopefully, by Friday. 9 We're hoping to get it by this weekend. 10 Also the very popular Il Verdi 11 restaurant has been closed as well and is going to 12 open about the middle of December. 13 Q. Stop right there, because I just want to 14 give some further information about that. Il Verdi 15 was built and opened about when? 16 A. In '81. 17 Q. In 1981. Was it ever other than light 18 bulbs or maybe some wallpaper -- was it ever really 19 updated? 20 A. No. Never. 21 Q. So in 26 years -- under Mr. Yung's 22 direction that has been closed -- is that also gutted? 23 A. Correct. 24 Q. And to be opened in December? 25 A. Yes. Just getting back to the quality 145 MARK GIANNANTONIO - direct 1 of this. This Seaside Cafe is a casual restaurant. 2 People go in and out of there. But now the dining 3 experience will be, while it will be -- it will feel 4 like a gourmet restaurant, but you'll be able to get 5 and in and out fairly quickly. And that's the 6 quantity of this restaurant, so -- and Il Verdi, it 7 will give the look and feel of a New York style 8 Italian restaurant. Very, very elegant. Well done. 9 The other thing that we just completed a 10 few weeks ago, when we're speaking about the flow of 11 traffic, the one thing that we needed to get people 12 from the Quarter to the gaming floor, we added two 13 table pits here. And it's called F zone. It's 14 basically, if you're familiar with the property, it's 15 where our palm trees are. And that really has opened 16 up a line of sight, so it used to be all slot 17 machines, hightop slot machines. Now it's tables and 18 it's full of action. Very exciting. And then you can 19 see through -- right through to the north tower when 20 you're looking forward. 21 Q. So when people are walking by there, 22 instead of just seeing a bunch of hightop slot 23 machines, they're seeing people crowded around tables, 24 having fun, and that I presume is the attraction that 25 you're looking for to get people to come from the 146 MARK GIANNANTONIO - direct 1 Quarter into the casino? 2 A. Correct. 3 And then, finally, and probably the most 4 tangible piece of this is the renovation of the north 5 tower gaming area. You know, I've heard Bob Little 6 call it a hangar. Basically, that's what it looked 7 like. You know, on a mid-week period, the darn thing 8 would look like an Air Force hangar. Very vacant when 9 it wasn't busy. And what we're doing is adding a 10 center bar. 11 MR. LEVENSON: I think these -- these 12 haven't been submitted, either, Daryl? 13 MR. NANCE: No. 14 MR. LEVENSON: Could I offer A-78 and 15 A-79. 16 MR. MICHAEL: They are -- 17 MR. LEVENSON: Do you have those there? 18 MR. NANCE: Yeah. A-78. What is that? 19 MR. LEVENSON: It's the more outside one 20 without people -- well, they both have people. 21 The larger people are on A-79. 22 (Laughter.) 23 UNIDENTIFIED PERSON: Bartender in A-79. 24 MR. LEVENSON: One has the word 25 "Tropicana." That's A-78. 147 MARK GIANNANTONIO - direct 1 MR. NANCE: Okay. 2 A. These are just renderings of what the 3 center bar will look like. The table game area will 4 be a more of a semi-circle around this center bar. 5 Really adding a lot of excitement. They'll have 6 plasmas inside and throughout the casino. And then 7 this will -- this is a rendering of the interior. You 8 know, you've seen these throughout Las Vegas and even 9 here in Atlantic City. But it certainly will 10 hopefully help draw customers into the casino and help 11 drive more gaming revenue for us. So these are some 12 things that are on the drawing board that -- 13 Q. You can have a seat. 14 But you also mentioned -- well, you 15 didn't mention -- I'm going to ask you to mention -- 16 the restaurant Wellington's? What is going on with 17 the restaurant Wellington's? 18 A. Apparently, Wellington's is being 19 utilized -- because it was closed September so that we 20 could satisfy the needs of the customers that go into 21 the Seaside because we need a volume -- we needed 22 somewhere to do volume coverage during this period of 23 time. That also is being renovated. It's getting all 24 brand-new kitchen equipment which, you know, basically 25 we used to put patchwork on kitchen equipment for 148 MARK GIANNANTONIO - direct 1 years and years. And what we've been allowed to do is 2 to replace a lot of the -- and that's -- what we talk 3 about the 30 million. There's a lot of capital 4 projects that are small projects. But when I say 5 "small" could be a hundred thousand that we're doing 6 more frequently now, so. 7 Q. And, also, I know these individually may 8 sound kind of unimportant, but I remember when I was 9 chatting with you in preparation for this, you were 10 listing for me certain things that are now being done 11 at the property under Mr. Yung's ownership that 12 weren't done under the previous ownership. I know you 13 know what I'm talking about, so why don't you just 14 tell us. 15 A. Yeah. I mean, just to give you a view 16 in my opinion of how things have changed at the 17 property. I think it really started when Kevin 18 Preston came on board and Bob Little. You know, 19 there -- there really has been a change in that the 20 support from corporate is just apparent now. They're 21 here on property more frequently. The employees know 22 them. And I think, for example, we had employee 23 meetings where we had meeting, come in, this was about 24 a month and a half ago. We did a series of three 25 meetings which really helped with employee morale. It 149 MARK GIANNANTONIO - direct 1 was really what the doctor ordered right at that time. 2 And it just helps to turn things. You know, we've had 3 a difficult period of time, and that really gave us a 4 really good shot in the arm. 5 And the other things that I think many 6 employees would say at the property is that on the 7 hotel operations side, we were able to do -- and this 8 never got reported, but we were making fundamental 9 changes to our operations almost immediately when it 10 came to improving service. For example, at the front 11 desk. Like every other hotel in town, at peak 12 check-in there might be a 40-inute wait to check in. 13 And almost overnight the hotel operation staff, in 14 addition to the staff at the Columbia Sussex, was 15 really able to turn that around, put in new systems, 16 and get people checked in. And it, you know, it -- it 17 was remarkable how customers noticed that improvement. 18 Q. And what is -- just it used to be 40 19 minutes. Now what is it, approximately? 20 A. It's -- you know, might take a minute 21 and a half to check in, now. 22 The other thing was immediately we used 23 to have two towels in every room. Now we have four. 24 Doesn't sound like much, but guests notice it. We had 25 one bottle of shampoo. In January of '07 we had three 150 MARK GIANNANTONIO - direct 1 bottles. Bottle of shampoo, conditioner, and lotion. 2 Again, it's the little stuff. Nobody really knows 3 about. You know, I've even read where we only had -- 4 we had no amenities in the guest room. Well, I mean, 5 I guess anything is possible, but I can tell you since 6 January, we've had three bottles of amenities in the 7 guest rooms. 8 Q. What about -- what about the beds, just 9 as an example? 10 A. We replaced our beds with a Westin 11 version of the Heavenly bed. It's a Euro-style 12 pillowtop mattress. 13 And, again, these are the things that, 14 when I was evaluating the situation prior to the 15 merger, you know, and I think, you know, talking to 16 some of my staff Ann Lasal and some other people, 17 these were areas were we knew we were going to see 18 some improvement. They were going to help us to get 19 to places that we weren't getting to before. And the 20 proof of it is -- and I think Mr. Yung had mentioned 21 it yesterday is, if you look at these internet 22 wholesalers, four or five years ago on Trip Adviser, 23 we were ranked -- and, of course, it's hotels -- hotel 24 casinos, and just hotels. We were ranked 27. And I 25 think we are now ranked, like, 10th. But when it 151 MARK GIANNANTONIO - direct 1 comes to casinos, we're, like, third. So there's been 2 a huge improvement in the way that our scores from -- 3 from the internet and wholesale world has been 4 impacted. And I can see that. Because, you know -- 5 it's a lot of it has to do with the amenities that we 6 offer. 7 Q. And even the quality of the food. I 8 mean, you were mentioning to me something about the 9 beef? 10 A. Yeah. We -- 11 Q. All this costs money, I presume? 12 A. In all of our gourmet rooms we put into 13 place certified Black Angus beef, which is something 14 that we never did before. 15 Q. Now, obviously, from what we've heard, 16 there was a level -- and I think you just testified to 17 it earlier -- that morale was a bit suffering during 18 the early part of 2007. Tell us, you know, as now 19 chief operating officer since August of this year -- 20 tell us about the morale of the employees at the 21 hotel. 22 A. Well, you know, I think a hundred times 23 better than it was. I mean, I think that it's the 24 things like what occurred at today's paper that sets 25 it back. You know, just talking to employees, they -- 152 MARK GIANNANTONIO - direct 1 they believe that we had a bed bug. And to be honest 2 with you, you know, bed bugs are -- they travel on 3 luggage. People don't notice -- know that. But they 4 only come into your hotel through a piece of luggage. 5 And they come from states that have high humidity. 6 And any hotel is suspect to bed bugs. But the case 7 that was reported in today's paper that said bed bugs 8 in the Atlantic City Press was -- is not true. It was 9 not substantiated. And it's a shame because, you 10 know, the press should be an advocate to the city. 11 Q. So, in other words, bed bugs don't get 12 born in the -- 13 A. It's not because you're dirty, let's put 14 it this way. You could have -- you could travel to 15 Disney and come back with a bed bug and have it in 16 your house. So it's just that way. 17 Q. And have you had a series of employee 18 meetings, and is that how you are able to gauge the 19 morale of recent times? 20 A. Well, I mean I just see it. I'm on the 21 floor a lot. You know, I talk to a lot of our 22 employees. As our executive staff, we got a great 23 executive staff. I mean, you know, Kevin, Bob, and 24 Jim Barracca, you know, we're out there. That's what 25 we're doing. We're not -- we're not managers in 153 MARK GIANNANTONIO - direct 1 offices. You know, we have a vested interest to make 2 this property the best that it can be. For me, you 3 know, I was born and raised here. I don't want to see 4 the Tropicana, you know, certainly have a bad name. 5 This is a great property. 6 Q. Now, in your interactions with Mr. 7 Little and Kevin Preston, and particularly Mr. Yung, 8 are they open to listening to your view about what 9 should or should not be done at the property? 10 A. Yes. To give you a example of that, 11 where we did have shortfall in service with slot 12 jackpot pay-out times, you know, talking to Bob and 13 Kevin, we presented to Mr. Yung, you know, this is the 14 situation that we're in. And we were table to hire 15 back immediately slot attendants that helped with that 16 service and get that -- get that response time back 17 where it needed to be. 18 Q. Do you believe that you are getting the 19 personnel and the support that you believe is 20 necessary to run an operation -- casino hotel 21 operation successfully in Atlantic City from 22 corporate? 23 A. I believe we are. Yes. 24 Q. Just, I guess one last question. 25 Because there's been talk about people who were making 154 MARK GIANNANTONIO - cross 1 150,000 or above and no longer there or whatever. You 2 may not have the exact number, but approximately how 3 many people are working at the hotel casino that are 4 making that much and above? 5 A. I mean, it's probably about ten or so. 6 MR. LEVENSON: I don't have any further 7 questions. 8 CHAIR KASSEKERT: Miss Maher, cross? 9 10 CROSS-EXAMINATION BY MS. MAHER: 11 Q. Good afternoon. 12 A. Good afternoon. 13 Q. Could you pronounce your name for me 14 again? 15 A. Diannantonio. 16 Q. Mr. Diannantonio. Thank you. 17 Just so I can clear up a few things and 18 understand your position there and where you've come 19 and how you've gotten to that point, how long have you 20 been with the Tropicana Atlantic City since what year? 21 Please. 22 A. Since I began in 1988, and I left for a 23 short period of time. Came back in 1989. 24 Q. And you've been there since 1989 then? 25 A. Yes. 155 MARK GIANNANTONIO - cross 1 Q. When you came back in 1989, what was 2 your position? 3 A. I was in food and beverage. I was food 4 and beverage operations analyst where I did all the 5 analysis for the department, of labor, menu pricing, 6 costs, things of that nature. 7 Q. And how long were you in that position? 8 A. About two years. 9 Q. And then what position did you move to 10 from that, please? 11 A. From there I spent about two years in Il 12 Verdi as assistant maitre d'. And after being in 13 there, making a lot of money in Il Verdi, I just 14 figured I better put my degree to work, and I went 15 to-- I moved to a senior financial analyst in the 16 finance department. 17 Q. And your degree is in what, please? 18 A. Economics. 19 Q. And so you moved from the maitre d' 20 position to what position? 21 A. Senior financial analyst. 22 Q. Okay. And what did you do in that 23 position, please? 24 A. All the analysis that -- ad hoc analysis 25 that needed to be done. The budget for the year, you 156 MARK GIANNANTONIO - cross 1 know, any type of analysis that was asked. At the 2 time I think we were planning the west tower 3 renovation -- or west tower. And helped to complete 4 the white paper for that. 5 Q. How long did you stay in that position? 6 A. I guess it wasn't too long of a period 7 of time. I guess it was probably less than a year. I 8 got promoted as to the Executive Director of Casino 9 Customer Service. 10 Q. And what did you do in that position, 11 please? 12 A. Well, that's where I began to manage the 13 rooms and the yield of the rooms along with all the 14 call centers. 15 Q. Along with all the what? 16 A. Call centers. Outbound and inbound 17 phone calls. 18 Q. How long were you in that position? 19 A. I guess about five years. 20 Q. And, I'm sorry. I'm not adding this up 21 very well. Where did you move from then, to what 22 position? 23 A. I -- where are we at now? 24 MR. LEVENSON: I have it written down. 25 A. I guess I was then Executive Director of 157 MARK GIANNANTONIO - cross 1 Marketing Administration. 2 Q. And what did you do in that position? 3 A. Similar -- similar things. Still had 4 all those responsibilities. Did more casino analysis 5 and also made -- had a telemarketing team for high 6 level casino customers. 7 Q. And from there? 8 A. From there I was appointed Assistant 9 Vice President, Hotel Operations and Marketing 10 Administration. 11 Q. And what did you do in that position? 12 A. Oversaw the hotel and kept my previous 13 responsibilities. 14 Q. Regarding marketing? 15 A. Yes. 16 Q. And is that the position that you were 17 in when Mr. Yung took over the operation? 18 A. No. I was then Vice President of Hotel 19 Operations. I had a little promotion after that. 20 Q. All right. And, again, you dealt with 21 the hotel side of the casino or hotel side of the 22 operation, I should say? 23 A. Not really. You know, when you're 24 responsible for yield in the hotel, I was as involved 25 on the casino side as I was on the hotel side. 158 MARK GIANNANTONIO - cross 1 However, from an operations standpoint, my 2 responsibilities, luckily, are alined with the hotel 3 operations. 4 Q. Were you say you're familiar with the 5 hotel operations than you are the casino side or the 6 casino operations? Would that be fair? 7 A. I think I'm equally familiar. 8 Q. And then in 2007 -- January 2007, that's 9 when you held the title of VP of the Administration 10 and Marketing; is that correct? 11 A. January 2007 I was Executive Vice 12 President of Operations. 13 Q. Okay. And that's when Mr. Yung came in? 14 A. Yes. 15 Q. Okay. And then your proceed position to 16 your position now came in August of 2007? 17 A. That's correct. 18 Q. Now, I want to talk to you about the 19 layoffs a little bit. And I'm going to hand you 20 what's been marked as Exhibit A-80. 21 A. Sure. 22 Q. And that's been floating around a little 23 bit during the course of this hearing. And are you 24 familiar with that document? 25 A. I am. 159 MARK GIANNANTONIO - cross 1 Q. And how is it that you're familiar with 2 that document? 3 A. My HR person put that together. 4 Q. Put that together at your request? 5 A. Yes. 6 Q. And who is your HR person that put that 7 together? 8 A. Tina Tartaglio. Or one of her 9 employees. I'm not sure. 10 Q. And what information did they use to put 11 that together? 12 A. Well, it's basically a termination 13 turnover summary. So what it does, it goes back and 14 extracts when someone leaves on their RIF, what was 15 the reason for leaving? Was it a layoff? Was it a 16 termination? Was it a resignation? Things of that 17 nature. And for the purpose of just hoping to have 18 everybody on the same page, I guess. 19 Q. Okay. And that was why that document 20 was put together for the purpose of having everyone on 21 the same page? 22 A. Yes. 23 Q. Was it put together for the purpose of 24 this particular hearing? 25 A. No. It was -- I think put together a 160 MARK GIANNANTONIO - cross 1 while ago. 2 Q. And when was it put together? 3 A. Maybe a couple weeks ago. This says 4 11-14. 5 Q. And it was put together for what purpose 6 then? 7 A. Just to have me going into it knowing 8 what the numbers were and have everybody being on the 9 same page. 10 Q. Okay. 11 A. Because I've seen so many different 12 numbers there. There were 900 layoffs -- 13 Q. Exactly. 14 A. Exactly. 15 Q. So at this point we've seen a lot of 16 different numbers. A lot of different numbers have 17 been thrown around by a lot of different people. Are 18 these the numbers? 19 A. Well, I would say these are the numbers. 20 Absolutely. 21 Q. This is -- this is the number? 22 A. Yes. 23 Q. These are the definitive numbers in 24 terms of layoffs? 25 A. Correct. 161 MARK GIANNANTONIO - cross 1 Q. In terms of voluntary terminations -- or 2 voluntary resignations, terminations? 3 A. Firings. 4 Q. Firings, if you will. 5 A. And hire backs. 6 Q. And hire backs. 7 A. Yes. 8 Q. But we've gone over those numbers, 9 again, but I don't know how many people have been laid 10 off from January 2007 to October 31st 2007? 11 A. 500. 12 Q. And how many have voluntarily left? 13 A. 443. 14 Q. How many were terminated for cause or -- 15 A. 376. 16 Q. And then how many hired back? 17 A. 422. 18 Q. And that gives us a net number of what, 19 please? Net number of total terminations, please? 20 A. About -- it's 1319. 21 Q. And then would you agree with me, I 22 believe, you came up with the net terminations of -- 23 A. 897. 24 Q. -- of 897; is that correct? 25 A. Correct. 162 MARK GIANNANTONIO - cross 1 Q. And that's not on there, but I think 2 that's the figure that I came up with subtracting the 3 numbers. 4 A. Well, you know, it's -- it's a little -- 5 little leading. It's 897. But it's -- you know, it's 6 certainly not terminations. If you resign, it's a 7 resignation. 8 Q. Well -- 9 A. I'm just saying, you know, it's 10 turnover. So I just want to make sure we're all on 11 the same page here. 12 Q. People that have -- that no longer are 13 employed at the Tropicana, I guess we could say? 14 A. Yes. Correct. 15 Q. Do you know in January of 2007 what 16 number you started with? 17 A. Yes. 18 Q. What number would that be? 19 A. 4,400 -- 4,424. 20 Q. 4,000 -- 4,424. And where did you get 21 that number, please? 22 A. From an employee roster count. 23 Q. And that was January -- January 1, 2007? 24 A. Yeah. I think it was January 1. 25 Q. Thereabouts? Okay. 163 MARK GIANNANTONIO - cross 1 Now, you -- 2 A. I think the take over was January 3rd 3 so. 4 Q. Okay. Now, you've indicated, I believe, 5 that you -- regarding the layoffs, you and Mr. -- I 6 think you said you and Mr. Yung evaluated every 7 department very carefully? 8 A. No. I didn't say that. I said myself 9 and the people that I work with. 10 Q. Okay. I'm sorry. 11 Did you interface all with Mr. Yung 12 during the layoffs. 13 A. During the layoffs? Yes. 14 Q. Okay. 15 A. He was on property. 16 Q. When did you first know or when did you 17 first get the direction that there needed to be 18 layoffs. There were too many people working here. We 19 need to reduce costs? When did you first get that 20 directive? 21 A. You know, we started talking about it 22 right after January 3rd. 23 Q. Who is "we"? 24 A. The people that I knew I was going to 25 report to. Jim Barracca, Mr. Stan Clayton. You know, 164 MARK GIANNANTONIO - cross 1 people that were on the property after -- you got to 2 realize, the merger -- this was such a significant 3 merger. And the reality of this is -- this property 4 made up of a very high percentage of Aztar. So, you 5 know, there were, you know, concerns about just 6 getting on the ground and making sure that things went 7 pretty smoothly. 8 Q. No. And I appreciate and understand 9 that. But I guess my question is this. When -- when 10 did you first get the directive there needs to be 11 layoffs. Start evaluating. 12 A. Well, you know, I was asked to stay on 13 board. I can't recall the exact date, but I guess, 14 you know, I -- I knew in my own mind, you know -- I 15 read about Mr. Yung, and certainly had some contacts 16 with regard to the people that I would be reporting 17 to. And, you know, during that time frame, I was 18 trying to help them get acclimated with our own 19 property, the systems, what numbers we do. It's 20 pretty monumental. You're taking a hotel that does 21 over 7,000 room nights. They want to know, you know, 22 their first thing really isn't asking you, you know, 23 what kind of bodies are you going to cut? They want 24 to know what kind of revenue. You know, those that 25 the are the kind of things we talk about as well. 165 MARK GIANNANTONIO - cross 1 Q. I understand that. But my question is 2 still this. At some point, someone had to communicate 3 to you -- 4 A. Yes. 5 Q. -- that layoffs needed to be made. That 6 they wanted to make layoffs. Am I right or wrong on 7 that? 8 A. You are. 9 Q. When was that communicated to you? 10 A. I don't know. Exact date. 11 Q. Can you give me a month? 12 A. I mean, I -- I can tell you it was -- we 13 talked about it the day after the merger took place. 14 Q. So in -- 15 A. January 4th, I guess it was. 16 Q. And who is "we"? 17 A. The people that I -- the person that I 18 reported to at the time. 19 Q. Which was? 20 A. Jim Barracca. 21 Q. And what did Jim Barracca say to you in 22 regards to the issue of layoffs? 23 A. I have no idea. It just -- we, might 24 have spent a little time on it. It wasn't a big 25 discussion. I think the first department that we 166 MARK GIANNANTONIO - cross 1 looked at was engineering. 2 Q. And -- 3 A. So, you know, I guess if you're question 4 is, were we talking about public areas or food and 5 beverage? No. We weren't talking about any of that. 6 You know, we would talk about operational issues. And 7 then we might get to, you know, let's sit down and 8 talk about facilities. Walk me through how many 9 people you have and so forth. 10 Q. Well, at what point did you understand 11 that there -- that Mr. Yung wanted a number of layoffs 12 to occur? 13 A. I mean, I may not be getting your 14 question. It could have been -- I think I had a sense 15 there were going to be some reductions prior to 16 January 3rd, but I had more of a sense on January 4th. 17 Q. And were you ever given any direction? 18 For example, this is how much, this is the dollar 19 amount that we want -- 20 A. Never. 21 Q. To lay off? 22 A. I never heard -- 23 Q. You never heard that? 24 A. No. Not -- I mean, certainly not back 25 then. I've heard it more recently. 167 MARK GIANNANTONIO - cross 1 Q. Well, back then were you ever directed, 2 here's X amount of dollars. We want to cut in 3 salaries. 4 A. No. 5 Q. There's $22 million in salaries we want 6 to cut/? 7 A. No. 8 Q. Let's start. How do we do? How do we 9 accomplish that? 10 A. No. 11 Q. How do we move forward? 12 A. That came, I guess, on the road show, 13 which I certainly wasn't privy to. I wasn't part of 14 the organization or no one ever said to me, hey, 15 listen, Mark, we need to cut 30 million. Give me your 16 ideas. That never occurred. 17 Q. What was your role in the layoff 18 procedure then. 19 A. Well, you know, my role was to basically 20 give them an understanding of our operations. You 21 know, because again, coming into a property of this 22 magnitude, every operation is different. Every 23 employee does a different function. And basically 24 help them understand -- not only me, but many 25 people -- many people that work for me. Have them 168 MARK GIANNANTONIO - cross 1 spend time with the operations and -- so, in other 2 words, at the same time you're asking me about the 3 layoffs, we had people that were looking at ways, how 4 we could, you know, facilitate improvements as well. 5 Q. When you say you evaluated every 6 department very carefully, was that in conjunction 7 with the layoffs? Did you evaluate departments where 8 the layoffs should occur? 9 A. No. 10 Q. And whether they should occur in each 11 department? 12 A. No. Many departments weren't even 13 touched. Housekeeping was never touched. There were 14 many, many departments that were not touched. Valet. 15 Q. What departments were touched in the 16 layoffs? 17 A. Just the ones that coming to mind, I 18 guess, the engineering department. Public areas 19 department. I'm trying to think through. I guess on 20 the food and beverage side, there was some shipping 21 and receiving individuals. 22 I mean, there was -- forgive me. I'm 23 just having a little mental break. 24 Q. Uh-huh. 25 A. But, you know, different departments. 169 MARK GIANNANTONIO - cross 1 Q. Okay. And how did you make the 2 decisions -- or who made -- well, let me ask you. Let 3 me back up. 4 Who made the decisions to make the 5 layoffs in these various departments where the layoffs 6 were made? 7 A. Well, I think the first thing is that 8 folks that were the new folks coming in had to have an 9 understanding of what took place. And, you know, it 10 was my job, and my Vice President of food and beverage 11 job, and other people to say this is what we do. This 12 is why we do it. This is how we do it. And 13 determine, you know, productivity levels and things of 14 that nature. Where we thought we could change to -- 15 and have -- pick up some efficiencies without 16 affecting service, you know, that was where we tried 17 to -- that's where we looked at. 18 Q. Okay. And who was it -- who made the 19 final recommendation that we need to lay off ten 20 people in the -- 21 A. Well, I would work with Jim Barracca who 22 was my immediate boss. He reported to Stan Clayton, 23 and then, I guess, there was a general discussion 24 maybe between Stan and Mr. Yung. And that's -- I 25 mean, it was -- that's basically how it happened. 170 MARK GIANNANTONIO - cross 1 Q. And who made the final decision, who 2 said, all right. Sixteen -- 23 slot attendants to 16. 3 Four locksmiths to one>. 4 A. That's really a hard question. 5 Q. Three cleaners to two? 6 A. That's a hard question to answer -- 7 Q. Who made those decisions? 8 A. -- because, you know, it could have went 9 as high as Mr. Yung, or it could have occurred from 10 Mr. Clayton who reports directly to Mr. Yung. The 11 problem is, I'm not in the room in Kentucky to say who 12 made that final decision, so I don't know who. You 13 know. 14 Q. Okay. 15 A. And then I know they certainly listen to 16 me. I mean, you know, it's not like I was sitting 17 there saying, okay. If I felt that there was a need 18 to speak up and say this is why we do it here, or this 19 is why we need to do it here, you know. 20 Q. So you -- would it be fair to say, 21 though, that you participated in the evaluation of the 22 various departments. You had nothing to do with the 23 layoff decisions? 24 A. No. I think -- I just said the 25 opposite. I was a part of it. Let's put it this way, 171 MARK GIANNANTONIO - cross 1 you know, the reason why the cuts in public areas took 2 so long is because we -- you know, I have -- I'm a 3 numbers guy. I need to know if what we're about to do 4 is going to make sense, and is it going to work? And 5 I think I said earlier, the number that we put into 6 place, if everybody shows up to work, the place is 7 clean. Or if we get 81 40-hour shifts, then our 8 property is clean. And that's why we're clean today. 9 Q. Now -- 10 A. Because we're getting 81 FTEs. 11 Q. Let me ask you about the slot attendants 12 layoffs, when the layoffs were reduced. Did you have 13 any role in the initial decision? 14 A. I was -- Fred, that was Fred's 15 department. 16 Q. Okay. So you did not have any -- 17 A. Any role. 18 Q. -- input into that decision? 19 A. I had a role in bringing some people 20 back. 21 Q. All right. Did you -- you did not have 22 any role in the initial decision to make those 23 layoffs? 24 A. No. 25 Q. What about, for instance, the proposal 172 MARK GIANNANTONIO - cross 1 to take four locksmiths to one, did you have any input 2 into that? 3 A. It was Fred's department. Not really. 4 Q. Would -- what department would you say 5 that the bulk of the layoffs came in? 6 A. You know, I don't know. I mean, I guess 7 I've seen numbers. I'm sure I just -- off the top of 8 my head, it could be 50/50 hotel/casino. I don't have 9 the figure with me. 10 Q. Okay. You were talking about the union 11 activities and the layoffs. There's been talk about 12 this call-out or this sick-out regarding the union. 13 Are you familiar with that? 14 A. Yes. 15 Q. And how are you familiar with it? 16 A. Like I said, I was, you know, on the 17 property when it was occurring. 18 Q. Okay. And how do you know that it was 19 an actual sick-out that the union was actually -- 20 A. Well -- 21 Q. -- organizing this and -- 22 A. You know, I'm not saying -- 23 Q. -- doing this activity? 24 A. I'm not saying they're organizing. I'm 25 going to tell you what occurred. If on a Saturday 173 MARK GIANNANTONIO - cross 1 night half your staff calls out or a very high number 2 of the percentage of your staff calls out, that is an 3 extraordinary item that occurs. And, believe me, 4 somebody like me is going to know about it. 5 Q. Okay. Uh-huh. 6 A. You know, I'll get a phone call. Hey, 7 just wanted you to know. We're having a problem. 8 Everybody that we thought was coming in at 4:00, half 9 of them just called out. Things of that nature. 10 Q. So you're just basing that on the 11 numbers involved and the timing involved. You don't 12 know of any particular -- you don't have any other 13 particular information regarding organized Local 54 14 unions call-out or sick-out or things of that sort? 15 A. I don't have anything of that nature. 16 Other than I can tell you that we had an 17 extraordinarily amount of call-outs. A high amount of 18 call-outs. 19 Q. You indicate -- you talk about some 20 sabotage? 21 A. Yes. 22 Q. Okay. And you had -- you indicated, did 23 you not, the you did not anticipate the degree of 24 sabotage that occurred? 25 A. Right. 174 MARK GIANNANTONIO - cross 1 Q. What was the degree of sabotage? How 2 prevalent was it? Where did it occur? 3 A. It was pretty prevalent. It was things 4 as basic as -- not graffiti, but very horrible 5 writing. You know, Columbia Sussex blah, blah, blah, 6 blah, blah. And, you know -- 7 Q. Where at? Like on the walls on the 8 facility? 9 A. Yeah. Throughout the facility. 10 Q. Okay. And how of much of this did you 11 see and how long of a time period did it occur? 12 A. You know, it was about a six-week period 13 I would say, something like that. 14 Q. Did it cause actual damage to the 15 property? 16 A. Well, yeah. If you got to repaint or 17 replace wallpapers, things of that nature. 18 Q. I'm sorry. How long of a period did it 19 occur over? 20 A. I said six weeks. You know, sabotage 21 occurs all the time. I mean, it just -- but we 22 certainly saw spike -- 23 Q. But this was more -- 24 A. Yeah. I think between March and April. 25 You know, May, you know, those were the months that 175 MARK GIANNANTONIO - cross 1 things really, you know, kind of heated up. 2 Q. And basic -- would you agree that this 3 may have been in response to the layoffs? 4 A. Yes. 5 Q. What efforts did you take to find out 6 who was doing the sabotage or address the sabotage? 7 A. Well, we had certainly security keep an 8 eye on things a little more frequently. And walk into 9 a men's bathroom. All of the urinals were filled with 10 sand. I mean, it's -- that's -- real damage is 11 caused. You know, you lose that bathroom for a while. 12 You have to snake all of the drains and things like 13 that. 14 Q. Did you ever call the police? Report it 15 to the police? Make -- did you take any efforts like 16 that? 17 A. I'm not sure if we did that. I don't 18 know. 19 Q. You don't know? 20 A. I don't know. 21 Q. Who would have been the person to do 22 that if that would have been done? 23 A. Well, it could have been a department 24 head. It could have been director of security at the 25 time. 176 MARK GIANNANTONIO - cross 1 Q. Okay. You don't know if that was done 2 or not, though? 3 A. I'm not sure. 4 Q. You talked -- you talked about the 5 customer complaints. Were you familiar with the 6 customer complaints prior to the Division's report, 7 prior to this hearing? I mean, did you familiarize 8 yourself and keep up on that prior to this becoming an 9 issue here? 10 A. Well, let's put it this why. I guess 11 the issue is that Carolyn Chun had these customer 12 complaints. Some of these complaints I was copied on, 13 some of which I was not. But I will tell you when 14 we-- when I am made aware of a complaint, we address 15 it immediately. We rectify it immediately. We have a 16 system in place that, you know -- we, you know, if 17 it's me personally calling the customer and 18 apologizing to keep the customer here. And I think 19 and that's why I -- to be honest with you, that's why 20 I think we had a high degree of success with those 21 customers because they were coded. Those customers 22 were coded to our player development staff, and they 23 did a good job of rectifying some of it. 24 Q. These customers complaints that were 25 issued in the Division's report, you looked at the 177 MARK GIANNANTONIO - cross 1 Division's report and went back and reviewed the 2 complaints? 3 A. I did. 4 Q. And do you recall contacting any of 5 those customers following up on any of that, taking 6 any specific action with regard to this particular 7 group? 8 A. Well, the only thing I can think of is 9 if I was copied on an e-mail of a complaint, I would 10 have either forwarded on to the Executive Director 11 Hotel Operations or the Vice President of Food and 12 Beverage to immediately rectify it. That's how we 13 handle complaints at the Trop. 14 Q. And you indicated that you checked and 15 93 percent of these people, I think you said, never 16 wavered in their frequency to the property; is that 17 correct? 18 A. That's correct. 19 Q. What kind of check did you conduct? Did 20 you call them? 21 A. I went into -- no. I didn't. They all 22 had accounts. I looked them up on the casino system. 23 Q. Okay. 24 A. But I was not aware that there was a 25 booklet of these complaints. 178 MARK GIANNANTONIO - cross 1 Q. Oh, you weren't -- 2 A. Well, I was not aware that -- I guess 3 Fred asked Carolyn to keep a booklet of complaints. 4 Q. When did you become aware of that? 5 A. I guess when it was -- I don't know. A 6 week or two -- week or two ago. 7 Q. When you became aware of that -- and you 8 were aware that it's Carolyn Chun had these 9 complaints; is that correct? 10 A. Yes. 11 Q. Did you ever speak to her regarding 12 those complaints? 13 A. I just said, you know, I'd like to see 14 the complaints. 15 Q. Okay. And did you ask her if she 16 provided them to the Division or not? 17 A. She told me. I didn't ask. 18 Q. When did the renovation of the south 19 tower start? 20 A. January. Beginning of -- second week in 21 January. 22 Q. Okay. And that was something that was 23 initiated by Mr. Yung in his takeover, or had that 24 project been budgeted for and planned prior to Mr. 25 Yung's takeover? 179 MARK GIANNANTONIO - cross 1 A. That was part of the master plan with 2 Aztar. 3 Q. Okay. So that was something that had 4 already been initiated prior to this -- 5 A. Yes. 6 Q. -- to this, I guess, administration? 7 A. Yeah. 8 Q. Okay. And that continued as planned; is 9 that correct? 10 A. Correct. 11 Q. Now, the renovation of the slot area. 12 You talked about the one slot area that was open? 13 A. Yes. 14 Q. That was open; is that correct? 15 A. That's correct. 16 Q. And that's the one that comes directly 17 down from the Quarter? 18 A. Pretty much so. It's, you know, just 19 right in -- right all this area. 20 Q. And when did that renovation -- when was 21 that renovation completed? 22 A. I think June. 23 Q. And so that's been open June, July, 24 August through current; correct? 25 A. Correct. 180 MARK GIANNANTONIO - cross 1 Q. Have you noticed any increase in revenue 2 or any change in revenue since that slot area has been 3 opened? 4 A. You know, it's hard to say because we've 5 had so many factors weighing in on our revenue. You 6 know, certainly Pennsylvania and smoking have, you 7 know, had more of an impact. Some of the items that I 8 think, I guess were self inflicted, were the degree of 9 revenue lost, slot revenue lost by the elimination of 10 slot player development. It -- you know, my 11 estimation, that's costing us about 2.3 million per 12 month who in slot revenue. 13 We also, when I took over, it was pretty 14 apparent to me that the -- how customers were issued 15 comps had been tightened so significantly, so if you 16 were brought down by a limo every week, that you came 17 down to Manhattan, in many cases we do not provide 18 that service. So, you know, that really hurt -- that 19 hurt our customers. And I think, in a sense, they 20 left -- some of them left as a result of that. We 21 also had a cut in cash back from -- pretty substantial 22 cut. I'd rather not talk about the percentages since 23 this is public, but very substantial cut in cash back. 24 And then we also had our air junket 25 program eliminated, I think back in May. Equates to 181 MARK GIANNANTONIO - cross 1 about another million a month. So these are things 2 that we're addressing now, Kevin and I and Bob Little 3 are addressing. 4 Q. So in response to my question whether 5 the renovations of that slot area increased revenue, 6 the answer is basically, you don't know. 7 A. Let's put it this way. You know, well, 8 we do know. We know our win-per-unit and so forth. I 9 wasn't really responsible for those numbers back when 10 the net completion of that, when that completion of 11 that area was done. So when I took over sometime in 12 August, I can tell you exactly what the win-per-unit 13 in that area is, but I can't answer that question of 14 how it was in June so it was -- 15 Q. How long has it been since you've been 16 responsible for it? 17 A. I think it -- 18 Q. Has it increased in revenue? 19 A. Yes. We shifted a lot of business from 20 other areas of the floor into that area. 21 Q. So you're not getting any new business 22 distributed from that area. You're just shifting from 23 other areas to that area? 24 A. And I think it's probably an unfair 25 question because when you're a road business -- and I 182 MARK GIANNANTONIO - cross 1 can tell you one thing. The wave of bad press that we 2 had last week, it certainly -- the wave of bad press 3 that we had this morning is -- easily a ten percent 4 shot to our revenue on a daily basis. So, you know, 5 when I got here, we had six or eight customers that 6 called and cancelled their reservations. I don't know 7 what that number's up to. There's so many shifting 8 things that are moving, it's hard to say. 9 Q. Well, as a matter of fact, would you 10 agree that you're -- and how -- as of June, was that 11 the only renovation that was completed other than the 12 south tower? Was there any other renovation that were 13 completed by June? 14 A. The rooms were. 15 Q. Pardon? 16 A. The south tower rooms? 17 Q. Those were the two major renovations 18 that were completed by June? 19 A. Yes. 20 Q. And you haven't seen, in your 21 estimation, any decrease in revenue since -- since 22 those have been completed you can attribute to 23 directly to either of those things? 24 A. The what ones. 25 Q. The slot area? 183 MARK GIANNANTONIO - cross 1 A. Well, no. I mean, I don't think we 2 would have spent a nickle if we thought it was going 3 to decrease revenue. If you look at the return on 4 capital investment, I think the issue is once the 5 properties stabilized, we are going to see an increase 6 in our -- we'll have a return on our investment. The 7 problem is it's hard to quantify now because of some 8 of the things I've mentioned. 9 Q. And when you say the "property is 10 stabilized," what do you mean by that? 11 A. Well, we stopped getting out of the 12 press and, you know, we just operate. You know, 13 really operate and have, you know, pretty normal 14 things go on. And, you know, as opposed to bad press 15 and things that are reported that are not fair. 16 Things like that. 17 Q. There's talk of making some changes in 18 player development. Are you involved in that at all? 19 A. Yes. 20 Q. And what changes are you making in 21 player development? 22 A. Without getting too specific, we're 23 going to bring some staff in. 24 Q. Bring some staff in, bring some more 25 marketing people in? 184 MARK GIANNANTONIO - cross 1 A. Correct. 2 Q. Anything else that you're going to do to 3 improve player development? 4 A. Well, that will be the first thing. 5 We're going to reinstitute an air junket program. And 6 also as Mr. Yung said, talked about spending more on 7 marketing promotions. That should help drive revenue 8 to our property. Because we know once we get them to 9 our property, people -- you know, we service thousands 10 of guests every say. Day. They come and leave very 11 happy. And it's a attribute to our employees. That's 12 what makes them happy. 13 Q. And you talked about morale. Would it 14 be fair to say that morale was very low after your -- 15 after January of 2007 after you began laying a number 16 of people off? 17 A. Not so much in January. I think, you 18 know, the morale became low, you know, March or April. 19 But it certainly wasn't all the departments. For 20 example, at the same time the morale in public areas 21 was fairly low, we probably had the best morale I have 22 ever seen in housekeeping department. So I mean, 23 it's-- it was all over the place. But, you know, the 24 problem is you need to try to keep employees 25 motivated. Try to, you know -- 185 MARK GIANNANTONIO - cross 1 Q. So my question is this, though. In your 2 opinion, did the layoffs affect the morale of the 3 employees? 4 A. I would -- 5 Q. After January, February, March, April, 6 and a number of -- 7 A. Yes. That's a fair question. 8 Q. -- a number of employees had been laid 9 off? 10 A. I think in my opening comment, any time 11 a company takes over another, there's anxiety that is 12 going to occur, and we did have changes here. It's 13 not going to be -- not telling the truth if I thought 14 it wasn't easy. So, yeah. It impacts. 15 (Conferring.) 16 MS. MAHER: Thank you. No further 17 questions. 18 CHAIR KASSEKERT: Let me ask if 19 Commissioners have questions? 20 Commissioner Frulio? Start with you. 21 COMMISSIONER FRULIO: Mr. 22 Diannantonio -- 23 THE WITNESS: Yes. 24 COMMISSIONER FRULIO: First of all, it's 25 always good to see a fellow Stockton alumnae 186 MARK GIANNANTONIO 1 make it in this town. With that, were right 2 about anxieties. When they changed management, 3 I happened to be there at the Golden Nugget 4 when you went to Bally Grand, and you could 5 feel the anxieties. What I want to know is, 6 did you personally feel those same anxieties 7 when there was a change of management here? 8 THE WITNESS: Well, maybe earlier -- 9 early on when you don't know who the company is 10 and so forth. But I think once I got 11 acclimated with the company, and they asked me 12 to stay on, I mean, I -- I didn't have too much 13 anxiety. 14 COMMISSIONER FRULIO: Did you feel the 15 same anxiety -- let's say the same anxiety when 16 you were made COO of an organization that 17 included -- you being a numbers guy -- that 18 included table games and slot machines that you 19 weren't that familiar with? 20 THE WITNESS: Well, I was pretty 21 familiar with it. I just didn't oversee it. I 22 didn't have the anxiety. I still don't. I 23 know we have a great property, and I know we 24 have great employees. So, in my opinion, it's 25 a winning combination. 187 MARK GIANNANTONIO 1 COMMISSIONER FRULIO: Can you give me 2 the definition of a world bet at craps? I'm 3 kidding. 4 (Laughter.) 5 COMMISSIONER FRULIO: There was -- I 6 think from what I have here -- a layoff of 7 20 -- let's say cocktail servers, way back when 8 there. And someone that I know said he went to 9 the Trop to play blackjack, and he waited a 10 long time for a cocktail waitress and got 11 disgusted, left, went to the bar and bought a 12 drink, went back. How do you solve that 13 problem without -- without bringing some of 14 these people back? 15 THE WITNESS: Well, we -- you know, 16 there's always -- you know at peak time, I 17 mean, we could have enough staff at a property. 18 Whether in valet -- you know, you look a 19 property like Caesars, has probably the most 20 challenging valet in Atlantic City. They can 21 have 400 valet attendants. And when they get 22 hit on a Saturday night, they just don't -- the 23 problem is they don't have the capacity and 24 room, where we have more capacity. So, you 25 know, peak time on a Saturday night, you're 188 MARK GIANNANTONIO 1 going to get people sometimes waiting just 2 because a cocktail server could be hustling, 3 doing a great job, and they -- the way they 4 make their rounds, they make their rounds. 5 They may get asked a question over here. They 6 get off beat, and then miss Lloyd. Now he's 7 got to wait for the next pass, so. 8 (Laughter.) 9 THE WITNESS: So I think the staffing on 10 the -- 11 MR. LEVENSON: I could use a vodka right 12 now. 13 THE WITNESS: Staffing on the casino 14 floor is good. I mean, I think, you know, 15 things are starting to really start to click. 16 And they were -- they had -- they have been. 17 COMMISSIONER FRULIO: Is your main focus 18 now or emphasis on player development. 19 THE WITNESS: The main -- okay, focus on 20 top line revenue. You know, our goal -- 21 believe me, our goal is to drive up so much 22 revenue that we could have staff back 23 routinely. I mean, right now we're outpacing 24 the market. If the market's down seven or 25 eight percent, you know, we're down more than 189 MARK GIANNANTONIO 1 that. But a lot of it -- and I think that's 2 what we tried to say here today. A lot of it's 3 for various reasons. Construction. No 4 question. We're -- our seats in the 5 restaurants, half of them are shut down right 6 now. You know, we can't -- just for that 7 reason alone, you can't comp any people because 8 you don't have the seating capacity. You know, 9 we are comping into the Quarter. Thank God we 10 have the Quarter to help us during that time. 11 COMMISSIONER FRULIO: Thank you. I have 12 no other questions. 13 CHAIR KASSEKERT: Commissioner Fedorko? 14 VICE CHAIR FEDORKO: No Stockton jokes. 15 COMMISSIONER FRULIO: All marine jokes. 16 VICE CHAIR FEDORKO: Yeah. Right. 17 (Laughter.) 18 VICE CHAIR FEDORKO: I just have one 19 question, Mr. Diannantonio. You got a public 20 relations problem. What are you going to do to 21 solve it? 22 THE WITNESS: Well, you know, I think 23 our best days lie ahead. And I think for a lot 24 of -- for a little while here, you know, we've 25 been, you know -- I don't want to look 190 MARK GIANNANTONIO 1 backwards. I want to look forwards. I think 2 if we operate the way I know we can operate, 3 things will take care of themselves. I really 4 do believe that. I think that this company is 5 a good company. I think once we are licensed 6 and we operate, you know, we're going to -- a 7 lot of the nay-sayers -- and I'm sure they're 8 out there. And hopefully, you know, we can all 9 get together and work with one common cause 10 here. I -- you know, I think results will fix 11 everything. So, you know. 12 VICE CHAIR FEDORKO: Do you have a 13 public relations person? 14 THE WITNESS: We have an advertising, 15 public relations person. I'll give you an 16 example of this. And, unfortunately, you 17 probably don't -- you're not aware of this, but 18 in the last two weeks, we've done three or four 19 community events in Atlantic City. I'm sure -- 20 I'm probably pretty sure nobody even seen it 21 where we did the tree lighting ceremony at 22 Tropicana. We donated 2500 to Salvation Army. 23 We've donated turkeys. You know, we're not 24 getting -- we don't do it for the press. 25 Believe me. We do it because we want to be a 191 MARK GIANNANTONIO 1 good corporate citizen. 2 But, you know, right now we could be 3 donating a million dollars and still not get 4 the press that, you know -- it's public 5 relations. I know it's going to turn when we 6 get our results in line. That will happen. 7 VICE CHAIR FEDORKO: Okay. Thank you. 8 CHAIR KASSEKERT: Tell me. Just refresh 9 my recollection. You were not in charge of the 10 gaming side of the operations prior to August. 11 So you don't have any first-hand knowledge of 12 the gaming layoffs that occurred. Only the 13 hotel side. 14 THE WITNESS: I mean, you know, of 15 course, I was there. I was aware of some 16 things that was occurring. Sure. 17 CHAIR KASSEKERT: Okay. Post August 18 when you came in to -- to really head up both 19 sides, both the gaming operation side and the 20 hotel operation side, what layoffs occurred 21 post August? 22 THE WITNESS: I think we did some cuts 23 in security. 24 CHAIR KASSEKERT: Okay. And when those 25 security cuts happened, there was obviously 192 MARK GIANNANTONIO 1 concern expressed about having enough security 2 officers on the floor. Did you express any 3 concern about that? 4 THE WITNESS: Well, to be honest, I know 5 that, you know, we absolutely had discussions. 6 And I think when we made the cut, we felt that 7 we could handle the mandatory posts along with 8 the power shift and all the other shifts. And 9 I guess we fell a little short and as a result 10 brought some back. 11 CHAIR KASSEKERT: And you have some -- I 12 believe some citations filed against you -- 13 THE WITNESS: Yes. 14 CHAIR KASSEKERT: -- with respect to 15 that. Okay. And when -- when this occurred, 16 when you felt that -- you felt that things were 17 a little short, who did you go to to get the 18 approval in order to bring those people back? 19 THE WITNESS: Off the top of my head, I 20 don't recall, but probably Kevin Preston or Bob 21 Little. 22 CHAIR KASSEKERT: Okay. So you went to 23 them and said, listen, we're too short. We 24 don't have enough people. We're not covering 25 mandatory posts. We need -- 193 MARK GIANNANTONIO 1 THE WITNESS: Yeah. We just brought it 2 up to the ranks, and that's pretty much how 3 that occurred. 4 CHAIR KASSEKERT: And did they pretty 5 much follow your direction when you made those 6 recommendations? 7 THE WITNESS: Yes. I think we 8 immediately brought some people back. I mean, 9 Tama Hughes and, you know -- I have to tell 10 you, you know, she's all over our compliance 11 issues. And, you know, we did whatever we had 12 to do to just make it right. 13 CHAIR KASSEKERT: Okay. And with 14 respect to the patron complaints, I've been 15 going through the Division's exhibits, and I do 16 see that a number of them are really beyond 17 that March date when you were concerned about 18 there being slow down. I see -- I see 19 complaints from August. 20 THE WITNESS: Sure. 21 CHAIR KASSEKERT: I see complaints from 22 July. How have you been handling the ongoing 23 complaint process? 24 THE WITNESS: Well, again, I looked at 25 that as well. The -- I think the issue was the 194 MARK GIANNANTONIO 1 point I was trying to make was about two-thirds 2 were in that March, April range and a third 3 fell after that. 4 CHAIR KASSEKERT: Uh-huh. 5 THE WITNESS: The bottom line is we 6 are -- that's our business. We're very 7 conscientious on customer complaints and, you 8 know, we want every -- you know, we're doing 9 12, 15,000 customers there a day. We want 10 everybody to come in and leave very happy so 11 that they come back. 12 CHAIR KASSEKERT: Uh-huh. 13 THE WITNESS: And that's why we're 14 running 94 percent occupancy year-round. 15 I don't think we would be doing that if 16 we had -- if you read today's papers, you might 17 think we're a Super 8 Motel. And I would only 18 say if it was true, we wouldn't be running 94 19 percent occupancy. And, you know, I think we 20 would not be having success. 21 CHAIR KASSEKERT: Uh-huh. And -- and I 22 did see one complaint. 23 I know that the newspapers today 24 discussed not only bed bugs, which you've 25 alluded did not happen, but roaches. But the 195 MARK GIANNANTONIO 1 complaint I do see in here about roaches 2 appears from 2005; is that correct? It was pre 3 the takeover. 4 THE WITNESS: I think so. Yes. 5 CHAIR KASSEKERT: Okay. And since then, 6 have you heard about any complaints with 7 respect to any other kind of vermin? 8 THE WITNESS: Not really. No. Thank 9 God. But no. These are big facilities, and 10 you know, I think we're all -- you know, I 11 guess I don't have to say it, but things 12 happen. And, you know, we try to minimize it. 13 We have exterminators there on routine 14 schedules and, you know, it's not an issue. 15 CHAIR KASSEKERT: All right. And that's 16 your plan going forward, that you'll continue 17 to try to address these issues as they come up, 18 knowing that in the hotel business you're going 19 to see things happen from time to time. 20 THE WITNESS: Absolutely. 21 CHAIR KASSEKERT: You're going to see 22 toilets overflow. 23 THE WITNESS: Yeah. 24 CHAIR KASSEKERT: You're going to see 25 things -- 196 MARK GIANNANTONIO 1 THE WITNESS: That's the thing. The 2 toilet overflowing is not the operator. 3 Someone causes a toilet to overflow. And, you 4 know, we unclog 30 toilets a day. 5 CHAIR KASSEKERT: Uh-huh. 6 THE WITNESS: Or more. Whatever. 7 Depends on, you know, the occupancy. But -- 8 CHAIR KASSEKERT: Uh-huh. Or the 9 occupant. 10 THE WITNESS: Yes. 11 CHAIR KASSEKERT: Thank you. 12 Commissioner Epps? 13 COMMISSIONER EPPS: Mark, you were 14 running the hotel for a while before the 15 merger; right? 16 THE WITNESS: Yes. 17 COMMISSIONER EPPS: And we've known -- 18 we've been familiar here at the Commission. 19 Never heard bad things about you. Apparently 20 you were doing a good job. Were you doing a 21 poor job? Because, apparently, what you said 22 is they came in, you changed because you had 23 let people go, and now you're leaner. Were you 24 doing a poor job? 25 THE WITNESS: I don't think so. I think 197 MARK GIANNANTONIO 1 Mr. Yung runs a hotel company, and I think I 2 alluded to, Mr. Epps, you know, one of the 3 things that -- I'll give you an example. Of 4 the people that work with me, when we talk 5 about this merger, we said, you know, how is it 6 going to go? We alluded to the positiveness of 7 the merger. How can we do things more 8 effectively? You know, was I doing a poor job 9 by having one bottle of shampoo in the room? 10 I'm not sure I was. But I'll tell you, I 11 certainly wasn't allowed to put three bottles 12 in or they would be there. 13 COMMISSIONER EPPS: Were you 14 overstaffed? 15 THE WITNESS: Well, you know, if you 16 look at Aztar -- I'll answer it this way. If 17 you look at Aztar the last couple of years, we 18 were -- we had -- we were trimming our -- our 19 head count as well. 20 COMMISSIONER EPPS: But my question is 21 more specific. Not Aztar. Mark was running 22 the hotel. You called the shots. Were you 23 overstaffed? 24 THE WITNESS: Well, it was a hotel and 25 casino, so, you know. 198 MARK GIANNANTONIO 1 COMMISSIONER EPPS: On the hotel side. 2 THE WITNESS: On the hotel side, you 3 know, staffing levels in housekeeping, they're 4 tied to the union's credit system. So we're -- 5 if we're running 94 percent today or 94 percent 6 last year or 94 percent the year before, it's 7 the same amount of bodies. In public areas I 8 can -- I would honestly tell you, you know, 9 when I was running it prior, we had 150 or 10 whatever it was. And we're doing it -- we're 11 keeping the property clean with 81 bodies. But 12 there's no smoking. We've made modifications 13 to the casino floor. Things of that nature. 14 So, and we have good -- very good management 15 so. 16 COMMISSIONER EPPS: So it was right then 17 and it's right now. I don't understand the 18 difference. 19 THE WITNESS: Well, your question was 20 were we overstaffed? I guess -- 21 COMMISSIONER EPPS: I don't know what 22 you're telling me. I don't know if you're 23 telling me you were or not. 24 THE WITNESS: Well, I can tell you we 25 had more staff for various reasons. I mean, 199 MARK GIANNANTONIO 1 you know, and housekeeping we were overstaffed. 2 COMMISSIONER EPPS: So then the cuts 3 that you made were only because smoking went 4 away and other things went away, not because 5 the new attitude came in, and there was a 6 direction from the top that told you to cut 7 staff. Is that what you're telling me? 8 THE WITNESS: I had cut staff prior to 9 Columbia Sussex taking over. 10 COMMISSIONER EPPS: Columbia Sussex took 11 over. You cut staff in hotel. Was it because 12 they told you to or because you decided for 13 business reasons that's what you needed to do? 14 THE WITNESS: No. It was an initiated 15 from them. 16 COMMISSIONER EPPS: Thank you. 17 So you did cut staff compared to what 18 you were running the hotel with in December of 19 '06? 20 THE WITNESS: Yes. But not in every 21 department, so. 22 COMMISSIONER EPPS: I didn't say you cut 23 every department. But you cut on hotel staff. 24 You were running a different hotel. 25 THE WITNESS: Right. 200 MARK GIANNANTONIO 1 COMMISSIONER EPPS: Now, the call-outs. 2 Did they result in personnel action? 3 THE WITNESS: Yes. 4 COMMISSIONER EPPS: What? Terminations. 5 THE WITNESS: Oh, I'm sorry. Sure. 6 Yeah. 7 COMMISSIONER EPPS: You know that for a 8 fact? 9 THE WITNESS: I'm pretty sure we've had 10 terminations as a result of call-outs and 11 things of that nature. 12 COMMISSIONER EPPS: Okay. 13 THE WITNESS: Grievances. I mean, 14 whatever the appropriate action would have been 15 required was taken. 16 COMMISSIONER EPPS: Okay. I mean, I 17 guess what I'm asking, do you think you can 18 specifically state that because there were 19 call-outs in March or April, some of those 20 people were terminated? 21 THE WITNESS: That's hard to say because 22 if you call -- you know, if I'm an employee and 23 I call out in a public areas, you get points 24 for it. And I think you go up to 40 points or 25 whatever. So if it was first call -- 201 MARK GIANNANTONIO 1 COMMISSIONER EPPS: Job action as to 2 that action. But if the person reached their 3 number of demerits, then the process took 4 place? 5 THE WITNESS: Let's put it this way. 6 Whatever the appropriate discipline would have 7 been would have been issued. 8 COMMISSIONER EPPS: Il Verdi. Is that 9 how you pronounce it? 10 THE WITNESS: Il Verdi. 11 COMMISSIONER EPPS: Okay. You're 12 redoing it? 13 THE WITNESS: Yes. 14 COMMISSIONER EPPS: But you worked there 15 in the past, you said? 16 THE WITNESS: Yes. 17 COMMISSIONER EPPS: You made a lot of 18 money there? 19 THE WITNESS: I was kidding. 20 COMMISSIONER EPPS: They were doing good 21 coverage at that time. I believe you. 22 (Laughter.) 23 COMMISSIONER EPPS: They were doing good 24 covers at the time; correct? 25 THE WITNESS: Yeah. Yeah. 202 MARK GIANNANTONIO 1 COMMISSIONER EPPS: How? Full? 2 THE WITNESS: Yes. 3 COMMISSIONER EPPS: And what -- what 4 what's going to be the difference in covers now 5 that you fix it? 6 THE WITNESS: It is not covers. It's 7 quality of customer. You know, with the 8 expansion of the restaurants -- you know, all 9 the restaurants at Borgata, you know, Il Verdi 10 was in need of renovation so that we can -- you 11 know, the customers that we want to go to Il 12 Verdi are the highest of the high. And we need 13 to get more of our fair share of those 14 customers. And one way of doing it is to 15 create a brand-new atmosphere in Il Verdi and 16 making it so special that it's going to stop 17 them -- stop those customers maybe from going 18 to Borgata and things of that nature. 19 COMMISSIONER EPPS: It's going to still 20 be Il Verdi? 21 THE WITNESS: It's going to still be Il 22 Verdi. 23 COMMISSIONER EPPS: Leaving the place 24 and going somewhere else. People leaving the 25 Quarter, were going where? 203 MARK GIANNANTONIO 1 THE WITNESS: People leaving the Quarter 2 were going -- 3 COMMISSIONER EPPS: You said that people 4 leaving the Quarter came through, saw something 5 that wasn't appealing. They walked through and 6 went to another casino. Is that what you're 7 suggesting? 8 THE WITNESS: It's that, and it's just 9 no atmosphere. If you go into the table game 10 area, there's nothing. If you were a table 11 game customer, there's nothing table there. So 12 that's why we're building the center bar. You 13 know, any bar that was ever built in Atlantic 14 City, Taglio, the center bar, they all drive a 15 lot of customers to it because of the 16 excitement. So we're hoping to get a lot of 17 revenue, casino revenue by having a bar dead 18 set in the middle of your casino bar. 19 COMMISSIONER EPPS: The center bar 20 doesn't come from the Quarter, does it? 21 THE WITNESS: No. But just like we 22 opened Tango's and Tiffany's Lounge. People 23 like those types of amenities. 24 COMMISSIONER EPPS: Questions I was 25 trying to understand, the whole foot traffic 204 MARK GIANNANTONIO 1 leaving the Quarter thing and how those people 2 are going to be encouraged to play in the 3 casino. 4 THE WITNESS: Well, it's just going to 5 flow. If you come over to the property, I 6 could show you where he added those two table 7 pits. The lines of sight, Mario Guiseppe, our 8 Vice President of Games, he was right on when 9 he said it's going to improve the lines of 10 sight by having those two table pits, you now 11 could see into an area that you could never see 12 before. So people are no now going to know 13 there are 120 table games that were buried in 14 the north tower, original tower. So it's going 15 to make for a -- sure, is it a magnet? It's 16 not a magnet, but it's hopefully going to help 17 get customers over there. 18 COMMISSIONER EPPS: Okay. The hotel ops 19 changed. 20 THE WITNESS: Yes. 21 COMMISSIONER EPPS: This 40 minutes to 22 one minute. What was it? What is the change? 23 THE WITNESS: Basically it's a 24 combination of checking people in when they 25 arrive. Period. So we check you in. We give 205 MARK GIANNANTONIO 1 you a key, take your luggage. You go, and we 2 tell you to go to your room when we know it's 3 going to be ready. 4 COMMISSIONER EPPS: I guess what I'm 5 asking is, did you put a new system -- is it a 6 new IT system? 7 THE WITNESS: Well, it was a new -- 8 COMMISSIONER EPPS: What took 40 minutes 9 that now takes a minutes? What physically 10 changed? 11 THE WITNESS: Because there was a 12 check-in time. We had a check-in time. Say 13 3:00. We would begin to check people in at 14 once. It would congregate masses of people in 15 the lobby. Once we were able to modify our key 16 systems so that we could time the keys, we 17 could give the key to you and say go to your 18 room at 2, 2:00 or 3:00. We'll be sure it's 19 ready, and check you in at 10:00 in the 20 morning. This way you don't have to go back to 21 the lobby. 22 COMMISSIONER EPPS: I see. 23 With respect to A-80, just in your 24 experience, Mr. -- Mr. Yung called the second 25 column, voluntary terminations, he called them 206 MARK GIANNANTONIO 1 "quits" for euphemism. 2 THE WITNESS: Uh-huh. 3 COMMISSIONER EPPS: In your experience, 4 400 quits in a year in nine months, is that 5 big? Is that high? 6 THE WITNESS: No. You know, I think we 7 probably were getting 3 to 350 -- I don't have 8 the number off the top of my head, but I think 9 resignations and -- it was probably higher than 10 we had been running a little. 11 COMMISSIONER EPPS: Any of those quits 12 you think are attributed to low morale? 13 THE WITNESS: Could be. 14 COMMISSIONER EPPS: Now you said morale 15 is good now? 16 THE WITNESS: I think it is. 17 COMMISSIONER EPPS: Do you think I would 18 get that same answer at Trop? 19 THE WITNESS: If you go to the Trop? 20 I-- I would say yes. 21 COMMISSIONER EPPS: Okay. And the last 22 thing, you said driving revenue in that slot 23 area, things of that nature, Q2 was down; 24 correct? 25 THE WITNESS: Yes. 207 MARK GIANNANTONIO 1 COMMISSIONER EPPS: And that came on 2 line in June. 3 THE WITNESS: Correct. 4 COMMISSIONER EPPS: So July through -- 5 through Q3 that was on-line; right? 6 THE WITNESS: Yeah. 7 COMMISSIONER EPPS: Q3 was down further. 8 Right? So it didn't -- necessarily drop. 9 THE WITNESS: That's what I was trying 10 to say earlier. I mean, there were -- there's 11 other, you know, you put things in proportion 12 of why you're up, down. And, you know, this 13 renovation had their -- everything else being 14 equal, would have really helped us so. 15 COMMISSIONER EPPS: So Q -- we should 16 take from that that Q3 would have been further 17 down but for that coming on line. 18 THE WITNESS: Well, yeah. I'll tell 19 you, I think some of the things that I had 20 mentioned hurt our business significantly. 21 That's really where the numbers -- the decline, 22 if you look at 5 million down in slot revenue, 23 you can quantify -- three and a half million 24 without a doubt. I mean, there's analysis to 25 prove we're down three and a half million out 208 MARK GIANNANTONIO 1 of five because of a reduction in player 2 development and air program. You know, it is 3 what -- the numbers speak for themselves. So 4 you would think if you add back that, you 5 know -- or, you know, have more people 6 networking your property, you're going to do 7 better. 8 COMMISSIONER EPPS: Okay. I think 9 that's all I have. 10 CHAIR KASSEKERT: Commissioner 11 Sommeling? 12 COMMISSIONER SOMMELING: Just -- just 13 I'm curious about the new concourse that you've 14 developed to go into the casino. Is it your 15 experience that you've been in charge of casino 16 and hotel the customers that go into, say, the 17 Quarter would then come back out of the Quarter 18 and go into the casino or vice versa? If you 19 have customers that go to the casino, they 20 would leave the casino to go into the Quarter? 21 THE WITNESS: Well, the -- 22 COMMISSIONER SOMMELING: Are they one 23 and the same customers? Are or are we talking 24 about separate customers here? Those people 25 that come to gamble, those people that come to 209 MARK GIANNANTONIO - redirect 1 come for entertainment or dining in the 2 Quarter, or a combination of both? 3 THE WITNESS: I think the issue is when 4 you -- prior to us adding these table pits, if 5 you walk out of the Quarter and just entered 6 our casino, you would see mass slot machines. 7 You would not -- you wouldn't even know that we 8 had tables. You couldn't see them because of 9 the high slots. So the lines of sight were 10 backward. 11 Now we just added 20 table games at the 12 throat of the entrance to the Quarter which 13 will at least say to people, oh, here's where 14 the table games are. And it should help a -- 15 and we opened it two Fridays ago, and they 16 were -- they've been packed since we've opened 17 them. So and you know, we're seeing, you know, 18 an uptick as a result of it, so. 19 COMMISSIONER SOMMELING: No more 20 questions. 21 CHAIR KASSEKERT: Anything on redirect? 22 23 REDIRECT EXAMINATION BY MR. LEVENSON: 24 Q. I just have one question, because it's 25 difficult to gauge on the floor plan there, but the 210 MARK GIANNANTONIO - redirect 1 square footage of the new north tower, bar, table game 2 area, could you tell us what that square footage is? 3 A. It's about 20 -- a little over 21,000. 4 Q. 21,000 square feet? Okay. I just 5 wanted to get some idea of that. 6 MR. LEVENSON: Thanks. I have nothing 7 further. 8 CHAIR KASSEKERT: Anything on recross? 9 MS. MAHER: No, thank you. 10 CHAIR KASSEKERT: Any other questions 11 from the Commissioners? 12 COMMISSIONER SOMMELING: No questions, 13 Madame Chair. 14 CHAIR KASSEKERT: You may step down. 15 Thank you. 16 I think -- well, correct me, Mr. Nance. 17 Correct me what occurs next. I think our next 18 special meeting is scheduled for Monday 19 beginning at 10:00, and we'll continue 20 testimony on this matter. 21 MR. NANCE: Right. Then after -- 22 MS. FAUNTLEROY: Adjourn for the 23 evening. 24 MR. NANCE: But I have to close out the 25 meeting from this morning. 211 1 In accordance with Resolution No. 2 06-12-13-20, the next closed session of the 3 Commission shall be held on Wednesday, December 4 12, 2007, at 9:15 a.m. in the Commission 5 offices. 6 It is now time for the public 7 participation portion of the meeting. 8 CHAIR KASSEKERT: Is there anything 9 anyone from the public that wishes to be heard? 10 (No response.) 11 CHAIR KASSEKERT: Seeing no one, I will 12 close this portion of the meeting and entertain 13 a motion to adjourn. 14 COMMISSIONER FRULIO: Motion to adjourn. 15 COMMISSIONER SOMMELING: Motion to 16 adjourn. 17 VICE CHAIR FEDORKO: 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: Motion carries. 24 (Public Meeting 07-11-21 was adjourned 25 at 5:05 p.m.) 212 1 2 C E R T I F I C A T E 3 4 5 I, DARLENE SILLITOE, a Certified Court 6 Reporter and Notary Public of the State of New 7 Jersey, certify that the foregoing is a true 8 and accurate transcript of the proceedings. 9 10 11 I further certify that I am neither 12 attorney, of counsel for, nor related to or 13 employed by any of the parties to the action; 14 further that I am not a relative or employee of 15 any attorney or counsel employed in this case; 16 nor am I financially interested in the action. 17 18 19 DARLENE SILLITOE CCR 20 License No XI01023 21 22 Dated: November 22, 2007 23 My Commission Expires on July 10, 2009 24 ID No 2062871 25