1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 08-08-21 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Thursday, August 21, 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 p.m. to 4:15 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 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 WILLIAM T. SOMMELING, VICE CHAIR MICHAEL A. FEDORKO, COMMISSIONER 4 MICHAEL C. EPPS, 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 ROBERT A. MONCRIEF, COUNSEL TERESA M. NAGENGAST, SENIOR COUNSEL 11 E. DENNIS KELL, ASSISTANT GENERAL COUNSEL CLAIRE FRANK, PROGRAM MANAGER 12 DIVISION OF GAMING ENFORCEMENT: 13 DEPUTY ATTORNEYS GENERAL MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL 14 BRIAN BISCIEGLIA, DEPUTY ATTORNEY GENERAL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 15 CHARLES F. KIMMEL, DEPUTY ATTORNEY GENERAL 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. 6 TERESA M. NAGENGAST, SENIOR COUNSEL JAMES FOGARTY, DEPUTY ATTORNEY GENERAL 3 MICHAEL & CARROLL DEREK G. TIMMS, ESQ. 4 FOR: GOLDMAN SACHS 5 ITEM NO. 7 E. DENNIS KELL, ASSISTANT GENERAL COUNSEL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 6 JOSEPH DOUGHERTY, ESQ. FOR: SHOWBOAT ATLANTIC CITY OPERATING 7 ITEM NO. 10 DIANNA W. FAUNTLEROY, GENERAL COUNSEL 8 MARY JO FLAHERTY, DEPUTY ATTORNEY PASHMAN STEIN 9 SEAN MACK, ESQ. FOR: THE CONSERVATOR/TRUSTEE 10 ITEM NO. 11 LEONARD J. DiGIACOMO, ASSISTANT 11 GENERAL COUNSEL JAMES FOGARTY, DEPUTY ATTORNEY GENERAL 12 SILLS CUMMIS & GROSS KENNETH F. OETTLE, ESQ. 13 FOR: INFINITY WORLD ENTITIES 14 ITEM NO. 12 KAREN WOZNIAK, ASSISTANT GENERAL COUNSEL FOX ROTHSCHILD, LLP 15 NICHOLAS CASIELLO, JR., ESQ. PATRICK MADAMBA, ESQ. 16 FOR: PINNACLE ENTERTAINMENT, INC. 17 18 19 20 21 22 23 24 25 4 1 AGENDA PUBLIC MEETING NO. 08-08-21 2 August 21, 2008, 10:35 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of the August 11 11 6, 2008, public meeting 4 2 Applications for employee and casino service industry licenses 5 16 applications remanded for hearings 11 11 8 applications granted 11 12 6 Transact Technologies, Incorporated 12 13 Applications for initial and renewal 7 of casino key employee licenses and for qualification: 8 Edward William, Executive Director of 13 14 Surveillance for Adamar of New Jersey, Inc., 9 Robert H. Green, Jr., Director of Property 13 14 Operations for Atlantic City Showboat, Inc. 10 Eric L. Reynolds, Vice President of 13 14 Community and Employment initiatives for 11 Marina District Development Company, LLC 3 Stipulations of settlement and consent 12 agreements: a) Jimmy Francois (07-0658-ER) 15 17 13 b) Lori S. Castrataro (08-0303-ER) 15 17 c) Gerald J. Eget (08-0263-ER) 15 17 14 d) Theresa H. Mancz (08-0022-ER) 15 17 e) Sean M. Reese (07-0523-ER) 15 17 15 f) Renee D. Farms-Rivers (08-0172-RC) 15 17 g) Rochelle A. Richardson (a/k/a 15 17 16 Rochelle A. Surles) (08-0309-ER) h) Alizon Lopez (07-0785-ER) 15 17 17 4 Petitions for early reapplication: a) Nathaniel B. Daley (08-0441-RA) 17 20 18 b) Shayon L. Oatman (08-0440-RA) 21 22 c) Darrell P. Thompson (08-0442-RA) 22 23 19 5 Applications for suspension: a) Frank R. Casale, II (08-0562-RC) 23 24 20 b) Guo Y. Chen (08-0566-RC) 25,47 54 Sworn by 47 21 William Wong, interpreter c) Nishidah L. Morton (08-0564-RC) 23 24 22 d) Jennifer Ocasio (08-0565-RC) 23 24 e) Amedeo Pagano (08-0563-RC) 23 24 23 f) Akeema S. Pannell (08-0596-RC) 23 24 g) Frank J. Tedeschi (08-0597-RC) 23 24 24 6 Petition of Goldman Sachs for a waiver 27 32 of qualification (PRN 0160806) 25 5 1 CONTINUED AGENDA PUBLIC MEETING NO. 08-08-21 2 August 21, 2008, 10:35 a.m. ITEM PAGE VOTE 3 7 Petition of Showboat Atlantic City 32 34 Operating Company (t/a Showboat Casino 4 Hotel) for an amendment to is certificate of operation and casino hotel alcoholic 5 beverage license to permit an expansion of its gaming floor (PRN 2230801) 6 8 Proposed publication and temporary 14 15 adoption of amendments to NJAC 19:54-1.2 7 and 1.6 and new rule NJAC 19:54-1.11 (Promotional gaming credits; deduction from 8 gross revenue) 9 Petition of IGT and Showboat Atlantic 35 36 9 City Operating Company, LLC, for permission to discontinue the Fort Knox nickel 10 multilevel progressive slot machine game and transfer its jackpots (PRN 2120801) 11 10 Consideration of the sixth application of 36 46 the Conservator/Trustee for the former 12 casino licensee, Adamar of New Jersey, Inc., for approval of fees for the Conservator/ 13 Trustee, his personal counsel, legal, and other consultants 14 11 Amended petition of Infinity World 54 153 Investments, LLC, et al., for declaratory 15 rulings regarding qualification status under the casino control Act and for other 16 relief (PRN 1010805); and third amended petition of Infinity World Investments, LLC, 17 et al., for approval of a trust agreement and for other relief (PRN 3510703) 18 12 Amended petition of Pinnacle Entertain- 87 145 ment, Inc., for a statement of compliance 19 pursuant to NJSA 5:12-81 (PRN 0760611) Daniel Lee, sworn 97 20 21 22 23 24 25 6 1 E X H I B I T S : 2 NO. DESCRIPTION ID EVD 3 ITEM NO. 2 4 1 Remand for hearings 16 license X 5 2 Grant 8 licenses X 6 7 ITEM NO. 11 8 P-1 Letter, 7-24-08, Clifford Chance X 9 10 ITEM NO. 12 11 C-1 Draft Resolution X 12 D-1 Report, 6-30-08, James C. Fogarty X 13 P-1 Map, Pinnacle Assembled Parcels X 14 15 16 17 18 19 20 21 22 23 24 25 (Exhibits retained by Commission.) 7 1 (Public Meeting 08-08-21 was commenced 2 at 10:35 a.m.) 3 MR. NANCE: Good morning. I'd like to 4 read an opening statement: 5 This is to advise the general public 6 that in compliance with Chapter 231 of the 7 public laws of 1975 entitled the "Open Public 8 Meetings Act," the New Jersey Casino Control 9 Commission on June 23, 2008, filed with the 10 Secretary of State at the State House in 11 Trenton, New Jersey, a notice of this hearing. 12 On June 23rd, 2008, copies were mailed to 13 subscribers. 14 Members of the press will be permitted 15 to take photographs, and we ask that this be 16 done in a manner which is not disruptive or 17 distracting to the Commission. 18 The use of cellular telephones in the 19 public meeting room while the Commission is in 20 session is prohibited. 21 Would everyone please stand for the 22 Pledge of Allegiance. 23 (The flag salute was recited.) 24 MR. NANCE: Good morning. 25 CHAIR KASSEKERT: Prior to starting 8 1 today's meeting, I want to take a moment to 2 recognize an employee who has been with us for 3 quite some time who has announced his 4 retirement at the end of the month, Steve 5 Ingis, who has been the -- who has been with 6 licensing -- 7 How long have you been doing licensing 8 matters, Steve? 9 MR. INGIS: I've been with the 10 Commission 26 years. 11 CHAIR KASSEKERT: Twenty-six years. 12 And we certainly all wish you a long and 13 healthy and happy retirement. We are going to 14 definitely miss you. And just best wishes. 15 I don't know if any of the other 16 commissioners have any attorney comments they 17 want to make or -- 18 (Laughter.) 19 COMMISSIONER FEDORKO: Well, one less 20 attorney isn't going to help the -- no big 21 deal. 22 (Laughter.) 23 COMMISSIONER FEDORKO: Steve, I will 24 miss you. We have been in a few battles 25 together, and I really appreciate all you've 9 1 done for me. I thank you. 2 MR. INGIS: Thank you very much. 3 COMMISSIONER EPPS: Steve, I totally 4 comment that I will miss you. I did enjoy, 5 being one of the attorneys on the panel, the 6 academic dialog that we've engaged in some of 7 these matters as we were leading up to what we 8 had to do. And I enjoyed the collegiate 9 bouncing off of ideas. And the fact that you 10 were receptive to some of my thoughts and not 11 just telling me what to do is -- was -- no. 12 All jokes aside, was a welcome experience, and 13 I appreciate you for that. You've been here a 14 long longer than me, and the fact that you 15 respected some of my thoughts and insights in 16 some of these things gave me a bit of 17 confidence as I moved forward in this position. 18 I appreciate you for giving me that confidence. 19 MR. INGIS: Thank you very much. I 20 appreciate it. 21 VICE CHAIR SOMMELING: Steve, I feel the 22 same way. And I wish you well on your 23 retirement and on your next engagement, 24 wherever that is. And I hope you feel free to 25 come back and see us whenever you have the 10 1 opportunity. 2 MR. INGIS: Thank you. I will. 3 Thank you very much for all of that 4 you've done for me through the years. Thank 5 you. 6 (Applause and standing ovation.) 7 CHAIR KASSEKERT: Now we've made you 8 totally embarrassed. 9 MS. FAUNTLEROY: Steve, you have the 10 next matter? 11 MR. INGIS: I only wish I had something 12 important on the agenda. 13 (Laughter.) 14 MR. NANCE: Good morning. 15 The matters discussed in closed session 16 were: Employee enterprise license matters. 17 The Commission approved the August 6, 18 2008, closed session minutes. 19 Litigation update regarding Warren 20 Lackland and Lewis M. Springer, Jr., versus the 21 State of New Jersey and the Casino Control 22 Commission; 23 Petition of Tropicana, et al., for 24 renewal of casino license; 25 Application of Dana White for renewal of 11 ITEM NO. 2 1 casino employee license; 2 And petition of Highgate Steel for 3 release of monies. 4 Item No. 1, ratification of the minutes 5 of August 6th, 2008, public meeting. 6 VICE CHAIR SOMMELING: Move to approve. 7 COMMISSIONER FEDORKO: Second. 8 CHAIR KASSEKERT: The motion has been 9 made and seconded. All in favor? 10 (Ayes.) 11 CHAIR KASSEKERT: Opposed? 12 (No response.) 13 CHAIR KASSEKERT: Motion carries. 14 MR. NANCE: Item No. 2, application for 15 employee and casino service industry licenses. 16 This agenda item will be entered as Exhibit 17 List 1 and 2. 18 Exhibit List 1 consists of 16 19 applications for initial and/or renewal of 20 casino key and casino employee licenses. 21 The Division has objected to licensure. 22 COMMISSIONER FEDORKO: Motion to remand 23 for hearings. 24 VICE CHAIR SOMMELING: Second. 25 CHAIR KASSEKERT: The motion has been 12 ITEM NO. 2 1 made and seconded. All in favor? 2 (Ayes.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: Motion carries. 6 MR. NANCE: Exhibit List 2 consists of 7 eight applications for initial and/or renewal 8 of casino key and casino employee licenses. 9 Staff and the Division have recommended 10 that these licenses be granted. 11 COMMISSIONER FEDORKO: Motion to grant 12 applications. 13 VICE CHAIR SOMMELING: 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 MR. NANCE: For consideration is the 21 casino service industry license application 22 pursuant to NJSA 5:12-92(c) for Transact 23 Technologists, Incorporated. 24 Staff and the Division have recommended 25 that this application be granted. 13 ITEM NO. 2 1 COMMISSIONER FEDORKO: Motion to grant 2 application. 3 VICE CHAIR SOMMELING: Second. 4 CHAIR KASSEKERT: The motion has been 5 made and seconded. All in favor? 6 (Ayes.) 7 CHAIR KASSEKERT: Opposed? 8 (No response.) 9 CHAIR KASSEKERT: Motion carries. 10 MR. NANCE: For your consideration are 11 the following applications for initial and/or 12 renewal of casino key employee licenses and for 13 qualification for: Edward William, Executive 14 Director of Surveillance for Adamar of New 15 Jersey, Inc.; Robert Green, Jr., Director of 16 Property Operations for Atlantic City Showboat, 17 Inc.; and Eric Reynolds, Vice President of 18 Community and Employment Initiatives for Marina 19 District Development Company, LLC. 20 Staff and the Division have recommended 21 that these applications be granted. 22 COMMISSIONER FEDORKO: Motion to grant 23 initial and/or renewal key initial employee 24 licenses and for qualification. 25 VICE CHAIR SOMMELING: Second. 14 ITEM NO. 8 1 CHAIR KASSEKERT: Motion is made and 2 seconded. This is a roll call vote. 3 MR. NANCE: Commissioner Fedorko? 4 COMMISSIONER FEDORKO: Yes. 5 MR. NANCE: Commissioner Epps? 6 COMMISSIONER EPPS: Yes. 7 MR. NANCE: Vice Chair Sommeling? 8 VICE CHAIR SOMMELING: Yes. 9 MR. NANCE: Chair Kassekert? 10 CHAIR KASSEKERT: Yes. 11 MR. NANCE: The record will reflect that 12 the motion is unanimous. 13 For your consideration, Item No. 8, 14 proposed publication and temporary adoption of 15 amendments to NJAC 19:54-1.2 and 1.6 and new 16 rule NJAC 19:54-1.11. 17 Mr. Kell? 18 MR. KELL: Good morning, Madame Chair, 19 Commissioners. 20 In accordance with amendments to the 21 Casino Control Act effective April 11th, 2008, 22 and operative August 14th, 2008, you have 23 before you proposed amendments in a new rule 24 authorizing casino licensees subject to certain 25 limitations to take a deduction from gross 15 ITEM NO. 3 1 revenue for the value of promotional gaming 2 credits wagered by patrons at slot machines. 3 Staff recommend that you publish and 4 also temporarily adopt the amendments at this 5 time. 6 VICE CHAIR SOMMELING: Move to approve, 7 Madame Chair. 8 CHAIR KASSEKERT: Is there a second? 9 COMMISSIONER FEDORKO: Second. 10 CHAIR KASSEKERT: We're moving for 11 temporary publication and adoption. 12 All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: Motion carries. 17 MR. NANCE: Item No. 3, stipulation of 18 settlement and consent agreements. When I call 19 your 84 name, please come forward, standing 20 behind this middle table, spreading across the 21 room so that you may be seen: Jimmy Francois 22 Lori Castrataro, Gerald Eget, Theresa Mancz, 23 Sean Reese, Renee Rivers, Rochelle Richardson, 24 and Alizon Lopez. 25 CHAIR KASSEKERT: Has everyone whose 16 ITEM NO. 3 1 name been called come forward? 2 Ma'am, come forward. 3 Okay. Ma'am, I'm going to ask that you 4 state your name for the record, please? 5 MS. RICHARDSON: Rochelle Richardson. 6 CHAIR KASSEKERT: Sir? 7 MR. FRANCOIS: Jimmy Francois. 8 CHAIR KASSEKERT: Okay. In a minute 9 we're going to vote to the stipulations which 10 you've agreed to with the Division of Gaming 11 Enforcement. I'm going to ask at this point if 12 any of you wish to be heard on your matter. 13 You don't have to say any -- 14 We have one more gentleman? 15 Come forward, sir. Can you state for 16 the record, please. 17 MR. LOPEZ: Alizon Lopez. 18 CHAIR KASSEKERT: Thank you. As I was 19 saying, we're going to vote in a moment 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 to. 25 (No response.) 17 ITEM NO. 4 1 CHAIR KASSEKERT: No one wishes to be 2 heard? 3 Mr. Biscieglia? 4 MR. BISCIEGLIA: Good morning, Chair, 5 Commissioners. 6 The Division has nothing further in the 7 matter and ask these stipulations be adopted. 8 Thank you. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 COMMISSIONER EPPS: Motion to approve 12 the stipulations. 13 VICE CHAIR SOMMELING: 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 Thank you very much for coming. Good 21 luck. 22 MS. RICHARDSON: Thank you. 23 MR. LOPEZ: Thank you. 24 MR. NANCE: Item No. 4, petition for 25 early reapplication for Nathaniel Daley, Shayon 18 ITEM NO. 4 1 Oatman, and Darrell Thompson. 2 Ms. Frigen? 3 MS. FRIGEN: Good morning, Madame Chair, 4 and Commissioners. 5 Is Nathaniel Daley present or 6 represented? 7 (No response.) 8 MS. FRIGEN: Apparently, is he not here. 9 For your consideration is his petition 10 seeking permission to reapply early for a 11 license, registration, and/or noncredential 12 hotel employment. 13 The Division has objected to this 14 petition in its entirety. 15 And Mr. Daley, apparently, is not 16 present. 17 Thank you. 18 CHAIR KASSEKERT: Thank you. 19 Mr. Biscieglia? 20 MR. BISCIEGLIA: Thank you. 21 By way of our -- the Division's letter 22 of July 24th, 2008, the Division has objected 23 to this petition. The Petitioner's casino 24 employee license was suspended by Commission 25 order on May 26th, 2005, after he failed to 19 ITEM NO. 4 1 request a hearing following the filing of the 2 Division complaint. The Division now filed an 3 amended complaint on March 3rd of 2005. The 4 issues addressed in that complaint were a 5 December 12th, 2002, indictment for possession 6 of CDS with intent to distribute within 1,000 7 feet of -- excuse me -- of school property, 8 third degree. 9 This case was eventually entered into 10 PTI. The Respondent was on May 29th, 2003. 11 And on August 19th, 2004, he completed PTI and 12 this was dismissed. 13 What precipitated the amended complaint, 14 though, was an indictment on February 2nd of 15 2005, for robbery, first degree. At the time 16 of the filing the Division's amended complaint, 17 these charges were pending. 18 Following the filing of the Division's 19 complaint, the Respondent was convicted on June 20 20th of 2005 of amended charge of theft by 21 unlawful taking, third degree. Also following 22 this May 28th, 2007, the Respondent was again 23 arrested for obstruction of law, disorderly 24 conduct, and obstructing public highways. The 25 Respondent failed to -- excuse me -- the 20 ITEM NO. 4 1 Petitioner failed to disclose this arrest in 2 his current petition. 3 Based upon the fact that he was 4 convicted of a disqualifying offense, there was 5 additional criminal charges, these criminal 6 charges were not disclosed in the current 7 petition, and the Petitioner actually states 8 that in the petition that he has not had any 9 current legal problems, the Division must 10 object to the relief sought by the petition. 11 Thank you. 12 CHAIR KASSEKERT: Thank you. 13 Any questions for Mr. Biscieglia? 14 VICE CHAIR SOMMELING: No questions, 15 Madame Chair. 16 COMMISSIONER FEDORKO: Motion to deny 17 Mr. Daley's petition to reapply early for a 18 casino employee license, a casino service 19 employee registration, and/or to work as a 20 noncredential hotel employee. 21 VICE CHAIR SOMMELING: Second. 22 CHAIR KASSEKERT: The motion has been 23 made and seconded. All in favor? 24 (Ayes.) 25 CHAIR KASSEKERT: Opposed? 21 ITEM NO. 4 1 (No response.) 2 CHAIR KASSEKERT: Motion carries. 3 MS. FRIGEN: Okay. The next case we 4 have Miss Oatman. 5 Miss Oatman, you can have a seat at the 6 table. 7 For your consideration is Miss Oatman's 8 petition seeking permission to reapply early 9 for a license, registration, and/or a 10 noncredential hotel employment as well. 11 However, in this case, the Division has 12 recommended that this petition be granted. 13 CHAIR KASSEKERT: Thank you. 14 Mrs. Oatman, is there anything you'd 15 like to say to us today. 16 MS. OATMAN: No, thank you. 17 CHAIR KASSEKERT: Okay. Mr. Biscieglia? 18 MR. BISCIEGLIA: Thank you. 19 The Commission has the Division's June 20 23rd, 2008, letter in which we have no 21 objection to the relief sought in the petition. 22 CHAIR KASSEKERT: Thank you. 23 Any questions by the Commissioners? 24 VICE CHAIR SOMMELING: No questions, 25 Madame Chair. 22 ITEM NO. 4 1 Move to grant Miss Oatman permission to 2 reapply early for a casino employee license, 3 and casino service employee registration, 4 and/or to obtain employment early as a 5 noncredential hotel employee. 6 COMMISSIONER FEDORKO: Second. 7 CHAIR KASSEKERT: The motion has been 8 made and seconded. All in favor? 9 (Ayes.) 10 CHAIR KASSEKERT: Opposed? 11 (No response.) 12 CHAIR KASSEKERT: Motion carries. 13 Thank you for coming. Good luck. 14 MS. OATMAN: Thank you. 15 MS. FRIGEN: Next we have is Darrell 16 Thompson -- is Mr. Thompson present? I don't 17 think I saw him sign in today. 18 Is he seeking permission to obtain 19 noncredential hotel employment early. By 20 letter dated June 23rd, the Division has 21 interposed an objection to this request. 22 CHAIR KASSEKERT: Thank you. 23 Mr. Biscieglia? 24 MR. BISCIEGLIA: Thank you. 25 Once again, the Commission has our 23 ITEM NO. 5 1 letter of June 23rd, 2008, in which the 2 Division interposes no objection to the relief 3 sought by the Petitioner. 4 Thank you. 5 CHAIR KASSEKERT: Thank you. 6 Any questions? 7 VICE CHAIR SOMMELING: No questions, 8 Madame Chair. 9 COMMISSIONER FEDORKO: Motion to grant 10 Mr. Thompson permission to work as a 11 noncredential hotel employee. 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 MR. NANCE: Item 5, application for 20 suspension for: Frank Casale, II, Guo Chen, 21 Nishidah Morton, Jennifer Ocasio, Amedeo 22 Pagano, Akeema Pannell, and Frank Tedeschi. 23 Miss Frigen? 24 MS. FRIGEN: Madame Chair, 25 Commissioners, I'm aware that Mr. Chen is 24 ITEM NO. 5 1 present, 5b. Let me ask whether any of the 2 other individuals who were just called are 3 present or represented? 4 (No response.) 5 MS. FRIGEN: Apparently not. So with 6 the exception of Mr. Chen, the remaining people 7 apparently are not here to test the 8 application. And let me find Mr. Chen. 9 Mr. Chen? There he is. Can you have a 10 seat at the table? 11 I don't know if you want to dispose of 12 the other ones first, or this one. However you 13 wish to proceed. 14 COMMISSIONER EPPS: Madame Chair, I move 15 to suspend the credentials on agenda Item 5a, 16 c, d, e, f and g. 17 COMMISSIONER FEDORKO: Second. 18 VICE CHAIR SOMMELING: Second. 19 CHAIR KASSEKERT: The motion has been 20 made and seconded. All in favor? 21 (Ayes.) 22 CHAIR KASSEKERT: Opposed? 23 (No response.) 24 CHAIR KASSEKERT: Motion carries. 25 We'll now deal with 5b. 25 ITEM NO. 5 1 Mr. Biscieglia? 2 MR. BISCIEGLIA: Thank you. 3 On May 31st, 2008, the Respondent was an 4 arrested by the New Jersey State Police Casino 5 Enforcement Bureau and charged with cheating at 6 blackjack contrary to NJSA 5:12-11, 13 excuse 7 me -- 1.3(a). 8 While employed while as a blackjack 9 dealer at the Atlantic City Hilton Casino 10 Resort, the Respondent was observed by 11 surveillance over paying winning hands and 12 pushing losing hands. These actions resulted 13 in the loss of at least $1450 to the Atlantic 14 City Casino Hilton Casino Resort. The 15 surveillance observed the Respondent pushing or 16 paying losing bets on at least eight occasions 17 over an hour and a half time period. 18 Thank you. 19 CHAIR KASSEKERT: Where is this in terms 20 judicially? 21 MR. BISCIEGLIA: This is currently 22 pending a grand jury with no date set. 23 CHAIR KASSEKERT: Pending a grand jury? 24 Okay. 25 Mr. Chen, is there anything you'd like 26 ITEM NO. 5 1 to say? 2 MR. CHEN: No. I know much English. 3 CHAIR KASSEKERT: You don't know. Okay. 4 Not much English. 5 Let me ask if any of the Commissioners 6 have any questions? 7 VICE CHAIR SOMMELING: No questions, 8 Madame Chair. 9 COMMISSIONER EPPS: I don't have any 10 questions. 11 CHAIR KASSEKERT: Sorry? 12 MR. NANCE: I think we have someone that 13 might be able to -- 14 CHAIR KASSEKERT: Translate? 15 I hate to -- if we get somebody to help 16 you translate, is there anything you'd like to 17 tell us? 18 MR. CHEN: Okay. 19 CHAIR KASSEKERT: All right. Why don't 20 we hold this. 21 MS. FRIGEN: Hold it? 22 CHAIR KASSEKERT: Okay. We're going to 23 hold your matter until we get somebody to come 24 help translate. 25 MR. CHEN: I'm sorry? 27 ITEM NO. 6 1 MR. NANCE: Item No. 6, petition of 2 Goldman Sachs for waiver of qualification. 3 Miss Nagengast? 4 MS. NAGENGAST: Good morning, Chair, and 5 Commissioners. 6 For your consideration is a petition of 7 Goldman Sachs Company seeking a waiver of 8 qualification in connection with the 9 gaming-related CSI license application of 10 Pinnacle Entertainment. 11 Derek Timms is here on behalf of the 12 Petitioner and Jim Fogarty is here on behalf of 13 the Division. 14 CHAIR KASSEKERT: Thank you. 15 Good morning. 16 MR. TIMMS: Good morning, Chair. 17 Derek Timms, Michael & Carroll, on 18 behalf of Goldman Sachs. 19 This petition is based on the previous 20 work we did in the Boyd matter for the waiver, 21 the institutional investor waiver which we 22 worked out that included the two and a half 23 percent limitation on noninstitutional investor 24 waivers. 25 We're asking for a waiver to go above 28 ITEM NO. 6 1 five percent and up to ten percent for all 2 Goldman entities with the implicit two and a 3 half percent waiver on noninstitutional 4 investors in the aggregate. 5 I would ask if there's any questions. 6 CHAIR KASSEKERT: Let me ask before we 7 hear from Mr. Fogarty, if any of the 8 Commissioners have any questions? 9 MR. FOGARTY: Good morning. 10 COMMISSIONER EPPS: Good morning. 11 MR. FOGARTY: Former DAG Rick McDonough 12 responded by letter dated April 4, 2008, not 13 opposing the relief sought by the Goldman 14 entities vis-a-vis their interest in Pinnacle. 15 Essentially, Mr. McDonough indicated that a 16 similar matter was handled by this commission 17 in -- with regard to Goldman Sachs investment 18 in Boyd, and you all had cut a resolution and 19 order at that point in time which pretty much 20 set forth what Goldman could or could not do, 21 as Mr. Timms has indicated that he'd like here 22 in this matter, too. 23 So this can be complicated. I'm willing 24 to ask questions. I didn't want to go real out 25 forward with all the Goldman entities that are 29 ITEM NO. 6 1 named and who they were, but I think I know 2 them. But -- but from our position, your 3 decision that you rendered in Boyd should be -- 4 should control here with regard to Pinnacle. 5 And it's on that basis we would ask you to 6 render your ruling granting the relief that's 7 sought by Goldman in this case. 8 And I'd be happy to answer any questions 9 you might have. 10 CHAIR KASSEKERT: Let me ask if there 11 are any questions for the parties? 12 Commissioners Epps. 13 COMMISSIONER EPPS: Just for Mr. Fogarty 14 or the staff, I just want to be clear in the 15 resolution and what we're concluding today, the 16 order that we issue will apply to enumerated 17 entities and others who may not specifically be 18 enumerated right now. Is that accurate? 19 MR. FOGARTY: Correct. Correct. 20 COMMISSIONER EPPS: So, I mean, 21 including but not limited to those who were 22 specifically enumerated, so others may apply 23 for the same standard. 24 MR. FOGARTY: Right. And that's kind of 25 what makes this a little different, if you 30 ITEM NO. 6 1 will. A, none of these entities hold anywhere 2 near the total of ten percent. 3 COMMISSIONER EPPS: Right. 4 MR. FOGARTY: So you have to sort of -- 5 but the request is between five and ten, so you 6 got to think about something -- 7 COMMISSIONER EPPS: Prospectively. 8 Right. 9 MR. FOGARTY: And then the other 10 complicating factor, if you will, is not all 11 the entities are named. Goldman's got a lot of 12 them. 13 COMMISSIONER EPPS: Right. 14 MR. FOGARTY: But there are three 15 institutional investors' names. 16 COMMISSIONER EPPS: Right. 17 MR. FOGARTY: And I can name them, but I 18 have to look at something to do that. 19 And but then there are these other 20 noninstitutional Goldman entities, and I don't 21 even think Goldman knows at this point if those 22 entities may or may not get involved in 23 Pinnacle investment. But given the overall 24 tenure of what they're asking for, given that 25 there are three institutional investors here, 31 ITEM NO. 6 1 what you did in Boyd was essentially grant the 2 institutional investor waivers to those three 3 people, allowing Goldman collectively to go up 4 to ten but limiting the noninstitutional 5 Goldman's to -- I think it's below two and a 6 half percent. 7 COMMISSIONER EPPS: Right. 8 MR. FOGARTY: And that's, at least how I 9 understand, what you did in Boyd and what I 10 suggest you do here. 11 COMMISSIONER EPPS: Okay. And I think 12 that's the way I understand it, and I think 13 that's where we were going with this one, that 14 it would be the same type of transaction and 15 without limit to the enumerated companies. 16 MR. FOGARTY: Correct. 17 COMMISSIONER EPPS: Okay. 18 CHAIR KASSEKERT: Any other questions? 19 VICE CHAIR SOMMELING: No questions, 20 Madame Chair. 21 COMMISSIONER EPPS: Madame Chair, I move 22 that we grant the petition and waive the 23 qualification requirement of Goldman Sachs 24 Company, Goldman Sachs Asset Management LP, and 25 GS Investment Strategies, LLC, in connection 32 ITEM NO. 7 1 with the pending application for a 2 gaming-related casino service industry license 3 of Pinnacle Entertainment, Incorporated, as 4 permitted by NJSA 5:12-85(f) and NJAC 5 19:51-1.14(b)(3) based on their status as 6 institutional investors as defined by NJSA 7 5:12-27.1 and permit Goldman Sachs Company and 8 its subsidiaries and affiliates to collectively 9 hold up to ten percent of Pinnacle 10 Entertainment, Incorporated, issued and 11 outstanding shares of common stock subject to 12 findings and conditions in the order. 13 VICE CHAIR SOMMELING: 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 MR. FOGARTY: Thank you. 21 MR. TIMMS: I thank the Commission for 22 their work and staff. 23 CHAIR KASSEKERT: Thank you. 24 MR. NANCE: Item No. 7, petition of 25 Showboat Atlantic City Operating Company for 33 ITEM NO. 7 1 amendment to its certificate of operation and 2 casino hotel alcoholic beverage license to 3 permit an expansion of its gaming floor. 4 Mr. Kell? 5 MR. KELL: Good morning, again, Madame 6 Chair and Commissioners. 7 In this matter, Joe Dockerty is here 8 representing the Petitioners, pinch hitting for 9 Tim Lowry. Deputy Attorney General Tim Ficchi 10 is here for the Division. 11 And I've circulated a draft resolution. 12 And just like to note on the record that it 13 does make certain representations as to the 14 compliance of outdoor smoking lounges with the 15 applicable state law. 16 CHAIR KASSEKERT: Thank you. 17 Mr. Dockerty? 18 MR. DOCKERTY: For the record, Joe 19 Dockerty here on behalf of the Applicant. 20 I do have Bob Judith (phonetic) here who 21 is table games for the Applicant if there are 22 any questions. Otherwise, we have no objection 23 to the form of resolution and ask that you 24 consider for approval. 25 CHAIR KASSEKERT: Thank you. 34 ITEM NO. 7 1 Mr. Ficchi? 2 MR. FICCHI: Yes, good morning, Chair, 3 Commissioners. 4 The Division has reviewed this matter 5 and the draft resolution. We have no objection 6 to the adoption of that draft resolution. 7 Thank you. 8 CHAIR KASSEKERT: Thank you. 9 Any questions for the parties? 10 VICE CHAIR SOMMELING: No questions, 11 Madame Chair. 12 COMMISSIONER EPPS: No. 13 COMMISSIONER FEDORKO: Motion to adopt 14 the draft resolution and approve the petition 15 of Showboat Atlantic City Operating Company for 16 an amendment to its certificate of operation 17 and CHAB license to permit the expansion of its 18 gaming floor subject to the conditions in the 19 resolution. 20 VICE CHAIR SOMMELING: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 35 ITEM NO. 9 1 CHAIR KASSEKERT: Motion carries. 2 MR. KELL: Thank you. 3 MR. DOCKERTY: Thank you. 4 MR. NANCE: Item No. 9, petition of IGT 5 and Showboat Atlantic City Operating Company, 6 LLC, for permission to discontinue the Fort 7 Knox Nickel multilevel progressive slot machine 8 game and transfer its jackpots. 9 Mr. Moncrief? 10 MR. MONCRIEF: Madame Chair, members of 11 the Commission, a draft resolution has been 12 circulated. 13 Leo Previti, who represents the 14 Petitioners in this case, is unable to be 15 present today. However, he reviewed the draft 16 resolution, had no objection. 17 I believe Deputy Attorney General 18 Charles Kimmel is here for the Division. 19 CHAIR KASSEKERT: Thank you. 20 Good morning, Mr. Kimmel. 21 MR. KIMMEL: Good morning. 22 I've also renewed the draft resolution 23 and have no objection to its adoption. 24 CHAIR KASSEKERT: Thank you. 25 Any questions? 36 ITEM NO. 10 1 COMMISSIONER EPPS: Madame Chair, I move 2 that we adopt the draft resolution and grant 3 the relief requested by IGT and Showboat 4 Atlantic City Operating Company, LLC, to permit 5 the transfer of the progressive jackpots to the 6 one cent Fort Know multilevel progressive slot 7 machine game subject to compliance with the 8 30-day notice requirement in NJAC 9 19:45-1.39(n)1. 10 VICE CHAIR SOMMELING: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: Motion carries. 17 MR. MONCRIEF: Thank you. 18 CHAIR KASSEKERT: Thank you. 19 MR. NANCE: Item 10, consideration of 20 the sixth application of the Conservator/ 21 Trustee for the former casino licensee, Adamar 22 of New Jersey, Inc., for approval of fees for 23 the Conservator/Trustee, his personal counsel, 24 legal and other consultants. 25 Miss Fauntleroy? 37 ITEM NO. 10 1 MS. FAUNTLEROY: I was marveling at how 2 well our new attorney did. 3 (Laughter.) 4 MS. FAUNTLEROY: Yes, Commission, you 5 have before you several bills for your 6 consideration. You have the Conservator's 7 invoice for the period June 20 through July 21, 8 his personal counsel, Pashman Stein's, invoice 9 for that same period, the invoice for Pam 10 Popielarski, consultant, for July -- June 28th 11 through July 18, Gary Simpson, two separate 12 invoices, June 2008 invoice and a June/July 13 invoice specifically related to the management 14 analysis component, and invoice for July for G. 15 Michael Brown, consultant, and two invoices for 16 Cole Schotz, the Delaware counsel, for the 17 periods May and June 2008, and two invoices for 18 Debevoise & Plimpton, legal consultants, April 19 22 to May 31 and June 1 to June 30, 2008. 20 You have here the Deputy Attorney 21 General Mary Jo Flaherty, and Sean Mack is here 22 for the Conservator and Pashman Stein. 23 There was additional documentation that 24 was forwarded by Sean Mack late last night in 25 response to a question regarding the document 38 ITEM NO. 10 1 cost on one of the invoices. The documentation 2 that was received was the same breakdown, but a 3 cover letter from managing partner Michael 4 Blair attesting to the validity of the charges 5 with respect to this particular matter. 6 I don't know if there any other comments 7 or questions that need to be entertained by the 8 Commission. 9 CHAIR KASSEKERT: Mr. Mack? 10 MR. MACK: Good morning, Chair, 11 Commissioners. 12 Just following up on the request for 13 clarification of those charges, as I understand 14 from Debevoise, in term of their Westlaw and 15 Lexis practices, each attorney he does 16 research -- he or she does research -- has to 17 plug in a personal identification number and 18 then a client matter number, and that way they 19 can track exactly which client is being done to 20 ensure allocation is done appropriately. 21 That was one additional point I wanted 22 to clarify as to how they do that. And I'd be 23 happy to answer any questions. 24 CHAIR KASSEKERT: Okay. Any questions 25 for Mr. Mack at this point? 39 ITEM NO. 10 1 VICE CHAIR SOMMELING: No questions, 2 Madame Chair. 3 CHAIR KASSEKERT: Commissioner Epps, do 4 you have any questions? 5 COMMISSIONER EPPS: Sean, I just have a 6 question prospectively to the extent that you 7 can tell me. As we head into the fall, is it 8 going to get more intensive or less with 9 respect to Pashman Stein's work on this matter 10 and Debevoise? I mean, are we expecting more 11 or less? 12 MR. MACK: I would expect probably later 13 in September things will begin to become more 14 intense for a period. Sort of like an outline 15 of process to you in some of our discussions, 16 and I think in later in September that process 17 will really begin to pick up speed, and it's 18 going to rely a lot on the legal work of 19 Debevoise, so I would expect that to go up. 20 COMMISSIONER EPPS: So I guess, to use 21 a -- I guess a bad term -- it's going to get 22 worse before it gets better. So we're 23 expecting heavier bills with respect to this 24 process as we approach our October date? 25 MR. MACK: Leading. Yeah. Leading up 40 ITEM NO. 10 1 to the October date, I would expect an uptick 2 in the bills. 3 COMMISSIONER EPPS: Okay. 4 CHAIR KASSEKERT: Let me just also ask 5 Mr. Mack. Is it -- it is customary for 6 firms -- I know that it differs from firm to 7 firm about the charging of research costs. Is 8 it customary for a firm like this to charge for 9 that and not as an additional charge on top of 10 the hourly rate? 11 MR. MACK: It absolutely is. I think 12 with the Tropicana Entertainment bankruptcy, 13 the bankruptcy practice, they have to submit 14 monthly applications they have to detail 15 everything out. I've been trying to pass those 16 on just for reference, and you'll see for each 17 one of those applications, there was a separate 18 charge for the Westlaw, Lexis, and similar 19 types of proofreading services that these firms 20 bill for. 21 CHAIR KASSEKERT: I guess that's 22 different than what we do in a lot of South 23 Jersey firms. 24 MR. MACK: Yeah. I know in our firm we 25 have -- I think we have a standard contract 41 ITEM NO. 10 1 rate for New Jersey Case Law. But anything 2 outside of that, I have to allocate the 3 particular client. That's just the way we 4 negotiated with Westlaw. 5 CHAIR KASSEKERT: Do they -- does 6 Debevoise have a similar -- 7 MR. MACK: They have, as I understand 8 it -- they've just negotiated, since they have 9 a national practice, they've just negotiated 10 substantial -- I think the letter from Mr. 11 Blair indicated 50 to 70 percent discounts 12 because of the volume of the research the 13 entire firm does with Westlaw. And so they 14 just take that discounted amount but allocate 15 everything to each client. 16 CHAIR KASSEKERT: Commissioner Epps? 17 COMMISSIONER EPPS: I have one other 18 question. 19 CHAIR KASSEKERT: Sure. 20 COMMISSIONER EPPS: Tropicana has 21 in-house counsel whose responsibility, if I'm 22 not mistaken, is the day-to-day legal affairs 23 as it concerns Tropicana. Now, I understand 24 that as a conservator and trustee, Justice 25 Stein has overall day-to-day responsibility for 42 ITEM NO. 10 1 the operations of Tropicana. But in some of 2 these matters, it seems that Pashman Stein is 3 advising or represent -- or engaged in issues 4 that are issues that preexisted the trustee 5 situation that concern Tropicana and its legal 6 staff. Can you talk to me a little bit about 7 that? Because if Justice Stein has counsel at 8 Tropicana that handles Tropicana's legal work, 9 where does it come in Pashman Stein begins to 10 do or address those items that counsel seem to 11 have been handling up until the point of 12 conservatorship? 13 MR. MACK: Some of these issues -- right 14 now, Tama Hughes is the general counsel and has 15 no staff, essentially. I believe under prior 16 ownership, there had been a larger legal staff. 17 And just because of the volume of her work, 18 she's had to ask us for assistance. I know 19 he's relying more on other outside counsel just 20 to handle regular matters, contract 21 negotiations, that they used to handle 22 in-staff. We're in the process of trying to -- 23 she'd like to hire an additional attorney 24 in-house so that they can begin to pull some of 25 that back in. And if we do -- if she doesn't 43 ITEM NO. 10 1 end up hiring somebody else, you asked about 2 Debevoise's fees, for instance, going up. A 3 new in-house counsel could assist with some of 4 the diligence gathering information and 5 documentation that otherwise Debevoise is going 6 to have to do in September. So we're -- by 7 adding additional staff in-house, we're trying 8 to address exactly -- exactly that issue. 9 COMMISSIONER EPPS: And, again, I don't 10 mean to be overly critical, but in as much as 11 Pashman Stein is stepping in as what you kind 12 of characterized as legal staff or support 13 staff legally for chief counsel at Tropicana, 14 it's just difficult when the senior partner at 15 your firm is that support counsel because it's 16 just -- you understand. It's difficult to -- 17 to swallow. But that -- I guess that wasn't a 18 question. 19 MR. MACK: Okay. 20 COMMISSIONER EPPS: Never mind. 21 CHAIR KASSEKERT: I think you're sensing 22 our frustration about the difference in hourly 23 rates between North Jersey and South Jersey. 24 And understanding that that's what it is -- 25 MR. MACK: We can recommend to Miss 44 ITEM NO. 10 1 Hughes that she rely South Jersey firms for the 2 Pashman Stein going forward if that's the sense 3 of the concern I'm hearing. 4 COMMISSIONER EPPS: Well, I don't know 5 what remedy is, but it's just difficult. 6 MR. MACK: Yeah. I think one of the 7 remedies is giving her more in-house support. 8 CHAIR KASSEKERT: And we're working -- 9 MR. MACK: Yeah. 10 CHAIR KASSEKERT: -- with Justice Stein 11 to do that and with a good cost/benefit 12 analysis to make sure that the benefits and the 13 savings will exceed the cost involved. And we 14 appreciate your help in supplying that 15 information to us. 16 Miss Flaherty? 17 MS. FLAHERTY: Yes. Chair and 18 Commissioners, we've had the opportunity to 19 review the billings, and we have checked them 20 with regard to the hours billed and the hourly 21 rates, and they seem to be accurate in that 22 regard. 23 Concerning the April to May Debevoise 24 billings, we have been advised that the amount 25 of the billing relates to the commencement of 45 ITEM NO. 10 1 the bankruptcy proceeding in Delaware leading 2 to the amount of that bill. And, also, I would 3 just note for the record that with regard to 4 any matters relating to billing and collection 5 of billings, typically, those are not charged 6 as a cost to the law firm. 7 And with that, we would leave to the 8 Commission's discretion the approval of the 9 billings that have been submitted. 10 But I would like to note for the record 11 on -- personally and on behalf of the Division, 12 our thanks to Mr. Ingis for his many years of 13 service. In the original days, he worked on 14 many important casino licensing cases, initial 15 cases, and was instrumental in that regard. 16 And over the years I've had the opportunity to 17 work with him, especially employee licensing. 18 And we had a close working relationship and 19 spent many years doing that. And it was my 20 pleasure to work with him. 21 So I wanted to express our appreciation 22 to him for all his years, and thank you, Steve. 23 MR. INGIS: Thank you very much, Mary 24 Jo. I appreciate it. 25 CHAIR KASSEKERT: Thank you. 46 ITEM NO. 10 1 Let me ask if there are any questions 2 for the Division or any other questions? 3 VICE CHAIR SOMMELING: No other 4 questions, Madame Chair. 5 COMMISSIONER EPPS: Just for 6 clarification -- or counsel -- this is approval 7 of the bills, but it still remains subject to 8 the provisions we set in place with respect -- 9 MS. FAUNTLEROY: Yes. Yes. The 19 10 million concentration account. 11 CHAIR KASSEKERT: Concentration account. 12 COMMISSIONER EPPS: Okay. 13 CHAIR KASSEKERT: Is there a motion? 14 COMMISSIONER EPPS: I move approval of 15 the fees. 16 VICE CHAIR SOMMELING: 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 Thank you. 24 MR. MACK: Thank you. 25 CHAIR KASSEKERT: Are we going to return 47 ITEM NO. 5b 1 to -- okay. 2 MR. NANCE: Item No. 5. 3 CHAIR KASSEKERT: We can return to Item 4 5b. 5 MR. NANCE: Miss Frigen? 6 MR. FRIGEN: Madame Chair, 7 Commissioners. William Wong of the Commission 8 staff is here to assist Mr. Chen with 9 translation -- for translation purposes. And I 10 did let them know they both would need to be 11 sworn in for translation purposes. 12 CHAIR KASSEKERT: Thank you. 13 Mr. Nance? 14 MR. NANCE: Mr. Wong? 15 CHAIR KASSEKERT: Yeah. We have to 16 swear both of you in. 17 COMMISSIONER EPPS: No. You are -- 18 19 WILLIAM WONG, was duly sworn to 20 translate in this matter. 21 22 GUO Y. CHEN, was duly sworn to testify 23 through an interpreter in this matter. 24 MR. NANCE: Please state your name for 25 the record? 48 ITEM NO. 5b 1 MR. CHEN: Guo Chen. 2 MR. NANCE: Thank you. You may be 3 seated. 4 CHAIR KASSEKERT: Thank you. 5 I guess we heard from you, Mr. 6 Biscieglia, maybe we can trans-- have Mr. Wong 7 translate. If you wouldn't mind restating what 8 you said since this is your motion to suspend 9 credentials so Mr. Wong can translate it for 10 Mr. Chen. 11 MR. BISCIEGLIA: Okay. On or about May 12 31st, 2008 -- how should I -- 13 COMMISSIONER EPPS: Just go slow. 14 CHAIR KASSEKERT: Go ahead. 15 MR. BISCIEGLIA: The Respondent was 16 arrested by the New Jersey State Police Casino 17 Enforcement Bureau and charged with cheating at 18 blackjack while employed as a blackjack dealer 19 at the Atlantic City Hilton Casino Resort. 20 MR. WONG: Can you say that one more 21 time? I'm sorry. 22 MR. BISCIEGLIA: While employed as a 23 blackjack dealer at Atlantic City... 24 The Respondent was observed by 25 surveillance over paying winning hands and 49 ITEM NO. 5b 1 pushing losing hands. Surveillance observed 2 him doing this on eight occasions within an 3 hour-and-a-half time period. These actions 4 resulted in a loss of at least $1450 to the 5 casino. 6 CHAIR KASSEKERT: And this is pending a 7 grand jury? 8 MR. BISCIEGLIA: And this is currently 9 pending grand jury with no date set. 10 CHAIR KASSEKERT: Mr. Chen, is there 11 anything you'd like to say to us today? 12 MR. CHEN: Yes. Yes. 13 MR. WONG: Mr. Chen stated that he 14 worked through the night, the previous night, 15 and he was extremely exhausted. And the family 16 member -- one of the kids was not feeling well, 17 and so he wasn't able to sleep or take any 18 rest. And so all this caused him to -- caused 19 him to -- I don't even know how to say -- miss 20 distributing the cards. And he -- he denied 21 that he intentionally did what -- what 22 happened, and he would never have the nerve to 23 do anything like that. He understand he has a 24 whole family to support. He has three kids. 25 And both him and his wife work in casino, and 50 ITEM NO. 5b 1 he cannot lose his job. 2 I'm basically just interpreting what he 3 said. 4 CHAIR KASSEKERT: Thank you. 5 MR. WONG: I'm not putting in my feeling 6 or anything. I just want to say on the side. 7 CHAIR KASSEKERT: Thank you, Mr. Wong. 8 MR. WONG: And he indicates that he made 9 a mistake without even acknowledging it. He 10 intend to call out sick on that day, but he 11 worries that if he calls out, then it will have 12 a negative impact to his job. 13 CHAIR KASSEKERT: Okay. All right. 14 Thank you. 15 Mr. Wong, does he understand that this 16 is pending a grand jury, that the grand jury 17 has to look at this? 18 MR. WONG: Yes. We talked about it 19 outside. 20 CHAIR KASSEKERT: Okay. Let me ask if 21 there are any questions? 22 COMMISSIONER EPPS: Well, the concern I 23 have is that in reading the paperwork, I think 24 he's requested a deferment until after the -- 25 MS. FRIGEN: That only extend to the 51 ITEM NO. 5b 1 final hearing on the -- 2 COMMISSIONER EPPS: Right. I understand 3 that. 4 MS. FRIGEN: Okay. 5 COMMISSIONER EPPS: Just, if we're going 6 to refute -- I mean deny that today, he needs 7 to understand that we're not going to allow 8 that and the reason. 9 Mr. Wong, the request was that we defer 10 suspending him until after the criminal matter 11 had been addressed. But that only applies with 12 final hearings. It doesn't apply in the 13 subject of suspension. 14 MR. WONG: Should I tell -- 15 COMMISSIONER EPPS: You should. 16 MR. WONG: Just want to make sure that I 17 understand. So that there's not going to be a 18 decision today? 19 COMMISSIONER EPPS: No. No. No. No. 20 MR. WONG: Is that what it is? 21 COMMISSIONER EPPS: He's asked that we 22 defer a decision until after the criminal 23 matter, but the deferrals only apply as it 24 relates to the final hearing, not to the 25 hearing for suspension. So the suspension 52 ITEM NO. 5b 1 would go forward today. 2 MR. WONG: Okay. And the decision is 3 made then he -- 4 COMMISSIONER EPPS: He has a right to a 5 final hearing. 6 CHAIR KASSEKERT: Hearing. 7 MR. WONG: Okay. 8 COMMISSIONER EPPS: But that final 9 hearing can be deferred until after his 10 criminal matter. 11 MR. WONG: Okay. Thank you. 12 CHAIR KASSEKERT: Miss Frigen? 13 MS. FRIGEN: And I would just add this 14 happened after the other paperwork was 15 submitted to you. We did hear from an attorney 16 on behalf of Mr. Chen, from New York, Mr. Yang, 17 who's also licensed to practice in New Jersey. 18 He, too, had initially asked us to delay based 19 upon the pending charges. And I explained to 20 him what, Commission Epps, you just explained 21 to Respondent. And we did send him a copy of 22 the letter that we had sent to Mr. Chen 23 explaining that we could not delay the 24 proceedings today. So we -- he did have some 25 opportunity to speak with an attorney as well 53 ITEM NO. 5b 1 about his status. I just wanted to let you 2 aware of that. 3 CHAIR KASSEKERT: Thank you. Okay. 4 Let me ask if there are any other 5 questions? 6 VICE CHAIR SOMMELING: No other 7 questions Madame Chair. 8 CHAIR KASSEKERT: Is there a motion? 9 VICE CHAIR SOMMELING: Move to suspend 10 the credentials of Mr. Chen. 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. Wong, would you explain -- you can 19 take Mr. Chen outside and explain what happened 20 and what happens next? 21 And I'm glad to hear he has an attorney. 22 Thank you. 23 MR. CHEN: Thank you. 24 MR. WONG: Thank you. 25 MR. BISCIEGLIA: Thank you. 54 ITEM NO. 11 1 MR. NANCE: Item No. 11, amended 2 petition of Infinity World Investments, LLC, et 3 al., for declaratory rulings regarding 4 qualification status under the Casino Control 5 Act and for other relief, and third amended 6 petition of Infinity World Investments, LLC, et 7 al., for approval of a trust agreement and for 8 other relief. 9 Mr. DiGiacomo? 10 MR. DiGIACOMO: Madame Chair, 11 Commissioners, good morning. 12 CHAIR KASSEKERT: Good morning. 13 MR. DiGIACOMO: Nicholas Casiello, Jr., 14 on behalf of the Petitioners. James C. Fogarty 15 for the Division of Gaming Enforcement. 16 CHAIR KASSEKERT: Thank you. 17 Good morning, Mr. Casiello. 18 MR. CASIELLO: Good morning, Madame 19 Chair and Commissioners. And also appearing 20 with me for the firm of Fox Rothschild, Pat 21 Madamba. I also want to note that our proposed 22 Trustee, James Hurley, and former member and 23 Chair of this Commission is here today. I 24 wanted him to come and sit up here today, and 25 he didn't want to get too close to the empty 55 ITEM NO. 11 1 seat, so he wanted to stay back there. 2 CHAIR KASSEKERT: Good to see you, Mr. 3 Hurley. 4 MR. HURLEY: Thank you. 5 CHAIR KASSEKERT: Mr. Casiello? 6 MR. CASIELLO: Yes. We have two 7 petitions for you today, declaratory ruling of 8 the applications of Infinity World's entities 9 with respect to qualification and another is 10 for approval of the trust agreement and the 11 trustee. 12 One procedural matter I'd like to 13 address before I go any further, and that is 14 that I have submitted to the clerk to be marked 15 as P-1, and I would like to offer into evidence 16 the July 24, 2008, letter from the law firm of 17 Clifford Chance. 18 CHAIR KASSEKERT: Thank you. 19 Any objection to that, Mr. Fogarty? 20 MR. FOGARTY: No. We've received a copy 21 of this in the past, so we have no objection. 22 CHAIR KASSEKERT: Thank you. 23 Seeing none, we'll move that into 24 evidence, and Mr. Nance has probably premarked 25 it. 56 ITEM NO. 11 1 Not yet? Okay. 2 MR. CASIELLO: Turning to the 3 declaratory ruling petition, this is probably 4 the longest petition I've ever filed with the 5 Commission, but it involves an unusual set of 6 facts. It involves a foreign company, and I 7 thought it was appropriate to go into quite a 8 bit of detail. I'm not going to repeat 9 everything in that hundred-plus paragraph -- 10 40-some-page petition. 11 CHAIR KASSEKERT: 120 paragraphs. 12 MR. CASIELLO: 120 paragraphs. Madame 13 Chair, I'm glad to see that you read it. Not 14 surprisingly, of course. 15 But if there's something I do not 16 address, and you would like me to address, 17 please ask me. 18 By way of background, in October of last 19 year you granted a temporary additional waiver 20 of the qualification requirement to allow the 21 Infinity entities to acquire up to 9.5 percent 22 of the outstanding shares of MGM Mirage without 23 first obtaining ICA. Since then, the Infinity 24 entities have acquired about 9.3 percent of the 25 outstanding shares of MGM Mirage. Under the 57 ITEM NO. 11 1 term of the stock purchase agreement with MGM 2 Mirage, they are allowed to acquire up to 20 3 percent of the outstanding shares, and we would 4 like to obtain your permission today to do so. 5 As explained in the detailed petition, 6 the ruler of UAE is Sheikh Mohammed. He's the 7 prime minister the Vice President of the UAE. 8 And in 2006 Sheikh Mohammed issued the decree 9 creating Dubai World as a vehicle for the 10 government to make investments both in and 11 outside of Dubai and consolidating the 12 activities of several preexisting entities. 13 Dubai World operates through its 14 business units, each of which is autonomous. 15 Some of the better known activity of the 16 business units are real estate development, 17 including the famous Palm World developments in 18 Dubai. They also are a majority owner of the 19 Mandarin Hotel in Times Warner Center in New 20 York, nickerbocker Hotel in New York. Probably 21 best known for being the largest -- the third 22 largest marine terminal operator in the world. 23 And they also have such diversified interests 24 as owning clothing retailers. 25 The decree created by Dubai World, it 58 ITEM NO. 11 1 shall be a chairman appointed by the Ruler, and 2 that the chairman shall supervise the business 3 units of Dubai World and have all its powers, 4 including the powers to appoint and remove 5 directors and officers. In accordance with 6 that decree, the Ruler issued another decree 7 appointing Sultan bin Sulayem as a Chairman of 8 Dubai World. Not bad for a Temple University 9 graduate. As chairman of the Dubai World, the 10 consultant bin Sulayem has plenary authority 11 over the affairs of Dubai World and over its 12 business. While he's not involved in the 13 day-to-day operation of the business units, no 14 major decisions are made without his approval. 15 While Dubai World has what is referred 16 to as a board of directors, it does not 17 function as a decision-making body as would be 18 true with a US entity, and its members are not 19 really directors as we use that term. For 20 example, the board of directors of Dubai World 21 has not approved or played any role in the 22 decision to acquire the MGM stock or the 23 financing of same. It has only met three 24 times. And Dubai World was created since 2006, 25 and its members are appointed by a chairman and 59 ITEM NO. 11 1 may be removed by him as well. Also, unlike US 2 corporations, the chairman has the unilateral 3 power to appoint and remove officers. In a US 4 corporation, they would be appointed by the 5 board of directors. 6 Two of the officers of Dubai World have 7 filed for qualification because of their 8 positions in the Infinity World entities. They 9 are Dr. Lai Boon Yu, who is Chief Investment 10 Officer, and Abdul Al Ulama, Chief Legal 11 Officer. The other officers are Farid Mohammed 12 Ahmed, who is Secretary General, Maryam Sharaf, 13 who is CFO, and Chin Seug Teo, who is Chief 14 Information Officer. 15 With respect to Farid Ahmed, the 16 Secretary General, he plays primarily a 17 ceremonial and public relations role. The 18 chairman of Dubai World travels a lot. Because 19 of his -- not only his positions in Dubai 20 World, but he has other positions in the 21 government of Dubai. And as a result, Ahmed 22 attends events on the chairman's behalf, 23 receives dignitaries. For example, when we 24 were there, he explained to us that there are 25 so much interest in the Palm, the World 60 ITEM NO. 11 1 Resorts, people and developers are coming from 2 around the world. Government agencies from 3 around the world are coming to see these 4 developments. And he is the person who handles 5 them in the chairman's absence. He deals with 6 the media. He deals with branding and the logo 7 of Dubai World getting its name out there. And 8 he acts as a liaison with the government of 9 Dubai. 10 As to Maryam Sharaf, the CFO, to 11 understand her function, I think it's important 12 that you understand the function of Dr. Yu, the 13 chief investment officer. Dr. Yu decides if 14 investments should be made. He analyzes if 15 they are good investments or not, something 16 that a CFO would normally assist in. He 17 considers the cost of financing and the method 18 of financing. According to the job 19 description, Maryam Sharaf's responsibilities 20 are the preparation and maintenance of 21 financial records, the maintaining of an 22 effective system of internal financial control, 23 investigation and advisory work in relation to 24 internal and external financial statements, et 25 cetera. She has no role in the decision -- she 61 ITEM NO. 11 1 had no role in the decision to make this 2 investment, and she has no role in whether or 3 not to keep this investment. 4 Furthermore, Kar Tung Quek, who is -- 5 who has also filed an application for 6 qualification, is treasurer and CFO of Infinity 7 World entities. He also serves in that 8 capacity as CFO of Nakheel, which is the 9 company that developed the Palm World and other 10 Resorts. And the financial functions of the 11 business units are decentralized and not 12 centralized at the Dubai World level. 13 Even if Dubai World were to be 14 considered a holding company, the statute 15 provides that officers are waivable if they are 16 not significantly involved in the activities of 17 licensee. The licensee we're talking about 18 here is MDDC, Marina District Development 19 Company, the Borgata. Certainly none of these 20 officers are involved in anything having to do 21 with MDDC. 22 As further evidence of the plenary 23 authority of the chairman to run Dubai World, 24 we have obtained and entered into evidence 25 today an opinion letter from the international 62 ITEM NO. 11 1 law firm of Clifford Chance, which is 2 authorized to practice law in Dubai. The first 3 paragraph of that opinion, I think, nicely sums 4 up the situation and states that the chairman 5 is authorized to make all decisions and take 6 any and all actions on behalf of Dubai World 7 without approval of the board. 8 In connection with the acquisition of 9 the MGM Mirage stock, Sultan bin Sulayem caused 10 to be created the Infinity entities and 11 selected the persons who would serve as 12 officers, directors, or managers of those 13 entities. Those persons are Chris O'Donnell, 14 who is also CEO of Nakheel, developer of the 15 Palm World, and who is also a member of the 16 board of directors of Dubai World. Dr. Lai 17 Boon Yu, who I mentioned earlier, who is also 18 the Chief Investment Officer of Dubai World. 19 Dar Tung Quek, who is also CFO and Treasurer of 20 the Infinity entities in CFO of Nakheel, and 21 Abdul Al Ulama, who is also a member of the 22 board of directors and Chief Legal Officer of 23 Dubai World. 24 Lest there be any doubt that these four 25 persons are the only persons who, along with 63 ITEM NO. 11 1 the chairman, have any authority over the 2 Infinity World entities and the investment in 3 MGM Mirage, the Chairman issued a resolution 4 confirming that and delegating to the Infinity 5 World managers all such authority. 6 For those reasons we ask that the 7 Commission determine that the Chairman of Dubai 8 World and the four persons who are the 9 officers, directors, or managers of the 10 Infinity World entities are the only natural 11 person qualifiers on these applications. 12 We've also asked the Commission to 13 determine that Dubai World and the Infinity 14 World entities should be considered entity 15 qualifiers as opposed to holding companies. 16 There are two reasons for that request, which 17 primarily relate to Dubai World. One, as 18 entity qualifiers, the Commission has more 19 flexibility in determining who the natural 20 person qualifiers are. And, two, the formation 21 document requirements for holding companies 22 contained in NJSA 5:12-82D 10, which 23 incorporates 7 and 8, are not mandatory for any 24 qualifiers. Our concern there, frankly, is 25 that if those requirements are imposed on Dubai 64 ITEM NO. 11 1 World, we would have to go to the Ruler and ask 2 him to issue a new decree to permit that. 3 What is the same, regardless of whether 4 an entity is a holding company or entity 5 qualifier, is both will have to demonstrate 6 their good character, honesty, and integrity by 7 a clear and convincing evidence. The basis for 8 our argument that they should not be construed 9 holding companies is because the Act defines a 10 holding company as an entity that has an 11 ability to control or vote a significant part 12 of the voting securities of an entity. 13 The word "significant" is not defined in 14 the statute or in any regulations. But I think 15 it's safe to say that it depends on the facts 16 and circumstances of every case. The key fact 17 here is that the majority of the stock issued 18 by MGM Mirage is controlled by one person, Kirk 19 Kerkorian, who has of May 7, 2008, owned 53.4 20 percent. Mr. Kerkorian has the absolute 21 ability to control MGM Mirage. In the 22 investment, the Infinity World entities is not 23 a significant part of the voting securities of 24 MGM Mirage under these circumstances. 25 I'll note that also we have used the 65 ITEM NO. 11 1 same theory to obtain waiver of all the 2 security holders of MGM Mirage other than Mr. 3 Kerkorian, including the institutional 4 investors in the periodic license renewals for 5 Borgata. 6 And, lastly, I'll note that the SEC 7 filings made by the Infinity World entities 8 said that their investment in MGM Mirage is for 9 investment purposes only, and they have no 10 intent to control MGM Mirage. 11 One update to the petition since it was 12 filed, and that is that the Chairman the Dubai 13 World has filed his license application. 14 As to the second petition for approval 15 of the trust agreement and for Mr. Hurley as 16 trustee, I don't think I need to spend much 17 time addressing the qualifications of Mr. 18 Hurley who's, you know, previously served as 19 chairman of this commission and recently he's 20 served as an ICA Trustee for the acquisition of 21 Harrah's. 22 He is here if you want to ask him any 23 questions as to the trust agreement. 24 CHAIR KASSEKERT: It's Commissioner 25 Fedorko's favorite chairman. Not me. Chairman 66 ITEM NO. 11 1 Hurley. 2 MR. CASIELLO: I'll cast my vote after. 3 CHAIR KASSEKERT: And he normally -- he 4 kisses his picture every time he passes. 5 That's what he thinks. 6 MR. CASIELLO: I'll decide who my 7 favorite is after today. 8 COMMISSIONER FEDORKO: I never said any 9 of that, for the record. 10 (Laughter.) 11 MR. CASIELLO: As to the trust agreement 12 itself, the starting point was a previously 13 approved trust agreement. Provisions were 14 added addressing the pledge of the stock as 15 collateral for a loan. I think that's a 16 situation that exists in other situations, but 17 I don't think the trust agreements ever really 18 got into the details of that and the mechanics 19 of that, and we thought it was important that 20 we do that. 21 Lastly, the trust agreement was reviewed 22 with a fine-toothed comb to assure that it 23 reflected the recent experience of the 24 Commission with respect to trust agreements, 25 and I think we've addressed all concerns that 67 ITEM NO. 11 1 had been raised. 2 I do want to note that the trust 3 property here consists solely of stock in a 4 publicly traded company, an asset that is much 5 easier to dispose of than the operating casino 6 hotel facility. 7 In addition to containing the standard 8 provisions for the payment of fees and expenses 9 of the trustee, and it is advisory we have 10 included a provision that allows the trustee to 11 be paid out of the proceeds of any sale of the 12 trust property if he has not already been paid. 13 Essentially, we've given him a security 14 interest in the trust property to make sure he 15 is paid. The trust property has a current 16 value of over $700 million, and Mr. Hurley has 17 assured me that his fees will not exceed that 18 amount. 19 (Laughter.) 20 MR. CASIELLO: We have one sealing 21 request with respect to that document, and that 22 is that the compensation for the trustee be 23 sealed, as it has in all other matters. 24 And I apologize for the time, but I 25 thought that this is such a unique and unusual 68 ITEM NO. 11 1 set of facts, I should get into all those 2 details. With that, I request that the 3 petitions be granted, that the application by 4 Infinity World Investments, LLC, and Infinity 5 World Holdings be deemed complete, that they be 6 allowed to increase their Holdings above 9.5 7 percent to 20 percent, that the trust agreement 8 be approved, and that Mr. Hurley be found 9 qualified to serve as Trustee. 10 CHAIR KASSEKERT: Thank you. 11 Let me ask would you like to hear from 12 Mr. Fogarty or ask questions? 13 COMMISSIONER EPPS: I'll wait. 14 VICE CHAIR SOMMELING: Mr. Fogarty. 15 CHAIR KASSEKERT: Mr. Fogarty, you're 16 on. 17 MR. FOGARTY: Yes. Good morning again. 18 First, with regard to the sealing 19 request, we have no objection to the sealing. 20 of -- 21 CHAIR KASSEKERT: Seeing none, we will 22 do the sealing request. 23 MR. FOGARTY: Thank you. 24 CHAIR KASSEKERT: Honor that request. 25 MR. FOGARTY: We -- I filed a letter on 69 ITEM NO. 11 1 behalf of the Division dated August 11, 2008. 2 That letter addresses both of these petitions. 3 I'll start with the easier one first, if you 4 will, and that is the approval of the trust 5 agreement. 6 A lot of work went into that trust 7 agreement. Trust me, a lot of work went into 8 that trust agreement. And from our 9 perspective -- the Division, my perspective, 10 and on behalf of the Division -- it complies 11 with the Act. Mr. Hurley, we recommend that 12 you qualify him. He's recently came off a 13 stint, if you will, as trustee for, I think, 14 the Apollo business with Harrah's. And 15 qualified him there. We ask you to qualify him 16 with regard to this thing. 17 With regard to the declaratory ruling 18 petition, we took the position that the 19 Division -- the Division and recommend to you 20 all that you should declare that all six of 21 these entities, the five Infinity entities and 22 Dubai World, be made subject to qualification 23 under the Act. Furthermore, we asked you to 24 please identify and rule that five 25 individuals-- five individuals be subject to 70 ITEM NO. 11 1 the qualification provision of the Act, also. 2 Specifically they would be: Mr. Abdul Al 3 Ulama, Mr. O'Donnell, Dr. Lai Boon Yu, Mr. 4 Quek, and Chairman bin Sulayem, Chairman of 5 Dubai World, bin Sulayem. 6 We suggested to you that you could call 7 Dubai World and the Infinity entities "entity 8 qualifiers" under the Act. Frankly, it's a 9 close question whether you call them an "entity 10 qualifier" or "holding company." We tried to 11 weigh the various factors and came out as the 12 way we did. The choice, of course, is yours. 13 Similarly, with regard to the 14 individuals, our main concern, quite frankly, 15 was to make sure that we captured -- felt 16 comfortable with the individuals that we 17 captured or recommend that you capture and 18 subject to the regulatory requirements, that 19 those people were the key individuals in this 20 enterprise that invested heavily in MGM Mirage 21 and, quite frankly, in MGM Mirage's CityCenter 22 project out in Las Vegas. We make note that 23 it's somewhere around $5 million. That's a lot 24 of money. It may or may not be to Dubai World. 25 May or may not be to MGM Mirage. But it is, 71 ITEM NO. 11 1 without doubt, a significant investment that -- 2 in our view -- requires us here in New Jersey 3 since MGM Mirage is a regulated entity to make 4 sure we capture the key people that were 5 involved in that decision that will be involved 6 in this participation going forward. 7 Principally, we were adamant, the 8 Division was, all along that Mr. Bin Sulayem 9 should have to subject himself to the 10 regulatory process here in New Jersey. And as 11 Mr. Casiello alluded to, the man has. He has 12 submitted finally -- I think our investigators 13 are scheduled to go back out to Dubai the 14 middle of September. 15 We, incidentally, have two of our 16 investigators present in Nevada where the other 17 four individuals are presently for some 18 business, I suspect, with MGM Mirage, 19 interviewing them now with regard to their 20 personal qualifications. 21 That in sum total is our position. I'd 22 be happy to answer any questions you may have. 23 As to any particular nuance or anything like 24 that. 25 Thank you. 72 ITEM NO. 11 1 CHAIR KASSEKERT: Thank you. 2 Questions from the Commissioners? 3 Commissioner Epps? 4 COMMISSIONER EPPS: I have a question 5 for Mr. Fogarty. 6 When I read your letter, I think you 7 swayed me with respect to the entity qualifier/ 8 holding company question when you suggested 9 that we don't necessarily need to reach that 10 right now because of the nature of the current 11 petition, and inasmuch as how that -- this 12 involvement affects Borgata and the Applicant 13 has given the current level participation with 14 respect to interest in Atlantic City, the 15 licensee that we regulated. And for that 16 reason I think I got to an entity qualifier 17 versus the holding company. Is that an 18 accurate characterization? 19 MR. FOGARTY: Yes. It is. It's a mixed 20 bag of factors here. We understand Mr. 21 Kerkorian has voting control of MGM Mirage. On 22 the other hand, there's going to be a seat at 23 the main table by -- more than one seat, 24 perhaps -- by Dubai/Infinity people going -- 25 going forward and as a $5 million investment 73 ITEM NO. 11 1 sitting behind that seat on the board. So on 2 the other hand, Mirage, yes, is a holding 3 company vis-a-vis Borgata and has at least 4 started things with regard to the Renaissance 5 Point. It's a mixed bag of factors. And we 6 just thought that the best way to handle 7 this -- not the only way, but the best way 8 because to -- and he understands, also, that, 9 you know, the standstill agreement kicks in at 10 20 percent. So, theoretically, tomorrow Dubai 11 World, and especially since apparently the 12 price of MGM Mirage is lower -- a lot lower 13 than where it was when they initially bought 14 in -- they may buy in to get themselves up to 15 that 20 percent. They can't do that yet. 16 Depends on what happens here today. But they 17 very well may. So, yeah, they could go up to 18 20 percent. 19 So it's a mixed bag at this point, and 20 we just thought the better way to look at it 21 was their entity qualification. You know, at 22 the end of the day, I'm not so sure it makes 23 that much of a difference. I understand 24 there's some differences, but I'm not sure 25 ultimately, at the end of the day, it makes 74 ITEM NO. 11 1 that -- that much of a difference. The 2 important part is that let's get this company 3 into the regulatory scheme. Let's get the main 4 individuals into the regulatory scheme. 5 In terms of standards, entity qualifier, 6 holding company, the key standards are the 7 same. The filings are the same. So I mean, 8 yeah, there's some nuances maybe that are 9 different, but it's not that big of a moment to 10 us. 11 COMMISSIONER EPPS: Well, I -- without, 12 I guess -- I mean, I guess at the risk of 13 revealing my hand, I think, to me, it remains 14 to the current posture that the matter is 15 before us today. It may -- I may think -- may 16 have a different view if we were here talking 17 about Renaissance Point development or 18 something there at this time, but we're not. 19 Mr. Casiello, I had a question for you, 20 also, with respect to -- or the same issue, 21 holding company versus entity qualifier with 22 respect to -- and allowed to have seats on the 23 board and how that might change the equation a 24 little bit. Can you address that? 25 MR. CASIELLO: Couple things. Number 75 ITEM NO. 11 1 one, I do agree with most of what Deputy 2 Attorney General Fogarty says; that is, at the 3 end of the day, it really doesn't make a lot of 4 difference. I think the same people should 5 have to qualify whether it's an entity 6 qualifier or a holding company. Okay? If you 7 make it a holding company, I think it's harder 8 to get to that point without creating some 9 rulings that, I'm sure, other people would 10 repeat to you in other matters. So that's one 11 reason why I thought the entity qualifier 12 approach made more sense. 13 I think part of, also, what you're 14 asking and what Deputy Attorney General 15 Fogarty -- 16 I'm having a hard time not saying 17 "Jim" -- I'm trying. 18 -- is saying is that here's what we have 19 today. And today he thinks entity qualifier 20 status is appropriate. But if they go to 20 21 percent, and if they add board seats, he wants 22 to take another look at it. And I think you 23 probably would want to take another look of it, 24 too. 25 The primary concern we have from our 76 ITEM NO. 11 1 perspective with respect to saying that Dubai 2 World is a holding company is the 82D 10 3 requirements. Part is going to the Ruler and 4 saying to the Ruler, you know, Mr. Ruler, 5 please issue an amended decree that says that, 6 you know, prior approval from the New Jersey 7 Casino Control Commission is required to 8 transfer the interest in Dubai World. I'm not 9 sure that an interest in Dubai World can be 10 transferred out of the government of Dubai, 11 but -- 12 You don't think our powers are more 13 controlling than the government of Dubai? I'm 14 surprised. 15 (Laughter.) 16 MR. CASIELLO: Let me make it clear to 17 you. If a company wants to do business in New 18 Jersey, they have to comply with New Jersey 19 law. They absolutely -- no doubt about it. 20 And I'm not saying they shouldn't have to do 21 that. I'm saying that I think it's important 22 for this Commission to recognize the unique set 23 of circumstances here. And that may be -- that 24 is a unique set of circumstances. I, frankly, 25 don't know if the government of Dubai, you 77 ITEM NO. 11 1 know, the Ruler of Dubai can do that, can issue 2 shares in Dubai World to somebody else. It's 3 owned by the government. I can't imagine that 4 changing. So in that sense, I'm saying it's 5 sort of a superfluous requirement. But that's 6 the primary reason why we were seeking the 7 entity qualifier status as opposed to the 8 holding company status. 9 COMMISSIONER EPPS: But with respect to 10 the seats on the board -- and although it's 11 not-- the ability-to-control argument suggests 12 that because of Mr. Kerkorian's level of 13 ownership, it doesn't apply, seats at the board 14 give you more input than a passive investment 15 who just has money in, but not say-so. 16 MR. CASIELLO: Beyond a doubt. 17 Absolutely. Absolutely. The way that works 18 is, just for the record, is that subject to the 19 receipt of all necessary regulatory approvals, 20 once Dubai World has over five percent, which 21 it does, they're entitled to one seat on the 22 board. Once they hit 12 percent, they're 23 entitled to, basically, proportional 24 representation. The size of the board of MGM 25 Mirage is currently 15, which would mean 78 ITEM NO. 11 1 that -- they round down, of course. Meaning 2 that we would be entitled to three seats on the 3 board if they acquired 20 percent. They 4 probably wouldn't kick people off the board to 5 make room for additional people, so they would 6 probably increase the board to 18. So Dubai 7 would -- Infinity World entities would have 8 three seats out of 18. 9 If you followed that, you're really 10 sharp. 11 (Laughter.) 12 MR. CASIELLO: I'm surprised I got that 13 out. 14 COMMISSIONER EPPS: One other question. 15 With respect to who has to qualify, and the 16 board of directors, you're suggesting, is -- 17 should not have to because they don't really 18 serve a function that we normally recognize as 19 a board of directors. And I'm going to ask 20 this question -- I guess for my own 21 edification. Why -- why does it exist if it 22 doesn't function as a board? 23 MR. CASIELLO: Good question. I'll 24 start off by saying that, you know, when I 25 first got involved in this matter and heard 79 ITEM NO. 11 1 there was a board of directors and heard that 2 there were officers -- I, you know, incorrectly 3 assumed that was the same thing that we have 4 here. And, you know, after talking to, you 5 know, general corporate counsel, in-house 6 counsel, and actually going to Dubai and 7 learning more about it, I found that that 8 really isn't the case. 9 What function does it serve? Based on 10 the minutes of the three meetings that I've 11 read thus far, that have occurred thus far, 12 it's everybody sitting around, and they sort of 13 give status reports of what they're doing. The 14 intent, as I understand it, right now is to 15 sort of let everybody knows what's going on, 16 but in terms of actually making any decisions, 17 it really doesn't. 18 I'm sorry. Did I answer that or -- 19 COMMISSIONER EPPS: Well, I guess. 20 (Laughter.) 21 MR. CASIELLO: Okay. 22 COMMISSIONER EPPS: Still don't 23 understand, but -- 24 CHAIR KASSEKERT: I guess for my own 25 edification, what is the -- what's the power of 80 ITEM NO. 11 1 the Ruler in this case? You know, in terms of 2 replacing the chairman, other members of the 3 board? Is it the Ruler's decision? Is it the 4 chairman's decision? 5 MR. CASIELLO: It's the chairman's 6 decision. The Ruler appoints the chairman. He 7 can remove the chairman. 8 CHAIR KASSEKERT: He can remove the 9 chairman. 10 MR. CASIELLO: Because the chairman 11 decides who will sit on that board. He decides 12 the makeup of that board, the size of that 13 board. He decides whether that board does 14 anything. And he also, of course -- decides 15 the officers. 16 CHAIR KASSEKERT: So we can't give Mr. 17 Fogarty the opportunity to qualify the Ruler? 18 (Laughter.) 19 MR. FOGARTY: I studiously avoided that. 20 CHAIR KASSEKERT: Avoid that with a 21 ten-foot pole. 22 MR. FOGARTY: I didn't want to go 23 through all that law to figure out if I could. 24 CHAIR KASSEKERT: We wouldn't want you 25 to create an international incident, Mr. 81 ITEM NO. 11 1 Fogarty. 2 MR. FOGARTY: I have the chairman. 3 That's enough. 4 CHAIR KASSEKERT: Commissioner Fedorko, 5 questions? 6 COMMISSIONER FEDORKO: Yeah. 7 Mr. Casiello, the ruler appoints all 8 government officials but has no position with 9 Dubai World or Infinity affiliates; correct? 10 MR. CASIELLO: Correct. He has no -- 11 COMMISSIONER FEDORKO: But yet he 12 appoints the chairman. 13 MR. CASIELLO: Appoints the chairman. 14 COMMISSIONER FEDORKO: So how does he 15 not have control over -- 16 MR. CASIELLO: He certainly has the 17 power to remove him if he so desires and to 18 appoint a replacement. And, of course, if that 19 happened, that person would then have to 20 qualify. The Ruler certainly is not someone 21 who is involved in the activities of Infinity 22 World entities and really not directly involved 23 with activities of Dubai World itself. The 24 Ruler is the representative government of 25 Dubai. 82 ITEM NO. 11 1 And to go back to the Chair's question, 2 you know, if you were to say that the ruler of 3 Dubai had to be qualified because it is the 4 owner, you're essentially saying the government 5 of Dubai would have to be licensed, and that's 6 not an issue I'd like to deal with. 7 MR. FOGARTY: He does have control, sir. 8 It's the short answer. The Ruler does have 9 control. No matter how you look at it, he has 10 control. 11 COMMISSIONER FEDORKO: Right. Because 12 he appoints the chairman. 13 CHAIR KASSEKERT: Right. 14 MR. FOGARTY: Yes. 15 COMMISSIONER FEDORKO: Or removes him. 16 CHAIR KASSEKERT: Or removes him. 17 COMMISSIONER FEDORKO: Okay. 18 MR. FOGARTY: He's the Ruler. He is the 19 government. 20 (Laughter.) 21 MR. FOGARTY: There's nobody else there. 22 There's no electorate. 23 COMMISSIONER EPPS: And -- and the 24 investment mechanism -- there was a decision 25 made to create an investment mechanism, for 83 ITEM NO. 11 1 lack of a better term, called Dubai World for 2 engaging in the market or those type of 3 enterprises by the government. That was the 4 decree, to create this Dubai World investment 5 arm. 6 MR. CASIELLO: Correct. And the Ruler 7 has -- 8 COMMISSIONER EPPS: It was the Ruler's 9 decree; right? 10 MR. CASIELLO: Yes. And the Ruler, as a 11 way of clarification, has created other decree 12 entities. I can't recall all the names, but 13 one owns the airline, Emirates Air. There's 14 another one that owns the third or fifth 15 largest shareholder in Deutsche Bank, owning 16 about two-point-something percent. 17 You're going to -- I shouldn't say 18 you're going to see more of this, but the 19 United States is seeing more and more 20 investments by government entities in all 21 aspects of our economy. Singapore, China are 22 other countries that have these government 23 entities that are basically serving commercial 24 functions. 25 COMMISSIONER EPPS: And I guess that -- 84 ITEM NO. 11 1 I mean, I understand that is the slippery slope 2 we stand on. But some of my questions when we 3 first started to review this is if, for 4 example, Mr. Casiello decided that in his 5 entity he wants to create an investment arm, 6 and it's his decision to create, and he by 7 decree sets it up -- it functions to serve his 8 interests. And if it -- arguably, if it 9 doesn't satisfy him in the way that it's going, 10 he could change it until it satisfies him. And 11 that's what, I guess, makes you engage in the 12 academic debate that you don't really engage 13 in. 14 MR. CASIELLO: Yeah. But the way he 15 controls these decree entities is through the 16 appointment of a chairman and lets the chairman 17 handle the actual investments and operations of 18 those entities. So, yeah, at the end of the 19 day, the ruler can remove the chairman and 20 replace it with somebody else. If he's not 21 satisfied, he has that ultimate hammer. Okay? 22 But in terms of who's really involved, who's 23 involved in the decision, who made the decision 24 to invest in MGM Mirage, it was the Ruler and 25 Dr. Yu. 85 ITEM NO. 11 1 COMMISSIONER EPPS: Chairman. 2 MR. CASIELLO: I'm sorry. The chairman. 3 CHAIR KASSEKERT: Chairman. 4 (Laughter.) 5 MR. CASIELLO: Just see if you were 6 paying attention. 7 COMMISSIONER EPPS: Sit down. Quit 8 while you're ahead. 9 CHAIR KASSEKERT: Commissioner 10 Sommeling? 11 VICE CHAIR SOMMELING: Mr. Casiello, it 12 puts us in a strange position to try to think 13 of how we'd ever deal with a ruler. Since he 14 does everything by decree, I would assume that 15 by decree he could undue what's been done with 16 regard to Dubai World and then put something in 17 place of it to his satisfaction because he does 18 have the ultimate control and can change 19 anything at will since he's a sovereign. So 20 does that -- obviously, enters into the 21 equation. But it's difficult to understand how 22 none of the other entities that's under the 23 Ruler would have -- would be autonomous in 24 their actions and in their investments and in 25 their further involvement with the corporation, 86 ITEM NO. 11 1 that is, MGM Mirage. 2 MR. CASIELLO: Again, at the risk of 3 repeating myself, number one, the Ruler does 4 not get involved in the activities of any of 5 these decree entities to any extent, really. 6 Okay? He appoints the chair. And the chair 7 appoints everybody else and runs the show. 8 Okay? The Ruler is the representative of the 9 people of Dubai. He is the government. He is 10 not doing this for himself, shall we say. So I 11 think if you want to talk about a slippery 12 slope, if you say the Ruler should have to 13 qualify, then why not the next step and say the 14 people of Dubai have to qualify? That's the 15 problem. 16 CHAIR KASSEKERT: Let me ask if there 17 are any other questions? 18 VICE CHAIR SOMMELING: No other 19 questions. 20 CHAIR KASSEKERT: We're going to 21 continue this matter. 22 MS. FAUNTLEROY: Yes. 23 CHAIR KASSEKERT: Let me ask if any of 24 the parties have anything else they want to 25 say? 87 ITEM NO. 12 1 We're going to take -- go ahead. 2 MR. CASIELLO: I have nothing further, 3 Madame Chair. 4 Are you okay, Chairman Hurley? 5 MR. HURLEY: Yes. 6 CHAIR KASSEKERT: We're going to take a 7 very brief recess. 8 MS. FAUNTLEROY: No. 9 CHAIR KASSEKERT: Commissioner Fedorko 10 needs a brief recess. Two minutes. And then 11 we will go to Item 12. 12 (A recess was taken from 12:02 to 12:10 13 p.m.) 14 CHAIR KASSEKERT: We'll go back on the 15 record. 16 Item No. 12, amended petition of 17 Pinnacle Entertainment, Inc., for a statement 18 of compliance pursuant to NJSA 5:12-81. 19 Miss Wozniak? 20 MS. WOZNIAK: Good morning, Chair, 21 Commissioners. 22 We have distributed draft resolutions to 23 the parties. Mr. Oettle is here on behalf of 24 the Petitioner and DAG Fogarty on behalf of the 25 Division. 88 ITEM NO. 12 1 CHAIR KASSEKERT: Thank you. 2 Let me ask counsel to enter their 3 appearances officially. 4 Mr. Oettle? 5 MR. OETTLE: Good morning, Chair 6 Kassekert and Commissioners. Kenneth F. Oettle 7 from the firm of Sills Cummis for Pinnacle 8 Entertainment. 9 CHAIR KASSEKERT: Thank you. 10 MR. FOGARTY: And good afternoon. James 11 Fogarty, Deputy Attorney General, for Josh 12 Lichtblau, Director of the Division of Gaming 13 Enforcement. 14 CHAIR KASSEKERT: Thank you. 15 Pinnacle Entertainment is before us 16 today seeking the issuance of statements of 17 compliance as to its qualification and that of 18 three affiliates. 19 This application has been through 20 several incarnations. An initial petition in 21 2006 sought interim casino authorization in 22 anticipation of a merger with Aztar 23 Corporation, the holding company of Tropicana. 24 When that acquisition was unsuccessful, 25 Pinnacle amended its filing to instead seek the 89 ITEM NO. 12 1 issuance of statements of compliance. 2 Subsequently, of course, Pinnacle 3 acquired the Sands Casino and applied for a 4 gaming-related casino service industry license 5 to enable the transition of ownership and the 6 closure of that facility. 7 The Act authorizes us to issue 8 statements of compliance when we are satisfied 9 that an applicant has established by clear and 10 convinces evidence that one or more of the 11 eligibility criteria in the Act has been 12 satisfied. 13 Mr. Fogarty has reported on behalf of 14 the Division, and today we'll hear testimony 15 and the arguments of counsel. 16 Let's move now to the admission of the 17 premarked exhibits. 18 Mr. Nance? 19 MR. NANCE: Chair, Commissioners, the 20 premarked exhibits are as follows: The Casino 21 Control Commission has one exhibit, C-1 for 22 identification only. C-1 is a draft 23 resolution. 24 The Division of Gaming Enforcement has 25 one exhibit, D-1. D-1 is a report dated June 90 ITEM NO. 12 1 30th, 2008, regarding Pinnacle Entertainment, 2 Inc., for statements of compliance. 3 CHAIR KASSEKERT: Thank you. 4 Are there any objections to the 5 admission of these exhibits? 6 Mr. Oettle? 7 MR. OETTLE: No objections, Chair. 8 CHAIR KASSEKERT: Mr. Fogarty? 9 MR. FOGARTY: No objection 10 CHAIR KASSEKERT: Thank you. 11 Any comments on the draft resolution? 12 Mr. Oettle? 13 MR. OETTLE: No comments. 14 CHAIR KASSEKERT: Mr. Fogarty? 15 MR. FOGARTY: Just to be certain, I'm 16 looking at the draft resolution dated August 17 13th. 18 CHAIR KASSEKERT: Correct. 19 MS. WOZNIAK: That's correct. 20 MR. FOGARTY: That's the appropriate 21 one, then. Yes. 22 MS. WOZNIAK: That's correct. 23 CHAIR KASSEKERT: I'll, therefore, move 24 these into evidence and put them on the record. 25 Are there any other procedural matters 91 ITEM NO. 12 1 that need to be brought to our attention at 2 this time? 3 Mr. Oettle? 4 MR. OETTLE: No other procedural 5 matters, Chair Kassekert. We're prepared to go 6 forward. 7 CHAIR KASSEKERT: Very good. 8 Mr. Fogarty? Any other procedural 9 matters? 10 MR. FOGARTY: No. 11 CHAIR KASSEKERT: Thank you. 12 We'll now move to opening statements. 13 Mr. Oettle? 14 MR. OETTLE: Thank you, Chair. 15 This is an application for statement of 16 compliance by Pinnacle Entertainment and 17 related entities. It -- as the Chair 18 indicated, it has quite a history to it. And 19 before I give you a brief summary of that 20 history, as I think I should, I'd like to 21 introduce the people who are here from Pinnacle 22 for this proceeding today. 23 Sitting directly behind me -- directly 24 behind me is Dan Lee, the Chairman and Chief 25 Executive Officer of Pinnacle Entertainment. 92 ITEM NO. 12 1 With him is Jack Godfrey, Executive Vice 2 President, Secretary, General Counsel. And 3 also from Pinnacle in Las Vegas Lynn Handler, 4 Vice President and Corporate Counsel. 5 In Atlantic City, CEO of Pinnacle's 6 Atlantic City operation, Kim Townsend. Kim has 7 brought with her three people from the 8 operation: Tom Green, who is Director of 9 Security; Bernadette Cummings, Office Manager; 10 Carmen Gonzales, Public Relations. 11 Also with us is Carl Zeitz, consultant. 12 Jack Plackter, real estate/land use Counsel. I 13 think that's the full contingent with us today. 14 This process began with a petition for 15 ICA back in March of 2006 at which time 16 Pinnacle had an interest in looking -- was 17 looking to buy the Tropicana. We had a 18 contract, ended up serving as a stalking horse, 19 and, ultimately, was outbid. When Pinnacle was 20 outbid for the Tropicana it amended its 21 petition for ICA to a petition for statement of 22 compliance. By that time Pinnacle had filed 23 PHD forms for all of its qualifiers, BED forms, 24 as appropriate, and was ready to move forward 25 for investigation and still had an interest in 93 ITEM NO. 12 1 Atlantic City. The regulators graciously 2 consented to investigate Pinnacle. And, as it 3 turns out, very soon thereafter Pinnacle 4 contracted to purchase the Sands and the 5 Traymore site along with it. 6 As you know, the Sands closed late in 7 2006, and it was demolished in October of 2007. 8 Since the process of demolishing the Sands, 9 clearing the site and preparing the site for a 10 new project began late in 2006, Pinnacle has 11 continuously pursued that process, as you will 12 hear from our witness today who is Dan Lee, 13 Chairman and Chief Executive Officer of 14 Pinnacle. 15 Also in 2006, because the closing of the 16 Sands would necessitate Pinnacle's involvement 17 both in consulting with the Sands operational 18 crew and in handling gaming equipment such as 19 slot machines, tokens, after the closing of the 20 Sands, Pinnacle -- Pinnacle was asked to apply 21 for a gaming-related casino service industry 22 license, which it did in 2006. That 23 application is pending, but it's not before you 24 today. 25 At the same time, back in late 2006, 94 ITEM NO. 12 1 Pinnacle petitioned for a ruling that it was 2 qualified as a financial source. Again, so 3 that it could involve itself in the handling of 4 these gambling equipment. The Commission ruled 5 in October of 2006 that Pinnacle was qualified 6 as a financial source. 7 Meanwhile, while the petition for 8 statement of compliance has continued. Since 9 we first petitioned for it back in 2006 10 investigations were performed by Mr. Fogarty, 11 his predecessor Dot Turi, and all the 12 investigators. And I would like to thank, by 13 the way, the DGE for its very hard work in this 14 matter. I'd like to thank Miss Wozniak. We 15 have -- the Commission staff, for her hard work 16 through the good office's hard work and 17 cooperation of the staffs of both agencies. 18 This matter has progressed steadily, and now is 19 before you ready for conclusion. 20 As I indicated, the work in preparing 21 this site for a significant casino project has 22 continued steadily since Pinnacle took an 23 interest in it. The site has been cleared. 24 Other property, as you will hear, has been 25 purchased to expand the site and make it 95 ITEM NO. 12 1 appropriate for an even larger project. The 2 process of obtaining governmental approvals is 3 ongoing. And while no time limits can be set 4 for when the approvals will be obtained or when 5 all the property will be together, the 6 company's moving as quickly as it can to put 7 this project together. Again, as you will 8 hear. 9 As I said, we have one witness for you, 10 Dan Lee. He's very familiar with the project. 11 He can testify to that. And given the 12 opportunity, of course, he will be able to 13 answer questions. Everyone else in the 14 audience here today is available as well to 15 answer your questions should you have something 16 specific -- something specific that Mr. Lee is 17 unable to respond to. 18 And with that, we are prepared to call 19 Mr. Lee when the time is appropriate. 20 CHAIR KASSEKERT: Thank you. 21 Mr. Fogarty? 22 MR. FOGARTY: I don't have a whole lot 23 to say, so I will be brief. 24 We filed our report, which you've noted 25 and which is in evidence now, dated June 30, 96 ITEM NO. 12 1 2008. In it we try to put in as much as we 2 thought was relevant, so you all have a 3 snapshot, if you will, at a given point in time 4 of Pinnacle and of the key individuals who 5 comprise Pinnacle and will have an impact here 6 in New Jersey -- have had an impact here in New 7 Jersey and will have an impact here in New 8 Jersey. 9 We are happy to see that Mr. -- that Dan 10 Lee will give us some words today. It's always 11 nice to get the key person, the key individual, 12 the key executive from a company such as 13 Pinnacle here, take some time with us and share 14 his thoughts on things. 15 As a personal aside, although this isn't 16 really personal, but it involves the Traymore 17 site. I can remember hearing after hearing 18 after hearing, one economic concentration 19 hearing in particular, where this Traymore site 20 always seemed to be some sort of bone of 21 contention. So I'm glad to see that it finally 22 looks like it's going to get developed. That's 23 awfully nice to see. 24 And with that, that's all I have. Thank 25 you. 97 ITEM NO. 12 1 CHAIR KASSEKERT: Thank you. 2 Mr. Oettle, you may call your first 3 witness. 4 MR. OETTLE: Thank you, Chair. I'd like 5 to call Dan Lee. 6 CHAIR KASSEKERT: Mr. Lee, Mr. Nance 7 will swear you in. 8 9 DANIEL LEE, having been first duly sworn 10 to tell the truth, testified as follows: 11 12 MR. NANCE: Please state your name for 13 the record. 14 THE WITNESS: Daniel Lee. 15 MR. NANCE: Thank you. 16 CHAIR KASSEKERT: You may proceed, Mr. 17 Oettle. 18 MR. OETTLE: Madame Chair, may I sit 19 while questioning the witness? 20 CHAIR KASSEKERT: Surely. 21 22 DIRECT EXAMINATION BY MR. OETTLE: 23 Q. Mr. Lee, are you the chairman and CEO of 24 Pinnacle Entertainment? 25 A. Yes. 98 ITEM NO. 12 1 Q. In that capacity, I assume you're 2 familiar with Pinnacle's Atlantic City project on the 3 site of the former Sands Casino? 4 A. Yes. 5 Q. Can you give us a report on the progress 6 of that project, covering areas such as demolition and 7 site clearing, purchase of adjacent properties, 8 government approvals, design, possible financing? 9 A. Okay. Well, I think we've all, as Mr. 10 Fogarty just say -- the Traymore site was a great site 11 for a long period of time. It was involved in a 12 little bit of a turf war, I think, for a long time 13 because the Sands itself blocked the Traymore from 14 having frontage on Pacific Avenue. And the Traymore 15 blocked the Sands from having frontage on the 16 boardwalk. And certainly the most successful casinos 17 in Atlantic City have had frontage on both. In fact, 18 most of those that didn't have frontage on both have 19 not done well. 20 When we had the agreement to purchase 21 Aztar, and ultimately we were overbid, but when we had 22 that agreement, Carl Icahn had called me and said, why 23 don't you buy my stuff instead? And he also owned the 24 Stratosphere and so on. And I had told him I wasn't 25 interested in Stratosphere, and the Sands was barely 99 ITEM NO. 12 1 profitable and declining and the site -- and he said, 2 well, you can build a new place. And I said, well, it 3 doesn't have any frontage on the boardwalk. And 4 that's where he said, ah, you're wrong. I've been 5 talking with Gary Loveman, and I think I can get the 6 Traymore site. And I said, well, if you can do that, 7 then we can pull something together because it's a 8 large site in the middle of the boardwalk. 9 And Mr. Icahn is a good businessman, a 10 little bit of a difficult negotiator. And I think it 11 took us about four months, but he did succeed in 12 buying the Traymore site and then sold everything to 13 us. 14 The -- our appraisal of the Sands was 15 that it was an outdated property that had gotten quite 16 rundown, was built in the early days of Atlantic City 17 where we built hotel rooms just simply because you had 18 to, and so they built the minimum size hotel rooms. 19 They built the minimum number of hotel rooms and not 20 very competitive in today's world. Plus, it was 21 barely profitable, and with the trend, was about to 22 become unprofitable. So we made the difficult 23 decision to close it. 24 And then we started examining what we 25 had. Now, we had bought the Sands/Traymore site for 100 ITEM NO. 12 1 approximately $275 million. Like much of Atlantic 2 City, it had little out parcels and in holdings, and 3 stuff that blocked views. And it's very difficult to 4 assemble a large site in today's world. And, 5 recognize -- I was looking at some numbers the other 6 day. I think this is the first year in the 30-year 7 history of casino gaming in Atlantic City that 8 Atlantic City accounts for less than half of the 9 casino gaming revenues of the Northeastern United 10 States, that there's actually as much casino revenues 11 in Connecticut, Pennsylvania, New York, and Delaware 12 and so on as Atlantic City. And so the competition 13 isn't the Claridge. The competition is the Indian 14 casinos in Connecticut and the new casinos in 15 Pennsylvania, the new casinos in New York, and the new 16 one coming in the Catskills. 17 And, interestingly, some of the same 18 people have built these casinos here are doing those. 19 Dave Hanlon who was featured in Atlantic City is now 20 building a multimillion dollar place in the Catskills. 21 They've got special approval by the legislature. Bill 22 Weidner, who is actually involved in the Sands and 23 other casinos is building a casino in Bethlehem, 24 Pennsylvania, and so on. 25 And to be competitive with those takes 101 ITEM NO. 12 1 something of some seriousness, some mass. It takes a 2 large piece of land. You have to have good access. 3 You have to have good visibility. And so we've been 4 working on that diligently for the last year and a 5 half. I think we have -- we've purchased 6 approximately 30 additional pieces of land from nine 7 different owners, each of which had to be negotiated 8 separately. Totals about $75 million. So our 9 investment in land is the ballpark of $350 million 10 now. 11 We've spent tens of millions designing a 12 building. We're in the process now of trying to 13 evaluate what that would cost to build. And, 14 obviously, there's a -- there's a -- there's three 15 fluid things that you have to deal with when you're 16 developing any business. One is what do you think it 17 can earn? And factoring into that are things like, 18 well, will Maryland legalize 15,000 slot machines in 19 November? What will happen with the smoking ban in 20 Atlantic City? Which is probably not positive for 21 revenues. But, on the positive side, you look at the 22 places that have added rooms, and they've picked up 23 gaming win. And so more rooms is a good thing. And 24 we would intend to have more rooms than any of the 25 existing casinos here. And so it's nice to see that 102 ITEM NO. 12 1 hotel expansions do continue to work here in even a 2 difficult environment. 3 So on the one hand you're looking at 4 what do you think you can earn? Secondhand, what will 5 cost? Recognizing construction -- a great deal of the 6 cost of construction is actually transportation, 7 moving things to the site. I mean, you get the steel 8 from the steel mill. It has to be transported here. 9 So the price of oil factors into the cost of 10 construction in a lot of ways. 11 But then the flip side is what will our 12 cost to capital be to build it? And right now the 13 capital markets are between flux. And I'm glad we're 14 not looking for the money today because it would be 15 extremely expensive to get. And I think the cost of 16 that money today would probably exceed what he could 17 earn on the project. But we're not yet at the point 18 where we would seek the money. Capital markets do 19 normalize over time. It's probably the worst capital 20 market I've seen in my 30 years since business school. 21 But these things usually don't last too long. And so 22 I hope and suspect that by the time we're ready to 23 start construction, the capital markets have improved, 24 and we're in a good position to go. 25 We've also demolished, I believe, five 103 ITEM NO. 12 1 buildings. The original Sands, which was a lot of 2 fireworks and stuff to have a little fun with. There 3 was the self-parking garage of the Sands, which was 4 quite large. The Jefferson Hotel where the Sands had 5 offices. There was an abandoned apartment building 6 and an abandoned office building off Martin Luther 7 King, which had asbestos in it. Those have all been 8 taken down and removed. We still have one more 9 parking garage to go. And then we get into buildings 10 which have tenants in it. And as the different leases 11 expire with the tenants, we will be removing the 12 asbestos and taking those down. That includes the 13 post office on Pacific Avenue, the Comfort Inn, the 14 Econo Lodge, the Miami Hotel which was recently 15 closed, and the various shop buildings along the 16 boardwalk. 17 Then we have to remove a number of 18 tanks. We think there's around a dozen tanks that are 19 buried that have to be removed probably. Most of 20 those were fuel oil tanks for houses that once 21 existed. So we don't know exactly how many they are. 22 Because you find some as you go along. But you have 23 to remediate it properly when you find them and remove 24 them. We also have some foundations from the old 25 Traymore that have to be removed in order to get our 104 ITEM NO. 12 1 own foundation in right. 2 So we're, you know, in a lot of ways, we 3 have broken ground, and we're kind of moving ahead. 4 Our total investment to date is the until ballpark of 5 about $400 million. 6 We have been working with the City on 7 creating an urban renewal zone which allows us to tie 8 it together into a cohesive project. We are working 9 with the CRDA to get certain streets widened so we can 10 make sure that people can get from the foot of the 11 Expressway to our site and get out of town. And we 12 are pretty optimistic that on of those will come to 13 fruition in the next couple of months. And we'll go 14 one step at a time. And that's where we are. 15 Q. Thank you very much. That's an 16 excellent summary. 17 MR. OETTLE: I have no further questions 18 for Mr. Lee. Of course, he's available for 19 cross-examination by Mr. Fogarty -- 20 CHAIR KASSEKERT: Okay. Mr. Fogarty? 21 MR. OETTLE: -- and questions from the 22 Chair and other Commissioners. 23 CHAIR KASSEKERT: Thank you. 24 MR. FOGARTY: I have one question. 25 105 ITEM NO. 12 1 CROSS-EXAMINATION BY MR. FOGARTY: 2 Q. When do you expect to file for the site 3 plan approval for your coastal area facilities thing 4 that you just mentioned? 5 A. Hopefully, by the end of this year. 6 Right now we have conceptual design of what we'd like 7 to build. We're actually going to find out shortly 8 here how much it would cost to actually build what we 9 designed. From my experience that usually results in 10 a reiteration of, well, that's too high. What can we 11 do to bring the cost down? And when we've gone 12 through that process of finishing the design of 13 something that we think would get a good return 14 investment, then we will file with CAFRA. Our hope is 15 to do it sometime before year end. 16 Q. How long do you see that process taking? 17 A. Well, kind of depends on what number we 18 get. I mean, we dreamed up a building. We've turned 19 it over to a third-party cost estimating firm who 20 spent weeks now going through and figuring out, well, 21 if this is a luxury restaurant, so this would be 600 a 22 foot. And this would be four-star guest room, and 23 that will be 400 a foot, and how many feet is it? And 24 all that. And they'll add it all up. I actually 25 don't have the ugly news yet, but I'm going to get 106 ITEM NO. 12 1 some number that's in the billions. And then we'll go 2 back and revisit of, gee, if the guest room is, you 3 know, 475 square feet instead of 500 square feet, what 4 does that save us? Recognizing most of the hotel 5 guest rooms in the town are significantly smaller than 6 that. 7 But there's a process that every 8 developer goes through to try to get to something that 9 is exciting and draws a lot of people but is also -- 10 what's the word? That is also cost effective or 11 efficient. So we're trying to work that through. And 12 as soon as -- there's no sense in filing something 13 with CAFRA if we can't afford to build it. So we're 14 trying to figure out something that we think is cost 15 effective for the market and yet exciting and splashy. 16 And when we get to a point and, hopefully, it's in the 17 next couple months, we will file with CAFRA. 18 Q. I have a note that says once upon a time 19 there's a mention about 3,000 hotel rooms? 20 A. That's what we -- 21 Q. Is that still out there? 22 A. That's in the conceptual design 23 currently. There's no obligation to build that many, 24 but conceptually there's actually three hotels in the 25 complex that total 3,000 rooms. One would be a luxury 107 ITEM NO. 12 1 hotel that takes advantage of the -- of being close to 2 the beach, where every room would have a balcony and 3 be able to open the door and feel the ocean breeze, 4 which that shouldn't be unique, but it is, actually. 5 I don't think there's one casino hotel in here where 6 you can open a window and feel the ocean breeze when, 7 in fact, that ocean breeze is perhaps the single most 8 important reason why people come to Atlantic City. 9 And then one of the other issues we 10 found is about 200 feet above us is one of the 11 windiest spots in the entire United States. So once 12 you're up 20 stories, you don't want windows that kind 13 of open. So you have to keep the windows that open as 14 being down low, and as the building gets taller, you 15 would have more of a four-star hotel that would have 16 large rooms and nice rooms but without balconies and 17 without windows that open as it gets too windy. 18 And then we have a component that would 19 have kind of a more hip hotel that would attract a 20 little bit of a younger crowd. And not -- obviously, 21 not 19 but 25-year-olds. And kind of a hip type 22 hotel. And there's things that just -- give you one 23 idea that we've kicked out around what makes it a hip 24 hotel is literally as simple as you get on the 25 elevator, and it's a high-speed elevator like most of 108 ITEM NO. 12 1 them that go a thousand feet a minute. And you push 2 your elevator button. The lights in the elevator dim. 3 You look up, and you realize the ceiling of the 4 elevator is glass, and on the roof of the elevator 5 there are spotlights that shine up through the 6 elevator corridor, so you can look up and see what 7 it's like to careen up that elevator thing at a 8 thousand feet a minute. You do it every day, and you 9 don't realize you're on a thrill ride. And it's not 10 hard to turn a normal elevator into the thrill ride. 11 Most of us are too old to enjoy that. But 25 years 12 olds -- 13 (Laughter.) 14 Q. My son would. 15 A. Yeah. And it's kind of funny. We were 16 explaining this to our board of directors, and Ellis 17 Landau, who is on our board of directors and was the 18 Chief Financial officer of Boyd Gaming until he 19 retired, grew up in Philadelphia. And he said, you 20 know, the Traymore hit that. And I said, you're 21 kidding me? The Traymore, I guess, in their elevators 22 had a window on the side of the elevator in which you 23 could see the wall moving past the elevator on its way 24 up. And he remembered as a ten-year-old kid riding 25 the elevators in the Traymore and seeing that. And it 109 ITEM NO. 12 1 was a total coincidental, again, that we were thinking 2 of doing something similar to what the Traymore itself 3 had, so. 4 Q. Yeah. What exactly will an urban 5 renewal zone do for your project? 6 A. I'm going to ask Jack Plackter to 7 address that a little bit, if you don't mind. 8 THE WITNESS: Or, Jack, certainly 9 correct me if I misstate something. All right. 10 A. But I think it makes it easier to deal 11 with some of the zoning, with some of the street 12 closures we need to that get done, some of the 13 setbacks. There are places where we intend to have 14 much bigger setbacks than is the norm. 15 It's interesting, strolling the 16 boardwalk last night, I decided that the single 17 prettiest place in Atlantic City at this pint in time 18 is in front of the Dennis Hotel where the hula shop is 19 now closed and gone. And the boardwalk is widened, 20 and you get to look at the old architecture of 21 Atlantic City, which in its heyday was spectacular. 22 And part of the reason for it being spectacular is it 23 had setbacks from the boardwalks, so you didn't have a 24 wall of shops right along the boardwalk. And so we 25 intend to have generous setbacks on the boardwalk 110 ITEM NO. 12 1 because we think that helps bring people in, despite 2 the fact that we're paying record prices for the land. 3 So it's a very difficult decision to do, but we think 4 it's the right thing to do. 5 But then there's other sections where we 6 have hotel rooms that come right up to the boardwalk. 7 And so there's some sections where we want to be -- 8 where we need a variance from the zoning, and there's 9 other sections where we're set back enough, and it's 10 kind of a tradeoff that we think makes sense. 11 THE WITNESS: Jack, correct me again if 12 I misstated anything. 13 MR. PLACKTER: You're right. 14 A. And then there are a handful of 15 properties that are blighted, and that we've tried to 16 deal with. But the owners want in the neighborhood of 17 a hundred million dollars an acre. And an urban 18 renewal zone would allows -- or would allow through 19 the City those properties to be acquired through 20 eminent domain, and the owners would get fair market 21 value, so. 22 Q. One last question. Can you look in that 23 crystal board and tell he when the credit markets will 24 improve? 25 A. I wish I could. 111 ITEM NO. 12 1 (Laughter.) 2 A. You know there's a lot of guys on Wall 3 Street that make more than I do, and they're right 4 about half the time. 5 You know, who knows? The problems with 6 the banks -- you know, the issue is when the banks 7 take a hit on the mortgages, then they end up with 8 more leverage than they want themselves. And one of 9 the ways they fix that leverage is not making loans. 10 And so they've drawn back. 11 In this industry in particular, I think 12 a number of large firms going private kind of resulted 13 in more debt than more buyers for that debt. So 14 Harrah's alone was $25 million of debt financing. And 15 there simply weren't enough buyers for the debt. So 16 the Harrah's paper trades at 21 percent yield now. 17 It's the largest most diverse casino company in the 18 world. And their paper trades at 21 percent yields. 19 Other casinos trades similar. And, you know, if you 20 could buy Harrah's paper with a 21 percent yield what 21 you pay for Pinnacle's paper -- well, our paper trades 22 at about 13 percent. So the bonds we issued a year 23 ago at seven and a half are now trading at 13. And we 24 haven't done anything wrong. Our business has been 25 fine. 112 ITEM NO. 12 1 And, frankly, our largest facility, 2 which is Lake Charles, Louisiana, just had the best 3 month it's ever had. Our numbers came out, I think 4 two days ago. And doesn't hurt that the price of oil 5 helps the economy in that part of the world. But our 6 business has done well, and we've gone straight with a 7 13 percent yield. So if we go and try to raise new 8 money today, lenders are going to look at that 13 9 percent number. And I'm not sure the returns in 10 Atlantic City are high enough to justify borrowing 11 money at 13 percent to build something. 12 Now, over time, with inflation as low as 13 it is, and it's still quite low, you know, people 14 start looking at it and say, gee, I have money in US 15 Treasury Bonds at 3.95 percent. Inflation is 4.5 16 percent, so I'm going to actual lose money in the 17 treasury bonds. Maybe I ought to put this money to 18 work. And, hey, here's the Harrah's paper at 20 19 percent. So, typically, you would have a recycle and 20 a normalization of it. 21 I'm a perennial optimist, so I tend to 22 hope that people will come back from vacation after 23 Labor Day and markets will start to improve. But 24 we'll see. I mean, six months ago, I was telling 25 people that if the markets didn't improve, every 113 ITEM NO. 12 1 airline in the country would be bankrupt and most of 2 the car companies. And I'm sorry to say that I was 3 pretty accurate in that forecast. Most of the 4 airlines have gone bankrupt and a number of the car 5 companies are pretty close to it. And I keep looking 6 for it and saying, you know, these things do go in 7 cycles. And, hopefully, it will come back. But in 8 the meantime, we keep moving forward day by day. You 9 know, we're not -- if the credit markets are suddenly 10 there today, we're not ready to start construction, 11 anyway. So we're actually kind of lucky that we're 12 not there. 13 And as a policy -- and I, you know -- 14 we're probably -- well, I recently saw some numbers 15 that showed we are the third least leveraged casino 16 company today. Penn is least leveraged and Wynn is 17 second least, and we're third. We're not the largest 18 casino company, but we're financially pretty strong. 19 But we're pretty cautious, and so we 20 don't like to start construction on something unless 21 we're reasonably certain we have the funds to finish 22 it. We don't want to end up with something like Boyd 23 has, actually in place now, $500 million into it and 24 stopped. But on the other hand, there's no reason not 25 to get the gun loaded and ready to go. And when the 114 ITEM NO. 12 1 capital markets are there, you arrange the financing, 2 then you run for the opening. So that's what we're 3 doing here. 4 Q. Thank you, Mr. Lee. 5 CHAIR KASSEKERT: Questions from the 6 Commissioners? 7 Commissioner Fedorko? 8 COMMISSIONER FEDORKO: Mr. Lee, I just 9 have one question for you. 10 I've heard you say this at gaming 11 events, and I read something in the paper where 12 you were quoted where you said one of the 13 options would be selling the property. Is that 14 something that you're really considering? 15 THE WITNESS: I -- back on our -- and 16 recognize when we do these earnings calls now, 17 it started out as something for the investment 18 community. Now everybody listens, including 19 every newspaper reporter, and so on. I think 20 half our employees. And the investment 21 community has, frankly, not been positive on 22 Atlantic City of late. Atlantic City numbers 23 haven't been very good. And we get the 24 question all the time. Why are we in Atlantic 25 City? Why don't we just sell Atlantic City and 115 ITEM NO. 12 1 buy in our stock? Okay. 2 Frankly, our -- like all the gaming 3 stocks, our stocks are down a lot. And if you 4 run the math on that, buying in our own stock 5 is probably a higher return investment than 6 building in Atlantic City. But it's not as 7 easy. I mean, I was research analyst once 8 through the 1980s. I was an analyst and a 9 charter financial analyst. And I think back. 10 I thought the world was so uncomplicated that 11 you can just do that. And you can't. You 12 structure a company to go build stuff so you 13 have debt covenants that call for that and so 14 on. And so, for example, if we did sell the 15 land in Atlantic City, I could buy in stock. 16 I've got debt covenants that would require me 17 to use it to pay off my bank debt, and my bank 18 debt is at LIBOR plus two. So the bank debt is 19 at four percent. I'd be giving up a great 20 opportunity to build a great resort and putting 21 the money to work at four percent, which is 22 pretty silly. 23 I get the question all the time: Why 24 don't you, you know -- don't build in Atlantic 25 City and buy in your stock. And I pointed out 116 ITEM NO. 12 1 at our first-quarter conference call when we 2 bought some additional land in Atlantic City. 3 People are saying, what? You bought more land? 4 What are you doing? And I said, listen -- you 5 know, and they said, how are you ever going to 6 pay for this? And I said, well, I think the 7 credit markets will improve. They said -- 8 But realistically, only three things are 9 going to happen with this land. Either we're 10 going to develop it -- and we hope to. We 11 intend to. That's why we're here. Why we keep 12 moving ahead and so on. Or we go find a joint 13 venture partner. There's a number of people 14 out there that we could work with, to be a 15 partner and go like MGM did, go find some ruler 16 somewhere and be sitting here. 17 (Laughter.) 18 THE WITNESS: You know, I was trying to 19 think what other countries have rulers. I 20 mean -- 21 (Laughter.) 22 THE WITNESS: If we get money from the 23 Bank of England, do we have to sit here and 24 ponder whether Queen Elizabeth has to file a -- 25 (Laughter.) 117 ITEM NO. 12 1 THE WITNESS: So it -- but I mean, you 2 can find a joint venture. Or ultimately you 3 could sell the land. Or, frankly, you could 4 sell Pinnacle. I mean, you could find somebody 5 who decides to buy Pinnacle in order to get the 6 site. And I was just being a realist. And, 7 frankly, that was not news to anybody on Wall 8 Street, obviously. You put together a great 9 casino site, something is going to happen. 10 Either you're going to develop it, or somebody 11 else is going to develop it. 12 But I think it was the big news to the 13 Atlantic City Press, but it wasn't really big 14 news to Wall Street. And I didn't think I was 15 saying anything earth shattering, but it made a 16 headline here. So -- but, no. 17 Or put it another way. The land is not 18 for sale. We don't have a real estate agent 19 out there. We haven't talked with anybody 20 about selling it. The joint venture kind of 21 pondered in my own head, who I might approach 22 at some point if the capital market -- if we 23 got to the point we're ready to build, and the 24 capital markets are still crummy, you know, 25 obviously, you would start thinking about -- 118 ITEM NO. 12 1 I think that's where MGM was. They 2 started building CityCenter. They needed some 3 money, and they found their way to Dubai. I 4 think it's great. Hats off to Jimmy Hearn for 5 figuring out how to do that. And, you know, at 6 the right time, we might have to make a similar 7 trek. Dubai World is one of only many funds 8 that are over there that you can go and talk 9 to. So it's not that you have to go see Dubai 10 World. It doesn't mean we wouldn't go see 11 Dubai World, but there's probably WW World 12 Saudi Arabia Worlds, and there's probably an 13 infinite number of Infinity Worlds, so -- 14 (Laughter.) 15 THE WITNESS: But, so, you know, you try 16 to find a joint venture partner. And, 17 obviously, if you can't find a joint venture 18 partner, and you can't figure out how to do it 19 yourself, and you have assembled this great 20 site, you don't just sit on it. I mean, the 21 least -- we're in this thing $400 million, and 22 we're not going to just sit on it. Something 23 needs to be developed there. The land's not 24 worth anything sitting there fallow. 25 I mean, I think I was actually running 119 ITEM NO. 12 1 the math yesterday watching the air show 2 trying -- looking from the top of Madison House 3 down to our site, thinking, we could park a lot 4 of cars down here. 5 (Laughter.) 6 THE WITNESS: We should have thought 7 about that. And I started running the math. 8 Wow. If we had a parking lot, filled it up 9 every single day, I think we'd cover ten 10 percent of our real estate taxes. I mean, you 11 can't do that as a parking lot. It has to have 12 something on it. And so that's the longwinded 13 answer. 14 COMMISSIONER FEDORKO: Another rumor 15 going around. 16 CHAIR KASSEKERT: Yeah, right. 17 COMMISSIONER FEDORKO: You were going to 18 park buses there or something like that. 19 COMMISSIONER EPPS: RV. 20 COMMISSIONER FEDORKO: Or RVs. 21 THE WITNESS: Well, let's see. It's 22 roughly 20 acres, and $400 million. At $20 23 million an acres, they better be gold-plated 24 buses so. 25 (Laughter.) 120 ITEM NO. 12 1 COMMISSIONER FEDORKO: Thank you. 2 CHAIR KASSEKERT: Commission Sommeling? 3 VICE CHAIR SOMMELING: Yes. Mr. Lee, 4 where is your project in St. Louie right now as 5 far as completion is concerned? 6 THE WITNESS: We have two. The one in 7 downtown St. Louis, we opened in December. 8 It's actually doing about 15 to 20 percent 9 better than we had forecast to the City of St. 10 Louis Selection Committee when they chose us. 11 That's the one with a Four Seasons Hotel and 12 the second hotel -- got two hotels in it and a 13 pretty good size casino. 14 The second project in St. Louis is under 15 construction. About ten miles south. It's in 16 St. Louis. There was a city of St. Louis, and 17 then there's a county of St. Louis. And the 18 second one is in the county. And it opens late 19 next year. 20 VICE CHAIR SOMMELING: And how many 21 properties or sites are in the development 22 pipeline right now beyond St. Louie? 23 THE WITNESS: We have a project that's 24 been -- received most of the approvals, and we 25 hope to start construction on them shortly, in 121 ITEM NO. 12 1 Lake Charles adjoining our biggest casino. 2 That one is called Sugarcane Bay. That's about 3 a $400 million project. 4 And then we're working on the designs 5 for one in Baton Rouge which we have approval 6 for, local approval for, and a gaming license 7 for. 8 We have a proposal for a project in 9 Kansas City, Kansas, that in mid September the 10 selection committee in Kansas will choose. 11 There's four different proposals. So on the 12 math, we have a 25 percent chance of being 13 chosen there. 14 There's some other stuff that we would 15 like to build, like a hotel at our casino in 16 New Orleans and so on, that we've kind of put 17 on the back burner until the credit markets get 18 better. So we have -- we're a pretty busy 19 little company. 20 VICE CHAIR SOMMELING: So in the scheme 21 of things, then, where would you say the 22 Atlantic City proposed project might end up? 23 THE WITNESS: Well, the irony, they're 24 not -- they're not competing so much as 25 complementary. It helps us -- I mean, 122 ITEM NO. 12 1 obviously, Atlantic City is in the billions. 2 These other ones are hundreds of millions. But 3 the other ones help us get to a size where we 4 can take on the billion-dollar project. So, 5 you know, if -- when you run the math, if we 6 were to do this without Sugarcane Bay and 7 without Baton Rouge, we'd end up very highly 8 leveraged. If we get those two opened quickly, 9 which we hope to do, and one in River City, 10 then the company is significantly bigger, and 11 it's easier for us to do Atlantic City. But -- 12 so it's a -- you know, it's coming along. 13 I mean, one of the other issues that we 14 have to face is in states that have a limited 15 number of licenses, when they choose you, they 16 gave you a time frame to get open because 17 that -- they chose you to have that license, 18 and they want the tax revenues and jobs and so 19 on. And so we have agreements, development 20 agreements with various jurisdictions that have 21 various deadlines in it that we're trying to 22 hit. And that's important in Louisiana and in 23 Missouri. 24 Here, it's much bigger project. It 25 takes a lot of time to pull it together. And 123 ITEM NO. 12 1 we don't actually have a time frame that we 2 must meet. Okay? Now, there is a rather large 3 clock ticking every day because we have $400 4 million invested, and the cost to carry on $400 5 million is pretty big on what is today a piece 6 of raw land. So we're trying to go as fast as 7 we can. But if it takes longer, we're not 8 actually in violation. 9 VICE CHAIR SOMMELING: Thank you. 10 No other questions. 11 CHAIR KASSEKERT: Commissioner Epps? 12 COMMISSIONER EPPS: I have a couple 13 questions. 14 You said that the cost of capital to 15 begin construction right now is high. But, 16 hopefully, when you're ready to go -- because 17 you're not at that stage, when you're ready to 18 go, it will be better. Do you have any idea -- 19 this is like asking the magic question in a 20 round about way. Do you have any idea when 21 you'd be speaking cost capital -- construction 22 capital. 23 THE WITNESS: A lot of the stuff -- some 24 of the stuff that we need to line up in order 25 to begin construction is in our control. Some 124 ITEM NO. 12 1 of it is not. You know, as I mentioned 2 earlier, there's certain governmental approvals 3 that we're working with locally here. 4 Certainly CAFRA is one, the redevelopment 5 agreement was another. And the CRDA widening 6 the roads is another. If that flows pretty 7 smoothly, that could be done in -- 8 Six months, Jack? 9 Could be. Yeah. 10 I mean, if some of that gets tied up in 11 litigation, that could take longer. And, 12 hopefully, it won't. And then, frankly, I 13 could be pleasantly surprised and find out that 14 the thing we've dreamed up can be built for 15 less than the number I expect they're going to 16 tell me. And then that will go pretty quickly. 17 So it could be any time as breaking ground the 18 first part of next year to a year and a half 19 from now. 20 So I don't think we ever expected to be 21 under construction this year because it takes a 22 fair amount of time to remove these buildings, 23 remove the tanks. We knew that the post office 24 wouldn't be vacated until January of '09. 25 That's pretty central to the project. So we 125 ITEM NO. 12 1 always knew it would be at least sometime in 2 '09. 3 COMMISSIONER EPPS: Okay. My next 4 question, quite frankly, some of your earlier 5 statements seemed almost doom and gloom for a 6 fan of Atlantic City. I mean, your statement 7 was, we're not going to build until we -- this 8 market turns around and maybe we won't ever 9 build. And that seemed -- to hear that was a 10 little bit off-putting. I'll tell you that I'm 11 more encouraged by your comments and your 12 testimony today. And it seems more promising 13 that there is a light at the end of the tunnel, 14 wherever the end of that tunnel is. But the 15 construction project is to come about. 16 THE WITNESS: Let me try to reconcile 17 those statements because, believe it or not, 18 they are consistent. I have investors who are 19 worried that we would borrow money at 14 20 percent and build a project that earns 12. 21 Okay? So when I say, look, we have to make the 22 numbers work. Obviously, not only would it be 23 foolish for us to go ahead, but if we can't 24 make the numbers work, we're not going to be 25 able to get the money. Okay? 126 ITEM NO. 12 1 And part of that is trying to persuade 2 investors to get them to come down and, 3 frankly, look at the properties and say that, 4 you know, the Borgata does extremely well, and 5 we want to build something as nice or nicer 6 than the Borgata on the boardwalk. And the 7 fact that you may own bonds in some other 8 casino that's near bankruptcy, is not a 9 negative on Atlantic City. It's a function of 10 the casino you bought bonds in. And go look at 11 what you bought bonds in, and you'll understand 12 it better. 13 So there is a marketing effort, frankly, 14 for lack of a better term, of persuading 15 investors that Atlantic City is a good place to 16 invest in. We -- I, obviously, believe it. 17 We've put $400 million here. Right? But I 18 need to find another, you know, couple billion. 19 And right now, you know, if you go to Wall 20 Street and say, boy, it's a beautiful day out, 21 they'll tell you, well, it's too bad because it 22 can't possibly be this nice tomorrow. 23 (Laughter.) 24 THE WITNESS: I mean, they're just so 25 negative, you know, it's not a receptive 127 ITEM NO. 12 1 audience. And until -- until there's a little 2 better sentiment on Wall Street, we're just 3 beating our head against the wall. 4 COMMISSIONER EPPS: Another question is 5 right now, with the amount of property that 6 you've assembled and with some of the things 7 that have either come down or suggested that 8 will come about, it seems that you're left with 9 a little bit of an awkward footprint, at least 10 right now, because you go from Indiana to 11 Kentucky and at a certain point you go up to 12 almost Atlantic but not in a perfect square. 13 But somewhere at -- between Martin Luther King 14 and Kentucky on Pacific, some of those 15 project-- those properties were left to be out 16 of any redevelopment zone. They were left to 17 stand, I guess, because they're viable, 18 existing businesses or for whatever reason that 19 decision was made. How do you anticipate going 20 about a footprint or a design that leaves those 21 facilities there? 22 THE WITNESS: Right. 23 COMMISSIONER EPPS: If that occurred. 24 THE WITNESS: Well, the City ultimately 25 chose the borders of the redevelopment zone. 128 ITEM NO. 12 1 We had recommended an area, and they ultimately 2 drew the line. Which we largely concurred but 3 not entirely occurred with what we would have 4 wanted the line to be. In that group of 5 buildings that you're seeing, we do own the 6 Fischer flower shop. We do not own the adult 7 bookstore. And I think his number is in the 8 ballpark of a hundred million an acre. And 9 there's a narrow building in there owned by a 10 law firm. There's the Professional Arts 11 Building, which owned by Feldman and John 12 Schultz, and there's the Park Lane, which is a 13 type of time-share facility. It was actually 14 started in the time-share business before there 15 was time-share laws, so it's kind of 16 grandfathered and doesn't really sell deed to 17 time-shares. 18 We spoke with the owners of all of 19 those, and the prices were just pretty extreme. 20 And it's -- this is actually been a big part of 21 the challenge of Atlantic City. And why the 22 big new places go into the marina. Because you 23 can -- and why so many people look at Bader 24 Field. I mean, you would think you'd want to 25 be at the beach and want to be at the 129 ITEM NO. 12 1 boardwalk, and then when you try to do that, 2 what you find is the way the city was parceled 3 out a hundred years ago was a four- or 4 five-acre site for an old hotel and then 5 itty-bitty pieces of land around it. Right? 6 And it's kind of interesting to reflect 7 on what's happened the last 25 years. I'm not 8 sure a casino has ever sold a piece of land. 9 And over the years, they just gradually buy the 10 little places next door to them. And sometimes 11 you have to wait it out and wait for somebody 12 to die or somebody to finally decide that their 13 little row house isn't really worth $18 million 14 or whatever it is. And -- but everybody thinks 15 they have the key. Everybody is trying, you 16 know -- it's really kind of sad because 17 everybody is trying to be the -- the piece of 18 land that you absolutely have to have to build 19 the billion-dollar place. Therefore, they can 20 ask any price they want. 21 And part of our design issue is -- we 22 have driven the architects absolutely nuts 23 saying, you know, I don't think we're going to 24 get this Comfort Inn. You're going to have to 25 design around it. So they design the whole 130 ITEM NO. 12 1 thing to go around the Comfort Inn. And then 2 you finally do reach a deal for it. When the 3 people who own the Comfort Inn realize that 4 you've now designed around them, you've showed 5 them a plan that said, look, we don't need you, 6 then all of a sudden, their price becomes much 7 more reasonable. Then you end up going back to 8 the architect. You know, I was just kidding 9 about the Comfort Inn. 10 (Laughter.) 11 THE WITNESS: And they end up, you know, 12 redesigning it. We literally spent millions of 13 dollars redesigning because we had designed 14 around pieces of land we didn't think we'd get. 15 The only one that we actually thought 16 was -- that I actually thought was critical was 17 the Greek restaurant on the corner, and I made 18 Carl Icahn buy that before we reached the deal 19 with Icahn because that at least give us a full 20 city block. 21 Now, there's other stuff that's highly 22 desirable. But, you know, we -- I think we've 23 talked with every adjoining land owner. And 24 what they -- what they valued their land at was 25 either high or ridiculous. Those that were 131 ITEM NO. 12 1 high, I think in every case we've reached a 2 deal. Those that are ridiculous, we have not. 3 So that's where it is. And that's the 4 hurdle of operating here. Every single casino 5 developer who's trying to build along the 6 boardwalk has a horror story to tell you about 7 it, so. 8 COMMISSIONER EPPS: So, just following 9 up, how significant in your list of things that 10 have to get done is the assemblage of parcel in 11 that scenario? 12 THE WITNESS: Well, recognize, we're 13 above 20 acres. So we're, I think, the largest 14 casino site along the boardwalk already. 15 Now -- 16 COMMISSIONER EPPS: So your significant 17 a parcel interest is already obtained? 18 THE WITNESS: No. There's some stuff 19 like, you know, for example, we intend to have 20 a parking garage on the inland side from 21 Pacific Avenue. It would be great if that 22 parking garage would go all the way to 23 Atlantic. 24 COMMISSIONER EPPS: Right. 25 THE WITNESS: We'd put out some feelers 132 ITEM NO. 12 1 with the different shops along Atlantic, and 2 their expectations for what they thought it was 3 worth was just ridiculous. So we designed the 4 garage parking garage to stop behind those 5 shops. 6 COMMISSIONER EPPS: And do you -- 7 THE WITNESS: It doesn't go to Atlantic. 8 It would be nice if it did. It's not cost 9 effective to do. It would cost tens of 10 millions of dollars to go an Atlantic. And the 11 number of parking spaces you pick up is not 12 much. And then the parking spaces you pick up 13 are a block away from your casino. So you're 14 actually better off just having another floor 15 on the garage. 16 COMMISSIONER EPPS: Do you own entire 17 Pacific Avenue frontage? 18 THE WITNESS: As you're coming down 19 Pacific Avenue, we own the entire frontage 20 between Kentucky -- no. I'm sorry. Between 21 Indiana and Martin Luther King. 22 COMMISSIONER EPPS: On Pacific. In the 23 inland side. 24 THE WITNESS: On the water side of the 25 Pacific, we own all of the frontage -- 133 ITEM NO. 12 1 I had a map in my pocket. Just this 2 means treating it as an exhibit. 3 (Laughter.) 4 THE WITNESS: But we own all the green. 5 It's easier if I just give this to you. 6 (Laughter.) 7 CHAIR KASSEKERT: Daryl's looking at me 8 like, we better do this. 9 THE WITNESS: You can have that as an 10 exhibit, I suppose. But I will say there's two 11 things coded blue there. The larger blue piece 12 is the post office, which we will own whether 13 our agreement with the post office is 14 already -- there's another piece coded blue 15 that's over on the boardwalk, and we probably 16 will not own that. 17 So but you can see along the water side 18 of the Pacific, we have the entire block from 19 Martin Luther King -- no. From Indiana to 20 Martin Luther King. Then the next block is 21 which goes -- it's a half a block from Martin 22 Luther King to Mt. Vernon, and there we own 23 about half that frontage. Then we own the 24 frontage from Mt. Vernon to Kentucky, and then 25 we own the frontage for the next half a block 134 ITEM NO. 12 1 from Kentucky to New York. So we have a total 2 of, I think, two and a half blocks or most of 3 two and a half blocks of frontage on the water 4 side of Pacific, which I think is more than 5 anybody else has on the Pacific. 6 And then we have the good -- excuse me, 7 a good chunk of the block of the inland side on 8 Pacific between Indiana and Martin Luther King. 9 COMMISSIONER EPPS: That footprint, as I 10 look at it, was what I had in mind when I began 11 the questioning. And it's just those little 12 pieces that create the difficult from me having 13 a perfect symmetrical footprint, and I was just 14 wondering how you -- 15 THE WITNESS: Well, the cost of a 16 perfect symmetrical footprint, I think we pick 17 up less than an acre, and it would be a hundred 18 million dollars. Okay? And so at some point 19 you say that -- and that, unfortunately, is -- 20 COMMISSIONER EPPS: Work around it. 21 THE WITNESS: -- one of the problems in 22 developing Atlantic City. It just is there. 23 You don't have that problem if you build if the 24 Poconos or build -- and the other thing you 25 have is, you don't really control your 135 ITEM NO. 12 1 neighbor. So you can literally end up with an 2 adult bookstore. The fellow with the adult 3 book store, I said, you know -- it's a really 4 tawdry adult bookstore. And he said he wanted 5 a huge number. And I said, well, what makes 6 you think your land is worth this much? And he 7 says, well, when you build your building, I'll 8 have more business. And I said, you might have 9 more business if we had a door on that side of 10 the building. But if you're there, you're not 11 getting a door on that side of the building. 12 So, all of a sudden, you end up designing your 13 building to kind of shield your customers from 14 somebody who decides to have a tawdry building 15 next door. The Borgata doesn't have that 16 problem. Okay? Nor do the Indian casinos in 17 Connecticut. Okay? 18 And so -- but, you know, we're kind of 19 the company that's trying to live up to the 20 original Casino Control Act where it was let's 21 use casino gaming as an urban -- unique urban 22 redevelopment tool for Atlantic City. We're 23 the guys out there actually trying to do the 24 urban redevelopment. I mean, we've torn down 25 some buildings that had vagrants in it, that 136 ITEM NO. 12 1 were about to fall down, and we're removing 2 tanks. And, I mean, we're doing our best to be 3 the urban redevelopment tool, so. 4 COMMISSIONER EPPS: Thank you. That's 5 all I have. 6 CHAIR KASSEKERT: Mr. Lee, can you 7 comment -- I've read in the Atlantic City Press 8 today an article about the loss of some jobs. 9 Can you comment on that? 10 THE WITNESS: Yeah. Well, the -- 11 recognize, at this point in the development 12 there isn't a reason to have a lot of people 13 here. 14 CHAIR KASSEKERT: Uh-hum. 15 THE WITNESS: But probably one of the 16 things that happened is, we had acquired the 17 Sands, and even though the Sands had closed 18 just before we acquired it, there are lots of 19 loose ends to tie up. And so we had some 20 people who had stayed on dealing with 21 accounting matters and other matters. And we 22 finally looked at it and said, you know, by the 23 time we get opened, while these are all fine 24 people, it doesn't really make sense for us to 25 keep them on the payroll for an extended period 137 ITEM NO. 12 1 of time. And their skills aren't the skills 2 you would need for construction. That's 3 different people. And so, unfortunately, we 4 laid some people off. 5 The newspaper characterized it as a 6 "stalled" project, which having spent $30 7 million in the last three months buying 8 additional land doesn't feel like a stalled 9 project to me. But I don't control what they 10 write. But they are right. There were some 11 people we let go simply because we weren't 12 fully employing them. 13 CHAIR KASSEKERT: Now, I'm assuming some 14 of them were the people that were, you know, 15 taking in the chips and redeeming all that, and 16 as we move further along, they'll be less of 17 that. 18 THE WITNESS: Kim, would that be 19 correct? 20 CHAIR KASSEKERT: She can't really 21 testify. I have to swear her in. 22 (Laughter.) 23 THE WITNESS: She can't testify, but I 24 believe that's correct. And, you know, part 25 of-- you know, we are still -- I mean, for 138 ITEM NO. 12 1 example, Atlantic City was doing its own 2 payroll. You know, we -- for our casinos that 3 have thousands of employees, we do the payroll 4 out of Las Vegas. 5 CHAIR KASSEKERT: Uh-hum. 6 THE WITNESS: So we're saying, why are 7 doing that? We can deal with the payroll out 8 of Las Vegas. It's easy. Our -- you know, 9 we're headquartered in Las Vegas. And so we 10 have a payroll office in Las Vegas. And so 11 that there was some things that we just said, 12 this isn't very efficient. These are fine 13 people but, you know, there's a time to staff 14 up for opening. And we can't really -- doesn't 15 make economic sense for us to keep people on 16 the payroll trying to make work for them 17 because we want to have them when we open. And 18 so we had to lay some people off. 19 But we don't have a very big staff here 20 to begin with. I mean, although I think Jack 21 Plackter made the comment to me that our staff 22 at this level of seeking governmental approvals 23 is still probably twice what Revel's was and 24 three times that the Borgata's was at this 25 stage. So I think -- it wasn't a large number 139 ITEM NO. 12 1 of people. 2 CHAIR KASSEKERT: Uh-hum 3 THE WITNESS: I've looked at the 4 newspaper article. I thought, well, I thought 5 Harrah's laid more people off today than we 6 did, and we did it once. So it was just -- 7 CHAIR KASSEKERT: I've also gotten some 8 questions from some people in the community 9 with concerns about the Pagano's Plaza on the 10 boardwalk and when you anticipate that being 11 closed down. Since it is a -- it's a nice area 12 of storefronts, certainly, and I know that -- 13 but I know that it can't stay there forever as 14 well. 15 THE WITNESS: Yeah, I mean -- I, you 16 know, walked the boardwalk. Their storefronts, 17 they were intentionally not renovated by the 18 CRDA -- 19 CHAIR KASSEKERT: Right. 20 THE WITNESS: Because we knew they would 21 come down. So they're not as nice as those 22 that were renovated by the CRDA. The Opa's 23 restaurant is pretty decent, but the rest of 24 them is fairly tawdry. It's kind of 25 irrelevant. First off, we make very little 140 ITEM NO. 12 1 rent on it. 2 CHAIR KASSEKERT: Uh-hum. 3 THE WITNESS: And we certainly don't 4 want to hold up the project because you want to 5 help the T-shirt business stay in business for 6 another year. I mean, some of those buildings 7 have asbestos in it. They may have tanks under 8 it. And so I think some of those tenants have 9 been kind of lobbying to try get another year. 10 They have a lease. The lease is about to 11 expire; right? And -- 12 CHAIR KASSEKERT: Just so few places I 13 can eat in Atlantic City. I have to tell you. 14 I can eat there. 15 (Laughter.) 16 THE WITNESS: The calamari is actually 17 very good. 18 (Laughter.) 19 THE WITNESS: And I've actually eaten 20 there myself. When they have the doors open, 21 it's wonderful. 22 CHAIR KASSEKERT: Yeah. 23 THE WITNESS: Unfortunately, it's part 24 of what's clearing the site. The same way 25 the -- Mr. Indyg with the Comfort Inn would 141 ITEM NO. 12 1 love to be there another summer. You know, we 2 paid him -- when we bought the Comfort Inn, we 3 paid him, you know, more than full value for 4 the Comfort Inn, and we leased it back to him 5 for a dollar a month. Or something along 6 those lines. Some amount a month. Oh, he'd 7 love to have another summer, make money in that 8 hotel and pay us a dollar a month. You know 9 but, you know -- I'm sorry. 10 We are trying to build a big project 11 here and, you know. And, you know, there's -- 12 you know, we'd actually talked to -- obviously, 13 we're going to have a lot of restaurants in 14 this place. We'll make sure one of them has 15 good calamari. 16 CHAIR KASSEKERT: I still wouldn't be 17 able to eat there. 18 (Laughter.) 19 CHAIR KASSEKERT: Let me ask if there 20 are any other questions. 21 VICE CHAIR SOMMELING: No other 22 questions, Madame Chair. 23 CHAIR KASSEKERT: Anything on redirect? 24 MR. OETTLE: Yes, Chair. We'd like to 25 introduce that map as P-1. 142 ITEM NO. 12 1 (Laughter.) 2 CHAIR KASSEKERT: That's a good idea. 3 MR. OETTLE: Maybe Mr. Fogarty would 4 like to have a look at it before -- 5 MR. FOGARTY: I think I can say yes 6 without seeing it. 7 CHAIR KASSEKERT: Mr. Nance, would you 8 mark this? Any -- no objection then, I'm 9 assuming? 10 MR. FOGARTY: No objection. 11 CHAIR KASSEKERT: We'll move that into 12 evidence. 13 Thank you. 14 Mr. Fogarty? Anything on recross? 15 MR. FOGARTY: I do not. 16 CHAIR KASSEKERT: Okay. Move to closing 17 statements. 18 MR. OETTLE: Thank you, Chair. 19 For all the reasons expressed on the 20 record by Chairman Lee and in view of the 21 Division's supportive report, we respectfully 22 request that the Division grant us a statement 23 of compliance to Pinnacle and its affiliated 24 petitioning entities. 25 CHAIR KASSEKERT: Thank you. 143 ITEM NO. 12 1 Mr. Fogarty? 2 MR. FOGARTY: Yes. I have seen Miss 3 Wozniak's draft resolution, and have no 4 objection to essentially the grant of the 5 statements of compliance subject to the 6 conditions as she has noted. 7 CHAIR KASSEKERT: Thank you. 8 I just asked the Commissioners if anyone 9 needs a recess, and we don't. 10 So let me ask at this point, are there 11 any other matters that need to be brought to 12 our attention? 13 MR. FOGARTY: Not from me, ma'am. 14 MR. OETTLE: No, ma'am. 15 CHAIR KASSEKERT: Okay. Very good. 16 A statement of compliance is a finding 17 by the Commission based upon the best 18 information available at the time of our 19 ruling. 20 Oh, you can go sit down. I'm sorry, Mr. 21 Lee. I'm letting you sit there. Unless you'd 22 like to sit there. 23 (Laughter.) 24 CHAIR KASSEKERT: Based upon the best 25 information available at the time the ruling 144 ITEM NO. 12 1 that the Applicant complies with one or more 2 qualification criteria under the Casino Control 3 Act. 4 At the outset, it is apparent that 5 Pinnacle has met its continuing obligation to 6 cooperate with and provide information to the 7 regulatory agencies. And in that respect let 8 me commend Pinnacle's counsel for their 9 diligence and attentiveness to the regulatory 10 matters, among other things, the filing of the 11 disclosure forms on behalf of the subsidiaries 12 and individual qualifiers, including the 13 requisite 23 Pinnacle directors and officers. 14 Pinnacle's commitment to the regulatory 15 compliance has been evident not only during 16 this proceeding but throughout the 17 transitioning and closure of the Sands 18 property. 19 The focus of this hearing is the 20 request for a ruling that the Applicants 21 possession the good character, honesty, and 22 integrity, and the financial stability, 23 integrity, and responsibility required by our 24 Act. The record provides a clear basis upon 25 which the Commission can find that Pinnacle and 145 ITEM NO. 12 1 its three subsidiaries meet the Act's criteria 2 for qualification. 3 So I, therefore, move that the 4 Commission adopt the draft resolution marked as 5 Exhibit C-1 for identification and thereby 6 grant the petition of Pinnacle Entertainment 7 for statements of compliance subject to the 8 findings and conditions contained therein. 9 Is there a second? 10 VICE CHAIR SOMMELING: Second. 11 CHAIR KASSEKERT: Motion has been made 12 and seconded. This is a roll call vote. 13 MR. NANCE: Commissioner Fedorko? 14 COMMISSIONER FEDORKO: Yes. 15 MR. NANCE: Commissioner Epps? 16 COMMISSIONER EPPS: Yes. 17 MR. NANCE: Vice Chair Sommeling? 18 VICE CHAIR SOMMELING: Yes. 19 MR. NANCE: Chair Kassekert? 20 CHAIR KASSEKERT: Yes. 21 MR. NANCE: The record will reflect that 22 the motion is unanimous. 23 CHAIR KASSEKERT: Thank you. 24 We will adjourn now. We will have a 25 recess now until 3 -- 4:00? 4:00. Thank you. 146 ITEM NO. 11 1 (A recess was taken from 1:12 to 4:05 2 p.m.) 3 CHAIR KASSEKERT: Go back on the record. 4 Let me just ask if there are any 5 additional questions by any of the 6 Commissioners at this point? 7 VICE CHAIR SOMMELING: No questions, 8 Madame Chair. 9 COMMISSIONER EPPS: I have a few. 10 CHAIR KASSEKERT: Any other procedural 11 matters that need to be brought to our 12 attention? 13 MR. OETTLE: No, Madame Chair. 14 CHAIR KASSEKERT: Okay. 15 MR. FOGARTY: None from me. 16 CHAIR KASSEKERT: Very good. Thank you. 17 All right. The Commission today is 18 considering two petitions by Infinity World and 19 its affiliates that were filed in connection 20 with the process of perfecting an application 21 for interim casino authorization in order for 22 them to own in excess of five percent of the 23 common stock of MGM Mirage. 24 The first petition seeks approval of the 25 ICA trust agreement and the finding of the 147 ITEM NO. 11 1 former Commission Chairman, James Hurley, as 2 qualified to serve as an ICA trustee. 3 The other petition is seeking a 4 determine that the ICA application is complete, 5 asks for various declaratory rulings on 6 Petitioner's qualification status under the 7 Casino Control Act. 8 In a detailed report, the Division has 9 responded to both petitions. 10 Some things that are pleasantly obvious 11 need not detain us long such as former Chairman 12 Hurley's continuing suitability under the 13 applicable casino key employee standards. 14 Similarly, I am satisfied that the ICA trust is 15 also acceptable. 16 Less obvious is what regulatory status 17 to ascribe to the group of companies that 18 directly or indirectly owns the MGM stock at 19 issue. Although the discussion is similar for 20 all of the companies, the focus appropriately 21 is on Dubai World given that each individual 22 director associated with the other companies 23 has already filed for qualification. 24 Both the Division and the Petitioners 25 extensively debate whether Dubai World is a 148 ITEM NO. 11 1 holding company under the definition of Section 2 26 of the Act or may be better characterized as 3 an "entity qualifier," a term not defined in 4 the statute which but which has been used to 5 label those so-called corporate-like qualifiers 6 for which the Commission possesses broad 7 discretion in identifying those natural persons 8 associated with the entity that must qualify. 9 The debaters, based on the current 10 circumstances essentially reach the identical 11 conclusion. Dubai World is a entity qualifier 12 and not a holding company, and on this I would 13 agree. Although the parties before us use the 14 "entity qualifier" designation to analyze which 15 Dubai World directors must qualify, neither 16 party contends that the Commission would be 17 without discretion to reach that same result 18 under a holding company analysis. For that 19 matter, Mr. Casiello points to the statutory 20 requirement under Section 82D(7) through (10) 21 which would directly apply to holding companies 22 but not entity qualifiers as a concern. 23 Whichever designation pertains, whether 24 it be a holding company or an entity qualifier, 25 the Commission possesses the discretion to 149 ITEM NO. 11 1 determine which individual, such as board 2 directors, need to qualify. 3 Under either approach, the Commission in 4 exercising that discretion must be mindful that 5 the ultimate charge to decide at the 6 appropriate time if the Applicant meets the 7 statutory qualification criteria such as good 8 character and financial stability. 9 Unless those individuals through whom a 10 company manifests its persona has been 11 thoroughly investigated, any eventually ruling 12 on the company's good character must -- might 13 be suspect. Thus, it is critical that the 14 Commission capture at this stage all those 15 presently known individuals who need to undergo 16 the vetting process so that the Commission can 17 be assured that any eventual good character 18 determination is markedly unassailable. 19 In my view, the legislature would have 20 the Commission do nothing less than grabbling 21 with, for instance, the implementation of the 22 standard for qualification waivers under 23 Section 85D(1). 24 In this case, Dubai World has a 17- 25 member Board of Directors. The Division 150 ITEM NO. 11 1 insists that the board chairman and two other 2 company directors, who happen to also hold 3 positions at one or more of the Infinity World 4 entities, must qualify, and it is satisfied 5 that they have made the appropriate filings. 6 As for the remaining 14 board members, I 7 am convinced that none of those other directors 8 needs to qualify at present based on the 9 entirety of the record before us, including the 10 previously submitted materials and today's 11 presentation. 12 Of course, a change in circumstances 13 might alter that assessment and require the 14 issue to be revisited, and I have every 15 confidence that the Division will monitor and 16 report as appropriate. 17 Dubai World also reports in its business 18 entity disclosure form that it has several 19 officers. As company chief executive Dubai 20 World's chairman must qualify, along with the 21 chief investment officer, the chief legal 22 officer, and the chief financial officer, each 23 of whom in this case is essential for assessing 24 the entity's good character. However, I am 25 satisfied that Dubai World secretary general 151 ITEM NO. 11 1 and chief information officer need not qualify. 2 If my fellow Commissioners agree with my 3 remarks, it is clear that we will not be able 4 today to rule that the ICA application is 5 complete. Given the distances and time 6 differences involved, I believe a further 7 extension of the filing deadline through 8 October 3rd, 2008, is appropriate with 9 authority delegated to me to extend such 10 deadline consistent with past practice. 11 As a final matter, Counsel has orally 12 requested that we confirm his understanding of 13 the relief the Commission granted last October 14 in issuing the temporary and conditional 15 waiver, specifically he inquires whether the 16 position of Infinity World and its affiliates 17 in MGM's common stock may exceed 9.5 percent, 18 which is a percentage noted in our earlier 19 resolution. 20 Although a completed ICA resolution has 21 not yet been perfected, the trust agreement is 22 in place, and if the Commissioner agrees with 23 our my earlier remarks, it and the Trustee will 24 be approved today. 25 As the for the Division, it indicates 152 ITEM NO. 11 1 that it is satisfied that the Infinity World 2 position in MGM may increase but not beyond the 3 contractually provided for maximum of 20 4 percent. I would agree, and with the 5 Division's consent, grant a continuing waiver 6 up to and including that amount subject to, 7 one, the trust agreement to the fullest extent 8 practicable, participating in the acquisition 9 of any additional MGM shares, which shares -- 10 which shares, in any event, must be subject to 11 the trust and become part of the corpus 12 thereof; and, two, an appropriately modified 13 version of conditions two through four of the 14 October resolution. 15 Before eliciting from the Division 16 whether it consents -- before -- I'm really 17 doing good. 18 Before eliciting from the Division 19 whether it consents, I would comment that 20 although the assets of the trust may be 21 controlled within the bounds of the ICA by the 22 candidate that is obtained ICA, additional 23 purchases of what might be called "regulated 24 properties" still bear advanced monitoring and 25 regulatory scrutiny to ensure that those 153 ITEM NO. 11 1 purchases do not heighten or otherwise alter 2 the qualification status of the ICA candidate. 3 With that, Mr. Fogarty, what is the 4 Division's position on the continuing waiver? 5 MR. FOGARTY: We would consent to that, 6 Madame Chair. 7 CHAIR KASSEKERT: Thank you. 8 Accordingly, based on and consistent 9 with my previous remarks, I move that the 10 Commission adopt the proposed resolution and 11 issue the various declaratory rulings and 12 approvals subject to the noted conditions. 13 Is there a second? 14 VICE CHAIR SOMMELING: Second. 15 CHAIR KASSEKERT: Motion has been made 16 and seconded. This a roll call vote. 17 MR. NANCE: Commissioner Fedorko? 18 COMMISSIONER FEDORKO: Yes. 19 MR. NANCE: Commissioner Epps? 20 COMMISSIONER EPPS: Yes. 21 MR. NANCE: Vice Chair Sommeling? 22 VICE CHAIR SOMMELING: Yes. 23 MR. NANCE: Chair Kassekert? 24 CHAIR KASSEKERT: Yes. 25 MR. NANCE: The record will reflect that 154 ITEM NO. 11 1 the motion is unanimous. 2 CHAIR KASSEKERT: Thank you. 3 MR. CASIELLO: Thank you, Madame Chair, 4 Commissioners. 5 MR. FOGARTY: Thank you. 6 MR. OETTLE: And I do want to thank you 7 your staff, especially Mr. DiGiacomo, and I do 8 also want to thank the Division of Gaming 9 Enforcement, Deputy Attorney General Fogarty, 10 and Mark Sivetz who took the time to go to 11 Dubai to thoroughly be able to address this 12 matter. 13 Thank you. 14 MR. NANCE: In accordance with 15 Resolution No. 07-12-12-26, the next closed 16 session of the Commission shall be held on 17 Wednesday, September 3rd, 2008, at 9:15 a.m. in 18 the Commission offices. 19 It is now time for the public 20 participation portion of the meeting. 21 CHAIR KASSEKERT: Is there anyone from 22 the public who wishes to be heard? 23 MR. DiGIACOMO: Madame Chair, 24 Commissioners, if I may? 25 CHAIR KASSEKERT: Sure. 155 1 MR. DiGIACOMO: I would be remiss after 2 my years at the Commission, if I did not say 3 something regarding a colleague of mine whom I 4 will dearly miss. Steve, thank you for the 5 time that we've spent together. It has been my 6 pleasure to work with you. 7 CHAIR KASSEKERT: I think that's lovely. 8 Thank you, Len. 9 (Applause.) 10 COMMISSIONER FEDORKO: And I thought you 11 were going to announce your retirement. You 12 got me all -- 13 (Laughter.) 14 MR. DiGIACOMO: You should only hope; 15 right? 16 CHAIR KASSEKERT: You want to give Diana 17 a heart attack? She's already having pains in 18 her chest. 19 Seeing no one else from the public, I'll 20 declare this portion of the motion closed and 21 entertain a motion to adjourn. 22 VICE CHAIR SOMMELING: Motion to 23 adjourn. 24 COMMISSIONER FEDORKO: Second. 25 CHAIR KASSEKERT: The motion has been 156 1 made and seconded. All in favor? 2 (Ayes.) 3 CHAIR KASSEKERT: Opposed? 4 (No response.) 5 CHAIR KASSEKERT: The motion carries. 6 (Public Meeting 08-08-21 was adjourned 7 at 4:15 p.m.) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 157 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: August 25, 2008 23 My Commission Expires on July 10, 2009 24 ID No 2062871 25