0001
 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 7
 9           - - - - - - - - - - - - - - - - - - -
10   
11                 Tuesday, December 4, 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                  1:30 a.m. to 2:40 p.m.
17   
18   
19      Certified Court Reporter:  Darlene Sillitoe
20   - - - - - - - - - - - - - - - - - - - - - - - - - - -
21              ATLANTIC CITY COURT REPORTING, LLC
22         CERTIFIED COURT REPORTERS AND VIDEOGRAPHERS
23              1125 ATLANTIC AVENUE, SUITE 416
24              ATLANTIC CITY, NEW JERSEY  08401
25          (609) 345-8448  www.accourtreporting.com
0002
 1   B E F O R E :
 2   CASINO CONTROL COMMISSION:
         LINDA M. KASSEKERT, CHAIR
 3       MICHAEL A. FEDORKO, VICE CHAIR
         MICHAEL C. EPPS, COMMISSIONER
 4       RALPH G. FRULIO, COMMISSIONER
         WILLIAM T. SOMMELING, COMMISSIONER
 5   
     PRESENT FOR THE CASINO CONTROL COMMISSION:
 6       DARYL W. NANCE, ADMINISTRATIVE ANALYST
         DANIEL J. HENEGHAN, PUBLIC INFORMATION OFFICER
 7   
     OFFICE OF THE GENERAL COUNSEL:
 8       DIANNA W. FAUNTLEROY, GENERAL COUNSEL/EXECUTIVE
          SECRETARY
 9       LEONARD J. DIGIACOMO, ASSISTANT GENERAL COUNSEL
         STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL
10   
11   
12   A P P E A R A N C E S :
13   
          DIVISION OF GAMING ENFORCEMENT:
14        YVONNE G. MAHER, ACTING DIRECTOR
          MARYJO FLAHERTY, DEPUTY ATTORNEY GENERAL
15   
16        STERNS & WEINROTH, PC
          BY:  PAUL M. O'GARA, ESQ:
17        FOR:  TROPICANA ENTITIES
18        CLEARY & JOSEM, LLP
          BY:  REGINA C. HERTZIG, ESQ.
19        FOR:  UNITE-HERE, LOCAL 55
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25   
0003
 1                 E X H I B I T S :
 2   Division No.      Description                    EVD
 3   D-68 Division of Gaming Enforcement's             X
          Proposed Conditions
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0004
 1                 (The Special Meeting was commenced at
 2          1:30 p.m.)
 3                 MR. NANCE:  Good morning.
 4                 This is to advise the general public
 5          that in compliance with Chapter 231 of the
 6          Public Laws of 1975 entitled the "Open Public
 7          Meetings Act," the New Jersey Casino Control
 8          Commission on November 29th, 2007, filed with
 9          the Secretary of State at the State House,
10          Trenton, New Jersey, a notice of this hearing,
11          and on November 29th, 2007, copies were mailed
12          to subscribers.
13                 Members of the press will be permitted
14          to take photographs and we would ask that this
15          be done in a manner which is not disruptive or
16          distracting to the Commission and which does
17          not interfere with the public's right to
18          observe the hearing.
19                 The use of cellular telephones in the
20          public meeting room while the Commission is in
21          session is prohibited.
22                 Would everyone please stand for the
23          Pledge of Allegiance.
24                 (The flag salute was recited.)
25                 CHAIR KASSEKERT:  Good afternoon.
0005
 1                 MR. NANCE:  Good afternoon.
 2                 CHAIR KASSEKERT:  We are here today on
 3          the matter of the relicensing of the Tropicana
 4          Hotel and Casino to hear closing arguments from
 5          various parties.
 6                 Let me first ask if there are any
 7          procedural matters that need to be brought to
 8          our attention?
 9                 MS. FLAHERTY:  Yes, Chair.  There were
10          three pages of Mr. Lyons' sworn interview which
11          is in evidence that need to be incorporated
12          into that document, pages 28, 35 and 41, and we
13          would ask that that be allowed.
14                 CHAIR KASSEKERT:  Thank you.
15                 Any objection?
16                 MR. O'GARA:  None.
17                 CHAIR KASSEKERT:  Okay.  Seeing none, we
18          will move that in with that exhibit.
19                 In addition, there are two separate
20          sealing requests that need to be resolved.
21          First, the Tropicana requests the sealing of
22          A-12, 13, 18, 28, 48, 49, 51, 56, 57, 58, and
23          59.  These 11 exhibits contain information
24          regarding staffing levels both in general and,
25          more specifically, with respect to the security
0006
 1          department.  In review of the issues already to
 2          be decided at this hearing and considering the
 3          testimony already given, I do not believe that
 4          sealing is appropriate for those documents.
 5                 The second sealing request pertains to
 6          information about Jeffrey Silver's compensation
 7          from the Tropicana in his capacity as the sole
 8          member of the independent audit committee at
 9          the holding company level.  The relevant
10          exhibits here are A-82 and A-84 and D-62 and
11          D-64.  Obviously, Mr. Silver's ability to
12          comply with the tests of independence is
13          another issue to be decided.  Accordingly, some
14          of the monetary figures that have been proposed
15          for redaction should not be sealed in the
16          context of this proceeding.
17                 However, I believe that the proposed
18          redactions on Page 5 of D-64 at lines 8 and 9
19          should be sealed insofar as they relate to Mr.
20          Silver's overall compensation from other
21          sources other than Tropicana.  For these
22          reasons, I move to deny that these sealing
23          applications except for those limited matters
24          in D-64.
25                 We will now start closing arguments.  As
0007
 1          a result of our meeting --
 2                 MR. INGIS:  Madame Chair --
 3                 MR. DiGIACOMO:  Madame Chair?  You need
 4          a motion.
 5                 CHAIR KASSEKERT:  Oh, I need a motion.
 6                 I so move.  Is there a second?
 7                 VICE CHAIR FEDORKO:  Second.
 8                 COMMISSIONER SOMMELING:  Second.
 9                 CHAIR KASSEKERT:  The motion has been
10          made and seconded.  All in favor?
11                 (Ayes.)
12                 CHAIR KASSEKERT:  Opposed?
13                 (No response.)
14                 CHAIR KASSEKERT:  Motion carries.
15                 A couple of weeks ago we made a
16          determination that Local 54 would be allowed to
17          participate in this proceeding by making a
18          closing statement.  We will start with their
19          representative.
20                 And, ma'am, would you please state your
21          name for the record?
22                 MS. HERTZIG:  Sure.
23                 CHAIR KASSEKERT:  Because I've forgotten
24          it.
25                 MS. HERTZIG:  Regina Hertzig, Cleary &
0008
 1          Josem on behalf of Local 54.
 2                 Commissioners, I think the most telling
 3          statement came at the beginning of the hearing,
 4          before to any testimony was taken, and that was
 5          when Commissioner Frulio asked Mr. O'Gara about
 6          Tropicana's decision to reduce the number of
 7          locksmiths to one when there are over 2,000
 8          rooms in the casino.  And Mr. O'Gara's response
 9          was a very flip, "There's no law against
10          suicide."  And I submit to you today that
11          that's what this case is all about.  There is a
12          law against taking down all of the employees of
13          Tropicana.  If Tropicana itself wants to commit
14          suicide, so be it.  But when it's going to take
15          down all of its employees with it and the
16          reputation of the city of Atlantic City, I
17          believe that the Commission has a
18          responsibility to enforce the Casino Control
19          Act, and there certainly is a law in place to
20          do that.
21                 Holding one of New Jersey's limited
22          casino licenses, gaming licenses, is a
23          privilege.  And the performance of Adamar and
24          its owner, William Yung, here in Atlantic City
25          unquestionably demonstrates that they should
0009
 1          not be granted that privilege.
 2                 The Division of Gaming Enforcement
 3          presented evidence that the application has
 4          disregarded its statutory and regulatory
 5          obligations on multiple occasions over the last
 6          11 months.  As UNITE HERE Local 54
 7          representative, I will address those areas of
 8          particular concern not only to Local 54's
 9          members but to all Atlantic City residents
10          whose livelihoods depend on the continued high
11          quality casino tourism that this city brings.
12                 The steep decline in cleanliness and the
13          service standards of the Tropicana that have
14          occurred within the few months that the
15          Applicant took over its operations in January
16          2007 demonstrate that the license is
17          inappropriate.
18                 This decline in cleanliness should be a
19          matter for the Commission for three reasons.
20          First, the Atlantic City casino control hotel
21          industry is built on customer service.  The
22          statute specifically says it should be a
23          first-class facility of exceptional quality.  A
24          filthy and unsanitary facility that prompts a
25          flood of complaints from regular customers
0010
 1          cannot be considered a superior first-class
 2          facility.
 3                 Second, the Applicant has not
 4          demonstrated that it intends to change how it
 5          operates in the future.  William Yung asked the
 6          Commission to swallow the incredible
 7          proposition that the mass layoffs of hundreds
 8          of employees, 900 net, at the Tropicana
 9          Atlantic City, has no effect on the quality of
10          customer service.  In fact, he told the
11          Commission, "The service level at Tropicana is
12          vastly superior and the cleanliness is much
13          better than when we took it over."
14                 Third, the Applicant's witnesses were
15          not candid with the Commission, attempting to
16          hide facts and casting blames on employees and
17          unions instead of taking responsibility for
18          management's decisions.  The Tropicana did not
19          meet its burden of proving Tropicana is a
20          first-class facility.  It bears the burden of
21          proof by clear and convincing evidence that the
22          license should be renewed and that it maintains
23          the level of quality required under the
24          statute.
25                 In its report, the Division of Gaming
0011
 1          Enforcement called into question whether the
 2          Tropicana had maintained a first-class resort
 3          during the past 11 months.  There were many
 4          ways they could have demonstrated this.  They
 5          didn't introduce any photographs or video
 6          footage of the facility, did not call any
 7          employees to testify about the environment in
 8          which they work on a daily basis, and did not
 9          introduce inspection reports from local
10          government agencies that inspect its
11          restaurants and hotel rooms.  It did not
12          present any favorable reports from customers
13          praising its cleanliness or quality of customer
14          service.
15                 We submit that by failing to present
16          affirmative evidence showing that it is clean
17          and superior service it is providing to
18          Atlantic City guests they have not met its
19          obligations under the statute.
20                 We submit, and we'd like to you take
21          special attention to, D-11, which is the number
22          of customer complaints that took place that
23          were submitted between March '07 and August
24          '07.  I'm not going to read them here today,
25          but we'd like you to take particular note of
0012
 1          those.  They were only the ones that were
 2          submitted by -- into the player development
 3          department.  Granted, there probably are other
 4          customer complaints, and they admitted that it
 5          was only from the player development department
 6          that these complaints that are comprised of in
 7          D-11 that are part of the record in this matter
 8          deal with a number of complaints regarding
 9          cleanliness of the restrooms.
10                 And this is particularly noteworthy
11          because William Yung testified that cleanliness
12          was only a problem for three weeks.  Yet you
13          have these serious complaints that stretch from
14          March to August.  And those are in the record,
15          and we ask you to please take particular note
16          of those.
17                 The Applicant responded to those
18          complaints by saying the number is minuscule in
19          comparison with the number of rooms at the
20          Tropicana.  This testimony itself was
21          deceptive.  On the last day of hearing, Mr.
22          Giannantonio admitted the complaints produced
23          at DGE are not the only customer complaints,
24          and the customer complaints that are not tied
25          to the player development department were not
0013
 1          even submitted.
 2                 The Tropicana blamed Local 54 for its
 3          cleanliness problems.  They testified that
 4          there was a sick-out.  However, there was no
 5          evidence through time records or any employee
 6          records to show that there was mass call-out or
 7          sick-outs.  All of those things could have
 8          easily been introduced into the record.  None
 9          of that evidence was provided to the
10          Commission.
11                 It also did not discipline any
12          employees.  If there was any kind of mass
13          sick-out, you'd think that Tropicana would have
14          attempted to discipline employees.  No
15          discipline was imposed on employees.  No
16          records of any discipline.  No records of time
17          sheets were submitted.
18                 They also blamed the cleanliness on
19          sabotage and that -- they did present --
20          attempt to present evidence.  However, this
21          evidence proves just the opposite.  There were
22          five reported incidents of vandalism between
23          March and June, two of which occurred in
24          nonpublic areas.  And according to Mr.
25          Giannantonio, they might have just been a
0014
 1          couple of employees causing this.  These five
 2          incidents of vandalism are not what made the
 3          regular customers so unhappy that you'll see in
 4          D-11 and in the DGE's report.  If the Tropicana
 5          were actually submit undergoing or experiencing
 6          a wave of vandalism, then one has to wonder why
 7          the security director's report reduced the
 8          number of security officers.  Preventing and
 9          remedy to vandalism is part of a superior
10          first-class in Atlantic City.
11                 The Applicant's insistence on blaming
12          Local 54 and its employees for its own failure
13          to staff its facilities shows that the
14          Applicant is not going to change in how it
15          operates or take responsibility for the quality
16          of its casino.
17                 The real reason -- we all know the real
18          reason why Tropicana became unsanitary, and
19          that's because the cleaning staff was cut in
20          half.  William Yung testified under oath that
21          most of the planned staff reductions -- this
22          was before they took over -- would be made
23          through attrition and before making cuts.  On
24          November 2nd, 2006, he said he has to get there
25          first and analyze the whole thing.  They took
0015
 1          over on January 3rd.  Nonetheless, that same
 2          month, 22 public areas attendants were laid
 3          off.  In mid-March another 59 public area
 4          attendants were laid off, bringing the total
 5          number of positions eliminated to 81.  This was
 6          more than half of the public areas attendants,
 7          and no positions have been restored.  To this
 8          day there's only 73 public area attendants that
 9          remain on the job.
10                 Yung testified that he -- in sworn
11          statements to the DGE that he used his
12          experience in the hotel industry to determine
13          how many employees were needed in the hotel and
14          food and beverage outfits -- outlets.  He said
15          we have other large properties that may be not
16          as large as this but, you know, 800 room
17          properties.  And so you know the amount of work
18          it takes to serve rooms or serve meals, or
19          check in people.  You know, we know how many
20          people there should be.  But Yung did not have
21          experience at operating a large casino like the
22          Tropicana Atlantic City that would enable him
23          to intelligently gauge how many public area
24          attendants he should eliminate on the casino
25          floor and still maintain a first-class
0016
 1          facility.
 2                 Throughout the hearing, the Tropicana's
 3          witnesses touted the importance of the analysis
 4          and identifying inefficiencies.  And indeed Mr.
 5          Giannantonio testified that the case, for
 6          example, public area staff, we didn't do the
 7          reduction in one day.  It took months to figure
 8          out the analysis.  Again, the record
 9          contradicts that testimony in that the numbers
10          were reduced by half -- in half by March of
11          2007.
12                 The 81 full-time equivalents equates to
13          20 public area attendants per shift, calculated
14          on three shifts, seven days per weak.  The
15          public area attendants are responsible for
16          cleaning the casino floor, the public
17          bathrooms, and other public areas.  The
18          Commission records show that there is more than
19          138,000 square feet of casino floor.  According
20          to Fred Buro's unrefuted testimony, there are
21          57 public bathrooms, as many as 32 stalls and
22          16 sinks in one, 28 elevators and 24
23          escalators.  There's -- according to Tropicana
24          witnesses, there's 12,000 customers that visit
25          daily.  It is beyond belief that 20 employees
0017
 1          could possibly clean a facility on this scale,
 2          clean with the number of customers that traffic
 3          the areas.
 4                 Mr. Giannantonio also approached --
 5          testified about the new approach to cleaning
 6          the Tropicana.  That you just look for dirt,
 7          and when you see dirt, you find it and clean
 8          it.  The quote is, "We tell people to find dirt
 9          and clean it."  In other words, only dirt that
10          is visible is cleaned.  The superficial
11          approach to keeping Tropicana clean bears a
12          striking resemblance to the allegation in the
13          Park Cattle Company's counterclaims in the Park
14          Cattle case, which is Park Cattle Company
15          versus Wimar Tahoe Corp., which is found in the
16          Commission's record at D-39.
17                 We submit in conclusion here that we
18          don't want the Tropicana to close.  We want it
19          to be maintained as a first-class facility.
20          But this company can't do it.  It doesn't have
21          the will or the wherewithal to do it.
22                 Therefore, we respectfully request that
23          the Commission appoint a conservator to operate
24          the casino -- the Tropicana in Atlantic City,
25          and we believe that if you -- the Act
0018
 1          authorizes you to appoint and constitute a
 2          conservator to, among other things, take over
 3          and into his possession and control all the
 4          property and businesses of the licenses
 5          relating to the casino on the approved level.
 6                 And we believe that that is what is best
 7          here.  And we respectfully submit that the
 8          license for the Tropicana be denied and that
 9          the Commission appoint a conservator to take
10          over the casino hotel here.
11                 Thank you.
12                 CHAIR KASSEKERT:  Thank you.
13                 Acting Director Maher?
14                 MS. MAHER:  Thank you.  Madame Chair,
15          members of the Commission.  Good afternoon.
16                 When I was thinking about my closing
17          remarks in this matter, one old saying came to
18          mind.  Never bite off more than you can chew.
19          And that in -- really, in a very simplistic
20          way, sums up what happened here.  Bill Yung bit
21          off more than he could chew with the Aztar
22          purchase and everything that came with it,
23          including the Tropicana Atlantic City.
24                 And this really is about Mr. Yung
25          because by his own words, he is Tropicana,
0019
 1          Incorporated.  This is evident in almost every
 2          aspect of how the Tropicana, Incorporated, has
 3          done business at the Atlantic City Tropicana.
 4                 It is very difficult to say after this
 5          hearing that they have established by clear and
 6          convincing evidence that they have the
 7          sufficient business ability and casino
 8          experience as to establish the likelihood of
 9          creation and maintenance of a successful,
10          efficient casino operation.  Why?  As Fred Buro
11          said when he testified, the Aztar acquisition
12          was a paradigm shift for the company.  "But to
13          simply put it, the portfolio of Columbia Sussex
14          at that time had nothing that did $605 million
15          per year in revenue."
16                 Columbia Sussex, by all accounts, by the
17          testimony, the evidence that was presented, the
18          report, was a company that ran Marriott hotels
19          and smaller riverboat casinos.  It appears that
20          Mr. Yung was just not willing or able to do
21          what it takes to run an Atlantic City casino
22          hotel operation, to establish and to maintain
23          an approved hotel and casino which is in all
24          respect as first-class facility of exceptional
25          quality that will help maintain Atlantic City
0020
 1          as a resort, tourist, and convention
 2          destination.
 3                 As Mr. Yung himself said in his
 4          testimony, the Tropicana Atlantic City was his
 5          largest operation to date.  He has very little
 6          experience in operating a casino of its size
 7          and nature.  But in spite of all that, he
 8          indicated when he testified that he saw no
 9          difference in operating a large hotel casino
10          the size of the Atlantic City Tropicana and
11          other properties.  And he did nothing in
12          particular to prepare for this experience.  And
13          that nothing in particular that he did to
14          prepare shows in what we have seen over the
15          last 11 months.
16                 Furthermore, it seems as if Mr. Yung did
17          not have enough of the proper personnel in
18          place to ensure his success in this endeavor.
19          Tropicana, Incorporated, has had three CFOs in
20          the past 12 house.  The president and CEO, Fred
21          Buro, brought on board to run the casino side
22          of the operation was terminated after seven
23          months.  The Director of Security Michael Lyons
24          was terminated after seven months as well.
25          Kevin Preston, Senior Vice President for Casino
0021
 1          Operations of the corporation has only been
 2          there since June of 2007.  Most of the higher
 3          level executives at the Atlantic City Tropicana
 4          were terminated immediately, including
 5          experienced legal counsel.  The Tropicana has
 6          had only two lawyers for the entire company, a
 7          company with the casino operations in five
 8          different jurisdictions.
 9                 And when asked what people were put in
10          place to transition the company, Donna More
11          candidly admitted when she testified that she
12          probably just did a lot of it herself.  What
13          this really boils down to is a corporate
14          philosophy to run a lean, efficient operation.
15          To consolidate to save money and ultimately
16          make money.  A corporate philosophy that most
17          likely isn't going to change any time soon and
18          appears not to be working at the Atlantic City
19          Tropicana.  This is evident in so many ways.
20          Snapshots if you will, as I believe
21          Commissioner Frulio referred on in one line of
22          questioning.
23                 Let's take a look at some of those
24          snapshots, some of those issues that were
25          addressed during the course of this hearing,
0022
 1          issues that the Division brought up in its
 2          opening statement.  The management service
 3          agreement.  Agreements that, by testimony and
 4          reports, are agreements to consolidate services
 5          for both the casino and hotel side of Tropicana
 6          Incorporated's operations.  Services such as
 7          payroll, accounting, et cetera.  These
 8          agreements consolidate local services to the
 9          corporate level and ultimately lead to layoffs
10          at various properties, again consistent with
11          Mr. Yung's corporate philosophy.  In New Jersey
12          such agreements cannot be in place and
13          effective until approved by the Commission.
14                 Since January of 2007 there has been a
15          great deal of confusion over these management
16          service agreements in New Jersey.  The fact
17          that they are not effective in New Jersey and
18          whether or not if the Tropicana,
19          Incorporated's, plans to seek any permission to
20          make them effective, and what the actual result
21          of that would be.  This issue was not made any
22          clearer, I would submit, during the course of
23          this hearing.  The answer was generally, I
24          don't know.
25                 Surprisingly, Mr. Yung when questioned
0023
 1          about the management service agreements, which
 2          seemed to be an integral component of his
 3          corporate philosophy, said he was not at all
 4          familiar with the management service
 5          agreements.  Furthermore, even though the
 6          agreements were not effective in New Jersey,
 7          there was testimony and evidence that fees
 8          accrued under them, admittedly a mistake.
 9          However, when questioned about the mistake,
10          general counsel for the company, Donna More,
11          said she could not explain how they did occur.
12                 Moreover, from the a financial
13          standpoint, the Tropicana entities by virtue of
14          inadequacy and procedures and a result in error
15          violated leverage covenant and are in technical
16          default of their credit facility arrangement.
17          As a consequence, the revolver is not
18          available, and the Tropicana must renegotiate
19          with its lenders, apparently at a more
20          stringent and in less favorable terms.
21                 At this point the financial stability of
22          the operation is in flux.  From a financial
23          performance aspect, the Division has serious
24          concerns with the effects of the layoffs,
25          especially at the Atlantic City facility,
0024
 1          coupled with an inability to address patron
 2          needs and the failure to address even minimum
 3          capital expenditures for its operations in
 4          forecasts.
 5                 Tropicana projects upstreaming all
 6          available funds form the Atlantic City
 7          operations for other than Atlantic City's
 8          operational needs.  This course, if not
 9          reversed, will not serve the Tropicana Atlantic
10          City over the long term.
11                 Somewhat related to this as well is an
12          issue brought up by Local 54, patron
13          complaints.  Issues of service and cleanliness,
14          which again go back to the Tropicana Atlantic
15          City's ability to create and maintain a
16          successful, efficient casino operation in
17          compliance with the statutory policies that
18          require them to establish and maintain an
19          approved hotel which is in all respects a
20          first-class facility.  Disconcerting was the
21          number of written patron complaints found by or
22          discovered by the Division in the Tropicana's
23          player development files.  And this was no by
24          means -- and this was, by no means, all of
25          them.  No one was able through the course of
0025
 1          the hearing -- no was able to testify about how
 2          the Tropicana was handling these complaints to
 3          move the property forward.  In fact, no one
 4          ever testified that they read them completely,
 5          let alone formed a comprehensive response to
 6          deal with them.  Instead of addressing the
 7          issue of patron complaints, the Tropicana
 8          personnel sought to blame the problem on
 9          vandalism and what they claim were disgruntled
10          union employees, a claim only supported by five
11          incident reports spanning through the months of
12          March 2007 through June of 2007, some of which
13          shows no proof of vandalism and none of which
14          showed proof that the union or employees were
15          involved.
16                 Another component of this area is the
17          detailed 15-page letter from the National
18          Environmental Health Association regarding
19          conditions at the Atlantic City Tropicana for a
20          convention stay which involved a number of
21          rooms.  Again, listening to the witnesses,
22          listening to the evidence, there appeared to be
23          no response in terms of how to deal with this
24          issue.  However, there was testimony that
25          perhaps the convention was simply trying to get
0026
 1          out of paying a portion of their bill.  Or that
 2          this complaint was suspicious because the
 3          management alleges no one at the convention
 4          complained while they were actually on the
 5          property, an allegation that is refuted by the
 6          contents of the letter itself.
 7                 And, finally, perhaps most disturbingly,
 8          Mark Giannantonio testified that he was made
 9          aware of the letter but did not contact the
10          National Environmental Health Association, and
11          he was not sure that anyone from the Tropicana
12          Atlantic City did.  When asked if he thought it
13          was important for him as the CFO and president
14          of the company to reach out to the group he
15          said, "I mean, yeah, I guess that could be the
16          case, but I did not do that."
17                 Also to be considered as another of
18          those snapshots or another one of those areas
19          that we brought up in our opening statement is
20          the regulatory -- I'm sorry, is the regulatory
21          compliance in New Jersey as well as other
22          jurisdictions.  To put it lightly, there seems
23          to be a lack of concern about staying compliant
24          with various jurisdictions' gaming regulations
25          if not an outright willful disregard for
0027
 1          regulators.  When questioned about regulatory
 2          violations in other jurisdictions, Indiana,
 3          Louisiana, Mississippi, Nevada, Mr. Yung
 4          appeared to have no real knowledge of the
 5          complaints or little interest in addressing
 6          them.  He testified that he does not dialog
 7          with Donna More about compliance issues.
 8          Although she testified she discussed all
 9          regulatory violation complaints with him.
10                 Mr. Yung was not aware of the important
11          independent audit committee issue which was
12          discussed during the course of this hearing.
13          He admitted it was important for him to know
14          about the regulations and make sure he's in
15          compliance.  That's his responsibility.  But he
16          has not done that.  He was not knowledgeable
17          about the Indiana regulations, and he quote --
18          and he considered regulatory violations in
19          Indiana insignificant.  And that's a quote.
20                 As to the Bank Secrecy Act violations
21          with the Lighthouse Casino in Mississippi,
22          prior to being charged with these violations,
23          Mr. Yung indicated he was not even aware of
24          Bank Secrecy Act requirements, although
25          interestingly enough, he had owned casinos for
0028
 1          ten years prior to that.  Nor was he aware that
 2          Nevada regulators were monitoring workforce
 3          reductions at the Tropicana Las Vegas.
 4                 Finally, perhaps most telling of all in
 5          this area are Mr. Yung's words to Fred Buro in
 6          response to the notification requests from the
 7          New Jersey regulators in regards to layoffs.
 8          "Is this the way you guys do business in New
 9          Jersey?"  And "I told you not to tell the
10          regulators.  Now you go back and make those
11          cuts, or I will find someone who will."
12                 Connected to this issue, but deserving a
13          particular attention, is the independent audit
14          committee complaint filed by the Division.
15          Regulations require each supervisor of a casino
16          mandatory surveillance and internal department
17          to report to an independent audit committee on
18          matters of policy, purpose, responsibility, and
19          authority.  For six months, from January 3rd,
20          2007 to June 29th of 2007, the Tropicana
21          Atlantic City, by their own admission, was
22          without such an independent audit committee.
23          In response to this, the Tropicana argues that
24          they were engaging in a continuing dialog with
25          regulators and that this somehow excuses their
0029
 1          failure to comply with the regulations.  The
 2          Division would submit that this dialog centered
 3          around the Tropicana's desire to place
 4          corporate management on a committee that by
 5          regulation is to be independent.
 6                 It is clear from Donna More's testimony
 7          she was aware of this requirement from day one.
 8          And as Commissioner Epps put it, from day one
 9          they were out of compliance.
10                 The petition was finally filed on June
11          1st of 2007 with a proposed independent audit
12          committee structure.  The independent audit
13          committee as it now exists for Tropicana
14          Atlantic City, a single-person audit committee
15          comprised of Jeffrey Silver, Esq., was finally
16          proposed in a June 14th, 2007, petition.
17                 Even with the final formation of this
18          committee, problems still exist.  The legal
19          services agreement signed by Donna More and Mr.
20          Silver not only indicates what his compensation
21          is for serving on the audit committee but also
22          provides that the Trop may also -- Tropicana
23          may also engaged his law firm to represent
24          Tropicana in different or additional matters.
25          This compromised the independent aspect of the
0030
 1          independent audit committee.  Perhaps it can be
 2          argued that Mr. Silver became independent
 3          during the course of this hearing, but for the
 4          months leading up to this hearing, he was not.
 5                 The Division would submit that the
 6          independent audit committee still does not
 7          appear to be functioning properly based on the
 8          testimony that we heard over the last two
 9          weeks.  According to Donna More's testimony,
10          two meeting have been held, one in June of 2007
11          via telephone, the other in November of 2007 in
12          Las Vegas.  No one was present -- no one from
13          surveillance was present at either of those
14          meetings.  And minutes from the November
15          meeting have still not yet been prepared.
16                 The seriousness of this violation must
17          be noted, and the Division believes that it has
18          been noted by the Commission order that the
19          audit committee complaint hearing be
20          consolidated with the licensing hearing.  The
21          functions of surveillance and internal audit
22          are vital, critical functions of any casino
23          operation, therein effecting the independent
24          arm of the casino to monitor operations within
25          the casino.  And for six long months the
0031
 1          Atlantic City Tropicana surveillance department
 2          and internal audit department had no
 3          independent oversight from the management they
 4          are tasked with monitoring, no independent
 5          audit committee to report to as is required by
 6          the regulations.
 7                 The Division cannot stress enough the
 8          importance of an independent audit committee.
 9          The failure to comply with this regulation is
10          serious and compounded by the fact that this
11          went on for six months, and that the audit
12          committee is to this date does not appear to be
13          functioning properly.  This independent audit
14          committee requirement is a linchpin within our
15          regulatory system to ensure its integrity
16          regarding two critical functions of the casino,
17          surveillance and independent audit.
18                 The Division asks this Commission to
19          find the Tropicana in violation of the two
20          counts in the independent audit committee
21          complaint and submits that a substantial
22          six-figure fine would be appropriate.
23                 And finally, layoffs.  By all accounts
24          the Tropicana Atlantic City has terminated
25          nearly one quarter of their workforce in only
0032
 1          ten months.  The majority of this reduction was
 2          done through large-scale layoffs that cut
 3          across every department of the hotel and
 4          casino.  The driving force is behind this
 5          layoffs is not to be more efficient but to make
 6          more money.  Again, consistent with the
 7          corporate philosophy of Mr. Yung.
 8                 The decision to make these layoffs came
 9          even before June of 2007 before an assessment
10          or analysis could be made of Tropicana Atlantic
11          City.  It came on the road show when Mr. Yung
12          told potential investors he was going to cut
13          $40 million in payroll at the Tropicana
14          Atlantic City.  These cuts began within 30 to
15          60 days of the takeover of the Atlantic City
16          Tropicana.  And according to Mr. Yung, through
17          his own testimony, this was the numbers, the
18          dollars decision.  "I think it was just that
19          the business was declining so that we had to
20          make cuts."  These cuts came with no real
21          assessments or analysis of the needs of
22          Atlantic City Tropicana.  Mr. Yung made them
23          based on his own experience running other
24          casinos and in his "industrial engineering
25          background."
0033
 1                 This arrogant approach to the layoffs
 2          resulted in a number of mistakes.  A proposal
 3          to reduce the locksmith staff to one, not even
 4          know what a locksmith did, but making the cuts
 5          because he had never heard of a locksmith in a
 6          casino.  Slot attendants laid off, causing such
 7          a disruption in service that they had to hire
 8          some of them back.
 9                 The layoffs in the hotel side in
10          particular caused immediate disruption and
11          deterioration of the condition of the property.
12          As Fred Buro said, those cuts were too fast and
13          too deep.  There was an abrupt turndown in the
14          cleanliness and service of the property which
15          affected the casino as well as the hotel
16          operations.  And for all the talk of the
17          efficiencies being the driving force behind the
18          layoffs, it is clear that the driving force was
19          dollars.  Dollars that needed to be saved as
20          revenue decline.
21                 It appears that this became a vicious
22          cycle.  Layoffs caused the property to decline,
23          which caused the loss of patrons, which in turn
24          led to more layoffs.  Fred Buro testified that
25          for a variety of reasons, the forecast for
0034
 1          gross revenue was not being met.  Mr. Yung's
 2          position was in response to that was they
 3          needed more cuts to compensate, and they needed
 4          them faster.
 5                 The most telling is the piece of paper
 6          that Mr. Yung handed Fred Buro proposing
 7          layoffs in table games, marketing and player
 8          development tied to nothing but dollar figures.
 9                 One area of particular concern in the
10          layoffs was the security department.  A number
11          of disturbing things came out during the course
12          of this hearing regarding security staff
13          layoffs.  The Glenn Koehler report.  Glenn
14          Koehler, the Director of Security, Risk
15          Management, and Surveillance for the Tropicana,
16          Incorporated.  The company expert came to the
17          Atlantic City Tropicana in June of 2007 to
18          assess the security staffing situation.  And
19          according to two highly credible witnesses who
20          testified before this Commission, Mr. Koehler
21          told them verbally after his assessment that
22          the Tropicana Atlantic City needed additional
23          security personnel.  However, his report dated
24          just a few days later recommended cuts.  What
25          is disturbing about this is that a review of
0035
 1          his report showed a complete lack of
 2          understanding of New Jersey regulations and the
 3          security needs at the Tropicana Atlantic City.
 4          It also included a dollar figure.  How much in
 5          savings would be achieved by the proposed
 6          security cuts?  It is unclear where Mr. Koehler
 7          got these numbers to come up with this dollar
 8          figure in savings.  And as Mike Lyons, the
 9          person who was directing him, taking care of
10          him, helping him make the assessment testified
11          he did not provide them.  And that Mr. Koehler
12          adamantly denied having any contact with
13          corporate management over this report, the
14          contents.
15                 Even more disturbing is the fact that it
16          appears that Mr. Glenn Koehler, the Director of
17          Security, Risk Management, and Surveillance for
18          Tropicana perjured himself before this
19          Commission when he stated that he never told
20          anyone at the Atlantic City Tropicana property
21          that he recommended additional security staff.
22                 Security staffing was a major portion of
23          the 320 layoffs proposed in the August 7th,
24          2007, letter to the regulations.  Mr. Yung
25          testified that they proposed laying off the
0036
 1          proposed 350 people in August because "business
 2          was really declining very quickly."
 3                 Testimony of Kevin Preston regarding
 4          this round of layoffs indicated there was
 5          little or no assessments to come up with this
 6          320 number.  One very telling aspect of this is
 7          they were using the Showboat as a comparison to
 8          the Tropicana for security staffing needs.  Not
 9          because it was truly comparable in size or
10          layout to the Tropicana and, in fact, it was
11          not.  But because "it was the only information
12          I could attain."  The Division submits that it
13          was only in response to the regulators reaction
14          and intervention that the 320 layoffs were not
15          effectuated.
16                 Finally, at the conclusion of all this,
17          it is perhaps most disturbing -- most
18          disturbing is Mr. Yung's testimony regarding
19          the layoffs and the cuts.  "I firmly believe
20          that our layoffs that we made and our
21          reductions in no way affected service."
22                 At the outset of this hearing, if you'll
23          remember two weeks ago, the Division expressed
24          concerns in these areas that I have outlined.
25          Having evaluated the Applicant's responses and
0037
 1          presentations, the Division cannot recommend
 2          the issuance of a plenary five-year license to
 3          Tropicana.
 4                 However, based on the totality of
 5          circumstances, including the Applicant's
 6          representations, the welfare of the Tropicana's
 7          workforce, and the public interest, the
 8          Division will recommend the issuance of a
 9          shorter term license to Tropicana; one year,
10          with stringent conditions in all the areas of
11          concern.  We have prepared a list of proposed
12          conditions for licensure, which I will not read
13          into the record but which I will distribute at
14          the conclusion of my closing remarks.
15                 It is the Division's believe that the
16          course of action will provide Tropicana and
17          especially its holding companies with the
18          opportunity to correct and, we hope, improve
19          their operations within the regulatory
20          framework.
21                 This shortened license term will also
22          provide the Division and the Commission with a
23          mechanism to assess Tropicana's efforts in a
24          timely manner.  Be assured that it is the
25          Division's intention through ongoing
0038
 1          investigations and monitoring of relevant
 2          areas, in particular any conditions imposed, to
 3          address any instances of noncompliance.  We
 4          will also fully and completely report to the
 5          Commission all relevant information regarding
 6          those companies and qualifiers so that the
 7          Commission may take whatever licensing action,
 8          positive or negative, appears appropriate at
 9          the conclusion of the license period.
10                 Thank you.
11                 CHAIR KASSEKERT:  Thank you.
12                 Mr. O'Gara?
13                 MR. O'GARA:  Yeah.  Madame Chair,
14          members of the Commission, Director.
15                 As the Director says, it's been a
16          lengthy hearing.  We've been here for two
17          weeks.  And initially we started out, and I
18          think over the two weeks, we've heard a great
19          deal of testimony.  There's over a hundred
20          exhibits here.  And the question now is what
21          does all of that mean, and what is it, and
22          where do we go?  I think at the outset, we need
23          to take a step back.  And as I indicated in my
24          opening, we have to determine what, in fact,
25          this hearing was about.  And I submit to you
0039
 1          that it's about two core issues.  And the first
 2          is whether or not the Tropicana Entertainment
 3          and its affiliates and its qualified
 4          principals -- and that's principally William
 5          Yung -- have demonstrated to the standards
 6          specified in the Act that they are qualified in
 7          all respects to own and operate a casino hotel
 8          in Atlantic City.
 9                 And the second is, in addition to the
10          plenary qualification, whether or not the
11          casino license of the New Jersey facility,
12          which is the Tropicana, should be renewed for
13          the term permitted by the statute.  And I
14          submit to you that the proofs that you've heard
15          today indicate the answer to both those
16          questions is yes.
17                 The Tropicana has demonstrated that it
18          meets the plenary qualification renewal
19          criteria, which are largely embodied in
20          Sections 84 and 85 of the Act and regulations
21          that you promulgated pursuant to those sections
22          of the Casino Control Act.  And, essentially,
23          they are the establishment of its financial
24          stability, integrity, and responsibility and
25          also the demonstration and proof of its
0040
 1          requisite wherewithal and business ability and
 2          its integrity to operate a casino hotel
 3          consistent with the mandates that are outlined
 4          in the Act and the regulations.
 5                 I submit to you that what we've heard
 6          isn't about an admittingly bad 10 days that
 7          Tropicana may have had in March or April, and
 8          it isn't about patron complaints about bedbugs
 9          or dust.  What, in fact, this is about is those
10          core elements of the Casino Control Act which
11          are -- which can be summarized in four words
12          that begin with the letter C, and they are:
13          Compliance, competence, cash, and consistency.
14                 And I believe, if we turn to the first,
15          which is competent, the question is are we
16          competent?  Is Tropicana Entertainment
17          competent to operate the Tropicana in Atlantic
18          City?
19                 Are we compliant?  Are we understanding
20          of the regulatory system that's imposed upon us
21          here in New Jersey, and can we function and
22          meet its needs and requirements?
23                 And character.  Do we have the requisite
24          character?  Can you trust us?  Can you trust
25          Bill Yung and the team he's assembled, which
0041
 1          includes Donna More, Mark Giannantonio, Kevin
 2          Preston, and Tama Hughes?
 3                 And do we have the cash?  Are we
 4          financially stable?  Can we meet the vagaries
 5          of this market, which you've experienced over
 6          the last year and which, apparently, we'll
 7          continue to experience for some time as there
 8          is some equalization in the market.
 9                 First let's speak to competence.  The
10          company is led by Bill Yung.  His background
11          and experience -- he testified to you how he
12          began, where he came from, what he built.  He's
13          simply applying that experience along with the
14          knowledge he gathers through this industry to
15          operating a first-class hotel.  Ask yourself
16          would Bill Yung, a man who came from where he
17          came, and who's accomplished, what he has
18          accomplished, would he come here and
19          intentionally take the largest hotel in his
20          portfolio and try to run it into the ground?
21          It makes no sense.  Would he intentionally
22          eliminate positions with the known consequence
23          of failing?  I submit to you that he would not.
24                 Admittedly, as Bill told you on the
25          stand, there were mistakes that were made, and
0042
 1          as mistakes were made, they were rectified.
 2          When they dealt with issues such as slot
 3          attendants and response time, he realized and
 4          took the input that he got from his people and
 5          made the changes that were required.
 6                 Were there proposals that perhaps came
 7          from lack of understanding?  And one of them is
 8          one which apparently Commissioner Frulio and I
 9          have fenced about for some time, hopefully not
10          disrespectfully, but -- and there was a
11          proposal to eliminate locksmiths.  But you --
12          in fact, what happened?  The locksmiths were
13          not eliminated.  There was an understanding
14          that here they did something they don't do
15          other places.  There are obviously regulations
16          which differ here about how we deal with things
17          on the floor and locks.  And it's not so much
18          about hotel locks which work with cards but
19          it's about floor locks that are on the lock
20          boxes.  And when, in fact, that information was
21          reviewed and a decision was made, the decision
22          was made not to make those changes.  So I think
23          it's important we look at the whole record.
24                 And what is it that's been the result of
25          Bill Yung's 11 months here with his company?
0043
 1          There's been a 94 percent occupancy rate at the
 2          hotel.  Mr. Giannantonio's told you that the
 3          convention business continues in the largest
 4          convention facility in Atlantic City at the
 5          rates that it continued and, in fact, is
 6          improving.  And that he is dedicated to
 7          building that business beyond its already
 8          healthy levels.
 9                 There have been renovations on the
10          casino floor.  There have been restaurant
11          renovations that haven't been done for 18
12          years.  There's, in fact, been the renovations
13          of the south tower.  And everyone who was on
14          the stand was asked, but wasn't that planned
15          under the prior management?  Well, planning and
16          planning will do you nothing.  It, in fact, was
17          done with money from this company.  They had
18          been planning for those renovations for some
19          time.  Those rooms have not been renovated
20          since that hotel was constructed.  That hotel
21          was constructed in the early 1980s.
22                 There have been capital expenditures of
23          $30 million, which include the floor changes,
24          the machine changes the hotel renovations, the
25          restaurant renovations, the two restaurants who
0044
 1          hadn't been accomplished in two decades.  There
 2          have been additional amenities.  There have
 3          been improvements large and small.  And I
 4          submit to you that they exhibit an attitude and
 5          a degree of expertise in some areas which have
 6          improved the Tropicana.  And with respect to
 7          areas where there has been a learning curve,
 8          there has been an understanding and a learning.
 9          This facility is being improved substantially.
10                 The Director mentioned there were issues
11          about capital expenditures.  I ask you to
12          assess the testimony you heard that, in fact,
13          when the forecasts were prepared, they included
14          the maintenance Capex but did not include the
15          Capex which would take you to the quote-unquote
16          five-percent levels.  However, their practice
17          had been in the past to identify those projects
18          as part of an annual budget cycle and then to
19          then do the project.  There was a clear
20          indication that there will be additional
21          capital projects between -- beyond the
22          maintenance Capex.  And I would suggest to you
23          that's demonstrated by the $30 million which
24          has been spent in the first 12 months.
25                 Clearing, understanding how to forecast
0045
 1          under the regulation is important.  And,
 2          clearly, I think the message is understood.
 3          But I ask you to assess what was done with
 4          respect to those capital expenditures in the
 5          first year as you assess how there will be
 6          compliance with that regulation.
 7                 All of these changes that occurred are
 8          occurring with a group of people who have to
 9          lead the Tropicana going forward?  And who are
10          they?  It's Mark Giannantonio who is a person
11          from Atlantic City.  I think by anyone's
12          measure, a capable and experienced leader.
13          Someone who understands his property, someone
14          who has experience in both of the silos we
15          heard about that exist inside of a hotel, and
16          who looks forward to getting past what has
17          occurred and moving on to build and have the
18          business grow so that not only the Tropicana
19          but, in fact, the Tropicana along with the city
20          absorbs what's happened in Pennsylvania,
21          absorbs the changes that come with the social
22          change of a smoking ban, and continues to grow
23          the business so that Mr. Yung can then go ahead
24          and do what he told you his ultimate goal is,
25          which is, he's a developer.  He builds things.
0046
 1          He may manage them.  But the 80 hotels he has,
 2          he has built.  He owns the real estate, and he
 3          builds them.  He bought the Tropicana in Las
 4          Vegas as a development project.
 5                 Who else?  Kevin Preston.  Kevin's
 6          brought his casino analysis to this operation.
 7          He didn't arrive in town as some kind of
 8          hatchet man or someone to do damage.  He
 9          arrived as someone to tried to get his arms
10          around what was going on and to find answers to
11          problems and help grow the company.  There's
12          been comment about, and we've all heard the
13          testimony about, whatever happened when Mr.
14          Koehler was here and said something to Mr. Buro
15          and said something to Miss Hughes?  And then
16          had a report which appears to be at variance.
17          Mr. Preston was confronted with that.  And what
18          was Mr. Preston's reaction?  Mr. Preston's
19          reaction was to back up and say, hold it.  This
20          doesn't quite make sense.  I mean, people were
21          added.  They heard something.  Very credible.
22          There's a report that's at variance.  He didn't
23          take any action.  He went on to see what the
24          story was and try to get a solution that met
25          the needs of the Tropicana but that just didn't
0047
 1          respond to a report that was at variance to
 2          what his own people were telling him.  And,
 3          ultimately, he comes to us with experience from
 4          a wide range of markets.  I know he was asked
 5          about his program at Harrah's.  Most of his
 6          time was spent in the Chicagoland market.  It's
 7          a very large market.  Other than Nevada and New
 8          Jersey, the largest.  Many of the executives
 9          that perform here every day and who run these
10          properties came from that very market.
11                 Donna More.  Donna came to the company
12          in order to function as general counsel and to
13          ensure that there was compliance.  What
14          background does Miss More bring?  Ms. More
15          brings a background which includes a long
16          period of service in the private practice of
17          law and with public gaming companies and
18          private gaming companies representing their
19          interests and understanding the regulatory
20          systems in which they function.  Additionally,
21          she served as the initial administrator for the
22          Illinois Gaming Board.  Prior to that she
23          served as the United States Attorney as the
24          Cooke County attorney.  She comes with her
25          integrity.  She comes with her willingness to
0048
 1          undertake all these tasks, and she brings to
 2          you that reputation and commitment to get
 3          things done.
 4                 I submit to you that this group going
 5          forward are a group that you can rely on, you
 6          should rely on, and will not disappoint you.
 7                 We've also heard about patron
 8          complaints, and we've heard about them at some
 9          length today.  I would submit to you that the
10          71 patron complaints in this record are
11          probably not the only 71 patron complaints
12          which have occurred in the city of Atlantic
13          City over the last nine months.  Each of them
14          stands on their own legs.  None of them were
15          substantiated by someone who came in with a
16          specific picture, testimony.  They are, in
17          fact, complaints.  Many of them raise issues
18          which had to be addressed and were addressed.
19          But I suggest to you that as the testimony did,
20          that very often these complaints may bear as
21          much relationship to the number of occupied
22          room nights inside of a facility as they do to
23          anything else.  That is that a three-room hotel
24          which has three complaints in two weeks is one
25          statistical measure.  Another statistical
0049
 1          measure is 71 room complaints in a 2200 room
 2          hotel which is 94 percent occupied over a
 3          period of ten months.  That, in fact, each of
 4          them is something which Mr. Giannantonio has
 5          told you would be a concern of his, will be a
 6          concern of his, and going forward he, in fact,
 7          has indicated that they've tried to address
 8          issues that are raised as they do issues that
 9          are raised by any patron.
10                 Were there problems over the -- at the
11          Tropicana over the last year?  Mr. Yung
12          candidly told you yes.  The March and April
13          period, when there was a housekeeping problem
14          in public areas, is one which the Tropicana has
15          had to relive again through this hearing.  How
16          long a period was it?  It appears to have been
17          a week to 10 days, 14 days.  Does anyone
18          honestly think that some of the issues were not
19          directly caused by some type of action that was
20          taken by people who had a goal?  Does anyone
21          seriously think that there is not some type of
22          relationship between the graffiti and the
23          sabotage and the discontent about changes in
24          personnel policies and layoffs?  And some of
25          the actions which occurred?  Half of the public
0050
 1          area employees call out over a period of time.
 2          There's credible evidence that, in fact, some
 3          of the things that happened couldn't happen by
 4          accident.  That, in fact, were things that have
 5          to bear with them intention by the people who
 6          caused them.  And isn't it telling that after
 7          there's been some period of time and people
 8          came to understand schedules, and Mr.
 9          Giannantonio and his staff worked with these
10          people, that as we stand here today these
11          approximate don't reoccur?  That the workforce
12          has come to understand the policies and, in
13          fact, the goals that Mr. Giannantonio is trying
14          to set forth have been met, and the property's
15          now undoubtedly clean.  And we submit that it
16          tells you that while there may have been
17          difficulties that in this one area that the
18          adjustment to the staffing has been made and,
19          in fact, the problem has been addressed.
20                 This hearing is more -- it's about much
21          more than ten days in March and April.  And to
22          suggest that Mr. Yung and his company and Mr.
23          Giannantonio and his staff can't operate a
24          casino hotel based upon incidents that happened
25          in two days in April is an insult not only to
0051
 1          the -- Mr. Giannantonio and his staff, but it
 2          defies credulity and, in fact, is not reality.
 3                 You'll recall Mr. Buro, who is not a
 4          particular friend at this point in time of Mr.
 5          Yung's, I would suggest, said in this testimony
 6          that Bill Yung is an excellent hotel operator.
 7          He also indicated that Mr. Yung told him that
 8          the goal was to get things done but to comply,
 9          that he wanted to obey the law.  Does he, in
10          fact, know every nuance of every regulation and
11          every applicable portion of our statute?  No.
12          Does any CEO?  No.  Should he know more?  Yes.
13          Has he probably learned a lot more here over
14          the last two weeks?  Yes.  Does he have the
15          people now who can make sure that he has a full
16          understanding and a fulsome understanding of
17          what it is that you need in order to find him
18          to be compliant?  Yes.  Were there layoffs?
19          Yes.  Were they, in fact, an attempt to
20          increase efficiency and, yes, maximize
21          revenues?  Yes.
22                 Clearly, Mr. Yung invested $500 million
23          of his own money, significant amounts in excess
24          of a billion dollars of debt investor money.
25          There have to be returns.  He realizes that to
0052
 1          get those returns, you have to operate a
 2          facility.  No one is here to commit suicide.
 3          No one is here to suggest that they want to
 4          operate a facility in such a way that it is not
 5          successful.  Because that lack of success of
 6          the facility is the very lack of success of the
 7          goals that they seek, whether it be success as
 8          a company, their reputation, their return to
 9          their investing.  Clearly, Mr. Yung's goals are
10          the same as yours.
11                 What kind of corrections were
12          undertaken?  What mistakes did Mr. Yung make?
13          Clearly, he told you that when he saw what
14          happened at the slot attendants, in fact, slot
15          attendants were brought back.  Player
16          development.  Mr. Buro made changes in player
17          development.  Mr. Yung saw those changes, saw
18          changes in comp rates, saw changes in
19          promotional expenses, and he now sees the
20          consequences.  What has happened?  Programs to
21          bring back additional customers.  Programs to
22          bring back player development people and
23          establish a player development program that
24          will be successful in this city.  Programs to
25          put cash on the street in order to build share,
0053
 1          building share to then retain customers.  I
 2          think it's clear from not only the testimony of
 3          Mr. Giannantonio but the testimony of Mr. Yung
 4          that, in fact, the message was received.
 5                 The Director alluded to the issues
 6          involving security.  Were there proposals with
 7          respect to security that perhaps you may view
 8          as unrealistic?  Yes.  Were Mr. Buro, Ms.
 9          Hughes, and others given an indication that
10          changes were needed, and, in fact, was there
11          then a report which was contrary to those
12          suggestions?  Yes.  Did Mr. Koehler perjure
13          himself?  I didn't call Mr. Koehler.  I called
14          Mr. Yung.  And I suggest to you that Mr.
15          Koehler's report was never a deciding factor in
16          anything that happened at the Tropicana.  When
17          all the exhibits are sorted through, when all
18          the testimony is reviewed, any changes that
19          were made in the security staff at the
20          Tropicana after whatever missteps may have been
21          taken in trying to get to that place, were made
22          after consultation with the Division and the
23          Commission.  Mr. Koehler's report resulted in
24          nothing.
25                 Going forward, is there a need to be
0054
 1          sure that the security issues that we'll have
 2          in the future will be addressed?  Yes.  Has
 3          that message been conveyed?  Yes.  Is there
 4          understanding of that message?  I submit to you
 5          the answer is yes.
 6                 Much of what has been in the public
 7          domain about the issue of layoffs and changes
 8          at the Tropicana is not what we've heard in
 9          this room.  In the end you have an exhibit
10          which nets out the various terms that have been
11          used here which are quits, terminations,
12          layoffs, reductions in force.  In fact, there
13          have been 500 layoffs.  That's the net number.
14          In fact, some of those layoffs were in areas
15          where the changes had to be made.  In fact,
16          others were in areas where it resulted in a
17          diminution of service and a change was made.
18          People were brought back.  Going forward, Mr.
19          Yung has committed to you that, in fact, he
20          will do what is necessary to maintain the
21          business that he has and to grow that business
22          in order to be successful.
23                 Remember, Mr. Buro in his sworn
24          interview, had the same view Mr. Yung had at
25          the time of the acquisition.  The bidders
0055
 1          looking at this property determined there were
 2          substantial costs associated with the company,
 3          Aztar, which could be dealt with.  There was an
 4          office in Phoenix with $25 million worth of
 5          overhead.  There was a view that -- and Mr.
 6          Buro shared that view -- that there were
 7          overstaffing in areas of the Tropicana, and, in
 8          fact, those areas could be addressed and would
 9          be addressed in order to run a more efficient
10          yet first-class operation.
11                 In some cases perhaps some of those
12          areas were addressed too quickly and a lesson
13          was learned.  But there is no question that as
14          we stand here today, the Tropicana has overcome
15          whatever issues there were for a short period
16          of time in the early spring, and it operates as
17          the type of facility of which this city can be
18          proud and which helps to grow the market in
19          this city.
20                 I'd like to talk now a moment, if I
21          could, about some of the financial stability
22          issues which the Director mentioned, and she
23          mentioned the covenant breach.  That covenant
24          breach, he candidly admitted to you on the
25          stand, results in which is called an event of
0056
 1          default.  And with that, there have been
 2          negotiations with the bank.  What do you know
 3          about those negotiations with the bank?  You
 4          know that there are discussions that are
 5          ongoing.  You know that the bank is willing to
 6          have those discussions.  You are very aware
 7          that the borrower, that is Tropicana, is highly
 8          confident that they're going to arrive at a
 9          resolution which, number one, will provide them
10          with greater room in dealing with their
11          covenants as they deal with the market which is
12          changing, and that they are fully confident
13          that during the period of those negotiations
14          they have the liquidity to accomplish them.
15                 The unrebutted testimony here is there's
16          about a hundred million dollars in cash sitting
17          there to deal with any issues that come up
18          during the time negotiations go on.  And it's
19          fully anticipated at the conclusion of
20          negotiations, you have not only the hundred
21          million dollars of flexibility but of the
22          flexibilities afforded by the entirety of the
23          availability of the revolver, which is a
24          substantial line of credit.
25                 With respect to the -- to what will
0057
 1          happen with that money, you have the commitment
 2          from Mr. Yung that he looks forward to
 3          additional capital expenditures, and he has
 4          demonstrated his willingness to improve the
 5          facility by the improvements that were made
 6          over the last several months, some of which
 7          people have been waiting for for 15 years.
 8                 I ask you to remember that a lot of
 9          people have talked about what they plan to do.
10          They plan to go ahead and renovate rooms.  They
11          plan to renovate restaurants.  They plan to go
12          ahead and make their slot floor more
13          attractive.  But, in fact, all those things
14          stood at the Tropicana as plans and have been
15          accomplished within the last several months.
16                 Compliance.  I submit to you that the
17          record that you have before you supports a
18          finding that the company takes its compliance
19          obligations very seriously and consciously
20          seeks to fulfill them.  Mr. Yung sought out
21          Miss More who had represented him in Illinois
22          and brought her into the company and made her
23          the general counsel and gave her responsibility
24          for compliance.  She has a full-time director
25          of compliance.  She, in fact, has a full-time
0058
 1          general counsel here at Tropicana in Atlantic
 2          City.  There's an indication that there's
 3          another attorney being hired to deal with these
 4          issues.  You see every day Miss Hughes.  You've
 5          heard Ms. More.  You've heard her interaction
 6          with Mr. Yung.  You've heard of her
 7          accessibility to Mr. Yung.  I submit to you
 8          that a company that brings Donna More to the
 9          table and that has that kind of access to the
10          CEO is a company which is, in fact, and will be
11          compliant.
12                 Now, on the record we have a number
13          of -- in the Division report and in the
14          testimony a number of complaints that were
15          brought by the Division and warning letters.  I
16          ask you to look at them carefully.  They are
17          obviously matters which we have tried to deal
18          with.  But look at them again to see how and
19          when they occurred.  There's a citation in the
20          reports, you'll find, of $90,000.  That fine is
21          for, in fact, activity and conduct that
22          occurred when Aztar controlled his company and
23          Bill Yung was sitting in Cincinnati.  The DGE
24          cited 11 complaints.  Not all of them involved
25          mismanagement.  Five were for conduct when it
0059
 1          was Aztar ownership and management.  The DGE
 2          cited 21 warning letters.  There are really
 3          only 18, and 11 of them resulted from conduct
 4          which occurred when Aztar was, in fact, the
 5          owner and in control of this property.
 6                 The DGE said eight of the warning
 7          letters resulted from patron complaints.
 8          That's not the case.  There are eight letters
 9          that responded to private citizens, but they
10          were never sent to us, never saw them, and had
11          no idea what they were.
12                 Then there's the famous Bill Yung
13          parking lot conversation with Fred Buro.  Did
14          Bill Yung in a private conversation with one of
15          his executives address frustration with
16          regulators?  Yes.  Did he admit to you on the
17          stand that he expressed frustration with
18          regulators?  Yes.  You'll have to conclude for
19          yourselves whether he's the only CEO who's ever
20          had any frustration with regulators in New
21          Jersey.  I suggest to you perhaps he is not.  I
22          also tell you that he told you on the stand
23          that his frustration was his frustration but,
24          in fact, his goal and, in fact, the way he runs
25          his company is to obey the law, to comply with
0060
 1          your directive, and he has never shown you
 2          anything but respect.  He has never publicly
 3          commented or criticized anything any regulator
 4          did.  He's had laid bare a private moment of
 5          frustration, and I suggest to you that's an
 6          inappropriate basis on which to make a judgment
 7          about this man.
 8                 As we speak of Fred Buro, what did Fred
 9          Buro say about Bill Yung that would be
10          pertinent to the considerations you make?  He
11          told you that Bill Yung never instructed him to
12          make any cuts that would have violated
13          regulations or statutory requirements.  He told
14          him that the company's position on regulatory
15          compliance was the to comply under every
16          circumstance.  It was not to violate the
17          regulations at all.  He said that Bill Yung
18          told him he always wanted to be compliant.  He
19          didn't want to be in the position of disobeying
20          regulations or paying fines.  And I suggest to
21          you that these are the words of the same Mr.
22          Buro who had his share of criticisms of Mr.
23          Yung and the person who Mr. Yung relieved of
24          his responsibilities.
25                 At this point I have to take just a bit
0061
 1          of time and address the complaint which sits
 2          astride this case, which is the complaint
 3          involving the audit committee, which also, very
 4          candidly, is an issue which you have to
 5          consider in your overall assessment of the
 6          company, its licensure and its qualification.
 7          And I suggest it's in two parts.  One of them
 8          is the complaint as it stands on its own legs,
 9          and one of them is the effect it has and the
10          impact it has on the decision you make about
11          qualification and relicensure.
12                 There is no doubt that there is a
13          requirement at the time that the interim
14          authorization was granted for Tropicana
15          Entertainment to constitute an independent
16          audit committee which would undertake the
17          regulatorily required supervision for policy
18          purposes of both internal audit and the
19          surveillance department.  But as is clear from
20          all the voluminous information you have in
21          front of you and all the testimony you've
22          heard, that did not occur.  And, accordingly,
23          Tropicana, in fact, did not comport with that
24          condition.  And the allegation of the complaint
25          in a simple word is true.  And for that you'll
0062
 1          assess a penalty.
 2                 I ask you in assessing that penalty and
 3          in assessing the impact of that to look at the
 4          totality of those circumstances.  In fact, that
 5          there were, whether correct or not, good faith
 6          efforts to try to reach an accommodation with a
 7          difficult situation which was private company
 8          without an independent audit committee and
 9          constituting how you would create that.  There
10          were discussions back and forth.  And whether
11          they were timely or not does not change the
12          fact there wasn't an audit committee.  But as
13          you will look at that, look at the fact that
14          there were discussions and policy issues at
15          stake, whether or not you would have 51 percent
16          vested into a person, of the votes, and then
17          have private people or could be a single
18          person.  There's no one making up a story here
19          about the dialog.  There was a dialog, and I
20          submit to you it was done in good faith.  It
21          was done in every effort to comply.  But we
22          candidly admit to you that that compliance was
23          not achieved in a timely fashion.
24                 While those discussions do not excuse
25          what violation may have occurred, they
0063
 1          certainly demonstrate to you that there was not
 2          contempt.  There's not disregard.  There was
 3          honest effort to try to resolve our problem.
 4          And although unresolved, it certainly speaks to
 5          the fact that the company wants to go forward,
 6          and at that time wanted to go forward and
 7          resolve those issues, even though not
 8          accomplished in a timely fashion.
 9                 Finally, character.  And this is the
10          foundation of all the requirements that the Act
11          has regarding licensing.  There are no
12          allegations that have been made in this case
13          that cast serious aspersions on the character
14          of Mr. Yung or any of the other qualifiers.
15          You, in fact, have before you the reports that
16          were rendered by the Division of Gaming
17          Enforcement in which they recommended the
18          qualification of each and every one of them.
19                 There have been issues raised about Mr.
20          Yung and his knowledge of what happened in
21          Mississippi and whether or not CTRs were filed
22          in a casino he controlled.  And he candidly
23          told you, no, they were not.  And he candidly
24          told you the action taken was, the person
25          responsible was terminated.  I suggest to you
0064
 1          that while this is serious, it was handled by
 2          FIN CEN.  They, in fact, imposed a financial
 3          penalty.  There was obviously a recognition of
 4          the circumstances.  It was immediately
 5          remedied.  This certainly is not the first time
 6          that a casino company of this size or even
 7          larger has had a violation involving the Bank
 8          Secrecy Act.  And, in fact, it's not even the
 9          longest period of time a major casino company
10          went with having a rogue employee not filing
11          reports, and then finding himself having to
12          remedy that situation with FIN CEN and the
13          regulators.
14                 Mr. Yung talked with you about his
15          personal investments and his IRS audit which
16          resulted from his investment into a plan which
17          was brought to him by Grant Thorton, a large,
18          recognized public accounting firm.  That plan,
19          which in its complexity as best he could was
20          described to you, involved being able to move
21          money from offshore back to the United States,
22          and through a serious of transactions, minimize
23          the tax impact thereof.  In doing so, he took
24          not only Grant Thorton's advice, he sought
25          independent accounting advice and got a legal
0065
 1          opinion.  Those opinions indicated to him that,
 2          in fact, it was more likely than not that that
 3          transaction would be tax free.  And "more
 4          likely than not," as you you've heard in
 5          testimony, is a standard that the IRS said that
 6          you can rely on in dealing with these and
 7          getting good faith opinions.  Subsequently, the
 8          IRS as part of an overall view of tax
 9          avoidance, determined that this particular
10          transaction that Mr. Yung engaged in did not
11          avoid taxes and, in fact, it was tax
12          liabilities, penalties, and interest.  Mr. Yung
13          paid those.  Mr. Yung then has sought his
14          remedy with those who gave him.  Advice and
15          importantly to you, I think, when offered the
16          opportunity to settle for a substantial sum of
17          money did not accept a condition which would
18          have prevented him from speaking publicly about
19          the circumstances.  He would not sign a secrecy
20          agreement.  I think that tells you something
21          about Mr. Yung's character.
22                 He's given you his assurances under
23          oath.  You have seen him.  You know what he has
24          built.  I submit to you that all of this
25          evidence indicates that whether or not he may
0066
 1          have made a mistake here or there in certain
 2          personnel decisions he made, all of the
 3          assurances you have, all the evidence
 4          demonstrate beyond any shadow of a doubt that
 5          he possesses the character necessary to be a
 6          participant in this industry in New Jersey, as
 7          does Mr. Preston, Ms. More, Mr. Giannantonio.
 8                 This hearing has been the subject of a
 9          lot of talk.  It's been the subject of a lot of
10          reporting.  It's been the subject of a lot of
11          repetition of issues that are in documents that
12          are before you.  Much of that titillates the
13          public interest, to some degree may sell
14          newspapers.  But I submit to you that what
15          this, in fact, is about are those four C's:
16          Competent, compliance, character, and cash.
17          Financial stability.
18                 You'll decide this case based upon all
19          the evidence you heard.  You always have, and I
20          submit to you that what you've heard
21          demonstrates to you not only are Mr. Yung,
22          Tropicana Entertainment worthy of plenary
23          qualification, but they've demonstrated that
24          they've met the standard for renewal of their
25          casino license for the period permitted by the
0067
 1          Act.
 2                 Thank you very much.
 3                 CHAIR KASSEKERT:  Thank you.
 4                 While it has been indicated by both the
 5          parties, all the parties today, we have taken
 6          over two weeks of testimony.  We have had
 7          hundreds of exhibits.  Obviously, this is a
 8          very long and detailed record for the
 9          Commission to consider.  Having received all
10          these things and having received all these
11          exhibits, I'll declare now that the record is
12          closed.
13                 Let me thank the Division of Gaming
14          Enforcement and their agents for their hard
15          work and the work of Acting Director Maher on
16          this issue.  Thank Mr. O'Gara, thank Miss
17          Hertzig for her input, and especially thank my
18          staff, my General Counsel, Dianna Fauntleroy,
19          and especially Mr. Ingis and Mr. DiGiacomo for
20          the efforts that they have put into this.
21                 As I said, this record is quite
22          extensive.  The Commission will need time to
23          digest that and the transcripts.
24                 Accordingly, we plan to issue a decision
25          in this matter at our next regularly scheduled
0068
 1          public meeting, which is Wednesday, December
 2          the 12th.  The meeting starts at 10:30.  It
 3          will be an item on the agenda.
 4                 Having said this, is there any other
 5          procedural matters that need to be brought to
 6          our attention at this time?
 7                 Yes, Ms. Maher?
 8                 MS. MAHER:  Yes, Chair.  I did reference
 9          in my closing argument that the proposed
10          conditions, if I may submit those now.
11                 CHAIR KASSEKERT:  Thank you.  Yes.
12                 MR. O'GARA:  Thank you.
13                 MS. MAHER:  You're welcome.
14                 Thank you.
15                 CHAIR KASSEKERT:  Thank you.
16                 Any other procedure matters?
17                 MR. O'GARA:  No.  I would just -- I've
18          never seen Miss Maher's conditions.  I have no
19          doubt that they are well thought out.  If I
20          have any response, I'll submit it to her and a
21          copy to you in writing.
22                 CHAIR KASSEKERT:  Thank you.
23                 Mr. DiGiacomo?
24                 MR. DiGIACOMO:  Yeah, Chair,
25          Commissioners.  For the record, it probably
0069
 1          will be best to mark this as a Division exhibit
 2          and then move it in.
 3                 What's the next number, Mr. Nance?
 4                 MR. NANCE:  D-68.
 5                 MR. DiGIACOMO:  If that's acceptable to
 6          the parties?
 7                 MS. MAHER:  Yes.
 8                 CHAIR KASSEKERT:  Marked as D-68.
 9                 Any objection?
10                 MR. O'GARA:  No problem.
11                 CHAIR KASSEKERT:  All right.
12          Accordingly, I'll move that into evidence as
13          well, and make the record a little bit bigger.
14                 (Laughter.)
15                 CHAIR KASSEKERT:  Thank you.
16                 Having said all that, I'll entertain a
17          motion to adjourn.
18                 COMMISSIONER SOMMELING:  Motion to
19          adjourned.
20                 CHAIR KASSEKERT:  Is there a second?
21                 COMMISSIONER FRULIO:  Second.
22                 CHAIR KASSEKERT:  The motion has been
23          made and seconded.  All in favor?
24                 (Ayes.)
25                 CHAIR KASSEKERT:  Opposed?
0070
 1                 (No response.)
 2                 CHAIR KASSEKERT:  Motion carries.
 3                 Thank you.
 4                 (The Special Meeting was adjourned at
 5          2:40 p.m.)
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0071
 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:  December 4, 2007
23          My Commission Expires on
            July 10, 2009
24          ID No 2062871
25