1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 08-04-02 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, April 2, 2008 10 Atlantic City Commission Offices 11 Joseph P. Lordi Public Meeting Room - First Floor 12 Tennessee Avenue and Boardwalk 13 Atlantic City, New Jersey 08401 14 10:35 a.m. to 4:21 p.m. 15 16 17 Certified Court Reporter: Darlene Sillitoe 18 - - - - - - - - - - - - - - - - - - - - - - - - - - - 19 20 ATLANTIC CITY COURT REPORTING, LLC 21 CERTIFIED COURT REPORTERS AND VIDEOGRAPHERS 22 1125 ATLANTIC AVENUE, SUITE 416 23 ATLANTIC CITY, NEW JERSEY 08401 24 (609) 345-8448 www.accourtreporting.com 25 2 1 B E F O R E : 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 MICHAEL A. FEDORKO, COMMISSIONER MICHAEL C. EPPS, COMMISSIONER 4 RALPH G. FRULIO, 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 DIVISION OF GAMING ENFORCEMENT: 11 DEPUTY ATTORNEYS GENERAL BRIAN BISCIEGLIA, DEPUTY ATTORNEY GENERAL 12 TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL MARYJO FLAHERTY, DEPUTY ATTORNEY GENERAL 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S : 2 ITEM NO. 4 STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 3 TIMOTHY J. LOWRY, ESQ. FOR: BOARDWALK REGENCY CORPORATION 4 5 ITEM NO. 8-10 LEONARD J. DiGIACOMO, ASSISTANT 6 GENERAL COUNSEL MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL 7 PASHMAN STEIN, PC JUSTICE GARY S. STEIN 8 SEAN MACK, ESQ. FOR: JUSTICE STEIN AS CONSERVATOR AND 9 ADAMAR OF NEW JERSEY, INC., 10 SILLS, CUMMIS & GROSS KENNETH F. OETTLE, ESQ. 11 FOR INDENTURE TRUSTEE WILMINGTON TRUST COMPANY 12 ITEM NO. 11 13 LEONARD J. DiGIACOMO, ASSISTANT GENERAL COUNSEL 14 MARYJO FLAHERTY, DEPUTY ATTORNEY GENERAL PASHMAN STEIN, PC 15 SEAN MACK, ESQ. FOR: TRUSTEE/CONSERVATOR, JUSTICE STEIN 16 ITEM NO. 12 17 DIANA W. FAUNTLEROY, GENERAL COUNSEL MARYJO FLAHERTY, DEPUTY ATTORNEY GENERAL 18 PASHMAN STEIN, PC SEAN MACK, ESQ. 19 FOR: JUSTICE STEIN, PASHMAN STEIN, PC 20 ITEM NO. 13 STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL 21 MARYJO FLAHERTY, DEPUTY ATTORNEY GENERAL PASHMAN STEIN, PC 22 SEAN MACK, ESQ. FOR: ADAMAR OF NEW JERSEY, INC. 23 24 25 4 1 AGENDA PUBLIC MEETING NO. 08-04-02 2 APRIL 2, 2008, 10:35 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of 8 9 March 19, 2008 4 2 Applications for employee and casino service industry licenses: 5 17 applications for remand 9 9 13 applications granted 6 Casino service industry license Application of: 7 Bayshore Rebar, Inc. 10 11 Galway Development Corp. pursuant to 11 11 8 NJSA 5:12-92(c) Applications for initial and renewal of 9 Casino key employee license and for qualification: Kristina L. Klichkovich, 11 12 10 Megajackpots Area Supervisor for International Gaming Technology 11 Michael P. May, Vice President of 11 12 Table Games for Bally's Park Place, Inc. 12 Stephen W. Morro, Chief Operating Officer 11 12 for International Gaming Technology 13 3 Stipulations of settlement and consent agreement: 14 a) Ronald G. Szeliga (07-0492-ER) 13 14 b) Jamaine D. Farmer (07-0093-RC) 13 14 15 c) Fedor S. Banuchi (07-0734-EA) 13 14 d) Anthony J. Harris (07-0332-EA) 13 14 16 e) Mauricio Ruiz-Llanos (07-0440-ER) 13 14 f) Kenneth D. White (07-0638-ER) 13 14 17 g) Annamarie Donall (07-0505-RC) 13 14 h) Andre P. Hardy (07-0249-RC) 13 14 18 4 Stipulation of settlement in State v. 14 16 Boardwalk Regency Corporation 19 (d/b/a Caesars) 5 Reconsideration of Commission final orders 20 due to noncompliance of conditions therein: a) Ramel L. Gibson (07-0642-NC) 16 18 21 b) Tarquin D. Gray (07-0641-NC) 16 18 c) Delmirah E. Muhammad (07-0493-NC) 16 18 22 d) Joseph P. Surovick (07-0722-NC) adj. e) Sabu D. Townsel (07-0752-NC) 16 18 23 6 Petitions for early reapplication: a) Dennis J. Gentile (08-0050-RA) 19 21 24 b) Martha I. Hernandez (08-0094-RA) 21 23 (a/k/a Hernandez-Solorzano) 25 c) Jesse L. Spellman (08-0051-RA) adj. 5 1 CONTINUED AGENDA PUBLIC MEETING NO. 08-04-02 2 APRIL 2, 2008, 10:35 a.m. ITEM PAGE VOTE 3 7 Application for suspension in State 22 23 v. Raymond Gillin (08-0216-RC) 4 8 Petition of the Trustee and Conservator 24 115 for Adamar of New Jersey, Inc., for an 5 order authorizing the reconveyance of assets (PRN 0730802) 6 9 Notice of motion of Indenture Trustee 24 115 Wilmington Trust Company seeking leave 7 to intervene or participate in PRN 0730802 10 Petition of Indenture Trustee Wilmington 24 115 8 Trust Company under section 130.10 of the Casino Control Act (PRN 0800801) 9 11 Petition of the Trustee and Conservator 115 121 For Adamar of New Jersey, Inc., to extend 10 The 120-day period and for other relief (PRN 0860803) 11 12 Consideration of the application of 121 135 the Conservator and Trustee for the former 12 casino licensee, Adamar of New Jersey, Inc., for approval of fees for the Conservator/ 13 Trustee, his counsel, and certain consultants 13 Petition of the Conservator for the 135 137 14 former casino licensee, Adamar of New Jersey, Inc., to extend certain transactional waivers 15 16 17 18 19 20 21 22 23 24 25 6 1 E X H I B I T S : 2 ITEM NO. 2 DESCRIPTION EVD 3 EL-1 Remand for hearings 17 license X 4 applications EL-2 Grant 13 licenses X 5 6 ITEMS NO. 8 - 10 DIVISION 7 D-1 Letter, 3-4-08, to Justice Gary S. X 8 Stein from Kenneth J. Baronsky Re: Vice Chancellor Noble Decision, 9 Delaware Court of Chancery, in Wilmington Trust Company v. Tropicana 10 Entertainment, LLC 11 D-2 Tropicana Press Release, Re: X Update on Delaware Bondholder Litigation 12 CONSERVATOR 13 C-1 Letter, 3-26-08, to Dianna Fauntleroy X 14 From Justice Gary S. Stein Re: Adamar of New Jersey, Inc. 15 16 17 18 19 20 21 22 23 24 (Exhibits retained by Commission.) 25 7 1 (Public Meeting 08-04-02 was commenced 2 at 10:35 a.m.) 3 MR. NANCE: I'd like to read an opening 4 statement: 5 This is to advise the general public 6 that in compliance with Chapter 231 of the 7 Public Laws of 1975 entitled the "Open Public 8 Meetings Act," the New Jersey Casino Control 9 Commission on October 16th, 2006, filed with 10 the Secretary of State at the State House in 11 Trenton an annual meeting schedule. On October 12 16th, copies were mailed to 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. 17 The use of cellular telephones in the 18 public meeting room while the Commission is in 19 session is prohibited. 20 Any members of the public who wish to 21 address the Commission will be given the 22 opportunity to do so before the Commission 23 adjourns for the day. 24 Please stand for the Pledge of 25 Allegiance. 8 ITEM NO. 1 1 (The flag salute was recited.) 2 MR. NANCE: Good morning. 3 CHAIR KASSEKERT: Good morning. 4 MR. NANCE: Good morning. 5 The matters discussed in closed session 6 were: Employee and enterprise license matters. 7 The Commissioners approved the March 5, 8 2008, closed session minutes. 9 Litigation update regarding: Warren 10 Lackland and Lewis M. Springer, Jr., versus the 11 State of New Jersey and the Casino Control 12 Commission; 13 Gloria Ford versus at state of New 14 Jersey, Casino Control Commission, el al.; 15 Tyron J. Floyd versus Casino Control 16 Commission and Sand Hotel Casino; 17 Husain versus Casino Casino Control 18 Commission, et al.; 19 In the matter of petition of SD for the 20 removal from the voluntary self-exclusion list; 21 And the petition of Tropicana, et al., 22 for renewal of casino license. 23 Item No. 1, ratification of the minutes 24 of March 19th, 2008. 25 COMMISSIONER FEDORKO: Motion to 9 ITEM NO. 2 1 approve. 2 COMMISSIONER FRULIO: Second. 3 CHAIR KASSEKERT: The motion has been 4 made and seconded. All in favor? 5 (Ayes.) 6 CHAIR KASSEKERT: Opposed? 7 (No response.) 8 CHAIR KASSEKERT: Motion carries. 9 MR. NANCE: Item No. 2, application for 10 employee and casino service industry licenses. 11 This agenda item will be entered as Exhibit 12 List 1 and 2. 13 Exhibit List 1 consists of 17 14 applications for initial and/or renewal of 15 casino key and casino employee licenses. 16 The Division has objected to licensure. 17 COMMISSIONER FRULIO: Motion to remand 18 for hearings. 19 COMMISSIONER FEDORKO: Second. 20 COMMISSIONER EPPS: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 10 ITEM NO. 2 1 CHAIR KASSEKERT: Motion carries. 2 MR. NANCE: For consideration is the 3 casino service industry license application of 4 Bayshore Rebar, Inc. 5 The Division has objected to the 6 qualification of Joseph Merlino and Phyliss 7 Merlino and the CSI license application of 8 Bayshore Rebar, Inc. 9 COMMISSIONER FRULIO: Notion to remand 10 for hearing. 11 COMMISSIONER FEDORKO: Second. 12 CHAIR KASSEKERT: The motion has been 13 made and seconded. All in favor? 14 (Ayes.) 15 CHAIR KASSEKERT: Opposed? 16 (No response.) 17 CHAIR KASSEKERT: Motion carries. 18 MR. NANCE: Exhibit List 2 consists of 19 13 applications for initial and/or renewal of 20 casino key and casino employee licenses. 21 Staff and the Division have recommended 22 that these licenses be granted. 23 COMMISSIONER FRULIO: Motion to grant 24 applications. 25 COMMISSIONER FEDORKO: Second. 11 ITEM NO. 2 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Ayes.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: Motion carries. 7 MR. NANCE: For consideration is the 8 casino service industry license application 9 pursuant to NJSA 5:12-92(c) for Galway 10 Development Corp. 11 Staff and the Division have recommended 12 that this application be granted. 13 COMMISSIONER FRULIO: Motion to grant 14 application. 15 COMMISSIONER FEDORKO: Second. 16 CHAIR KASSEKERT: The motion has been 17 made and seconded. All in favor? 18 (Ayes.) 19 CHAIR KASSEKERT: Opposed? 20 (No response.) 21 CHAIR KASSEKERT: Motion carries. 22 MR. NANCE: For consideration are the 23 following applications for initial and/or 24 renewal of casino key employee licenses and for 25 qualification for Kristina Klichkovich and -- 12 ITEM NO. 3 1 excuse me -- Klichkovich, Megajackpot Area 2 Supervisor for International Gaming Technology, 3 Michael P. May, Vice President of Table Games 4 for Bally's Park Place, Inc., and Stephen W. 5 Morro, Chief Operating Officer for 6 International Gaming Technology. 7 The staff and the Division have 8 recommended that these applications be granted. 9 COMMISSIONER FRULIO: Motion to grant 10 the initial and key licenses and for 11 qualification. 12 COMMISSIONER FEDORKO: Second. 13 CHAIR KASSEKERT: Motion is made and 14 seconded. 15 This is a roll call vote. 16 MR. NANCE: Commissioner Frulio? 17 COMMISSIONER FRULIO: Yes. 18 MR. NANCE: Commissioner Fedorko? 19 COMMISSIONER FEDORKO: Yes. 20 MR. NANCE: Commissioner Epps? 21 COMMISSIONER EPPS: Yes. 22 MR. NANCE: Chair Kassekert? 23 CHAIR KASSEKERT: Yes. 24 MR. NANCE: The record will reflect that 25 the information is unanimous. 13 ITEM NO. 3 1 Item No. 3, stipulation of settlement 2 and consent agreements. When I call your name, 3 please come forward, stand behind the middle 4 table, spreading across the room so that you 5 may be seen: Ronald Szeliga, Jamaine Farmer, 6 Fedor Bauchi, Anthony Harris, Mauricio Llanos, 7 Kenneth White, Annamarie Donall, and Andre 8 Hardy. 9 CHAIR KASSEKERT: Has everyone whose 10 name been called come forward at this time? 11 FROM THE FLOOR: Yes. 12 CHAIR KASSEKERT: Okay. I'm going to 13 ask that you each state your name for the 14 record, starting with you, sir. 15 MR. FARMER: Jamaine Farmer. 16 MR. HARRIS: Anthony Harris. 17 MS. DONALL: Annamarie Donall. 18 CHAIR KASSEKERT: Thank you. 19 In a moment we're going to vote on the 20 stipulations which you've agreed to with the 21 Division of Gaming Enforcement. I'm going to 22 ask at this point if any of you wish to be 23 heard on your matter. You don't have to say 24 anything if you don't want. 25 Does anyone wish to be heard? 14 ITEM NO. 4 1 MS. DONALL: No. 2 MR. HARRIS: No. 3 CHAIR KASSEKERT: Thank you. 4 Mr. Bisciglia? 5 MR. BISCIEGLIA: Good morning, 6 Commissioners. 7 The Division has nothing further to add 8 and ask that the stipulations be accepted. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 COMMISSIONER FEDORKO: Motion to approve 12 stipulations. 13 COMMISSIONER EPPS: Second. 14 COMMISSIONER FRULIO: Second. 15 CHAIR KASSEKERT: The motion has been 16 made and seconded. All in favor? 17 (Ayes.) 18 CHAIR KASSEKERT: Opposed? 19 (No response.) 20 CHAIR KASSEKERT: Motion carries. 21 Thank you for coming and good luck. 22 FROM THE FLOOR: Thank you. 23 MR. NANCE: Item No. 4, stipulation of 24 settlement in State versus Boardwalk Regency 25 Corp. 15 ITEM NO. 4 1 Mr. Ingis? 2 MR. INGIS: Good morning, Madame Chair, 3 Commissioners. 4 Timothy Lowry is here on behalf of the 5 Boardwalk Regency Corp., and Tim Ficchi for the 6 Division. 7 CHAIR KASSEKERT: Mr. Lowry? 8 MR. LOWRY: Good morning, Chair, 9 Commissioners. 10 I think the Commission has a busy agenda 11 today, so I won't belabor the point. I just 12 want to add that Caesars and through its 13 affiliates and parent organizations are taking 14 responsible gaming very seriously. We require 15 all of our employees remain vigilant in their 16 efforts to prevent underage gaming, and we are 17 constantly looking for new initiatives and 18 measures to make that possible. 19 Thank you. If there's any further 20 questions, we rely on the brief. 21 CHAIR KASSEKERT: Thank you. 22 Any questions for Mr. Lowry? 23 Mr. Ficchi? 24 MR. FICCHI: Good morning, Chair, 25 Commissioners. 16 ITEM NO. 5 1 The Division has nothing further. We 2 respectfully request that you accept the 3 stipulation as drafted. 4 Thank you. 5 CHAIR KASSEKERT: Thank you. 6 Any questions for Mr. Ficchi? 7 COMMISSIONER FEDORKO: Motion to approve 8 the stipulation of settlement and impose a 9 civil penalty of $30,000 against Boardwalk 10 Regency Corporation for violation of Commission 11 regulations regarding underage gambling. 12 COMMISSIONER EPPS: Second. 13 CHAIR KASSEKERT: The motion has been 14 made and seconded. All in favor? 15 (Ayes.) 16 CHAIR KASSEKERT: Opposed? 17 (No response.) 18 CHAIR KASSEKERT: Motion carries. 19 Thank you. 20 MR. FICCHI: Thank you. 21 MR. LOWRY: Thank you. 22 MR. NANCE: Item No. 5, reconsideration 23 of Commissioner final orders due to 24 noncompliance of conditions therein for Ramel 25 Gibson, Tarquin D. Gray, Delmirah Muhammad, and 17 ITEM NO. 5 1 Sabu Townsel. 2 Item No. D has been adjourned, which is 3 Joseph Surovick. 4 CHAIR KASSEKERT: Thank you. 5 Miss Frigen? 6 MS. FRIGEN: Good morning, Madame Chair 7 and Commissioners. 8 Let me ask whether any of these 9 individuals whose been just named is here or 10 represented today? 11 (No response.) 12 MS. FRIGEN: Apparently not. 13 And according to our records, they are 14 not presently employed in the casino industry. 15 Following the Commission granting their 16 license applications they have become 17 noncompliant with reporting agreements that 18 they had reached with the Division of Gaming 19 Enforcement. They also failed to appear at 20 conferences and to respond to letters seeking 21 an explanation for their nonappearance. And 22 approximately one month ago we sent meeting 23 notices, letting them know their cases were 24 being represented to the Commission for 25 consideration today. 18 ITEM NO. 5 1 CHAIR KASSEKERT: Thank you. 2 Mr. Biscieglia, anything to add? 3 MR. BISCIEGLIA: Yes. Thank you, Chair. 4 Based on the failure to appear today, 5 the Division must ask that the respective 6 motions granting licensure to the persons 7 before us are vacated. 8 Once again, based on the failure to 9 appear, it's just another step in the line of 10 noncompliance with the Division. 11 Thank you. 12 CHAIR KASSEKERT: Thank you. 13 Any questions? 14 COMMISSIONER EPPS: Madame Chair, I move 15 that based upon the noncompliance with 16 reporting conditions set forth in their 17 respective orders that we vacate the existing 18 orders and deny their respective license 19 applications of the individuals listed in Item 20 5a, b, c, and e. 21 COMMISSIONER FEDORKO: Second. 22 CHAIR KASSEKERT: The motion has been 23 made and seconded. All in favor? 24 (Ayes.) 25 CHAIR KASSEKERT: Opposed? 19 ITEM NO. 6 1 (No response.) 2 CHAIR KASSEKERT: Motion carries. 3 Thank you. 4 MR. NANCE: Item No. 6, petition for 5 early reapplication for Dennis J. Gentile, 6 Martha Hernandez. 7 Item No. C, Jesse Spellman, has been 8 adjourned. 9 MS. FRIGEN: Let me ask whether Dennis 10 Gentile is present today? 11 (No response.) 12 MS. FRIGEN: Okay. Apparently he is not 13 here. 14 He filed his petition seeking permission 15 to reapply early for a license or hotel related 16 employment. By letter dated February 20th, the 17 Division has interposed an objection to this 18 petition in its entirety. 19 CHAIR KASSEKERT: Thank you. 20 Mr. Biscieglia? 21 MR. BISCIEGLIA: Thank you. 22 The petitioner was revoked by Commission 23 order on October 27th of 2004. This was based 24 on his failure to respond to the Division's 25 complaint of May 8th of 2003. This was based 20 ITEM NO. 6 1 on a March 7, 2003, arrest for swindling and 2 cheating, a very serious casino theft -- or 3 casino charge. He was found -- he was 4 convicted of this charge on December 8th of 5 2003. 6 Following this conviction in which he 7 was sentenced to three years' probation, he 8 violated on probation on four separate 9 occasions: February 13th, 2004, and June 25th, 10 2004, February 18th, 2005, and May 27th of 11 2005. 12 Subsequent to the Division's complaint, 13 the Respondent was convicted of aggravated 14 assault on May 25th of 2004. He was sentenced 15 to two years' probation on this charge and 16 again violated probation twice on May 18th of 17 2005 -- or excuse me, February 18th of 2005 and 18 May 25th of 2007. December 2nd of 2005 his 19 probation was revoked, and he was sentenced to 20 three years in state prison. 21 The Petitioner has supplied no character 22 evidence of any kind in support of his instant 23 petition. Based on the very serious criminal 24 matters and the failure to support his petition 25 with any evidence, the Division must ask that 21 ITEM NO. 6 1 the petition is denied in full. 2 Thank you. 3 CHAIR KASSEKERT: Thank you. 4 Any questions for Mr. Biscieglia? 5 COMMISSIONER FRULIO: Motion to deny Mr. 6 Gentile's petition to reapply early for a 7 casino employee license, a casino service 8 employee registration, or to work as a 9 noncredential hotel employee. 10 COMMISSIONER EPPS: Second. 11 COMMISSIONER FEDORKO: Second. 12 CHAIR KASSEKERT: The motion has been 13 made and seconded. All in favor? 14 (Ayes.) 15 CHAIR KASSEKERT: Opposed? 16 (No response.) 17 CHAIR KASSEKERT: Motion carries. 18 MS. FRIGEN: Madame Chair, with respect 19 to Martha Hernandez, let me ask whether she is 20 here. She advised she would be running just a 21 little bit late today. 22 Although, I should mention that this is 23 basically a noncontested early reapplication 24 petition. I don't know if you want to hear it, 25 and then when she comes in or -- 22 ITEM NO. 7 1 CHAIR KASSEKERT: I think we should just 2 hear it. 3 MS. FRIGEN: Okay. 4 CHAIR KASSEKERT: Okay. Thank you. 5 Mr. Biscieglia? 6 MR. BISCIEGLIA: The Division has no 7 objection to this petition. 8 CHAIR KASSEKERT: Thank you. 9 Any questions? 10 COMMISSIONER FEDORKO: Motion to grant 11 Miss Hernandez permission to reapply early for 12 a casino service employee registration and/or 13 to obtain employment early as a noncredential 14 hotel employee. 15 COMMISSIONER EPPS: Second. 16 CHAIR KASSEKERT: The motion has been 17 made and seconded. All in favor? 18 (Ayes.) 19 CHAIR KASSEKERT: Opposed? 20 (No response.) 21 CHAIR KASSEKERT: Motion carries. 22 MR. NANCE: Item No. 7, application for 23 suspension in State versus Raymond Gillin. 24 Miss Frigen? 25 MS. FRIGEN: Before we hear from the 23 ITEM NO. 7 1 Division, let me inquire whether Raymond Gillin 2 is present or represented? 3 (No response.) 4 MS. FRIGEN: Apparently not. 5 CHAIR KASSEKERT: Mr. Biscieglia, you 6 may procedure. 7 MR. BISCIEGLIA: Thank you. 8 The Division will rely on its petition. 9 This a serious theft charge. 10 Thank you. 11 CHAIR KASSEKERT: Thank you. 12 Any questions? 13 COMMISSIONER FEDORKO: Motion to grant 14 the Division's application to suspend Mr. 15 Gillin's casino employee license. 16 COMMISSIONER FRULIO: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Ayes.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: Motion carries. 23 We will be adjourning. 24 COMMISSIONER EPPS: Recessing. 25 CHAIR KASSEKERT: Recessing. Did I say 24 ITEM NO. 8 - 10 1 "adjourning"? Oh. Recessing. 2 (Laughter.) 3 (A recess was taken from 10:50 to 12:28 4 p.m.) 5 CHAIR KASSEKERT: Thank you. We'll go 6 back on the record. 7 Mr. Nance, Item No. 8? 8 MR. NANCE: Yes. Items No. 8, 9, and 10 9 are as follows: Petition of the Trustee and 10 Conservator for Adamar of New Jersey, Inc., for 11 an order authorizing the reconveyance of 12 assets; 13 Notice of motion of Indenture Trustee 14 Wilmington Trust Company seeking leave to 15 intervene or participate in PRN 0730802; 16 And Petition of Indenture Trustee 17 Wilmington Trust Company under Section 130.10 18 of the Casino Control Act. 19 Mr. DiGiacomo? 20 MR. DiGIACOMO: Chair, Commissioners, 21 good afternoon. If counsel could enter their 22 appearance on the record, please. 23 JUSTICE STEIN: Good afternoon. I'm 24 Gary Stein. I'm the trustee and Conservator, 25 and I'm appearing pro se on this petition. 25 ITEM NO. 8 - 10 1 And Sean Mack of the law firm of Pashman 2 Stein is also appearing with me. 3 CHAIR KASSEKERT: Thank you. 4 MS. FLAHERTY: Yes, Chair, 5 Commissioners. Mary Jo Flaherty, Deputy 6 Attorney General, with the Division of Gaming 7 Enforcement. 8 CHAIR KASSEKERT: Thank you. 9 Good afternoon, everyone. 10 Retired Justice Gary Stein serves as 11 trustee under an interim casino authorization 12 trust that became operative on December 12, 13 2007, when the Commission denied plenary 14 qualification to the holding companies of 15 former casino licensee Adamar of New Jersey, 16 Inc. Upon this his appointment as Adamar's 17 Conservator on December 19, 2007, Justice Stein 18 acquired title to the casino hotel. Justice 19 Stein seeks Commission approval to reconvey 20 that title to Adamar and does so now primarily 21 to address a recent ruling in a Delaware 22 Chancery Court matter that Wilmington Trust 23 Company, as Indenture Trustee for certain 24 unsecured noteholders, instituted against 25 several former Adamar affiliates and two of its 26 ITEM NO. 8 - 10 1 former qualifying individuals. 2 Wilmington Trust is before us seeking 3 permission to intervene or participate in 4 Justice Stein's petition to reconvey title, and 5 it has separately petitioned for relief under 6 Section 130.10 of the Casino Control Act. 7 Thus, before considering Justice Stein's 8 petition, we will hear and decide Wilmington 9 Trust's intervention motion. 10 Turning then to the argument on that 11 motion, I remind counsel not to stray into the 12 areas that Wilmington Trust would present if it 13 were allowed to intervene or participate. 14 Mr. Oettle? Do you want to proceed? 15 MR. OETTLE: Thank you, Madame Chair. 16 CHAIR KASSEKERT: Yup. 17 MR. OETTLE: I'm here on behalf of 18 Wilmington Trust Company as the Indenture 19 Trustee for the Tropicana Entertainment 20 subordinated debt, and we have brought a motion 21 for leave to intervene or participate in 22 Justice Stein's petition, and we have brought a 23 separate petition, as the Chair indicated, 24 under a separate section of the Act. 25 The subject matter of both our motion 27 ITEM NO. 8 - 10 1 and our petition, separate petition is the same 2 as the subject matter of Justice Stein's 3 petition. Our goal is simply to be heard on 4 that subject. And because our goal is fairly 5 directed and focused, I think that the only 6 matter the Commission needs to address and we 7 are prepared to step aside from everything else 8 is the question of whether we can participate 9 in the Justice's petition. If we are permitted 10 to, there would be -- there may not be no need 11 for us to intervene. If we are permitted to 12 participate in the Justice's petition, there is 13 probably no need for us to have our separate 14 petition because it's the exact same subject 15 matter. 16 That said, I have with me two gentlemen 17 from the firm of Brown Rudnik in New York for 18 whom I've made a separate pro hac vice 19 application. Edward Weisfelner, Sigmund 20 Wissner-Gross. They are here should the 21 Commission be interested in the knowledge that 22 they have. Mr. Weisfelner is an insolvency 23 bankruptcy expert. Mr. Wissner-Gross is in 24 control of the Indenture Trustee litigation in 25 Delaware. Both have a subject matter 28 ITEM NO. 8 - 10 1 familiarity which could be of use to the 2 Commission. 3 If there's any need for a witness, then 4 I would raise the question of intervention or 5 our separate petition so that we could put a 6 witness on. If the Commission has no desire 7 for a witness, there's probably no need for us 8 to either intervene or have a separate 9 petition. Because all we wish to do is be 10 heard on the question of whether the Trustee 11 Conservator should be authorized to reconvey 12 the Adamar assets. 13 CHAIR KASSEKERT: Thank you, Mr. Oettle. 14 Justice Stein? Mr. Mack? 15 JUSTICE STEIN: Can we now proceed, 16 Madame Chair, to address the petition itself? 17 Or just -- 18 CHAIR KASSEKERT: Yes. 19 JUSTICE STEIN: Or just this issue of 20 intervention? 21 CHAIR KASSEKERT: Just this issue. 22 JUSTICE STEIN: We indicated in our 23 reply brief that we thought the Division of 24 Gaming Enforcement's observations were sound 25 that intervention was not necessary, and we 29 ITEM NO. 8 - 10 1 leave to the Commission the determination of 2 the request to participate. That's 3 satisfactory to us. 4 CHAIR KASSEKERT: Thank you. 5 Miss Flaherty? 6 MS. FLAHERTY: Yes, Chair. 7 You have our report of March 20th, and 8 in that report the Division took a position 9 that Wilmington Trust Company has an interest, 10 but that interest is not so special or unique 11 as to mandate intervention. Therefore, we 12 would oppose intervention but would not oppose 13 participation. 14 Thank you. 15 CHAIR KASSEKERT: Thank you. 16 Let me ask if any of the Commissioners 17 have any questions at this point? 18 COMMISSIONER EPPS: I do. 19 CHAIR KASSEKERT: Commissioner Epps? 20 COMMISSIONER EPPS: Mr. Oettle, just 21 briefly, can you address the issue that 22 distinguishes -- everyone here has said 23 intervention, and even you -- intervention is 24 probably not necessary or a step that we should 25 take, but you seek to participate. How is 30 ITEM NO. 8 - 10 1 participation different in your regard than 2 anyone else who might seek to participate, and 3 why is it necessary for us to decide the matter 4 before us with -- as opposed to us proceeding 5 without your participation? 6 MR. OETTLE: Are you asking what would 7 we add to the proceeding? 8 COMMISSIONER EPPS: Right. 9 MR. OETTLE: We would add a perspective 10 of a group of -- a significant group of 11 investors in the Tropicana entities, the 12 unsecured investors. This is a perspective 13 that the Division doesn't bring and certainly 14 is a perspective that the Trustee doesn't 15 bring. It is a way, as you can see, if you've 16 read the papers submitted before you, there's a 17 very sharp disagreement between our point of 18 view of the function of bankruptcy in 19 connection with the Tropicana entities and the 20 trustee conservator's view of the function of 21 bankruptcy or the risks of bankruptcy in 22 connection with the present financial 23 difficulties of those entities. 24 If you want that perspective, we bring 25 it. And if you don't allow us to participate, 31 ITEM NO. 8 - 10 1 no one else will bring that perspective. And 2 that -- the other criteria for participation 3 would be that we have a significant interest. 4 Certainly, we do with face value of $960 5 million of notes out there. We represent over 6 80 percent of those noteholders. 7 And we certainly won't complicate the 8 proceedings. Our papers have been filed, and 9 the only other presentation would be by me 10 today unless the Commission were desirous of 11 having a witness. I have two gentlemen here 12 who could serve in that capacity. 13 So it's really a different perspective 14 that we would bring that you would not 15 otherwise get unless you allow us to 16 participate. And the cost is very small. We 17 have filed our papers already, and I will speak 18 briefly, and that's about it. 19 COMMISSIONER EPPS: I guess my question 20 is if this matter turns narrowly on the Casino 21 Control Act and what we feel should or should 22 not be done with respect to the actions that 23 we've previously taken, do we even get to the 24 unique perspective that you bring? 25 MR. OETTLE: Well, depending on the way 32 ITEM NO. 8 - 10 1 you interpret the Casino Control Act, you could 2 have a very significant impact on this 3 particular creditor of the casino, Adamar. And 4 we are a creditor of Adamar because Adamar has 5 guaranteed this entire debt issue. And that's 6 why we -- part of the reason we brought a 7 petition under Section 130.10 of the Act which 8 enables us, if we feel that there's a potential 9 breach of fiduciary duty by the Conservator, to 10 ask the Commission to take a look at the 11 actions of the Conservator for our benefit. 12 So what -- by asking to participate in 13 the Justice's petition, we are essentially 14 asking for the same relief as if we were 15 pursuing that particular petition. But we're 16 willing to step aside from that petition so as 17 not to create additional legal issues. Because 18 all we really want to do is be heard. 19 We -- if you interpret the Act in a 20 certain way, it could have a very negative 21 effect, in our view, on us and to the degree 22 where we feel we would have been unjustly 23 treated by the Conservator. And, thus, 24 exercise our right to bring a petition before 25 the Commission looking for relief. So 33 ITEM NO. 8 - 10 1 effectively we're doing the same thing as we 2 would be doing under that section of the Act as 3 a creditor of the casino. 4 COMMISSIONER EPPS: Okay. That was it. 5 CHAIR KASSEKERT: Let me ask Justice 6 Stein, Ms. Flaherty, if you have any further 7 comments? 8 JUSTICE STEIN: No. 9 CHAIR KASSEKERT: Okay. Recess? 10 (A recess was taken from 12:37 to 12:45 11 p.m.) 12 CHAIR KASSEKERT: Thank you. We'll go 13 back on the record. 14 Thank you. 15 Counsel, in their oral presentations and 16 written submissions, correctly set forth the 17 standards under our regulations and the Uniform 18 Administrative Procedure rules that apply to 19 our consideration of Wilmington Trust's motion 20 to intervene. Suffice it to say, Wilmington 21 Trust does not contend that it has a statutory 22 right to intervene. Further, Wilmington Trust 23 essentially concedes that intervention is 24 inapposite, given the nature of the Justice's 25 petition and Wilmington Trust's desired role in 34 ITEM NO. 8 - 10 1 it. Moreover, the Division opposes the 2 intervention request to which the Commission 3 gives due consideration. 4 As for participation, in our discretion, 5 it would afford the opportunity to submit 6 written materials, oral argument, or both. 7 Unlike intervention, the Division here voices 8 no opposition and Justice Stein apparently is 9 in accord. Nevertheless, the Commission must 10 be satisfied that the requisite standards for 11 participation are met. 12 Although Justice Stein posits that 13 eventually he will need to reconvey title to 14 Adamar in order to facilitate his ultimate sale 15 of Adamar's stock to a new buyer, he advocates 16 doing so now. In his view, reconveying title 17 to Adamar will cure a default that the Delaware 18 court has found exists under the note 19 indenture, thereby forestalling a cascade of 20 events, including possibly a bankruptcy filing 21 that he predicts will follow if the default is 22 not cured by April 20, 2008. 23 Whether and how the default is cured are 24 simply not cognizable matters for the 25 Commission. Certainly, the Commission is not 35 ITEM NO. 8 - 10 1 so naive as to believe that its decisions have 2 only have regulatory consequences without 3 causing any broader economic or other 4 repercussions. Any such effects that are 5 incidental to its strict adherence to the 6 dictates of the Casino Control Act cannot be 7 avoided. However, the Commission otherwise has 8 endeavored scrupulously to avoid insinuating 9 itself in extra-regulatory matters between 10 private parties. 11 In any event, if the default is not 12 cured, Wilmington Trust apparently derives 13 certain contractual rights under the indenture. 14 Thus, for purposes of its litigation strategy 15 in Delaware, Wilmington Trust argues that it 16 has an interest in the outcome of Justice 17 Stein's petition which, if granted, potentially 18 would effect such a cure. 19 Certainly, the Commission has afforded 20 participation in other cases where economic 21 interests are involved. For instance, 22 unsecured creditors committees have been 23 allowed to participate in renewal proceedings 24 and financial stability matters involving a 25 casino licensee undergoing bankruptcy 36 ITEM NO. 8 - 10 1 reorganization. However, in this case Adamar 2 is no longer a casino licensee. Further, the 3 outcome of Justice Stein's petition essentially 4 turns on an interpretation of the Casino 5 Control Act. Although Wilmington Trust has no 6 particular expertise in that regard, the 7 Division certainly does, and it has made its 8 position known. Thus, Wilmington Trust is not 9 particularly likely to add constructively to 10 the case without confusing the matter. 11 Accordingly, I move to deny Wilmington 12 Trust's intervention and participation. 13 COMMISSIONER EPPS: Second. 14 CHAIR KASSEKERT: The motion has been 15 made and seconded. All in favor? 16 (Ayes.) 17 CHAIR KASSEKERT: Opposed? 18 (No response.) 19 CHAIR KASSEKERT: Motion carries. 20 With that disposition, I suggest that we 21 hold in abeyance Wilmington Trust's separate 22 petition under Section 130.10 while we address 23 the merits of Justice Stein's petition. 24 Aside from the written materials already 25 submitted from the Justice and the Division, 37 ITEM NO. 8 - 10 1 which alone constitute the record in this 2 matter, are there any additional exhibits to 3 the parties that wish to introduce at this 4 time? 5 Miss Flaherty? 6 MS. FLAHERTY: Yes. Chair, I'd like to 7 introduce Division exhibits which have been 8 marked as Exhibit D-1 and D-2. 9 CHAIR KASSEKERT: Would you identify 10 those for the record? 11 MS. FLAHERTY: Yes. The first is a 12 letter dated March 4, 2008, to Justice stein 13 from Kenneth Baronsky, regarding the Delaware 14 Court, Chancery Division. 15 And the second document is a Tropicana 16 press release regarding the Delaware bondholder 17 litigation. 18 CHAIR KASSEKERT: Thank you. 19 Mr. Nance, have you marked the exhibits? 20 MR. NANCE: Yes. 21 CHAIR KASSEKERT: Thank you. 22 Any objection to admission? 23 JUSTICE STEIN: No. 24 CHAIR KASSEKERT: Seeing none, I will 25 enter them as exhibits. 38 ITEM NO. 8 - 10 1 Okay. If there are no more procedural 2 matters, Counsel may now address the agenda 3 item. 4 Justice Stein? 5 JUSTICE STEIN: Yeah. I was just 6 wondering whether it was necessary to mark as 7 an exhibit my letter to your General Counsel, 8 Dianna Fauntleroy, of March 26th that relates 9 to D-1. It's immaterial to me. I know the 10 Commission has it as part of its records. If 11 you'd like it marked, we have a copy here. 12 CHAIR KASSEKERT: Why don't we mark it? 13 JUSTICE STEIN: It's up to you. 14 CHAIR KASSEKERT: Mr. Nance? 15 MR. NANCE: Mark it as C-1, Conservator 16 exhibit. 17 JUSTICE STEIN: Okay. May I begin? 18 CHAIR KASSEKERT: Sure. Let me -- 19 MR. NANCE: Are there any sealing 20 requests in regard to any of these documents? 21 CHAIR KASSEKERT: Yeah. Let me ask. 22 Are there any sealing requests with 23 respect to any of these items? 24 JUSTICE STEIN: Not from me. 25 MS. FLAHERTY: I have none, Chair. 39 ITEM NO. 8 - 10 1 CHAIR KASSEKERT: Thank you. 2 Justice, you may proceed. 3 JUSTICE STEIN: Okay. First day in 4 about a month that I didn't bring my lunch, and 5 I'm sorry now. 6 Madame Chair and members of the 7 Commission, I'm not sure that all of us 8 appreciate the fact that I would be here, if 9 not today two weeks from today or four weeks 10 from today, whether or not the bondholders ever 11 had filed suit in Delaware. I would be here 12 because some bright lawyer representing the 13 eventual buyer of the Tropicana before the 14 closing of the sale would have read the law 15 more carefully than I had before Judge Noble 16 rendered his decision and realized that Adamar 17 of New Jersey didn't own its assets, that I 18 owned them. And so if the Delaware litigation 19 had never been filed, I would have to come 20 before you, before the closing and say to you, 21 members of the Commission, we're selling 22 Adamar's stock. Nobody will buy Adamar's stock 23 unless Adamar owns its assets. Under the 24 Casino Control Act conservatorship provisions, 25 I own Adamar's assets, and I need to give them 40 ITEM NO. 8 - 10 1 back. So I have to acknowledge that before 2 Vice Chancellor Noble wrote his opinion and I 3 read it one weekend early in March, I didn't 4 appreciate. Even though I had read the 5 Commission's order carefully, I didn't 6 appreciate that the statute by operation of law 7 vested me with title to the assets. 8 And so to a certain extent, I think the 9 Commission's disposition of the Wilmington 10 Trust application to intervene and participate 11 is correct in the sense that I would be here 12 with or without. I would have to be here. 13 Because we couldn't sell the stock of Adamar 14 until the assets -- the casino slot machines, 15 the roulette wheels, the crap tables, the 16 mattresses -- until the assets are returned to 17 Adamar. We couldn't sell the stock. 18 And for the Commission's information, 19 the stock purchase agreements are going to be 20 distributed in draft to the prospective bidders 21 within the next couple of days. And as Michael 22 Blair's certification represented to you, we're 23 going to sell stock. That's the proposal. 24 That's always been our intention. And so I 25 think it's important for us all to understand 41 ITEM NO. 8 - 10 1 that this application would have been made 2 irrespective of the lawsuit. 3 There's another aspect of the 4 application that I think we should focus on, 5 and I've spent a little time the last few days 6 doing what I call street research into the 7 Casino Control Act. The conservator provisions 8 of the Act were passed back in 1978, and at 9 that time the ICA trust provisions had not been 10 enacted. They didn't come into the statute 11 until 1987. And let me -- let me tell you 12 where I'm going before I get there, and then 13 explain to you how I got there. 14 There's an oversight in the statute. 15 The legislature, as I know from my background, 16 but as you may or may not know, occasionally 17 drafts statutes imperfectly. And what I'm 18 about to explain to you is that nobody in the 19 legislature ever thought about how the ICA 20 trust provisions of the law would work if at 21 the same time there was an operative ICA 22 trustee of a disqualified applicant in a 23 conservator of a suspended licensee. Nobody 24 ever thought about it. And so when you look at 25 the two statutes carefully, you'll understand 42 ITEM NO. 8 - 10 1 what I'm about to tell you. They were never -- 2 nobody ever realized that if they worked 3 together, the provision in the conservator 4 statute that vests title to the assets and the 5 conservator shouldn't apply. 6 And let me go back now to 1978. The 7 conservatorship statute was passed in the very 8 early days. And, of course, one of the early 9 applicants for casino licensing, I believe, was 10 Resorts, which I think, although it's 11 identified as a company owned by Mr. Crosby, 12 was a public company in those days. And so if 13 you put yourself in the shoes of the people who 14 wrote the law, you'd realize that if you needed 15 to take over a licensee, you couldn't take over 16 its stock, especially if the stock were held 17 publicly. So the only way a conservator could 18 get control of a licensee's business would be 19 to take control of its assets. And so the 20 conservatorship statute has this provision. 21 And it's an interesting provision. It's in 22 three sections of the conservatorship Act. 23 What it says in 130.1 is that in the discretion 24 of the Commission, it may appoint and 25 constitute a conservator to take over and into 43 ITEM NO. 8 - 10 1 his possession and control -- and just listen 2 to this language -- all of the property and 3 business of the licensee relating to the casino 4 and the approved hotel. And I looked at that 5 language, and I said to myself, why in God's 6 name does it say, "take into control the 7 business of the licensee relating to the casino 8 and the approved hotel"? And that same 9 language appears in 130.2, and it appears in 10 130.2C. And then somebody who was around in 11 the early days reminded me that when Resorts 12 make its first application, there was the 13 Chalfonte Haddon Hall Hotel, and it was only 14 the -- I think it was just the Chalfonte part 15 that became the casino, and the Haddon Hall 16 which was across the driveway -- 17 MR. HENEGHAN: Other way. 18 JUSTICE STEIN: The other way around? 19 Thanks, Dan. 20 But in any event, somebody reminded me 21 that that was the case. And so the part that 22 did not become the casino was, in effect, 23 noncasino property. And so when they wrote the 24 statute and said what the conservator should do 25 when he was appointed, it said he should take 44 ITEM NO. 8 - 10 1 into his control the business of the licensee 2 but only relating to the casino and the 3 approved hotel. 4 And so with that background, I also 5 learned that in those days, in the late '70s, 6 that was a temporary permit law that would 7 apply to corporations that were requiring the 8 stock of a licensee. But that law had a couple 9 of flaws, one of which was that it didn't work 10 well with the corporation that acquired most 11 but not all of the stock. 12 And so if you fast forward nine years 13 later to 1987, the ICA trust provisions were 14 put in. And the ICA trust provisions define 15 the property that's subject to the trust. And 16 the section is 5:12-95.12. The property that's 17 subject to the trust, under the ICA trust 18 provision, is the stock of the licensee. That 19 is the stock that's being sold. So if you're 20 selling 80 percent of the stock of a licensee, 21 what goes into the trust is the 80 percent of 22 the stock. In fact, the statute and the trust 23 agreement that I was a party to defines the 24 trust property as the stock of the licensee. 25 Now, I said before that when they 45 ITEM NO. 8 - 10 1 drafted the ICA trust provisions in 1987, 2 nobody ever thought about what would happen. 3 And I think this is the first time. What would 4 happen if you had an ICA trustee that was 5 operative and at the same time had a 6 conservator? And the reason I know that nobody 7 thought about it is that the ICA trust 8 provisions direct the ICA trustee to sell the 9 stock of the licensee. That's 5:12-95.14E. 10 Otherwise dispose of all property subject to 11 the trust. What's the property subject to the 12 trust? The stock. 13 But the conservatorship provisions, 14 5:12-130.2C directs the conservator to dispose 15 of all the property of a former licensee 16 relating to the casino, and that refers back to 17 130.2A, and property in the conservatorship 18 statute is the assets. And the Commission 19 actually recognized that in the conservatorship 20 order. Because in that order it says that, as 21 Conservator, I should endeavor and be 22 authorized to dispose of the equity securities 23 of Adamar or all of the assets of the former 24 casino licensee in accordance with the trust 25 statute and the conservatorship statute. 46 ITEM NO. 8 - 10 1 It never dawned on the drafters to put 2 in a provision, and if the Commission would 3 like it, I actually drafted one that would fix 4 the Act, and it would say something to the 5 effect that provided, however, that in the 6 event the casino licensee whose stock is 7 subject to the operative trust agreement is 8 subjected by the Commission during the 9 operative period of the trust to a 10 conservatorship pursuant to 5:130.1, the 11 conservator should not become vested with title 12 to the property of the former casino licensee. 13 Why? Because you don't need it. You don't 14 need to own the casino property if you're a 15 trustee. Because you control the casino 16 property by ownership of the stock. 17 Let me interrupt myself to remind the 18 Commission that I would like a little time to 19 respond if I need it. All right. 20 CHAIR KASSEKERT: Sure. 21 JUSTICE STEIN: And so this problem that 22 we have will occur again if there's ever a time 23 that the Commission has an operative trustee 24 and conservator. 25 As a matter of fact, I understand that-- 47 ITEM NO. 8 - 10 1 I'm not -- I'm not predicting disqualification 2 or revocation in the Harrah's application, but 3 I think in Harrah's there may be a license 4 that's coming up for renewal and a 5 qualification of an acquiring company. 6 But some day it may happen again. And, 7 candidly, I think the statute ought to be 8 fixed. But if it isn't fixed, I think the 9 Commission could deal with it differently next 10 time. In your order this time appointing me as 11 Conservator, the Commission obviously focused 12 on the statute but said I don't have to take 13 possession of the assets. In fact, you said 14 even though I get title to the assets, I don't 15 have to take possession of them, and I 16 shouldn't take possession of them unless I ask 17 the Commission. And so if you think about it, 18 I suppose the Commission could have gone a step 19 further and said, notwithstanding the statute, 20 we order that title to the assets is restored 21 to the licensee nunc pro tunc. Could have done 22 that to take care of this little problem. 23 But it's not unusual that legislation is 24 not perfect. And what a regulatory agency like 25 yours is supposed to do is make sense out of a 48 ITEM NO. 8 - 10 1 statute. We cited in our brief the provisions 2 of the Casino Control Act that empower you to 3 take any action that's necessary to discharge 4 your regulatory duty. I suppose the broadest 5 provision in the statute is 5:12-75 that allows 6 you to exercise any proper power or authority 7 necessary to perform the duties assigned to you 8 by law. And the conservatorship statute also 9 specifically authorizes you to modify or alter 10 the provisions of the conservatorship. 11 And so this is what a regulatory agency 12 is supposed to do when there's a flaw or 13 omission or oversight in a statute. And this 14 Commission, because of its wonderful reputation 15 is probably the best regulatory casino agency 16 in the country, needs to make sense out of a 17 statute that was perfectly well intended but 18 has this little blip in it. 19 And so with that as background, I just 20 want to repeat what I -- what we've said very 21 clearly in our brief. There are two reasons 22 why we're asking you to do this. One of the 23 reasons would be relevant whether or not there 24 was a bondholders' suit. And the second 25 derives from the bondholder suit. 49 ITEM NO. 8 - 10 1 The first reason is that we need the 2 assets to go back. We expect to have a signed 3 purchase agreement by the end of April, if not 4 before. And, interestingly, the cure date of 5 April 20th is right around the time that we 6 expect our second round of bids to come in. 7 We'll be circulating the draft stock purchase 8 agreement to the buyers. We need to get this 9 cleared up. Could you clear it up as of the 10 date of closing? Yes, you could. But there's 11 no earthly reason why not to do it before. 12 The second reason is that, as our papers 13 make very clear, if the default isn't cured, 14 there are all kinds of things that might 15 happen. We don't know if they'll happen, but 16 they might happen. And before I detail what 17 might happen, let me explain very clearly to 18 the Commission how technical and formalistic 19 this default is as you understand Vice 20 Chancellor Noble's opinion because he says so. 21 The day before you appointed me as conservator, 22 December 18th, I already had been designated as 23 ICA trustee and the trust was made operative. 24 And so on December 18th, the very day before 25 the conservatorship order, I had the right to 50 ITEM NO. 8 - 10 1 exercise all powers incident to ownership of 2 the stock of Adamar. What did that mean? It 3 meant I controlled the assets of Adamar. Under 4 New Jersey law, anyone with a controlling 5 interest in all of the stock of a corporation 6 can dispose of assets, can pledge assets, can 7 mortgage assets, can transfer assets. I had 8 effective control of the assets. The next day 9 you made me the conservator, and under the law, 10 title to the assets moved from Adamar to me. 11 But did that diminish the bondholders' 12 security? Not one whit. The bondholders were 13 unsecured. The bondholders were in no 14 different position On the 19th of December than 15 they were on the 18th of December. 16 As I've said to you, we're not in that 17 fight. The only aspect of that dispute that 18 has any concern to me is whether or not the 19 failure to cure that default, that technical, 20 formalistic default, could result in an 21 involuntary bankruptcy of Tropicana 22 Entertainment, one of the parent companies, 23 acceleration of the debt, an involuntary 24 bankruptcy, and in that event, the fact would 25 be that Adamar of New Jersey would be a 51 ITEM NO. 8 - 10 1 guarantor of promissory notes in the amount of 2 $960 million that would have accelerated. And 3 if they accelerate, then we'd be liable to pay. 4 And if we couldn't pay, we would be subject to 5 a bankruptcy. 6 Now, the papers submitted on behalf of 7 the bondholders say, well, bankruptcy is not a 8 bad thing. Bankruptcy has the possibility of a 9 supervised sale. They're talking about a 10 provision of the Bankruptcy Act, Section 363, 11 that's an entirely different kettle of fish 12 from an involuntary or free-fall bankruptcy 13 that's filed by three creditors of Tropicana of 14 New Jersey to whom we owe $10,000. 15 So if those notes accelerate and an 16 involuntary position is filed, I don't have to 17 tell was that does to this business that we've 18 worked so hard since December to turn around. 19 The customers reading the paper, even if they 20 read about the bankruptcy of Tropicana 21 Entertainment, the Yung company, that would 22 cast a shadow over us. But if they read about 23 the involuntary of bankruptcy of Adamar of New 24 Jersey, Tropicana, that's got to hurt business. 25 And it affects what I'm doing at your direction 52 ITEM NO. 8 - 10 1 and order. It affects my ability to sell. It 2 may put the control of the sale in the 3 bankruptcy court. May not. But it may. And 4 if it did, the very purpose, the very goal that 5 was expressed in the order appointing me as a 6 conservator which was to ensure continuity and 7 stability in casino operations pending a sale, 8 would be defeated. 9 And so it just seems to me so obvious 10 that the best thing this Commission can do to 11 vindicate its regulatory interest here is to 12 approve this petition. 13 Now, the opposing papers said, well, if 14 the Commission approves this petition, it will 15 discourage investment in casinos because the 16 bondholders, they say, are investors in 17 casinos. If the Commission doesn't approve 18 this petition, it will cast doubt about the 19 stability of regulatory control of the casino 20 industry. The most obvious, the most 21 pragmatic, the most logical thing for this 22 Commission to do to accomplish the goal that it 23 hoped to achieve when it appointed me, which 24 was to sell the Tropicana Casino to a solid 25 licensable bidder for a good price and put that 53 ITEM NO. 8 - 10 1 casino back in business in Atlantic City the 2 way it should be, the best thing you can do is 3 to take the action that will best facilitate my 4 ability to make the sale and not divert us into 5 a bankruptcy or the complications that may 6 attend a bankruptcy. 7 Now, some other objections have been 8 advanced to this petition, and one of them is 9 by the Division and, candidly, I am anxious to 10 hear from Miss Flaherty because I don't 11 understand. The Division says, in effect, 12 that -- let me see if I can find their paper so 13 I can quote them accurately. 14 The Division says that if the assets -- 15 (Conferring.) 16 CHAIR KASSEKERT: Excuse me. I'm sorry. 17 JUSTICE STEIN: Sure. 18 The Division says that if the assets 19 that I own, the roulette wheels, the 20 mattresses, the slot machines, were transferred 21 back to Adamar, a suspended licensee, a denied 22 applicant would be on paper the holder of a 23 casino's assets. 24 And they go on to say this, and I'm 25 quoting from their letter: As a result for 54 ITEM NO. 8 - 10 1 some undetermined period for all issues 2 relating to the Tropicana property, the 3 regulatory authorities would be looking to the 4 entity whose license was denied as the holder 5 of the title. That places the regulators in an 6 untenable position. If there is a regulatory 7 problem, we must look to the entity which was 8 found not to be suitable to hold a license to 9 somehow address the issue raised. 10 And that's the only legal regulatory 11 objection that I see in the Division's papers. 12 But the answer to that is, I respectfully 13 submit, crystal clear. Because the 14 conservatorship statute, 5:12-130.7, says that 15 during the period of any conservatorship, the 16 casino operation that Adamar is running, in the 17 form of the conservatorship shall be deemed to 18 be a licensed casino operation. And any 19 reference in the Act to any obligations or 20 responsibilities incumbent on the licensee 21 shall be deemed to apply to the casino 22 operation. There's no regulatory difficulty. 23 Whether I own the assets or Adamar owns the 24 assets, Adamar is subject to your regulation 25 either way. And to the Division's regulation. 55 ITEM NO. 8 - 10 1 If Adamar's license had not come due in 2 2007, and if all that you had is a trustee, 3 would there be any difficulty in regulating 4 Adamar? Of course not. Because the Trust Act 5 gives to the trustee all of the powers of a 6 conservator. 7 And so the Division acknowledges that a 8 default might be anathetical to the objectives 9 of the Commission, but they say it's more 10 important for you to stay out of this. Or, 11 respectfully, I don't think that's your duty at 12 all. I think if you understand the issue and 13 the background and the problem with the 14 legislation and the fact that this is simply a 15 technicality -- a technicality, by the way, 16 that's probably resulted in a very large 17 expenditure of money for counsel fees and a 18 technicality that ought to get fixed -- that 19 because it's just a technicality, the 20 Commission should use its regulatory power and 21 fix it. 22 I work for you. And, ironically, 23 there's a petition that says that I may be 24 breaching my fiduciary obligation to the 25 bondholders by being here. Candidly, I would 56 ITEM NO. 8 - 10 1 be breaching my duty to you if I weren't here. 2 And my obligation under the law. My obligation 3 is crystal clear. I should get those assets 4 transferred back to Adamar as quickly as 5 possible, and I should avoid a technical 6 default not because I want to help Tropicana 7 Entertainment but because I want to avoid any 8 shadow of a bankruptcy proceeding either for 9 Trop Entertainment or Adamar. 10 And I forgot to mention this, but as the 11 exhibits ought to make very clear, when I read 12 Chancellor Noble's decision over the weekend 13 early in March, I was confused. I hadn't had 14 the opportunity to look at the law. I wasn't 15 sure what needed to be done. My instincts told 16 me that I ought to try to get the assets 17 transferred back to Adamar. And I called, 18 among other people, Sean very early on a 19 Saturday morning. My son, Michael, lawyers at 20 Debevois. Everybody was on the phone, got 21 e-mails from me. I think I may have spoken to 22 the Chair. And I called Ken Baronsky of 23 Milbank Tweed, who's the lawyer for the Yung 24 companies, and I said, look, I'm not sure how 25 this is going to play out, but would you write 57 ITEM NO. 8 - 10 1 me a letter asking me to reconvey the assets? 2 And he did. And that was entirely my idea and, 3 in retrospect, totally unnecessary. 4 My objective here is very clear. And 5 it's only to do what I was appointed to do, 6 which is to accomplish the sale of Adamar 7 consistent with the provisions of the Casino 8 Control Act to a solid, licensable bidder for 9 the highest possible price. And I represent to 10 you that this petition, if it's granted, would 11 best enable me to do that. 12 Thank you. 13 CHAIR KASSEKERT: Let me ask if there 14 are any questions before we hear from the 15 Division. Or would you like to hear from the 16 Division? 17 Miss Flaherty? 18 MS. FLAHERTY: Yes. Thank you. 19 We will rely on our March 19th, 2008, 20 submission, but we also wish to address some of 21 the following points. 22 The Commission is very familiar with the 23 background of this matter. But the 24 precipitating event for this petition's filing 25 is the February 29, 2008, Delaware Chancery 58 ITEM NO. 8 - 10 1 Court ruling. 2 That ruling held that the transfer of 3 title to Adamar assets to the Conservator was a 4 breach of an indentured provision. This caused 5 an occurrence of an event of default with a 6 60-day cure period. Milbank Tweed, which is 7 counsel for Tropicana Casino and Resorts, 8 provided correspondence to the Conservator with 9 regard to the filing of the petition, and the 10 Conservator determined to proceed and file the 11 petition with the Commission. 12 The documents have been marked as D-1 13 and C-1. 14 In the meantime, there has been another 15 action which has been brought in the Delaware 16 Chancery Court which is still pending, and 17 these events are described in a press release 18 issued by Tropicana Casinos and Resorts which 19 is shown by D-2. 20 The Act directly addresses the issue 21 which is raised by the petition. Section 22 130.1A provides in the event of a license 23 denial, the Commission appoint a conservator to 24 take over and into his possession and control 25 all of the property and business of the 59 ITEM NO. 8 - 10 1 licensee relating to the casino and the 2 approved hotel. The Commission on December 3 19th, 2007, acted to do so. 4 The Act in Section 120.2A further 5 mandates that, and I quote, "The conservator 6 shall become vested with the title of all the 7 property of the former or suspended licensee 8 relating to the casino and to the approved 9 hotel." 10 Justice Stein has mentioned Section 11 130.7 of the Act and that allows a casino 12 operation in the form of a conservatorship to 13 be deemed to be a licensed casino operation. 14 Of course, that is subject to the strict 15 compliance with all the obligations and 16 responsibilities under the Act. It is the 17 Division's view that the provisions of Section 18 130.7 only exist as a result of the mandate 19 contained in the other provisions of the 20 conservatorship section of the Act, including 21 130.2A, and that that the conservatorship 22 provisions of the Act are interwoven procedure, 23 an encompassing system to deal with all the 24 issues presented when a casino license is 25 denied. Section 130.7 does not exist in a 60 ITEM NO. 8 - 10 1 vacuum and only applies when the other 2 requirements of a conservatorship are met. 3 There are different issues which arise 4 when a security holder is found unqualified and 5 a trust is activated as opposed to a 6 conservatorship where a license has been 7 denied. The Commission has invoked both of 8 those sections of the Act to deal with this 9 unprecedented situation. And there are 10 provisions of conservatorship which must be 11 accorded to the trustee as he is also the 12 conservator. 13 Our question is what will happen over 14 time? I think it's clear that possible 15 probably no one anticipated this title issue 16 several months ago. I have -- I cannot 17 contemplate all the issues which may still 18 arise in the future. I do not know how long 19 this situation will last. And the point, I 20 guess, which is to be made is we need to be 21 sure that we are in control of this casino 22 operation, no matter what other circumstances 23 may arise, known or unknown. 24 The Division, in light of the 25 Commission's discretion with regard to 61 ITEM NO. 8 - 10 1 conservatorship matters has occurred in its 2 judgment regarding this conservatorship to 3 date, but now we now have a law enforcement's 4 concern that we need to bring to your 5 attention. In our view there are only three 6 ways in which a casino can be operated legally 7 in Atlantic City: Licensure, interim casino 8 authorization, or a conservatorship. If the 9 title to the former licensed casino assets are 10 returned and an unlicensable, denied casino 11 license renewal applicant would be the holder 12 of the casinos assets, the Division sees that 13 situation as impermissible under the governing 14 licensure interim casino authorization and 15 conservatorship provisions of the Act. It 16 offends an essential premise of a regulatory 17 process. Who would be responsible for 18 regulatory issues and violations over the long 19 term, not knowing what will happen? How long 20 would this last? How long would our regulatory 21 scheme be effective? And what would occur in 22 the meantime? 23 The title will need to go back probably 24 for a closing to occur. But that would be an 25 instantaneous transaction with virtually no 62 ITEM NO. 8 - 10 1 jeopardy to the regulatory system. It would 2 happen in a moment in time. It is clear that 3 critical business contractual and financial 4 issues exist among the former casino licensee, 5 the entities which once owned and controlled it 6 through the Aztar merger and the secured 7 facility lenders as well as the senior 8 subordinated noteholders. Their financial 9 stakes are significant, and they are stridently 10 seeking to preserve and protect them in various 11 forms at substantial effort and cost. It is 12 clear that those involved groups are 13 maneuvering to secure their best legal 14 positions. But the business and financial 15 issues and debates and disputes of those groups 16 are not the focus of the regulatory process. 17 The role of the gaming regulators is not 18 a simple one, but it must be a direct one. For 19 the Division it includes our law enforcement, 20 investigative, and prosecutorial missions. 21 Ultimately, our overriding concern shared with 22 the Commission is the integrity of casino 23 operations. We should not be inserted into 24 contractual disputes between business parties 25 in a financial setting, especially where, as 63 ITEM NO. 8 - 10 1 here, there are serious competing policy 2 matters where our integrity concerns are 3 subject to jeopardy. The statutory provisions 4 are clear and certain and should not be 5 disregarded. 6 Therefore, set forth in our papers, it 7 is our position that the Commission should not 8 grant the Conservator's request and that the 9 petition should be denied. 10 Thank you. 11 CHAIR KASSEKERT: Thank you. 12 MS. FLAHERTY: I'm available to answer 13 any questions. 14 CHAIR KASSEKERT: Let me ask -- I know 15 Justice Stein will want to respond, but let me 16 see if Commissioners -- 17 COMMISSIONER EPPS: I would. 18 CHAIR KASSEKERT: Do you have any 19 questions? 20 COMMISSIONER FEDORKO: Yeah, I do. 21 COMMISSIONER EPPS: Go ahead. 22 COMMISSIONER FEDORKO: Justice, the 23 issue that I keep wrestling on this, and you 24 touch on it briefly, is we found Adamar not 25 qualified to own a casino. Now, if we give 64 ITEM NO. 8 - 10 1 them back the assets, I mean, how does that -- 2 I can't -- I can't -- that just doesn't sit 3 right in my mind. 4 JUSTICE STEIN: I can understand, 5 Commissioner Fedorko, and there's two answers 6 to it. 7 Adamar, by your order, possesses the 8 assets. I don't. I'm not allowed to take 9 possession. I have legal title. They have 10 possession. But Adamar, under my 11 conservatorship, is deemed to be licensed. 12 Deemed to be licensed. And if they are deemed 13 to be licensed, whether they possess the slot 14 machines so that they can run the place or have 15 title to them subject to me owning their 16 stock -- I mean, if I own all their stock, I 17 can take back those assets in an instant. I 18 own the stock of the corporation that owns the 19 assets. 20 And so if you're concerned about control 21 of the assets, I have as good control of those 22 assets -- I had as good control on December 23 18th as I did on December 20th. The fact that 24 the Act vests me with title is redundant 25 because I already had every incident of 65 ITEM NO. 8 - 10 1 ownership of the assets that you need. 2 Now, just because the Division -- and, 3 obviously, their perspective is a law- 4 enforcement perspective, and they don't have 5 the broad regulatory responsibility that you 6 have. Just because they say there's a law- 7 enforcement issue doesn't mean there is. And 8 my reading of the statute is that for two 9 separate reasons there is enormous and total 10 regulatory and law-enforcement control whether 11 I own the assets or Adamar. One is 130.7 which 12 says that Adamar's deemed to be a licensee 13 under the conservatorship, meaning they are 14 fully subject to regulation. You could put 15 them out of business tomorrow. 16 And the second is that under the 17 trusteeship, under the trusteeship, I'm subject 18 to the Commission's regulation, and I control 19 all of the stock and assets of an operation 20 that's deemed to be licensed. 21 So I understand your question, but I 22 think the answer is crystal clear. The 23 legislature actually -- actually anticipated 24 this problem. They realized that if you pull 25 the license from a licensee, during the period 66 ITEM NO. 8 - 10 1 that you got a new licensee, a new owner, 2 somebody would have to run the casino. And so 3 they made the conservatorship statute take care 4 of that problem by saying the licensee is 5 deemed license. Even if it's not, it's deemed 6 licensed so long as there's a conservatorship. 7 I really think that's a full answer. 8 And I think that the Division's concerns are 9 very small in comparison to the much larger 10 regulatory concern that you have, which is to 11 make sure this casino gets sold, gets sold 12 under your control, not under the control of 13 the bankruptcy court. 14 Is that -- does that do it, 15 Commissioner? Or -- 16 COMMISSIONER FEDORKO: It does. But the 17 issue that I still can't get is, you have 18 control of the stock and the assets; correct? 19 JUSTICE STEIN: I have -- right now, 20 under the statute, I am authorized to exercise 21 all incidents of ownership of the stock. 22 Meaning I can sell it. 23 COMMISSIONER FEDORKO: Uh-huh. 24 JUSTICE STEIN: I can vote it. One of 25 the incidents of stock ownership under New 67 ITEM NO. 8 - 10 1 Jersey law is that the owner of a certain 2 percentage of the stock, in this case a hundred 3 percent, has the power to sell, transfer, 4 pledge, hypothecate the assets. So because, in 5 effect, I control the board of directors and 6 the management of Tropicana, if I wanted to 7 sell the slot machines tomorrow -- I'd ask you 8 first -- but I have the -- I have the legal 9 power to do it whether ownership is in Adamar's 10 name or in my name. Doesn't make any 11 difference because I control the stock. 12 So I -- I understand that there's a 13 disconnect because you've said Adamar is not 14 licensable today. 15 COMMISSIONER FEDORKO: Uh-huh. 16 JUSTICE STEIN: I hope they will be 17 soon. But if they're not licensable today, the 18 law takes care of that by saying that as long 19 as you have a conservator running it, they are 20 deemed to be licensed. And so whether they 21 possess the assets or own the assets doesn't 22 make a whit of difference, not a whit. 23 COMMISSIONER FEDORKO: Thank you. 24 CHAIR KASSEKERT: Commissioner Epps? 25 COMMISSIONER EPPS: I have some 68 ITEM NO. 8 - 10 1 questions, and I'll start where you just ended 2 because I have some difficulties with that 3 concept, also, as I was reading the moving 4 papers. 5 And I think I end up on the side of the 6 Division with the same philosophy, and that is 7 if we found a company not qualified to hold a 8 gaming license in New Jersey, for whatever 9 taint comes along with being unqualified, they 10 are, for all intents and purposes, a bad 11 company. If they came in initially -- before 12 they even were licensed, they couldn't hold 13 title to a casino property because that's not a 14 function that we allow. By being found 15 unqualified, they also cannot hold title to a 16 casino company. That's not a process we allow. 17 But we -- as you indicated, there was a thought 18 that said, hmm, but if that happens, how do we 19 keep the doors open? We establish a 20 conservator and we deem him -- that's the 21 deem -- is him to be a licensee in the place of 22 the company. I know it says the casino 23 company, but it's only by virtue of that 24 conservator that they are deemed. Not found, 25 not at a hearing, not a finding of 69 ITEM NO. 8 - 10 1 qualification, but deemed approved to operate a 2 casino hotel. 3 That is a very unique and, I believe, 4 intended to be very temporary situation. Thus, 5 keeps the company open and cause -- prevents 6 all kinds of unintended failure of business in 7 New Jersey and some continuity, if you will. 8 So I can't get to the point where in the 9 pendency of this transaction we give back title 10 to -- euphemistically a bad company for some 11 period of time that is undetermined. I think 12 that, and as you indicated, it could happen now 13 or it can happen later for purposes of the 14 transaction of the sale. I think that it gives 15 us comfort as a regulatory body whose job is to 16 protect the integrity and process of gaming 17 that a nonqualified company not hold title to 18 gaming assets, and if they have to hold title, 19 they hold title for as short a period as 20 possible, and that being the amount of time it 21 takes to sign over the documents to the new 22 owner. 23 JUSTICE STEIN: Commissioner, I 24 understand what you're saying. But there's 25 another aspect of this -- two other aspects 70 ITEM NO. 8 - 10 1 that I don't think your question takes into 2 account. 3 Certainly you have a strong regulatory 4 interest, and you might say the symbolism is 5 bad. Even though it doesn't make any practical 6 difference, there's a symbolic taint if a 7 former licensee found to be unqualified owns 8 its own assets because the statute didn't 9 contemplate it. 10 The two things your question doesn't 11 take into account are this: First of all, 12 there's an operative ICA trusteeship. That's a 13 totally different construct than simply the 14 conservatorship statute alone. If it were just 15 the conservatorship statute alone, I might 16 agree with you, might not, depending on the 17 circumstance. But when you've got an operative 18 ICA trusteeship. That's different. The 19 trustee owns the corporation's stock and 20 controls the assets. So whether title's in the 21 corporation or in the Conservator, doesn't 22 matter. That's one. 23 Secondly, you've got a bondholders' suit 24 in Delaware that poses a threat of acceleration 25 of $960 million in notes that your casino 71 ITEM NO. 8 - 10 1 licensee, suspended, is a guarantor of. You 2 decided as a Commission that you wanted that 3 business sold. You appointed me as Conservator 4 to sell it. I'm telling you, I'm telling you 5 that if those notes accelerate and Adamar of 6 New Jersey as a guarantor is subjected to an 7 involuntarily bankruptcy, you could make that 8 sale process very difficult and vulnerable, 9 vulnerable to the control of the bankruptcy 10 court. 11 So if I can just finish, and I'll stop. 12 But your question addresses only one aspect of 13 the problem, which is we don't like the idea of 14 a suspended licensee owning its assets. There 15 are two other aspects. I'm a Trustee. And you 16 can't ignore the fact that there's a threat of 17 an involuntary bankruptcy looming out there 18 that could kick in right at the time my sale 19 process matures. So what I'm saying to you is 20 your regulatory responsibilities are broader 21 than just symbolism. The conservatorship 22 statute says to you, 5:12-130.1A, that the 23 Commission may at any time after a 24 conservatorship is established modify the 25 powers of the Conservator. I operate at your 72 ITEM NO. 8 - 10 1 control and so, unlike the Division, your 2 perspective is broader. Your interested in 3 stability in the casino industry. And you've 4 decided in December that stability is going to 5 be restored to the industry if the Tropicana is 6 sold to a solid, licensable buyer. That's what 7 I'm trying to do. 8 COMMISSIONER EPPS: I understand those 9 points. And I -- to a certain degree I don't 10 disagree with you. However, I'm glad you 11 brought up the other provision, ICA. 12 What we have here, and the best way that 13 I can make it right in my mind, is a perfect 14 storm. We had a transfer of a property to a 15 new owner which triggers the ICA provision, and 16 that allowed that entity to continue operating 17 while we determine whether or not that new 18 owner was qualified. So that kept the doors 19 open in that pendency. 20 JUSTICE STEIN: Right. 21 COMMISSIONER EPPS: The conservatorship 22 keeps the doors open after the failed 23 qualification because it just so happened that 24 the license came up for renewal at the same 25 time that the ICA came to a conclusion. It was 73 ITEM NO. 8 - 10 1 a confluence a perfect storm. Thus, you ended 2 up -- or you start out as a trustee, and you 3 continued to be the trustee. And, ultimately, 4 we made you the Conservator primarily for the 5 same purpose, to keep the place open. However, 6 those two duties give you different 7 obligations. But cause for -- but this 8 situation brings to -- brings us to the same 9 point. And that thing that remains is an 10 unqualified entity that we found had to go. 11 So the ICA trust, it was operable -- 12 operable because that -- because that situation 13 existed. If there were no license renewal, you 14 would be continuing under a -- the trust 15 situation because the license would still be 16 good. 17 JUSTICE STEIN: Right. And it wouldn't 18 matter if Adamar owned its assets because the 19 license would be good. 20 COMMISSIONER EPPS: The license would be 21 good. 22 JUSTICE STEIN: Even though I controlled 23 them. 24 COMMISSIONER EPPS: However, in this 25 situation, the license failed at the same time 74 ITEM NO. 8 - 10 1 that the ICA trust failed. So the both things, 2 as you indicated, because there were 3 differences in the legislature, I think our 4 staff and our Commission recognized all of the 5 differences and the different obligations 6 attendant to each of your status. Or your 7 statuses, if that's a word. 8 (Laughter.) 9 COMMISSIONER EPPS: And gave to you by 10 the order what was necessary under both hats 11 that you wear at the same time. We were 12 mindful of those differences. 13 JUSTICE STEIN: With one exception, 14 Commissioner, and that's what I said at the 15 start. If the statute had been written with 16 the view to the possibility, however remote, 17 that a perfect storm could happen, and you had 18 an ICA trustee and a conservator at the same 19 time, the statute would have had an exception. 20 It would not have required the assets to vest 21 in the conservator because you didn't need it. 22 COMMISSIONER EPPS: But it seems -- 23 JUSTICE STEIN: And the reason you don't 24 need -- it, forget the symbolism, 25 Commissioner -- you wouldn't need it because, 75 ITEM NO. 8 - 10 1 A, the ICA trustee controlled the assets under 2 the ICA trust; and, B, the ICA trust statute 3 directs the trustee to sell the stock. You 4 can't sell the stock unless the licensee's 5 assets are owned by the corporation. So 6 there's something missing in the statute, 7 Commissioner. 8 Now, you can -- 9 COMMISSIONER EPPS: Even if I accept 10 your point that the legislature missed it -- 11 JUSTICE STEIN: Yeah. 12 COMMISSIONER EPPS: Okay, they missed 13 it. And so it didn't do what you suggested 14 that they did. And all we were left with is 15 what it did do. And we took the steps that 16 were necessary to do what we had to do with 17 the -- let's call it imperfect statute that we 18 had. So we took the necessary steps. If the 19 legislature had done something different, we 20 may have been in a different posture. But they 21 didn't. So we were left with what we had to 22 function at the time we had to do it. And, 23 thus, we had to do to what we had to do, and 24 that leaves us where we are today. 25 JUSTICE STEIN: You did right. You did 76 ITEM NO. 8 - 10 1 right. I never knew there was a problem until 2 I read the Chancellor's decision. But there's 3 one step left to take. What you as a 4 Commission, as a legislatively created agency, 5 need to do is reconcile these two statutes in a 6 way that makes sense. 7 May I finish, Commissioner Epps? 8 What you need to do is put the assets 9 back in Adamar, not because there's a symbolic 10 taint to that but because the trusteeship gives 11 your trustee all of the power the trustee needs 12 to control the assets. The statute has put you 13 in a position that you shouldn't be in. You 14 shouldn't have to face this problem. I 15 shouldn't have to make this petition. There 16 should never have been a transfer of assets. 17 It wasn't necessary. Because, as we both 18 agreed with each other, we both agreed when you 19 have a trusteeship and a conservatorship, you 20 have full control two ways. And so the 21 transfer of the assets personally to the 22 conservator is unnecessary. It's redundant. 23 It's wasteful. And it forces the conservator, 24 if this happened more often, every conservator 25 would have to come back here every time and 77 ITEM NO. 8 - 10 1 say, may I please transfer the assets back? I 2 don't need them. 3 COMMISSIONER EPPS: I think we stand 4 ready and willing to approve a transfer of the 5 assets back -- and it seems to me, and maybe 6 I'm naive about this, but it seems to me that 7 any potential purchaser of this company would 8 understand that you have no intention of 9 running away and never conferring title. So at 10 the end of the transaction, one extra document 11 would be included in the voluminous documents 12 that will be signed that day, that is a 13 transfer of the assets to the eventual owners 14 with the blessing of the Casino Control 15 Commission. And I'm certain -- I don't speak 16 for my other Commissioners -- but I'm certain 17 that we would never stand in the way of that 18 transaction at that point, and it seems more 19 clean to me. 20 JUSTICE STEIN: I never had a doubt that 21 you'd approved it eventually. Never had a 22 doubt. That wasn't my concern. I go a step 23 further. 24 I think this Commission needs to be 25 pragmatic and needs to look realistically at 78 ITEM NO. 8 - 10 1 what the event of default could mean to the 2 conservatorship that you created. And I'm 3 telling you what it could mean. It could 4 complicate my efforts. 5 Now, you may say that's not -- that's 6 not our problem. Well, whoever wins the 7 Delaware litigation, that's not your problem. 8 But the involuntary bankruptcy of Adamar of New 9 Jersey over a technicality, respectfully, that 10 is your problem. And the industry looks to you 11 not to simply read the law and do literally 12 what the law says. The law gives you broad 13 powers. And if you put your head in the sand 14 and ignore what's going on in Delaware and 15 ignore the threat in bankruptcy of Trop 16 Entertainment and ignore the threat of an 17 involuntary bankruptcy for Adamar, 18 respectfully, I don't think you're doing what 19 the statute contemplates. I don't think you're 20 accepting the broad responsibility that the 21 legislature not only intended you to discharge 22 but what you've always discharged. That's why 23 this Commission is held in such high regard. 24 And so I think there's two choices for 25 the Commission. Look at the statute 79 ITEM NO. 8 - 10 1 legalistically and technically and say, uh-uh, 2 Adamar is not licensed. We're not going to let 3 it own its assets even if it doesn't mean a 4 thing. Even though Justice Stein controls it, 5 they're the ownership of the stock. 6 And the other choice is to take a 7 broader, a broader view of your functions. 8 And, in my view, the correct view of your 9 function is to assume responsibility for a 10 decision that best enables the statute and the 11 responsibilities you gave to me to be 12 fulfilled, and that would allow the assets to 13 be transferred now. It would allow the cure of 14 a default that's purely technical. And it 15 would restore the status quo. If Trop 16 Entertainment eventually goes into bankruptcy, 17 that's their problem. It's not ours. If they 18 survive, that's -- that's all in the good. But 19 if the sale occurs, what's likely to happen is 20 that the senior debt would get paid off almost 21 in full, and these bondholders' positions 22 actually will be better off. So I don't think 23 down the road they're hurt if you help me to 24 facilitate this sale. 25 COMMISSIONER EPPS: It seems to me that 80 ITEM NO. 8 - 10 1 after all the discussion that you and I have 2 had today, almost a private conversation, we 3 get to what I would call the law of unintended 4 consequences. We did what we felt we had to 5 do, and what you're asking us to prevent 6 against is some consequence that may occur in 7 the future that we never intended by our action 8 and maybe didn't even anticipate might happen. 9 But, notwithstanding that, we have -- you're 10 asking us to look forward to something that 11 might occur and prevent that based on what we 12 did in opposition to our statutory obligations 13 that say we can't do that. It offends our 14 statute to do what you're asking to prevent 15 something that may occur or something that may 16 result from an action that we took. 17 We realize that some of these things 18 that you anticipate may occur. And it may even 19 be viewed by some people as our fault. We did 20 this, and we caused this ripple effect to 21 occur. That we have to live with as 22 commissioners. We have to deal with the 23 consequences of our action, intended or 24 unintended. And that's a consequence from the 25 denial that may ultimately occur. But we have 81 ITEM NO. 8 - 10 1 to wrestle with that preventing of some 2 unintended consequence that may occur or 3 protecting the integrity of our statute, and I 4 think that's a very tough position that we end 5 up in. And, but, ultimately -- 6 JUSTICE STEIN: I understand, 7 Commissioner. I think we disagree about which 8 interest should take priority here. I think my 9 own view is that the statutory and regulatory 10 interests are thoroughly protected both by the 11 provision that deems Adamar to be a licensee 12 during the conservatorship and the provisions 13 of the ICA trust. 14 And so, from my perspective, I would say 15 this Commission's duty is broader, that it 16 should not focus only on that, that it should 17 consider the broader ramifications of what this 18 default means, that it should acknowledge that 19 one of your objectives was to authorize me to 20 accomplish the sale of the casino in the most 21 effective way that I could and to find a 22 licensable buyer who would buy for the best 23 price and keep the casino industry healthy. 24 And if you ignore that chain of events, 25 I think you ignore it at the disadvantage of 82 ITEM NO. 8 - 10 1 the industry in Atlantic City as a whole. I 2 think the industry has a right to ask more of 3 you. I think the industry has a right to say 4 you are regulators of this industry. You're 5 not the Division whose perspective is law 6 enforcement and narrow and legalistic. Your 7 view ought to be broader. So I would urge you 8 to consider that carefully. 9 I know the Commission ordinarily makes 10 decisions on the day of argument or at public 11 meetings. I would urge the Commission, if it 12 thought it was appropriate, to reserve decision 13 and consider this issue at a special meeting. 14 We want to -- we want a prompt decision because 15 the April 20 deadline is looming out there, but 16 it doesn't have to be today. And I would just 17 urge the Commission to think about this. 18 This is not as simple as I thought it 19 was when I first read the decision. It -- it 20 implicates other interests. It implicates a 21 statutory flaw, a little oversight in the 22 legislation that I didn't appreciate when I 23 first looked at it. It implicates what your 24 view is of your regulatory function. And I 25 would urge the Commission to take -- take the 83 ITEM NO. 8 - 10 1 time that you need and think this through and 2 talk it through because this is a big deal for 3 the mission that you've given to me. I mean, I 4 don't want to see it derailed. I've worked 5 very hard to try to get this done right. And 6 I'm telling you that I -- I see problems ahead 7 if this isn't cured promptly. 8 So I would urge the Commission to do the 9 right thing, take all the time you need, and 10 give us a prompt decision that best reflects 11 your responsibility. 12 CHAIR KASSEKERT: But, Justice, 13 here's -- here's what I grapple with as well. 14 I agree with Commissioner Fedorko. I agree 15 with Commissioner Epps. How can we transfer an 16 asset back to someone that we have found 17 unqualified, an entity that we have found 18 unqualified? 19 But beyond that, this has come to us via 20 a Delaware decision. You are asking us to step 21 in and become involved in a decision that was 22 made by another state court where nothing else 23 was done. You know, what has -- what has 24 Milbank & Tweed and the Columbia Sussex done to 25 cure their problem? Did they appeal this? No. 84 ITEM NO. 8 - 10 1 Did they -- have they sat down with the 2 subordinated debt holders to try to attempt to 3 reconcile? No. Instead, it is pushed back to 4 the Casino Control Commission. Here we sit in 5 New Jersey looking at our statute the way it's 6 worded. I'm extremely frustrated by this 7 because I -- you're asking us to step into the 8 shoes of and get involved in something that is 9 not our fight. And understanding your desire 10 to settle property. And, certainly, you'll get 11 no argument from us. We want to see that 12 property sold. We don't want to see a default, 13 but isn't it up to Mr. Yung to cure his own 14 default? 15 JUSTICE STEIN: Respectfully, Madame 16 Chair, I don't know what their legal analysis 17 is. I suspect that they probably like some 18 parts of the decision, don't like some parts. 19 But, candidly, Vice Chancellor Noble's 20 conclusion -- I'll give you my perspective -- 21 that the transfer of assets as an event of 22 default under the indenture may be hard to 23 reverse on appeal. It's very technical. 24 Vice Chancellor Noble probably 25 recognized that better than anybody else when 85 ITEM NO. 8 - 10 1 he said on page 23, if I can find his decision, 2 he said: The company points out that 3 appointment of a conservator changed very 4 little. The trustee assumed operation of the 5 assets because of his control of all the stock. 6 Whether he exercised that authority because of 7 his holding of the stock or his holding of the 8 assets, as a practical matter, should make no 9 difference. 10 He understood that this was technical. 11 But, as he said, I'm just a poor judge in 12 Delaware. And, you know, there's another 13 perspective that he had. And he said he was 14 incapable of dealing with it. And what he said 15 was this: The company posits another 16 potentially troubling consequence of the 17 default. The Act, as implemented by the 18 Commission, prescribes a coherent methodology 19 and strategy for divesting an unqualified 20 operator from its assets in a way that is 21 likely to assure ongoing and proper operation 22 of the casino and effective sale of those 23 assets. As it now stands, the Commission, 24 through its supervision of Justice Stein 25 whether as trustee or as conservator, is in 86 ITEM NO. 8 - 10 1 control of both the current operations and the 2 process for finding a new operator who will 3 purchase the casino assets. As noted, that 4 serves a range of important public policy 5 concerns for New Jersey. A default under the 6 indenture with the attendant acceleration of 7 indebtedness may, if the processes of the 8 bankruptcy laws are invoked, complicate the 9 Commission's efforts and perhaps impair the 10 ability of New Jersey to achieve its important 11 public policy objectives. The company may well 12 be right, but any consequences of a potential 13 bankruptcy, whatever they may be, are simply 14 beyond the reach of a state court trial judge. 15 What I'm saying to you, Madame Chair, 16 they're not beyond your reach. You may elect 17 to ignore that consequence. You may elect to 18 say it's not our problem. We didn't create the 19 mess. Columbia Sussex did. We're not going to 20 help them. I'm telling you that I'm not here 21 to help Columbia Sussex. And, candidly, I 22 don't know why that letter from Mr. Baronsky 23 was introduced into evidence or why it has any 24 materiality at all. I've told you why I'm 25 here. I'm here to do what you hired me to do, 87 ITEM NO. 8 - 10 1 which is to sell the casino at the best 2 possible price to a qualified buyer. 3 That judge knew in his head that what he 4 was doing was going to cause a mess, but he 5 said he didn't have any power to do it. You 6 do. You do. There isn't a question in the 7 world that it is within your responsibility and 8 your statutory authority to take into account 9 what happens in the event this default isn't 10 cured. So I would urge you to just take 11 another look at this. This is not simple. 12 This is not just reading a statute and saying, 13 oh, well, that's the end of it. Your 14 responsibilities are broader. The industry 15 expects more of you. 16 And so I'm -- I'm very, very hopeful 17 that this Commission will take a careful, hard 18 look at this before they deny this petition. 19 CHAIR KASSEKERT: Again, Justice, I 20 don't think the casino industry expects us to 21 step in to -- an out-of-state case. You know, 22 I just -- I just have real problems with that. 23 JUSTICE STEIN: But you're not doing 24 that. You're not doing that. You're 25 addressing a -- 88 ITEM NO. 8 - 10 1 CHAIR KASSEKERT: But this is a 2 precipitating event. That was the event that 3 started this. 4 JUSTICE STEIN: As I told you when I 5 stood up, the first thing I said was whether 6 that lawsuit ever had been filed, I would be 7 here before you with this petition because the 8 statute shouldn't work this way. Your curing 9 this default is much more -- much more 10 important if you recognized that the statute 11 has a flaw and shouldn't work this way. It 12 doesn't need to work this way. You don't need 13 to put the assets in the conservator's name. 14 The Commission's order understood that well 15 because you said, don't take possession of the 16 assets. You don't need to take possession. Of 17 course I don't. I've never owned a slot 18 machine in my life. 19 And so there isn't -- there's much more 20 at issue here. And, you know, it's your call. 21 It's your call whether or not you want to see 22 your mission expansively or narrowly, but I 23 respectfully encourage -- 24 CHAIR KASSEKERT: I think we have to see 25 it statutorily. 89 ITEM NO. 8 - 10 1 JUSTICE STEIN: Well, I encourage you to 2 see it broadly. 3 COMMISSIONER EPPS: Justice, I have a 4 question. 5 You said in your remarks that you would 6 be here whether the lawsuit was filed or not. 7 JUSTICE STEIN: Yes. 8 COMMISSIONER EPPS: But this petition 9 didn't come until after the judge's ruling made 10 it necessary. 11 JUSTICE STEIN: I didn't know. I didn't 12 know I owned the assets. What made it 13 necessary is the statute. It's not what the 14 judge said. The judge's decision alerted me to 15 the statute. But the statute would have forced 16 me to come here anyhow without the decision. 17 I'm here because the statute has put the assets 18 in my name. I don't need them. 19 COMMISSIONER EPPS: But at what point 20 would the -- would the statute have forced you 21 to come back to us to transfer the assets? 22 JUSTICE STEIN: When I read it and 23 understood it, or maybe whether when the 24 lawyers for the buyer called me up and said, 25 Justice Stein, we can't close. You don't -- 90 ITEM NO. 8 - 10 1 the company doesn't own its assets. You own 2 them. So whenever that happened, Commissioner, 3 I would have to come back here. 4 But the more important point -- 5 COMMISSIONER EPPS: Exactly. But that 6 would have given us -- that's the same thing 7 we -- I expressed earlier. If you had to come 8 back here before closing, I'm sure we'd have 9 scheduled a special meeting for you. We'd come 10 down and convene, grant your -- blessing, I 11 mean, bless you to transfer the assets to the 12 potential buyer. If you said, you know, what? 13 There's a snag in this transaction. I don't 14 own the assets, I think we would give you the 15 authority to make that transfer at that time. 16 JUSTICE STEIN: You know what what's 17 wrong? You know what's wrong with that answer, 18 Commissioner? What's wrong with it is you're 19 saying, I'll transfer the assets as long as it 20 doesn't avoid a bankruptcy. But if my transfer 21 of the assets is going to avoid the bankruptcy, 22 I'm not going to do it now. I'm going to do it 23 later. That's, respectfully, putting the cart 24 before the horse. 25 The question is this: Should the assets 91 ITEM NO. 8 - 10 1 go back? You, and I think the whole Commission 2 agrees, they should. They should. Because the 3 casino doesn't need to own them. Not now, not 4 later. They don't need -- I don't need to own 5 them is what I mean. 6 COMMISSIONER EPPS: I'm sorry, Justice, 7 but I have to respectfully disagree with you. 8 I'm looking at this with a blind eye towards 9 the bankruptcy. I'm saying, I don't know 10 what's on this side. All I'm saying is you 11 need the assets at the end of the deal, not way 12 out here. I'm not even concerning myself with 13 the bankruptcy issue from that -- and you may 14 think it's a very myopic view of it, but from 15 that interpretation, irrespective of the 16 bankruptcy, you need the assets but not here. 17 You need it here at the close of the deal. 18 JUSTICE STEIN: I do. I do. But you 19 could do it now. Look, I'm -- I'm telling you 20 what I think best enables me to discharge my 21 responsibilities. That's all I can do. 22 CHAIR KASSEKERT: Miss Flaherty? 23 MS. FLAHERTY: A few comments. 24 In the Division's view, the 25 conservatorship provisions and the ICA 92 ITEM NO. 8 - 10 1 provisions have no flaw. The staffs of the 2 Commission with the Division wrote the interim 3 casino authorization provisions fully aware of 4 the conservatorship provisions. There is no 5 real dispute as to the operation of both of 6 them together. They have worked well. 7 This issue has arisen because of the 8 default provisions under an indenture agreement 9 as decided by a Delaware Chancery Court. 10 And the spector, the cloud of the 11 bankruptcy has been noted. That's one of the 12 concerns for the Division, unknown 13 circumstances. If one is filed, when it is 14 filed, where it is filed. If that occurs, the 15 assets will be with the trustee. The title to 16 the casino will be with Adamar. I do not know 17 what a bankruptcy court in Delaware, in 18 Kentucky, in whatever state, will accord this 19 Commission and the Division in terms of its 20 powers, its authorities, its jurisdictions with 21 regard to those assets. And that is one of our 22 concerns with regard to this matter, another 23 one of the many unknowns that exist. 24 But if title is with the casino, then it 25 is not with the conservator. And the 93 ITEM NO. 8 - 10 1 conservator needs to exist for the casino to 2 operate. They all work together. The 3 Conservator with the title for the casino to 4 operate. And if that is not the case, which 5 was a critical component of having 6 conservatorship, I don't know the basis for 7 continuing to have this casino hotel operation. 8 Thank you. 9 CHAIR KASSEKERT: Thank you. 10 Any other questions? 11 Justice Stein, anything else you'd like 12 to say? 13 JUSTICE STEIN: No, thanks, Madame 14 Chair. 15 CHAIR KASSEKERT: We will take a recess. 16 Why don't we take an extended break. Justice, 17 I want to make sure you get lunch. 18 MS. FAUNTLEROY: 3:00? An hour. 19 CHAIR KASSEKERT: An hour? 20 JUSTICE STEIN: That would be good. 21 Okay. 3:00. 22 CHAIR KASSEKERT: 3:00. 23 (A recess was taken from 2:05 to 3:38 24 p.m.) 25 CHAIR KASSEKERT: Go back on the record. 94 ITEM NO. 8 - 10 1 Let me ask at this time if there are any 2 matters that need to be brought to our 3 attention. 4 Justice Stein? 5 JUSTICE STEIN: Madame Chair, I would 6 just like to supplement my argument very 7 briefly. 8 It occurred to me, I wasn't here, of 9 course, during the license proceeding, but my 10 understanding is that none of the key employees 11 that are running the Tropicana now were 12 disqualified and that essentially their license 13 denial was based on conduct primarily of the 14 parent corporation. So it occurred to me that 15 perhaps the Commission would consider a middle 16 ground, which would be that the Commission 17 perhaps could consider ordering a retransfer of 18 the assets to Adamar, title of the assets to 19 Adamar subject to my retaining possession of 20 the assets until the end of the conservatorship 21 and the closing. 22 We actually have an inventory of the 23 casino's assets. And I would, you know, be 24 willing as Conservator to assert dominion, 25 possession, control over those assets notifying 95 ITEM NO. 8 - 10 1 the casino, monitoring the assets, getting 2 daily reports, if necessary. Post a bond if 3 the Commission deems that appropriate. But it 4 occurred to me that perhaps that would address 5 the Commission's concerns that control of 6 assets not be vested in an unlicensed operation 7 while at the same time satisfying my need for 8 title to the assets to be in Adamar in order 9 that we can sell the stock when the time comes. 10 So I make that suggestion to the 11 Commission because I'm mindful of the 12 Commission's concerns and your apparent feeling 13 that an unlicensed operation should not control 14 its assets during the period that it doesn't 15 have a license. 16 In any event, I thought that might 17 address your concerns as well as my concerns as 18 Trustee and Conservator. 19 I took the liberty of mentioning the 20 idea briefly to Miss Flaherty and the Division 21 of Gaming Enforcement, and I just wanted to 22 inform the Commission of that. 23 I'd be happy to answer any questions. 24 CHAIR KASSEKERT: Would anyone like to 25 ask any questions before I ask Miss Flaherty to 96 ITEM NO. 8 - 10 1 respond? 2 COMMISSIONER EPPS: No. 3 MS. FLAHERTY: Yes, Chair, and 4 Commissioners. 5 We mentioned this type of possibility in 6 our letter report where there might be some 7 type of construct which could be devised 8 outside of the statutory confines but said that 9 our concerns would still be in jeopardy. 10 Our position is that we would still want 11 title in the Conservator. If the Commission 12 would determine to rule against our position, 13 we think that some type of arrangement as has 14 been suggested would be a minimum for 15 protections that we see necessary. But we 16 would be in unchartered territory, devising 17 some type of agreement to address all the 18 possible issues and concerns that may arise, so 19 we would recommend still that the title still 20 stay with the Conservator, but if you are 21 determined to rule against that position, we 22 would want something like this to be in place. 23 CHAIR KASSEKERT: I mean, I don't think 24 this suggestion would allow for anything 25 different than the suggestion before in terms 97 ITEM NO. 8 - 10 1 of what the statute says. 2 MS. FLAHERTY: Correct. 3 CHAIR KASSEKERT: Correct. Okay. 4 Any questions? 5 COMMISSIONER FEDORKO: No. 6 CHAIR KASSEKERT: Okay. Thank you, 7 Justice, for your suggestion. 8 On November 30, 2007, Adamar's casino 9 license expired. Nevertheless, provisions in 10 the Administrative Procedure Act prevented the 11 license from lapsing and, thus, allowed the 12 casino to remain open through December 12, 13 2007, when the Commission concluded its hearing 14 on the license renewal. However, in refusing 15 to renew the license, the Commission faced the 16 dilemma of either ordering the immediate 17 closure of the casino because Adamar was 18 disqualified or finding another mechanism by 19 which those operations could continue. 20 Nothing in the ICA provisions 21 specifically affords a former casino licensee 22 whose license has expired the ability to 23 continue to operate a casino. Certainly, in an 24 appropriate circumstances, the pendency of ICA 25 does not prevent the Commission from renewing a 98 ITEM NO. 8 - 10 1 casino license. NJSA 5:12-95.12B. 2 Nevertheless, the Granting of ICA does not 3 relieve the underlying casino licensee from the 4 obligations and responsibilities otherwise 5 incumbent upon it under the Casino Control Act, 6 and that's at NJSA 5:12-95.15. Thus, a severe 7 enough breach of those obligations by the 8 casino licensee could lead to its license 9 denial or revocation without necessarily 10 resulting in the correlative ICA trust 11 agreement becoming operative if the ICA 12 candidate played no role in that breach. But 13 the trusteeship alone would be insufficient in 14 such circumstances to allow the casino to 15 remain open. 16 Similarly, once an ICA trust is 17 operative, the ICA trustee exercises all rights 18 incident to the ownership of the trust property 19 and becomes invested with the powers and duties 20 necessary to the unencumbered exercise of those 21 rights. NJSA 5:12-95.14C. Where, as here, 22 there is no longer an underlying license, the 23 ICA statute is silent on how to reinvigorate 24 that which was lost in order for the casino to 25 remain open. 99 ITEM NO. 8 - 10 1 Conversely, the Act's conservatorship 2 provisions in furtherance of maintaining 3 continuity and stability in casino operations, 4 directly affords the Commission the means to 5 ensure that a casino remains in operation 6 upon -- "upon the failure or refusal to renew a 7 casino license." NJSA 5:12-130.1A. Having 8 elected to invoke those provisions, in my view, 9 the Commission cannot lightly abandon them now 10 because of perceived extra-regulatory 11 consequences such as a bankruptcy filing or the 12 Delaware litigation. 13 At the heart of the discussion is 14 Section 130.2A which provides as follows: The 15 conservator shall become vested with the title 16 of all the property of the former or suspended 17 licensee relating to the casino and the 18 approved hotel, subject to any and all valid 19 liens, claims, and encumbrances. The 20 conservator shall have the duty to conserve and 21 preserve the assets so acquired to the end that 22 such assets shall continue to be operated on a 23 sound and business like basis. 24 Based on this provision, the Delaware 25 court concluded that Justice Stein's 100 ITEM NO. 8 - 10 1 appointment as Conservator and the transfer of 2 title from Adamar to him caused Tropicana 3 Entertainment to breach Section 4.06 of the 4 trust indenture by permitting an impermissible 5 "asset disposition" thereunder. 6 Section 130.2A is an essential component 7 of the conservator regulatory scheme. Prior to 8 a finding that a casino licensee is 9 disqualified, it owns -- is disqualified it 10 owns, that is, has title to, the casino hotel, 11 its primary asset. Under Section 82 of the 12 Act, anyone that owns a casino hotel is both 13 eligible and required to hold a casino license. 14 After a casino license renewal is denied, there 15 obviously ceases to be a valid casino license. 16 Thus, the former casino licensee, for purposes 17 of Section 82 can no longer own the casino 18 hotel property with an ongoing casino operation 19 therein. This is essentially the point that 20 the Division makes but that the Justice 21 overlooks. 22 Accordingly, by mandate of Section 23 130.2A, title to the property, which is the 24 primary indicia of ownership, is immediately, 25 and I would submit irrevocably, stripped from 101 ITEM NO. 8 - 10 1 the former licensee upon the institution of the 2 conservatorship so as to avoid a conflict with 3 Section 82. If title did not so pass, the 4 primary, if not exclusive, avenue available to 5 the Commission would be to order the immediate 6 cessation of casino operations upon the denial 7 of a license renewal. 8 Certainly, a possessory interest in a 9 casino hotel property is also an indicator of 10 ownership that arguably would require casino 11 licensure under Section 82. However, in 12 contrast to title to the property, the 13 legislature in Section 130.2B(1) left to the 14 Commission's discretion whether to expel a 15 former casino licensee from its possessory 16 interest in the casino hotel upon the 17 institution of a conservatorship. In 18 circumstances where the casino ex -- where the 19 Commission, rather, exercises that discretion, 20 such that the former licensee is not compelled 21 to surrender possession of the casino hotel, 22 there is ample justification to conclude that 23 retaining that possessory interest in the 24 context of a conservatorship action does not 25 trigger the casino licensure requirements of 102 ITEM NO. 8 - 10 1 Section 82. 2 With that background, the Justice's 3 application can now be put in context. His 4 request to reconvey title from him to Adamar is 5 in direct conflict with the earlier discussion 6 regarding the interplay between Sections 82 and 7 130.2A of the Act, and at no point in his 8 papers does he address the relationship between 9 those two sections. Although he does concede 10 that title transfer is mandatory upon -- under 11 Section 130.2A, he insists that the Commission 12 retains the discretion to allow title to revert 13 to Adamar, again without at all discussing the 14 implications that flow therefrom under Section 15 82. In insisting that such discretion exists, 16 he makes no effort to contrast the admittedly 17 mandatory provisions on title transfer in 18 Section 132.2A -- 130.2A, with the permissive 19 provisions in Section 130.2B(1) regarding 20 possession. 21 The Commission does not take the 22 legislature's disparate treatment of title and 23 possession as happenstance. Had the 24 legislature intended the flexibility in 25 treatment granted to possessory interests to 103 ITEM NO. 8 - 10 1 apply also titular ones, it most assuredly 2 would have chosen words more akin to those used 3 in Section 130.2B(1) rather than those that it 4 actually used in Section 130.2A. Justice 5 Stein's argument admits of the possibility that 6 the legislature was merely concerned with an 7 instantaneous transfer of title that could be 8 followed immediately by a Commission sanctioned 9 reversion thereof to the disqualified former 10 licensee. This suggestion would strain the 11 actual words chosen by the legislature, 12 particularly when they are read in the context 13 of the implications that would arise for 14 purposes of Section 82. 15 Given the mandate in Section 130.2A that 16 title must pass, presumably there would need to 17 be an equally strong mandatory counterweight 18 that would compel the reversion, but Justice 19 Stein cites no such provision. He does cite 20 Sections 72 [sic] and 130.1A which, at most, 21 confer the discretion on the Commission to 22 grant the relief he seeks but do not compel it. 23 Invoking the omnibus provisions of Section 75 24 is hardly appropriate given the previously 25 discussed strong policy reasons why the 104 ITEM NO. 8 - 10 1 legislature commanded a title transfer in the 2 first place. 3 As for Section 130.1A, it is addressed 4 to the powers and duties that the Commission 5 elects to confer on the conservator by way of 6 instructions. Rather than make such 7 instructions, once given, intractable, it is 8 plain why the legislature would vest the 9 Commission with broad authority to modify those 10 instructions as it has done in Section 130.1A. 11 However, where the legislature and not the 12 Commission has specifically fashioned the power 13 conferred on the Conservator as is the case 14 with the passage of title through Section 15 130.2A, Section 130.1A, is hardly a valid 16 source upon which the Commission can or should 17 rely to thwart an otherwise clear legislative 18 plan. 19 In further support of Justice Stein's 20 argument that the Commission may permit title 21 to revert to Adamar, he points to Section 22 130.7, which in pertinent part provides that: 23 During the period of any conservatorship, the 24 casino operation in the form of the 25 conservatorship shall be deemed to be a 105 ITEM NO. 8 - 10 1 licensed casino operation and any reference in 2 the Casino Control Act to any obligations or 3 responsibilities incumbent upon a casino 4 licensee or those persons dealing with, 5 affiliated with, having an interest in, or 6 employed by a casino licensee shall be deemed 7 to apply to the said casino operation. 8 In his argument, Justice Stein treats 9 Adamar as the equivalent of the casino 10 operation in the form of the conservatorship. 11 However, when the legislature refers to a 12 company like Adamar that has been denied a 13 renewal of its casino license, it does so 14 consistently throughout the Statutory 15 conservatorship provisions with the phrase 16 "former licensee," it is not synonymous with 17 the "casino operation in the form of the 18 conservatorship." It is the latter and not the 19 former that is deemed to be a licensed casino 20 operation. Thus, Justice Stein's reliance on 21 Section 130.7 for the proposition that Adamar 22 is somehow presently licensed is misplaced. 23 Justice Stein also discusses Section 24 130.2C, the pertinent part of which provides 25 that: A Conservator when selling or conveying 106 ITEM NO. 8 - 10 1 all of the property of a former licensee to the 2 entity that ultimately will own and operate the 3 casino hotel at the conclusion of the 4 conservatorship may do so only to such persons 5 who are eligible to apply for and shall qualify 6 as a casino licensee in accordance with the 7 provisions of the Casino Control Act. 8 Justice Stein correctly notes that the 9 quoted casino license eligibility and 10 qualification requirements from Section 130.2C 11 pertain to the ultimate buyer. Thus, they do 12 not have any direct applicability to the 13 Justice's proposed reconveyance to Adamar. 14 However, Justice Stein incorrectly assumes that 15 the Act does not elsewhere impose such 16 requirements. As earlier discussed, Section 82 17 does precisely that, and fatally undermines his 18 argument. 19 Justice Stein also promotes the 20 advisability of a stock sale over an asset 21 purchase. It is unnecessary to decide what 22 form the transaction should take for purposes 23 of the pending petition. Suffice it to say the 24 order appointing Justice Stein Conservator made 25 it clear that selling Adamar's equity 107 ITEM NO. 8 - 10 1 securities or selling all the former licensee's 2 assets in bulk are both viable alternatives so 3 long as the sale is done in accordance with the 4 ICA requirement that Tropicana Casino and 5 Resorts derive no return beyond the lower of 6 its actual cost or the property's value 7 calculated as of December 12, 2007, when the 8 ICA trust become operative. 9 For example, if an as Conservator 10 Justice Stein were to sell all of Adamar's 11 assets in bulk, NJSA 5:12-130.6 requires that 12 the net sale proceeds therefrom be paid to 13 Adamar as the former licensee. Had there been 14 no ICA trust, Adamar would be free to 15 distribute those proceeds to any of its 16 intermediary and holding companies in 17 accordance with whatever valid instructions 18 they issued. However, with the ICA trust in 19 place, appropriate steps in those circumstances 20 would need to be taken to dispense with a sale 21 of Adamar's equity securities, which at that 22 point would be redundant and to release the 23 funds from the strictures of the trust but only 24 in an amount that is capped by the actual cost 25 formula. Under such an a scenario, the statute 108 ITEM NO. 8 - 10 1 seems to compel Justice Stein to retain title 2 to the property. In any event, either mode of 3 conveyance appears to address regulatory 4 requirements. 5 Even granting, for the sake of argument, 6 that a stock sale is the preferred mode of 7 conveyance, and it is not altogether clear that 8 this is the case, Justice Stein misperceives 9 when Adamar may recover title to the assets. 10 For instance, in the case of a stock purchaser 11 that is already known to the regulators and 12 upon which the Division presumably could report 13 favorably in short order, a conveyance of title 14 coincident to a stock sale would appear in 15 order, assuming that the Commission were to 16 find that Adamar through its new owners was 17 purged of the taint of disqualification and 18 again licensable. 19 However, for a stock purchaser that 20 undertakes its own separate ICA process, the 21 granting of ICA is not sufficient, in my view, 22 for the casino to remain open unless a 23 Conservator remains in place through the 24 plenary qualification of the new stock 25 purchaser. Only upon such qualification could 109 ITEM NO. 8 - 10 1 Adamar reacquire title, as seemingly borne out 2 by Section 130.8D which provides that: The 3 sale, assignment, transfer, pledge, or other 4 disposition of the securities issued by a 5 former or suspended licensee during the 6 pendency of a conservatorship action instituted 7 pursuant to this article shall neither divest, 8 have the effect of divesting, nor otherwise 9 affect the powers conferred upon a conservator 10 by his amendatory and supplementary act. 11 Among the powers conferred on a 12 conservator are those set forth in Section 13 130.2A which mandates the vesting of title in 14 the conservator. Thus the legislature was 15 apparently satisfied when it amended Section 16 130.8D by Public Law 1987, Chapter 410, having 17 just enacted the ICA provisions that same year 18 in Public Law 1987, Chapter 409, that a stock 19 transfer through ICA would not dislodge title 20 from the conservator. Accordingly, for sound 21 statutory and policy reasons, Justice Stein's 22 rush to return title to Adamar is misplaced 23 and, in my view, must fail. 24 Given the overwhelming Statutory bases 25 militating against granting Justice Stein's 110 ITEM NO. 8 - 10 1 petition, the policy reasons he advances are, 2 at best, marginal. Primarily Justice Stein 3 envisions that bankruptcy will shortly ensue 4 unless he is allowed to reconvey title. 5 Contrary to the Justice's predictions, several 6 casino licensees have successfully navigated 7 through bankruptcy and survived. Certainly, 8 there is no guarantee that Adamar would be as 9 fortunate, especially if it were to be drawn 10 into a bankruptcy filing of its former parent 11 that is venued in a remote jurisdiction. 12 In that regard, the full effect, if any, 13 of a bankruptcy, whether voluntary or 14 involuntary, remains unknown for purposes of 15 the functioning of the conservatorship and the 16 trusteeship. Nevertheless, that risk and 17 whatever attendant delay it may cause in the 18 sale process, cannot justify granting Justice 19 Stein's petition and allowing a transfer that 20 is so blatantly contrary to the New Jersey 21 legislative scheme just for the sake of 22 deriving a perceived litigation advantage. 23 Although the speed with which a sale occurs is 24 an element of that process, the overriding 25 regulatory concern is that the purchaser must 111 ITEM NO. 8 - 10 1 meet the Act's strict qualification criteria. 2 If along the way, whether in or out of 3 bankruptcy, the Commission confronts a 4 situation where, for instance, control of the 5 casino hotel would be passed to someone who is 6 regulatorily unsuitable, all available options 7 must be explored, including the painful 8 prospect of ordering the closure of the casino. 9 As for the timing of Justice Stein's 10 application, which follows on the heels of the 11 ruling in Delaware adverse to Tropicana 12 Entertainment, it certainly appears that his 13 application could be perceived to be for the 14 benefit of Adamar's disqualified parent 15 companies. The March 4th letter to Justice 16 Stein from counsel for Tropicana Entertainment 17 certainly heightens that perception. 18 The significance of the letter from 19 counsel for Tropicana Entertainment cannot be 20 discounted. Even had no such request been 21 made, Justice Stein's petition to reconvey 22 title would seem to be designed to benefit 23 Tropicana Entertainment in its litigation with 24 Wilmington Trust. As I mentioned earlier when 25 addressing intervention, any Commission 112 ITEM NO. 8 - 10 1 involvement in the extra-regulatory matters 2 between private parties necessarily is limited 3 and arises solely as incidental to its 4 fulfilling its functions under the Casino 5 Control Act. 6 Unfortunately, Justice Stein's petition 7 not only squarely interjects the Commission in 8 the Delaware litigation, but also purports to 9 do so without providing a sound basis under the 10 Casino Control Act for the Commission to act. 11 Worse, in light of the March 4, 2008, letter to 12 the Justice, any favorable resolution on his 13 petition, even if clearly supported by the Act, 14 which it is not, would be seen as the 15 Commission aligning itself with Adamar's 16 disqualified parent companies against 17 Wilmington Trust and the noteholders. 18 Moreover, it is not at all clear that 19 the requested reconveyance would cure Tropicana 20 Entertainment's Delaware dilemma. Even if 21 there were a guarantee that the Delaware Court 22 would find that the reconveyance cures the 23 default, there would still be no cause under 24 the Act for the Commission to grant the 25 Justice's petition, but the absence of such a 113 ITEM NO. 8 - 10 1 definitive ruling from the Delaware Court 2 certainly makes it easier to reject the relief 3 the Justice requests. 4 Further, the clear implication from 5 Justice Stein's petition is that the requested 6 reconveyance is the sole means to cure the 7 default. However, other means for Tropicana 8 Entertainment to cure the default are assuredly 9 available, including the pursuit of an appeal 10 of the Delaware Court's ruling as noted by the 11 Division. Unfortunately, as the March 4, 2008, 12 letter suggests, the knee-jerk reaction was to 13 have the Commission provide a quick fix despite 14 the adverse consequences to the regulatory 15 apparatus. 16 Justice Stein today proclaimed that his 17 proposed remedy is the only pragmatic approach, 18 dismissing the Division's contrary position, 19 characterizing it as an ultra-technical 20 interpretation of the Casino Control Act. In 21 doing so, he argues that the Act has perceived 22 limitations in addressing the "perfect storm" 23 of a simultaneous conservatorship and operative 24 ICA trust agreement. He implores the 25 Commission to rectify this perceived statutory 114 ITEM NO. 8 - 10 1 defect by taking action that he readily 2 concedes would be in direct violation of the 3 specific language in the Act because he claims 4 that there are overriding policy and practical 5 concerns that should militate against our 6 strict adherence to the statute. However, as 7 Commissioner Epps aptly noted during the 8 earlier argument, it is our statutory mission 9 to enforce the Act. Where as here, the 10 language is eminently clear, and there is 11 absolutely no valid claim that any ambiguity 12 exists as to the direct we must take in this 13 matter, Justice Stein's protestation 14 notwithstanding, the answer in this case is 15 rather simple. In my judgment, we must deny 16 the relief requested consistent with the clear 17 statutory mandate of our enabling legislation. 18 With that, I, one, move to deny in all 19 respects Justice Stein's petition to reconvey 20 title; 21 Two, to issue further instructions to 22 him in his capacity as Conservator and Trustee, 23 that any other application that he intends to 24 present to the Commission should only be 25 brought after first securing permission from 115 ITEM NO. 11 1 the Chair to do so; 2 And, three, to dismiss as moot 3 Wilmington Trust's separate petition under 4 Section 130.10, and I so move. 5 Is there a second? 6 COMMISSIONER FRULIO: Second. 7 CHAIR KASSEKERT: The motion has been 8 made and seconded. This is a roll call vote. 9 MR. NANCE: Commissioner Frulio? 10 COMMISSIONER FRULIO: Yes. 11 MR. NANCE: Commissioner Fedorko? 12 COMMISSIONER FEDORKO: Yes. 13 MR. NANCE: Commissioner Epps? 14 COMMISSIONER EPPS: Yes. 15 MR. NANCE: Chair Kassekert? 16 CHAIR KASSEKERT: Yes. 17 MR. NANCE: The record will reflect that 18 the motion is unanimous. 19 Item No. 11, petition of the Trustee and 20 Conservator for Adamar of New Jersey, Inc., to 21 extend the 120-day period and for other relief. 22 MR. DiGIACOMO: Ma'am, Chair, 23 Commissioners, while I'm at counsel table, I 24 might as well retain this seat and advise that 25 the same parties are on this item as well. 116 ITEM NO. 11 1 CHAIR KASSEKERT: Thank you. 2 Justice Stein? 3 Mr. Mack? 4 JUSTICE STEIN: Mr. Mack is going to 5 handle that for us. 6 CHAIR KASSEKERT: Thank you. 7 MR. MACK: Good afternoon, Chair, 8 Commissioners. 9 As set forth in our papers, Justice 10 Stein has overseen an efficient yet robust 11 auction process to try to sell the 12 Commission -- or sell the casino pursuant to 13 his instructions by the Commission. We're 14 expecting that a signed contract from one of 15 the participants of the second round of the 16 auction process will be obtained later this 17 month. Unfortunately, that's beyond the 18 initial 120 days. And we're here to ask the 19 Commission to extend that the initial 120-day 20 time period for an additional amount of time. 21 We have suggested 120 days, but we really leave 22 that -- the amount of time -- to the 23 Commission's discretion. 24 In connection with our application, 25 we've raised the issue about the 121-day 117 ITEM NO. 11 1 waiting period. We largely raise that to flag 2 that for the Commission in terms of figuring 3 out how much time is going to be necessary. 4 Justice Stein, in terms of reaching a contract, 5 only needs a few more weeks beyond the first 6 120 days. The additional time period is really 7 up to the Department of Gaming Enforcement and 8 the Commission as how much time is needed to 9 complete that regulatory process. 10 We just ask you to keep that in mind 11 when deciding how long a time period should be 12 granted to us. 13 CHAIR KASSEKERT: Thank you, Mr. Mack. 14 Miss Flaherty? 15 MS. FLAHERTY: Yes, Chair, 16 Commissioners. 17 The Division does not oppose an 18 extension of 120-day period to complete the 19 disposition of the property, but it would 20 recommend to the Commission that it be shorter 21 than the additional 120-day period, that it be 22 for a period which is considered to be 23 reasonable to complete the necessary 24 arrangements and agreements. 25 As to the waiver of the 121-day ICA 118 ITEM NO. 11 1 waiting period, the Division would strongly 2 oppose that. That period is set statutorily. 3 It provides the remaining regulatory agencies 4 an opportunity to review and vet whichever 5 person may come before it as the new casino 6 licensed applicant or holder. At this point in 7 time, because no one has been identified, it's 8 impossible for us to have any investigative or 9 other information to provide to you. The only 10 way that the period can be shortened, in our 11 view, is if the Division is able and certainly 12 would want to as soon as they can report to you 13 with regard to an applicant. Obviously, if 14 someone is known to us and in the system, we 15 would be able to expedite our report to you. 16 And if the Commission is able to hold an 17 expedited hearing. 18 Therefore, because we do not know the 19 purchaser, I think it is premature to ask for 20 any relief with regard to the 121-day waiting 21 period, and it is statutorily set. 22 I can just advise the Commission that we 23 will do whatever we can to report as vigorously 24 as we can. 25 Thank you. 119 ITEM NO. 11 1 CHAIR KASSEKERT: Thank you. I 2 appreciate that. 3 Let me ask if there are any other 4 questions for any of the parties? 5 Okay. Thank you. 6 MR. MACK: Chair, can I just state -- 7 CHAIR KASSEKERT: Sure. 8 MR. MACK: We grant at this point it is 9 really premature on that, and we would feel 10 free to withdraw that request. 11 CHAIR KASSEKERT: Okay. You don't want 12 me to rule on it anyway? 13 MR. MACK: You don't need to rule on it 14 anyway. 15 CHAIR KASSEKERT: Okay. All right. I 16 won't do that, then. 17 Retired Justice Stein, Gary Stein, the 18 Trustee and Conservator of Adamar of New 19 Jersey, Inc., doing business as Tropicana 20 Casino and Resort, Tropicana, has requested 21 certain relief to with regard to two time 22 limits -- actually one time limit now -- that 23 are statutorily imposed upon him and the 24 potential purchasers of the Tropicana by the 25 interim casino authorization, ICA provisions, 120 ITEM NO. 11 1 of the Casino Control Act. 2 First, once an ICA trust becomes 3 operative, Section 94-14(e) not only 4 establishes an initial period of 120 days 5 within which the Trustee is to sell the trust 6 property but also authorizes the Commission to 7 extend that period for good cause. That sale 8 period began for Tropicana on December the 9 12th, 2007, and will expire on April 10th, 10 2008. Consequently, Judge Stein seeks an 11 extension for an additional 120 days. 12 I find that Justice Stein has made 13 substantial progress towards affecting the sale 14 of Tropicana, and he has indicated that he 15 anticipates an agreement of sale should be 16 signed within several weeks. 17 Therefore, under the circumstances, and 18 since the Division of Gaming Enforcement has 19 indicated that it does not object to an 20 extension of the sale period, I would move that 21 the Commission extend the sale period for an 22 additional 60 days to June 9th, 2008. This 23 will provide the Trustee with a reasonable 24 period of time to continue his efforts and will 25 also permit the Commission to closely monitor 121 ITEM NO. 12 1 the sale process without forestall -- 2 foreclosing, rather -- the Trustee from 3 returning to ask for additional time, if 4 needed. 5 Is there a second. 6 COMMISSIONER FEDORKO: Second. 7 COMMISSIONER FRULIO: Second. 8 COMMISSIONER EPPS: 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: The motion carries. 15 MR. NANCE: Item No. 12, consideration 16 of the application of the Conservator and 17 Trustee for the former casino licensee, Adamar 18 of New Jersey, Inc., for approval of fees for 19 the Conservator/Trustee, his counsel, and 20 certain consultants. 21 MS. FAUNTLEROY: Good late afternoon. 22 The next-to-the-last matter on the 23 agenda today is the consideration of the 24 application for allowance by Justice Stein for 25 his conservator fees for the period February 1 122 ITEM NO. 12 1 through February 20 as well as his counsel's 2 fees, Pashman Stein, for the same period as 3 well as the presentation of the consultant 4 invoices of Gary Simpson, financial consultant 5 and Michael Brown, management consultant, 6 previously approved by the Commission to assist 7 the Conservator in his responsibilities. 8 I believe Sean is here on behalf of both 9 the firm as well as the Justice. 10 And the Division has been provided with 11 a copy of the invoices as well. 12 CHAIR KASSEKERT: Thank you. 13 MR. MACK: Chair, Commissioner, you have 14 the invoices. I'd be happy to ask -- answer 15 any questions about them that you might have. 16 Otherwise, we ask they be approved. 17 CHAIR KASSEKERT: Thank you. 18 Let me just ask for questions -- 19 I'm sorry. Miss Flaherty? Any 20 comments? 21 MS. FLAHERTY: Yes. We have reviewed 22 the information and checked the computations, 23 and they appear to be accurate. We leave to 24 the Commission's discretion the approval of the 25 payments. 123 ITEM NO. 12 1 We would just note with regard to the 2 consultants that originally it had been set 3 forth in the petitions that their payments 4 would be made at the time of the sales. I 5 wanted to just note that for the Commission's 6 consideration. 7 Thank you. 8 CHAIR KASSEKERT: And I think that might 9 be my first question. And with respect to 10 the-- the consultants that had agreed to wait 11 until the sale had gone forward. And what 12 changed? 13 MR. MACK: What we're asking for is 14 authorization. The Commission, obviously, has 15 to approve the amount. Not necessarily still 16 hold in abeyance, but the timing of the payment 17 of the payment of this particular invoice. 18 We're asking for authorization that the amount 19 of the particular invoice is okay so that when 20 the time comes to pay it, we can pay it. And 21 we can discuss with the Commission what the 22 appropriate time is to pay those particular 23 invoices. 24 CHAIR KASSEKERT: Okay. All right. 25 COMMISSIONER EPPS: Well, I just have 124 ITEM NO. 12 1 one other question. 2 Two of the consultants have submitted 3 bills, and their bills are here for approval. 4 Another one, you had another consultant, and it 5 appears from some of the detail that consultant 6 was consulted, if you will allow that, but 7 there's no bill from her. Is there a reason 8 for that? 9 MR. MACK: Miss Popielarski has not 10 submitted an invoice to us. In all candidness, 11 as you can see from the invoices, Mr. Simpson 12 is probably is the most active consultant we've 13 had. Mr. Brown has been less active, and Miss 14 Popielarski has been even less active than Mr. 15 Brown. So she may have just not had sufficient 16 time in to generate her own motivation to 17 prepare an invoice. 18 CHAIR KASSEKERT: Any other questions? 19 I guess my only other concern, which I 20 think I will talk a little bit about in my 21 remarks, is the issue of some of the petitions 22 that have been put forth when -- when, 23 unfortunately, you made a trip to Atlantic 24 City, I guess a month or so ago, but didn't 25 argue. I have some concern about those bills 125 ITEM NO. 12 1 being paid. 2 With respect to the hotel fee, interest 3 and penalty, but I'll address those in my 4 remarks. 5 Unless you want to respond. 6 MR. MACK: I would -- Chair, I would 7 just say we generated this bill at the end of 8 the month. 9 CHAIR KASSEKERT: Uh-huh. 10 MR. MACK: We went -- Justice Stein and 11 I both went back through it. And anything that 12 we thought was excessive, anything we thought 13 didn't fairly represent work that deserved to 14 be compensated, we cut out of this bill. This 15 bill is already a reduction of the actual 16 amount of time that Justice Stein and Pashman 17 Stein have put into it. And the effort and the 18 work that was done, and every single one of 19 these entities, I stand behind. And I would 20 respectfully ask the Commission to respect that 21 none of the work and time reflected in here is 22 in any way excessive. 23 And even the trip down here, there were 24 discussions had before the Commission hearing, 25 decisions made at the Commission hearing which 126 ITEM NO. 12 1 wouldn't have been made possible had we not 2 been here. And even that was just necessary. 3 The only way to get down here, to talk to 4 people who were at the Commission hearing that 5 day was to come here. 6 CHAIR KASSEKERT: I guess my concern 7 becomes with -- especially with respect to the 8 hotel fee -- to the hotel tax and interests. I 9 think we provided you with information with 10 respect to prior cases that were pretty firmly 11 on point with respect to the arguments that we 12 never, you know -- we usually, we always -- we 13 never. We always charge interest when somebody 14 is late. So there was really no -- your 15 arguments notwithstanding, then, your desire to 16 appeal it notwithstanding, it was pretty clear 17 that we had case law. 18 And please jump in, Counsel Fauntleroy. 19 That we had case law in place for 20 determining that, you know, we didn't have 21 exceptions to those issues. And that's my only 22 concern. 23 MS. FAUNTLEROY: I don't need to add 24 anything. It's the Commission's discretion. 25 CHAIR KASSEKERT: Okay. 127 ITEM NO. 12 1 MR. MACK: Okay. I guess we will take 2 in the future the, I guess, more subtle message 3 is coming back from the Commission in response 4 to something like that. We'll look more 5 closely for that. Until I got down here and 6 had a chance to talk with Miss Fauntleroy, it 7 hadn't dawned on me that that was the message 8 that was being sent and in the material we had 9 received. But I see now understand those 10 subtleties that come back through Miss 11 Fauntleroy. 12 CHAIR KASSEKERT: I would never 13 characterize her as a subtle person. 14 (Laughter.) 15 CHAIR KASSEKERT: Well, let me ask if 16 any of the Commissioners have any feelings, 17 given Mr. Mack's representation, with respect 18 to that? If that changes anyone's mind with 19 respect to -- 20 COMMISSIONER FRULIO: No. 21 CHAIR KASSEKERT: Okay. All right. 22 Okay. 23 We have before us today the 24 Conservator's second application for allowance 25 of fees and for the allowance of fees and costs 128 ITEM NO. 12 1 and for services performed on his behalf by his 2 counsel, Pashman Stein, PC. The requests seeks 3 allowances for the period of February 1st 4 through February 20th. We've received the 5 Conservator's second Report of Administration 6 of Conservatorship which covers the same 7 period. 8 Additionally, the Conservator seeks 9 approval of the consultant fees incurred by 10 Gary Simpson for January and Michael Brown for 11 January and February. 12 At our January 16th public meeting, the 13 Commission approved the hiring of the Gary 14 Simpson as a financial consultant and Michael 15 Brown as a management consultant to assist the 16 Conservator. Both Mr. Simpson and Stein 17 represented that they would defer receipt of 18 any compensation until the closing of the sale 19 of the Tropicana. The Conservator now seeks to 20 have his invoices approved by the Commission, 21 but has represented that those invoices would 22 be not paid until -- until the closure with the 23 sale of the property. And, once approved, 24 he'll determine if payment should be made. 25 Uncertainty with regard to the impact of 129 ITEM NO. 12 1 the bondholders litigation in Delaware may be 2 indeed the driving force behind the Justice's 3 request. However, potential delays in the sale 4 of the property for whatever reason with as 5 much a possibility in the January -- were as 6 much a possibility in January when the 7 Commission approve the hiring of Simpson and 8 Brown as it is today, and Mr. Simpson and Mr. 9 Brown through the Conservator sought 10 appointment as consultant with that reality and 11 with the expressed intentions to delay payment 12 for their services until the property is being 13 sold. But that being said, both Mr. Simpson 14 and Mr. Stein's invoices are reasonable and 15 sufficiently detailed to support their fee 16 requests. 17 So, accordingly, I move to approve the 18 fees of Mr. Simpson in the amount of 32,000 -- 19 $32,087.50 for services rendered into January, 20 and the fees and costs of Mr. Brown in the 21 amount of $20,365 for services rendered and 22 costs incurred in January and February. 23 With, again, your representation, on the 24 record, Mr. Mack. 25 As to the invoice from Pashman Stein for 130 ITEM NO. 12 1 February, the amount sought for services 2 rendered and costs incurred in February is 3 $104,675 for 236.5 hours. Again, the 4 Conservator's counsel fees are in excess of 5 $100,000 for less than one month of -- one 6 month of services to the Conservator. And I 7 note in my motion to approve the Conservator 8 fees and as of those of his counsel at the 9 February 20th meeting that I did not want to 10 see the fees and expenses attendant to the 11 conservatorship become unduly burdensome. And 12 I expected the Conservator's counsel and 13 approved consultants to be judicious in that 14 regard. But I do recognize that the February 15 invoice reflects a significant expenditure of 16 time by the attorneys of Pashman Stein being 17 devoted to discussing and researching the 18 issues raised by the Indentured Trustee in the 19 Delaware litigation as related to his Trustee 20 and Conservator status. 21 In fact, that litigation resulted, 22 frankly, in the discovery demand, and I think a 23 demand for a deposition being made to Justice 24 Stein. 25 Accordingly, the assistance of Pashman 131 ITEM NO. 12 1 Stein to navigate those demands was appropriate 2 and prudent. Therefore, I do not object to the 3 fees incurred with regard to the Delaware 4 proceeding as reflected in the February 5 invoice. 6 However, I am concerned with the legal 7 fees incurred by Pashman Stein in pursuant of 8 the Conservator's request to waive the penalty 9 assessed against Adamar for a late payment of 10 its required hotel room fee tax. Through prior 11 written decisions, the Commission has expressly 12 maintained the seriousness with which it views 13 the obligations of making tax payments on time, 14 and have been loathe to waive any statutorily 15 mandated penalties. Notwithstanding 16 significant precedents strongly suggesting that 17 an application for waiver to be adversely 18 viewed, the counsel for the Conservator pursued 19 the relief through a petition, which petition 20 was ultimately withdrawn prior to 21 determination. 22 It is my opinion that any fees 23 associated with this fruitless pursuit should 24 be disallowed as to the Conservator's counsel 25 as well as the Conservator. 132 ITEM NO. 12 1 However, you wish to supplement. Let me 2 say this. If you had other discussions when 3 you came down here and wish to supplement that 4 in place of the hotel tax, I would certainly 5 entertain that as an amended bill. 6 MR. MACK: Just so I understand, so if I 7 identify what the hotel tax work was -- 8 CHAIR KASSEKERT: Well, you represented 9 on the record that when you came -- 10 (Conferring.) 11 CHAIR KASSEKERT: Right. 12 MR. MACK: Right. 13 CHAIR KASSEKERT: Right. 14 MR. MACK: Because there was also 15 another -- there was a second petition. 16 CHAIR KASSEKERT: The $750,000. 17 MR. MACK: And that did end up going 18 forward to this hearing. 19 CHAIR KASSEKERT: Yeah. Right. 20 And if you represented on the record 21 that you were down here doing other things and 22 can supplement your bill, I would be happy who 23 entertain that amendment. 24 Lastly, as to the Conservator's bill for 25 February, his invoice seeks an allowance of 133 ITEM NO. 12 1 $34,775 in fees and $905.96 in costs. With the 2 exception of the two areas, I generally find 3 the invoice to be reasonable. 4 However, for the reasons noted with 5 respect to Pashman Stein's pursuant of the 6 waiver of the penalty for the hotel room tax, I 7 would also disallow but allow you to 8 supplement, again, any fees incurred by the 9 Justice in relation to that aborted request. 10 Secondly, and I have discussed this 11 before with you today, I can't in good 12 conscience continue to authorize payment for a 13 car service for the Justice for his visits to 14 Tropicana and/or the Commission offices. The 15 current invoice reflects a charge of $750 for 16 February 7th, 2008, trip to Atlantic City. At 17 the February 20th meeting, I voted to authorize 18 a charge of $1500 for two trips to the city. 19 However, in light of my cautionary 20 remarks placed on the record at that meeting 21 with regard to your fees and expenses going 22 forward, I cannot continue to support such an 23 expenditure. While it is certainly the 24 Justice's privilege to continue to engage a car 25 service for his convenience, I cannot support 134 ITEM NO. 12 1 such an expenditure in light -- as an allowable 2 cost. 3 In light of my remarks, I move as 4 follows -- I move as follows: To approve the 5 invoices of Mr. Simpson and Brown for January 6 and February with the condition that the 7 amounts authorized not be paid until the 8 closing of the sale of the Tropicana; 9 Two, to approve the invoices of Pashman 10 Stein for February 1st through February 20th 11 reporting period, with exception -- and, as I 12 said before, the ability to supplement any fees 13 and costs, including an appearance before the 14 Commission at which the petition request was 15 initially adjourned prior to withdrawal, which 16 were occurred in pursuant of the request to 17 waive the penalty impose against Adamar for 18 late payment of the hotel room tax fee; 19 To approve the invoice of the 20 Conservator for February 1st through February 21 20th reporting period with the exception of any 22 fees and costs incurred, again, in pursuant of 23 the request to waive the penalty imposed 24 against Adamar for late payment of the hotel 25 room tax fee which, again, can -- I will allow 135 ITEM NO. 13 1 for an amended amendment and for the car 2 service; 3 And to delegate to the Chair or my 4 designee the authority to review and approve 5 revised bills from Pashman Stein and the 6 Conservator consistent with the decision of the 7 Commission. 8 Is there a second? 9 COMMISSIONER FEDORKO: Second. 10 CHAIR KASSEKERT: The motion has been 11 made and seconded. All in favor? 12 (Ayes.) 13 CHAIR KASSEKERT: Opposed? 14 (No response.) 15 CHAIR KASSEKERT: Motion carries. 16 MR. NANCE: Item No. 13, petition of the 17 Conservator for the former licensee, Adamar of 18 New Jersey, Inc., to extend certain 19 transactional waivers. 20 Mr. Ingis? 21 MR. INGIS: Good afternoon, Madame Chair 22 and Commissioners. 23 This matter relates to the transactional 24 waivers granted to the three consultants hired 25 by Justice Stein. Those transactional waivers 136 ITEM NO. 13 1 are due to expire next week on April 10th. 2 CHAIR KASSEKERT: Thank you. 3 Mr. Mack? 4 MR. MACK: Again, I rely on my papers. 5 I guess in terms of the length of the 6 extension, I would at least ask for the 7 extension to be at least so long as the current 8 60-day extension given to the Trustee. 9 CHAIR KASSEKERT: Thank you. 10 Miss Flaherty? 11 MS. FLAHERTY: Yes, Chair. 12 The Division noted the April 10th 13 expiration of the transactional waivers as set 14 forth in the Commission's prior order. As a 15 result, we do not object to the continuation of 16 the transactional waivers for the period 17 requested. 18 Thank you. 19 CHAIR KASSEKERT: Thank you. 20 Are there any questions? 21 If not, is there a motion? 22 COMMISSIONER EPPS: Madame Chair, I move 23 that we grant the petition, extending the 24 transactional waivers until June 9th, 2008. 25 COMMISSIONER FEDORKO: Second. 137 ITEM NO. 13 1 COMMISSIONER FRULIO: Second. 2 CHAIR KASSEKERT: The motion has been 3 made and seconded. All in favor? 4 (Ayes.) 5 CHAIR KASSEKERT: Opposed? 6 (No response.) 7 CHAIR KASSEKERT: Motion carries. 8 MR. NANCE: In accordance with 9 Resolution No. 07-10-12-26, the next closed 10 session of the Commission shall be held on 11 Wednesday, April 16th, 2008, at 9:15 a.m., the 12 Commission offices. 13 It is now time for the public 14 participation portion of the meeting. 15 CHAIR KASSEKERT: Is there anyone from 16 the public who wishes to be hear? 17 (No response.) 18 CHAIR KASSEKERT: Seeing no one, I 19 declare this portion of the meeting closed and 20 entertain a motion to adjourn. 21 COMMISSIONER FEDORKO: Motion to 22 adjourn. 23 CHAIR KASSEKERT: Second? 24 COMMISSIONER FRULIO: Second. 25 CHAIR KASSEKERT: The motion has been 138 1 made and seconded. All in favor? 2 (Ayes.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: Motion carries. 6 Thank you. 7 (Public Meeting 08-04-02 was adjourned 8 at 4:21 p.m.) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 139 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: April 4, 2008 23 My Commission Expires on July 10, 2009 24 ID No 2062871 25