0001 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 09-02-18 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, February 18, 2009 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 10:45 a.m. to 5:57 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 0002 1 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 MICHAEL C. EPPS, VICE CHAIR MICHAEL A. FEDORKO, COMMISSIONER 4 WILLIAM T. SOMMELING, COMMISSIONER 5 PRESENT FOR THE CASINO CONTROL COMMISSION: 6 DARYL W. NANCE, ADMINISTRATIVE ANALYST DANIEL J. HENEGHAN, PUBLIC INFORMATION OFFICER 7 OFFICE OF THE GENERAL COUNSEL: 8 DIANNA W. FAUNTLEROY, GENERAL COUNSEL/EXECUTIVE SECRETARY 9 LEONARD J. DiGIACOMO, ASSISTANT GENERAL COUNSEL TERESA M. NAGENGAST, SENIOR COUNSEL 10 LON E. MAMOLEN, SENIOR COUNSEL ROBERT A. MONCRIEF, COUNSEL 11 TRACY E. RICHARDSON, COUNSEL CLAIRE FRANK, PROGRAM MANAGER 12 BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 13 DIVISION OF GAMING ENFORCEMENT: DEPUTY ATTORNEYS GENERAL 14 JOHN ADAMS, DEPUTY ATTORNEY GENERAL 15 JAMES J. ARMSTRONG, DEPUTY ATTORNEY GENERAL TIMOTHY C. FICCHI, DEPUTY ATTORNEY GENERAL 16 MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL JAMES FOGARTY, DEPUTY ATTORNEY GENERAL 17 LOUIS ROGACKI, DEPUTY ATTORNEY GENERAL R. LANE STEBBINS, DEPUTY ATTORNEY GENERAL 18 19 20 21 22 23 24 25 0003 1 A P P E A R A N C E S : 2 ITEM NO. 6 TERESA M. NAGENGAST, SENIOR COUNSEL LOUIS ROGACKI, DEPUTY ATTORNEY GENERAL 3 JUDY BABINSKI, ESQ. FOR: AT&T MOBILITY NATIONAL 4 ITEM NO. 7 TERESA M. NAGENGAST, SENIOR COUNSEL 5 LOUIS ROGACKI, DEPUTY ATTORNEY GENERAL FOX ROTHSCHILD 6 MARIE JONES, ESQ. FOR: US PLAYING CARD COMPANY 7 ITEM NO. 8 CLAIRE FRANK, PROGRAM MANAGER 8 MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL TIMOTHY J. LOWRY, JR. ESQ. 9 FOR: HARRAH'S ENTITIES 10 ITEM NO. 12 LEONARD J. DiGIACOMO, ASSISTANT GENERAL COUNSEL 11 JOHN ADAMS, DEPUTY ATTORNEY GENERAL PASHMAN STEIN 12 SEAN MACK, ESQ. FOR: TRUSTEE/CONSERVATOR JUSTICE STEIN 13 WOLF BLOCK GILBERT BROOKS, ESQ. 14 FOR: STEERING COMMITTEE OF SECURED LENDERS 15 SILLS, CUMMIS & GROSS KENNETH F. OETTLE, ESQ. 16 FOR: OFFICIAL COMMITTEE OF SECURED LENDERS 17 STERNS & WEINROTH, PC PAUL M. O'GARA, ESQ. 18 FOR: TROPICANA ENTERTAINMENT, INC. 19 ITEM NO. 13 TRACY E. RICHARDSON, COUNSEL 14 JAMES FOGARTY, DEPUTY ATTORNEY GENERAL 20 PASHMAN STEIN SEAN MACK, ESQ. 21 FOR: TRUSTEE/CONSERVATOR JUSTICE STEIN WOLF BLOCK 22 GILBERT BROOKS, ESQ. FOR: STEERING COMMITTEE OF SECURED 23 LENDERS SILLS, CUMMIS & GROSS 24 KENNETH F. OETTLE, ESQ. FOR: OFFICIAL COMMITTEE OF SECURED 25 LENDERS 0004 1 A P P E A R A N C E S , Continued: 2 ITEM NO. 15 LEONARD J. DiGIACOMO, ASSISTANT GENERAL 16 COUNSEL 3 MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL STERNS & WEINROTH, PC 4 PAUL M. O'GARA, ESQ. FOR: COLUMN FINANCIAL, TRIMONT 5 WOLF BLOCK GILBERT BROOKS, ESQ. 6 FOR: RESORTS INTERNATIONAL, INC. 7 ITEM NO. 17 ROBERT A. MONCRIEF, COUNSEL TIMOTHY C. FICCHI, ESQ. 8 KAREN M. WOSNACK, ESQ. FOR: ATLANTIC CITY HILTON 9 ITEM NO. 18 DIANNA W. FAUNTLEROY, GENERAL COUNSEL 10 MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL PASHMAN STEIN 11 SEAN MACK, ESQ. FOR: TRUSTEE/CONSERVATOR JUSTICE STEIN 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0005 1 AGENDA PUBLIC MEETING NO. 09-02-18 2 February 18, 2009, 10:45 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of the 10 10 February 4, 2009, meeting 4 2 Applications for employee and casino Service industry licenses 5 33 initial and/or renewal of casino key 10 11 and casino employee licenses 6 25 initial and/or renewal of casino key 11 11 and casino employee licenses 7 Applications for initial and renewal of 11 12 casino key employee licenses and for 8 qualification: Joong J. Kim, Vice President of Korean 9 Marketing for Trump Taj Mahal Associates, LLC Danielle P. Mohn, Vice President of Marketing 10 for Marina Associates Nicholas L. Nickolich, Vice President of 11 Slot Operations for RIH Acquisition NJ, Inc. 3 Stipulations of settlement and consent 12 agreements: a) James J. Andress (08-0007-EA) 12 14 13 b) Robert M. Dagrossa (08-0336-EA) 12 14 c) Jose Gonzalez (08-0304-ER) 12 14 14 d) Jamie L. Labor (08-0703-ER) 12 14 e) Joseph M. Biddle (08-0869-EA) 12 14 15 f) Jose R. Montanez (08-0813-ER) 12 14 g) Pamela L. Wilson (08-0916-ER) 12 14 16 h) Marie Darby (07-0680-ER) 12 14 i) Diane Le (08-0610-ER) 12 14 17 4 Applications for suspension: a) Louis G. Ceresa (09-0070-RC) 14 15 18 b) Sanjeev K. Kapoor (09-0045-RC) 14 15 c) Darvin E. Riley (09-0046-RC) 14 15 19 d) Kaushal A. Vakharia (09-0071-RC) 14 15 5 Preliminary hearings concerning exclusion of: 20 a) Collis Brown (08-0512-EL) 16 17 b) Frank Malangone (09-0031-EL) 16 17 21 6 Petition of AT&T Mobility National 18 19 Accounts, LLC, for exemption from casino 22 service industry licensure (PRN 0630801) 7 Petition of the United States Playing 19 22 23 Card Company for waiver of the qualification requirement of Wellington Management, LLC 24 (PRN 2950803) 25 0006 1 CONTINUED AGENDA PUBLIC MEETING NO. 09-02-18 2 February 18, 2009, 10:45 a.m. ITEM PAGE VOTE 3 8 Petition of Harrah's Entertainment, Inc. 23 25 Harrah's Operating Company, Inc., Harrah's 4 Atlantic City Operating Company, LLC, Showboat Atlantic City Operating Company, 5 LLC, Bally's Park Place, Inc., and Boardwalk Regency Corp., to permit Katrina Lane to 6 perform duties and exercise powers of Senior Vice President and Chief Technology Officer 7 pending qualification (PRN 0350903) 9 Proposed temporary adoption of amendments 26 28 8 for alternative procedures for counting and recording player contributions to Bad 9 Beat payouts in poker; authorization of rulemaking experiment for the alternative 10 procedures pursuant to NJSA 5:12-69e 10 Proposed adoption of amendments to NJAC 28 29 11 19:45-1.12 and 19:46-1.18 (reduced frequency of card changing) 12 11 Petition of Harrah's Entertainment, Inc.; adj. Harrah's Operating Company, Inc.; Harrah's 13 Atlantic City Operating Company, LLC; Showboat Atlantic City Operating Company, 14 LLC; Bally's Park Place, Inc., (d/b/a Bally's Atlantic City); and Boardwalk 15 Regency Corp., (d/b/a Caesars Atlantic City) for an amendment to NJAC 19:45-1.1 pursuant 16 to NJSA 5:12-69(c) and NJAC 19:40-3.6 (revise reporting relationship of Chief 17 Executive Officer and Chief Gaming Officer) (PRN 0260904); and Submission of Harrah's 18 Atlantic City Operating Company, LLC; Showboat Atlantic City Operating Company, 19 LLC; Bally's Park Place, Inc., (d/b/a Bally's Atlantic City); and Boardwalk Regency 20 Corp., (d/b/a Caesars Atlantic City) for revisions to their tables of organization 21 12 Petition of the Trustee and Conservator 38 67 for Adamar of New Jersey, Inc., to extend 22 the sale period and to initiate Section 363 Sale (PRN 0330902) 23 13 Motion of the Steering Committee of 32 37 Secured Lenders seeking permission to 24 participate in the petition (PRN 0330902) of the Trustee and Conservator to extend 25 the sale period and to initiate a Section 363 Sale (PRN 0410901) 0007 1 CONTINUED AGENDA PUBLIC MEETING NO. 09-02-18 2 February 18, 2009, 10:45 a.m. ITEM PAGE VOTE 3 14 Motion of the Official Committee of 32 37 Unsecured Creditors for leave to intervene 4 or, in the alternative, to participate in the petition (PRN 0330902) of the Trustee 5 and Conservator to extend the sale period and to initiate a Section 363 Sale (PRN 0410902) 6 15 Petition of Column Financial, Inc., and 73 Trimont Real Estate Advisors, Inc., for 7 relief from certain conditions in CCC Resolutions 07-03-07-13 and 08-01-30-14 and 8 other relief (PRN 0220901) 16 Cross petition of Resorts International 73 9 Hotel, Inc., in opposition of relief sought in PRN 0220901 and for a declaratory ruling 10 as to certain licensing requirement (PRN 037091) Peter B. Hoelzle, sworn 105 11 Stephen Yankauer, sworn 167 Nicholas L. Ribis 209 12 17 Petition of RIH Acquisition NJ, LLC, 30 31 (d/b/a Atlantic City Hilton) for an 13 amendment to is operation certificate to reconfigure its casino floor (PRN 0400901) 14 18 Consideration of the applications of the 68 73 Trustee and Conservator for the former 15 casino licensee, Adamar of New Jersey, Inc., for approval of fees for the Conservator/ 16 Trustee, his personal counsel, legal, and other consultants 17 18 19 20 21 22 23 24 25 0008 1 E X H I B I T S 2 NO. DESCRIPTION EVD 3 4 ITEM NO. 2 5 P-1 Remand for hearings 9 license X 6 P-2 Grant 17 licenses X 7 ITEM NO. 15 8 D-1 Letter Report, 1-28-09, DAG Flaherty X 9 D-2 Letter Report, 2-10-09, DAG Flaherty X 10 11 CP-1 Loan Agreement, 3-14-07, Resorts X International Hotel, et. al, and Column 12 Financial, Inc. 13 CP-2 Opinion Letter, 3-14-07, Wolf Block X 14 15 16 17 18 19 20 21 22 23 24 (Exhibits retained by Commission.) 25 0009 1 (Public Meeting 09-02-18 was commenced 2 at 10:45 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 October 7, 2009, filed with the 10 Secretary of State at the State House in 11 Trenton, New Jersey, a notice of this hearing. 12 On October 7, 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 CHAIR KASSEKERT: Good morning. 25 MR. NANCE: Good morning. 0010 1 The matters discussed in closed session 2 were: Employee and enterprise license matters. 3 The Commission approved the February 4 4th, 2009, closed session minutes. 5 Item No. 1, ratification of the minutes 6 of February 4th, 2009, public meeting. 7 COMMISSIONER SOMMELING: Motion to 8 approve. 9 COMMISSIONER FEDORKO: Second. 10 CHAIR KASSEKERT: The motion has been 11 made and seconded. All in favor? 12 (Ayes.) 13 CHAIR KASSEKERT: Opposed? 14 (No response.) 15 CHAIR KASSEKERT: Motion carries. 16 MR. NANCE: Item No. 2, application for 17 employee and casino service industry licenses. 18 This agenda item will be entered as exhibit 19 List 1 and 2. 20 Exhibit List 1 consists of nine 21 applications and for initial and/or renewal of 22 casino key and employee licenses. 23 The Division has objected to licensure. 24 VICE CHAIR EPPS: Motion to remand for 25 hearings. 0011 1 COMMISSIONER FEDORKO: Second. 2 CHAIR KASSEKERT: The motion has been 3 made and seconded. All in favor? 4 (Ayes.) 5 CHAIR KASSEKERT: Opposed? 6 (No response.) 7 CHAIR KASSEKERT: The motion carries. 8 MR. NANCE: Exhibit List 2 consists of 9 17 applications for initial and/or renewal of 10 casino key and casino employee licenses. 11 Staff and the Division have recommended 12 that these licenses be granted. 13 COMMISSIONER EPPS: Motion to grant 14 applications. 15 COMMISSIONER SOMMELING: Second. 16 CHAIR KASSEKERT: The motion has been 17 made and seconded. All in favor? 18 (Ayes.) 19 CHAIR KASSEKERT: Opposed? 20 (No response.) 21 CHAIR KASSEKERT: Motion carries. 22 MR. NANCE: For your consideration are 23 the following applications for initial and/or 24 renewal of casino key employee licenses and for 25 qualification: Joong J. Kim, Vice President of 0012 1 Korean Marketing for Trump Taj Mahal 2 Associates, LLC; Danielle Mohn, Vice President 3 of Marketing for Marina Associates; and 4 Nicholas Nickolich, Vice President of Slot 5 Operations for RIH Acquisition, New Jersey, 6 Inc. 7 Staff and the Division have recommended 8 that these applications be granted. 9 VICE CHAIR EPPS: I move that we grant 10 initial and key license and for qualification. 11 COMMISSIONER SOMMELING: Second. 12 CHAIR KASSEKERT: Motion is made and 13 seconded. This is a roll call vote. 14 MR. NANCE: Commissioner Fedorko? 15 COMMISSIONER FEDORKO: Yes. 16 MR. NANCE: Commissioner Sommeling? 17 COMMISSIONER SOMMELING: Yes. 18 MR. NANCE: Vice Chair Epps? 19 VICE CHAIR EPPS: Yes. 20 MR. NANCE: Chair Kassekert? 21 CHAIR KASSEKERT: Yes. 22 MR. NANCE: The record will reflect that 23 the motion is unanimous. 24 Item No. 3, stipulations of settlement 25 and consent agreements. 0013 1 When I call your name, please come 2 forward, stand behind this center table, 3 spreading across the room so that you may be 4 seen: James Andress, Robert Dagrossa, Jose 5 Gonzalez, Jamie Labor, Joseph Biddle, Jose 6 Montanez, Pamela Wilson, Marie Darby, and Diane 7 Le. 8 CHAIR KASSEKERT: Has everyone whose 9 name been called come forward at this point? 10 Okay. 11 I'm going to ask that you each state 12 your name on the record. 13 You, sir? 14 MR. MONTANEZ: Jose Montanez. 15 MR. BIDDLE: Joseph Biddle. 16 MR. ANDRESS: James Andress. 17 CHAIR KASSEKERT: Okay. In a moment 18 we're going to vote on the stipulations which 19 you have agreed to with the Division of Gaming 20 Enforcement. I'm going to ask at this point if 21 any of you wish to be heard on your matter. 22 You don't have to say anything if you don't 23 want to. 24 Does anyone wish to be heard? 25 (No response.) 0014 1 CHAIR KASSEKERT: Okay. Mr. Armstrong? 2 MR. ARMSTRONG: Chair, we just ask that 3 you approve the stipulations of settlement. 4 CHAIR KASSEKERT: Thank you. 5 Any questions? 6 COMMISSIONER SOMMELING: Madame Chair, 7 move to approve the stipulations. 8 COMMISSIONER FEDORKO: Second. 9 CHAIR KASSEKERT: The motion has been 10 made and seconded. All in favor? 11 (Ayes.) 12 CHAIR KASSEKERT: Opposed? 13 (No response.) 14 CHAIR KASSEKERT: Motion carries. 15 Thank you for coming. Good luck. 16 MR. BIDDLE: Thank you. 17 MR. NANCE: Item No. 4, application for 18 suspension for Louis Ceresa, Sanjeev Kapoor, 19 Darvin Riley, and Vakharia -- excuse me -- 20 Kaushal Vakharia. 21 Miss Frigen? 22 MS. FRIGEN: Good morning, Chair and 23 Commissioners. 24 I would note Mr. Vakharia is here today 25 seated in the general area, but he advised me 0015 1 that he does not wish to contest the 2 suspension, is just here to observe. 3 Let me ask whether Mr. Ceresa, Mr. 4 Kapoor or Mr. Riley is present or represented? 5 (No response.) 6 MS. FRIGEN: Apparently not. 7 I would refer this matter over to the 8 Division. 9 CHAIR KASSEKERT: Thank you. 10 Mr. Armstrong? 11 MR. ARMSTRONG: Chair, the Division 12 would rely on the pleadings in these matters 13 and ask all suspensions be granted. 14 CHAIR KASSEKERT: Thank you. 15 Any questions? 16 COMMISSIONER SOMMELING: No questions, 17 Madame Chair. 18 COMMISSIONER FEDORKO: Motion to suspend 19 credentials. 20 COMMISSIONER EPPS: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 0016 1 CHAIR KASSEKERT: Motion carries. 2 MR. NANCE: Item No. 5, preliminary 3 hearings concerning the exclusion of Collis 4 Brown and Frank Malangone. 5 Miss Frigen? 6 MS. FRIGEN: Let me ask whether Mr. 7 Brown or Mr. Malangone is present or 8 represented? 9 (No response.) 10 MS. FRIGEN: Apparently not. 11 I would refer this over to Mr. Stebbins? 12 CHAIR KASSEKERT: Thank you. 13 Mr. Stebbins? 14 MR. STEBBINS: Thank you, Madame Chair, 15 members of the Commission. 16 There are presented for your 17 consideration two matters for preliminary 18 exclusion. 19 In reverse order, we'll take Mr. 20 Malangone first. He has a conviction for 21 mishandling and abusing his position with 22 regard to union pension and benefit funds. He 23 has a presence in the Atlantic City casinos, as 24 shown by his gambling activity. 25 Mr. Brown, the other individual on for 0017 1 today, also has a presence in the casinos, but 2 for other purposes. He has a documented 3 history of substantial wrongdoing within the 4 casinos, principally involving patrons. And it 5 is for that reason we ask that he, too, be 6 preliminarily placed on the exclusion list. 7 If you have any questions, I'd like to 8 answer them. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 COMMISSIONER SOMMELING: No questions 12 Madame Chair. 13 COMMISSIONER EPPS: Madame Chair, I move 14 that we grant the Division's request for 15 preliminary orders placing the names of Messrs. 16 Brown and Malangone on the exclusion list 17 pending final action on related petitions for 18 final exclusion. 19 COMMISSIONER SOMMELING: Second. 20 COMMISSIONER FEDORKO: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 0018 1 CHAIR KASSEKERT: Motion carries. 2 Thank you. 3 MR. STEBBINS: Thank you. 4 MR. NANCE: Item No. 6, petition of AT&T 5 Mobility National Accounts, LLC, for exemption 6 from casino service industry licensure. 7 Miss Nagengast? 8 MS. NAGENGAST: Good morning, Chair, 9 Commissioners. 10 CHAIR KASSEKERT: Good morning. 11 MS. NAGENGAST: For your consideration 12 is the petition of AT&T Mobility National 13 Accounts seeking an exception from nongaming 14 licensure. 15 Judy Babinski is here on behalf of the 16 Petitioner and Lou Rogacki on behalf of the 17 Division. 18 CHAIR KASSEKERT: Thank you. 19 Your petition, ma'am. Anything to say? 20 MS. BABINSKI: No, not at all. I rely 21 on the papers. 22 Thank you for considering it. 23 CHAIR KASSEKERT: Thank you. 24 Mr. Rogacki? 25 MR. ROGACKI: Chair, Commissioners, the 0019 1 Division filed its letter on December 23rd. 2 I'll be happy to answer any questions 3 you may have. 4 CHAIR KASSEKERT: Thank you. 5 Any questions for either of the parties? 6 VICE CHAIR EPPS: No questions. 7 COMMISSIONER SOMMELING: No questions, 8 Madame Chair. 9 COMMISSIONER FEDORKO: Motion to grant 10 the petition of AT&T Mobility National 11 Accounts, LLC, for an exemption from casino 12 service industry licensure as permitted by NJSA 13 5:12-92(c) and NJAC 19:51-1.13, subject to the 14 conditions in the order. 15 COMMISSIONER SOMMELING: Second. 16 CHAIR KASSEKERT: The motion has been 17 made and seconded. All in favor? 18 (Ayes.) 19 CHAIR KASSEKERT: Opposed? 20 (No response.) 21 CHAIR KASSEKERT: Motion carries. 22 Thank you. 23 MS. BABINSKI: Thank you very much. 24 MR. NANCE: Item No. 7, petition of the 25 United States Playing Card Company for waiver 0020 1 of the qualification requirement Wellington 2 Management, LLC. 3 Miss Nagengast? 4 MS. NAGENGAST: Chair, Commissioners, 5 for your consideration in this petition is a 6 waiver of qualification for an investor that 7 USPC says is an institutional investor. 8 Marie Jones is here on behalf of the 9 Petitioner and Lou Rogacki on behalf of the 10 Division. 11 CHAIR KASSEKERT: Thank you. Good 12 morning, Ms. Jones? 13 MS. JONES: Good morning, Chair 14 Commissioners. Marie Jones from Fox Rothschild 15 here on behalf of the United States Playing 16 Card Company. 17 Before you is a petition for waiver of 18 Wellington Management Company. At the time we 19 filed the petition, they had held just over ten 20 percent. They have increased their holdings to 21 just below 14 percent. They fit squarely 22 within the definition of an institutional 23 investor as they are an investment advisor 24 registered with the SEC, and our papers 25 establish good cause. 0021 1 I'd be happy to address any questions 2 you may have. 3 CHAIR KASSEKERT: Thank you. 4 Any questions before we hear from Mr. 5 Rogacki? 6 COMMISSIONER EPPS: I have a question. 7 CHAIR KASSEKERT: After? Okay. 8 Mr. Rogacki? 9 MR. ROGACKI: Chair, Commissioners, the 10 Division filed its letter on December 22nd, 11 2008, recommending that this petition be 12 granted. 13 I'll be happy to answer any questions 14 you have. 15 CHAIR KASSEKERT: Thank you. 16 Commissioner Epps? 17 COMMISSIONER EPPS: To our counsel or to 18 the Division. 19 Are you comfortable that the change does 20 not impact their -- the Petitioner's status as 21 an institutional investor? 22 MR. ROGACKI: I'll address that. 23 The Division is comfortable. 24 MS. NAGENGAST: I would tell the 25 Commission that in the past the Commission has 0022 1 granted waivers of qualification for 2 institutional investors up to 15 percent 3 provided that they fall squarely within the 4 definition, and Wellington does. 5 VICE CHAIR EPPS: Thank you. 6 CHAIR KASSEKERT: Thank you. 7 Any other questions? 8 COMMISSIONER EPPS: Having that comfort 9 level, I'll move that we grant the petition of 10 United States Playing Card Company and waive 11 the qualification of Wellington Management, 12 LLC, pursuant to NJAC 19:51-1.14(b)(3) and NJSA 13 5:12-85(f) based on the status as an 14 institutional investor as defined as NJSA 15 5:12-27.1. 16 COMMISSIONER 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 MS. JONES: Thank you. 24 MS. NAGENGAST: Thank you. 25 MR. ROGACKI: Thank you. 0023 1 MR. NANCE: Item No. 8, petition of 2 Harrah's Entertainment, Inc., Harrah's 3 Operating Company, Inc., Harrah's Atlantic City 4 Operating Company, LLC, Showboat Operating 5 Company, LLC, Bally Park Place, Inc., and 6 Boardwalk Regency Corp., to permit Katrina Lane 7 to perform the duties and exercise the powers 8 of Senior Vice President and Chief Technology 9 Officer pending qualification. 10 Miss Frank? 11 MS. FRANK: Good morning, Chair and 12 Commissioners. 13 A draft resolution on Miss Lane's 14 temporary qualification has been circulated to 15 the parties. 16 We have Tim Lowry here for Harrah's and 17 Mary Jo Flaherty for the Division. 18 CHAIR KASSEKERT: Good morning, Mr. 19 Lowry. 20 MR. LOWRY: Good morning, Chair, 21 Commissioners. 22 This is for Katrina Lane. She's 23 currently the Vice President of Channel 24 Marketing. She is seeking a promotion. In 25 that promotion, she will report directly to 0024 1 Gary Loveman, and her current role will be 2 Chief Technology Officer. 3 We rest on the papers submitted. And 4 we've reviewed the draft resolution. We have 5 no objection. 6 CHAIR KASSEKERT: Thank you. 7 Any questions for Mr. Lowry? 8 COMMISSIONER SOMMELING: I have no 9 questions. 10 CHAIR KASSEKERT: Miss Flaherty? Good 11 morning. 12 MS. FLAHERTY: Yeah. Good morning, 13 Chair, Commissioner. 14 We submitted a letter report dated 15 February 10th with regard to this matter. 16 We've also reviewed the draft resolution. 17 Subject to the requirements and conditions in 18 our report and the draft resolution, we have no 19 objection. 20 Thank you. 21 CHAIR KASSEKERT: Thank you. 22 Any questions from the Commissioners? 23 VICE CHAIR EPPS: No. 24 COMMISSIONER SOMMELING: Madame Chair, I 25 move to adopt the draft resolution and 0025 1 authorize Katrina Lane on a temporary basis 2 prior to her plenary qualification to assume 3 the duties and exercise the powers of Senior 4 Vice President and Chief Technology Officer for 5 Harrah's Entertainment, Incorporated, and 6 Harrah's Operating Company, Incorporated, 7 subject to the conditions contained in NJAC 8 19:43-2.7 which, among other things, require 9 that he [sic] file a PHD MJ and New Jersey 10 supplemental by March the 5th on 2009. 11 COMMISSIONER FEDORKO: Second. 12 CHAIR KASSEKERT: The motion is made and 13 seconded. This is a roll call vote. 14 MR. NANCE: Commissioner Fedorko? 15 COMMISSIONER FEDORKO: Yes. 16 MR. NANCE: Commissioner Sommeling? 17 COMMISSIONER SOMMELING: Yes. 18 MR. NANCE: Vice Chair Epps? 19 VICE CHAIR EPPS: Yes. 20 MR. NANCE: Chair Kassekert? 21 CHAIR KASSEKERT: Yes. 22 MR. NANCE: The record will reflect that 23 the motion is unanimous. 24 MR. LOWRY: Thank you. 25 CHAIR KASSEKERT: Thank you. 0026 1 MR. NANCE: Item No. 9, proposed 2 temporary adoption of amendments for 3 alternative procedures for counting and 4 recording player contributions to Bad Beat 5 payouts and poker and authorization of ruling 6 making experiment for the alternative 7 procedures pursuant to NJSA 5:12-69(e). 8 Mr. Mamolen? 9 MR. MAMOLEN: Good morning, Chair and 10 Commissioners. 11 Before you is the regulations that are 12 proposed for temporary adoption. The 13 Commission directed the staff to draft back on 14 January 7th of this year, in response to the 15 disposition to the Taj Mahal petition to amend 16 to allow for procedures for the Bad Beat payout 17 procedures. 18 The alternative procedures which are 19 before you basically, as you know, allow for 20 collection and reporting at the gaming table 21 and then return to the table inventory of the 22 gaming chips that are collected and recorded. 23 There are a couple of provisos to the 24 procedures that were determined by the 25 Commission to be appropriate, and those are 0027 1 that the dealer assigned to the poker table 2 count the contents of the container either, 3 one, in the presence of a poker supervisor and 4 under videotape surveillance or, if counted 5 without such presence and surveillance, in the 6 presence of a representative of the second 7 department, that person having no incompatible 8 function. 9 Again, these are before you for both 10 test and temporary adoption. 11 CHAIR KASSEKERT: Thank you. 12 Any questions? 13 VICE CHAIR EPPS: Madame Chair, I move 14 that we: A, preliminarily approve alternative 15 procedures for counting and recording player 16 contribution in Bad Beat payout as compatible 17 with the public interest pursuant to Section 5 18 of the Act; that we, B, authorize the 19 publication of the Notice of Temporary 20 Adoption, which will permit a test of the 21 procedures to begin on or after March 23rd, 22 2009, subject to the conditions listed and 23 continue for a period of time not to exceed 270 24 days; that we, C, temporarily adopt the 25 amendments contained in the Notice of Proposal 0028 1 for the purpose of conducting the test; that 2 we, D, delegate to the Director of the Division 3 of Compliance the authority to establish the 4 terms and conditions of a test of alternative 5 procedures and to approve any gaming equipment 6 necessary to the implementation of the test; 7 and, finally, that we, E, continue -- condition 8 any test of alternative procedures upon the 9 filing with and approval by the Division of 10 Compliance of all necessary test submissions 11 for a Section 69(e) test of alternative 12 procedures. 13 COMMISSIONER 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: Item No. 10, proposed 21 adoption of an amendment to NJAC 19:451.12 and 22 NJAC 19:46-1.18. 23 Mr. Mamolen? 24 MR. MAMOLEN: This one is before you for 25 final adoption and would allow card changing 0029 1 frequency to be reduced to once every 48 hours 2 for four table games, blackjack, Spanish 21, 3 mini bac and Double Attack blackjack. It 4 would, for those table games specifically, 5 which there's minimal human contact with the 6 cards whether by dealer, the requirement is 7 that it has to be dealt from at least a shoe 8 and cards can't be touched by any player at the 9 table. This would basically change it from the 10 current frequency of 24 hours, once every 24 11 hours. 12 There were no comments received -- oh, 13 there was one comment, I should say, from the 14 Division of Gaming which did not interpose an 15 objection to the proposed amendment. 16 CHAIR KASSEKERT: Thank you. 17 Any questions? 18 COMMISSIONER SOMMELING: No questions, 19 Madame Chair. 20 COMMISSIONER FEDORKO: Motion to adopt 21 as published. 22 COMMISSIONER EPPS: Second. 23 CHAIR KASSEKERT: The motion has been 24 made and seconded. All in favor? 25 (Ayes.) 0030 1 CHAIR KASSEKERT: Opposed? 2 (No response.) 3 CHAIR KASSEKERT: Motion carries. 4 MR. MAMOLEN: Thanks. 5 CHAIR KASSEKERT: Thank you. 6 MR. NANCE: Item No. 11 has been 7 adjourned. 8 For your consideration, Item No. 17, 9 petition of RIH Acquisition, New Jersey, LLC, 10 for an amendment to its operation certificate 11 to reconfigure its casino floor. 12 Mr. Moncrief? 13 MR. MONCRIEF: Madame Chair, members of 14 the Commission, a draft resolution has been 15 circulated between the parties. 16 Here for the Petitioner is Karen 17 Wosnack, and for the Division is Tim Ficchi. 18 CHAIR KASSEKERT: Thank you. 19 Good morning, Miss Wosnack. 20 MS. WOSNACK: Good morning. Karen 21 Wosnack for the Atlantic City Hilton. I've a 22 cold, so I apologize. 23 I'll rely on the papers. 24 Thank you. 25 CHAIR KASSEKERT: Thank you. 0031 1 Mr. Ficchi, good morning. 2 MR. FICCHI: Yeah. Good morning, Chair, 3 Commissioners. 4 Yeah. The Division reviewed the draft 5 resolution filed by Mr. Moncrief, and we have 6 no objection to the adoption by the Commission. 7 Thank you. 8 CHAIR KASSEKERT: Thank you. 9 Any questions? 10 COMMISSIONER SOMMELING: No questions, 11 Madame Chair. 12 COMMISSIONER FEDORKO: Motion to adopt 13 the draft resolution and approve the petition 14 of RIH Acquisition NJ, LLC, for an amendment to 15 its certificate of operation and CHAB license 16 to permit the reconfiguration to its gaming 17 floor subject to the conditions in the 18 resolution. 19 VICE CHAIR EPPS: Second. 20 CHAIR KASSEKERT: The motion has been 21 made and seconded. All in favor? 22 (Ayes.) 23 CHAIR KASSEKERT: Opposed? 24 (No response.) 25 CHAIR KASSEKERT: The motion carries. 0032 1 MS. WOSNACK: Thank you very much. 2 MR. FICCHI: Thank you. 3 MR. MONCRIEF: Thank you. 4 CHAIR KASSEKERT: Thank you. 5 MR. NANCE: For your consideration Item 6 13 and 14, motion of the Steering Committee of 7 Secured Creditors -- Secured Lenders seeking 8 permission to participation in the Petition 9 0330902 of the Trustee and Conservator to 10 extend the sale period and to initiate Section 11 363 sale and the motion of the Official 12 Committee of Unsecured Creditors for leave to 13 intervene or, in the alternative, to 14 participate in the Petition No. 0330902 [sic] 15 of the Trustee and Conservator to extend the 16 sale period and to initiate a Section 363 sale. 17 Miss Richardson? 18 MS. RICHARDSON: Good morning, Chair and 19 Commissioners. 20 Appearing for the Official Committee of 21 Unsecured Creditors is Ken Oettle, for the 22 Steering Committee of Secured Lenders is Gil 23 Brooks, and for the Division is DAG Jim 24 Fogarty. 25 CHAIR KASSEKERT: Thank you. 0033 1 Good morning, everyone. 2 MR. BROOKS: Good morning, Madame Chair. 3 MR. FOGARTY: Good morning. 4 CHAIR KASSEKERT: Before us for 5 consideration is a motion by the Steering 6 Committee of Secured Lenders to participate in 7 the petition of Retired Justice Gary S. Stein, 8 Trustee and Conservator for an extension of the 9 period in which to sell the former casino 10 licensee, Adamar of New Jersey, Inc., and for 11 permission to initiate a Section 363 sale. We 12 will also consider the motion of the Official 13 Committee of Secured Creditors for permission 14 to intervene or alternatively participate in 15 this petition. 16 As we hear the arguments of both the 17 Steering Committee as well as the Official 18 Committee, I would remind all counsel not to 19 stray into areas that would be presented if 20 either were allowed to intervene or 21 participate. 22 Mr. Brooks, we'll have you proceed 23 first, followed by Mr. Oettle. Thereafter 24 Justice Stein and the Division will have an 25 opportunity to respond. 0034 1 MR. BROOKS: Thank you, Madame Chair. 2 Madame Chair, we submitted a brief in 3 connection with this matter, and we've talked 4 about the standards necessary for the motion to 5 participate. We think we satisfied the 6 standards. 7 And, unless there's any questions, we'll 8 rely upon the written submission. 9 CHAIR KASSEKERT: Let me ask if there 10 are any questions? 11 COMMISSIONER SOMMELING: No questions, 12 Madame Chair. 13 CHAIR KASSEKERT: Mr. Oettle? 14 MR. OETTLE: Good morning, Madame Chair 15 and Commissioners. 16 We'll do the same as the lenders. We'll 17 rely on our papers. 18 And I should point out to the Commission 19 that as it turns out, we need only 20 participation this morning because we wish only 21 to submit our papers and speak today, so we can 22 withdraw our request to intervene. It won't be 23 necessary. 24 CHAIR KASSEKERT: Okay. Thank you. So 25 noted. 0035 1 Is Mr. -- Mr. Mack? 2 MR. MACK: Good morning, Chair and 3 Commissioners. 4 On behalf of Justice Stein, we have no 5 objection to the participation of either group. 6 CHAIR KASSEKERT: Thank you. 7 Mr. Fogarty? 8 MR. FOGARTY: Good morning. 9 In our letter that we filed in response 10 to the two requests dated February 10, we 11 appointed out we've been this way before with 12 both of these parties. Both of these 13 interested groups, I guess I should call them. 14 And we have no objection to participation but 15 participation only. 16 CHAIR KASSEKERT: Thank you. Okay. 17 We're going to take a brief recess, Mr. 18 DiGiacomo? 19 MR. DiGIACOMO: Yes, Chair, please. 20 CHAIR KASSEKERT: Okay. 21 (A recess was taken from 11:05 to 11:10 22 a.m.) 23 CHAIR KASSEKERT: We'll go back on the 24 record. 25 COMMISSIONER EPPS: We need our parties. 0036 1 CHAIR KASSEKERT: Yeah. Right. Where 2 are our parties? 3 COMMISSIONER EPPS: Out partying. 4 CHAIR KASSEKERT: Mr. Oettle, since you 5 changed your mind on participation and pursuing 6 intervention, I had to revise my remarks 7 accordingly. 8 Do we need Mary Jo? 9 MR. DiGIACOMO: Yeah. 10 Mr. Brooks may be otherwise engaged. 11 Let's see. 12 MS. FAUNTLEROY: That's right. He's in 13 that conference room, Len. 14 MR. DiGIACOMO: Yeah. 15 (There was a brief pause.) 16 CHAIR KASSEKERT: Thank you, Mr. Brooks. 17 MR. BROOKS: Sorry, Madame Chair. 18 CHAIR KASSEKERT: That's okay. Thank 19 you. 20 Counsel, in their oral presentations and 21 written submissions, correctly set forth the 22 standards under our regulations and the Uniform 23 Administrative Procedure rules that apply to 24 our consideration of the pending motion to 25 participate which is all that each committee 0037 1 seeks today. 2 We've afforded both the Official 3 Committee and the Steering Committee the 4 opportunity to participate when Justice Stein 5 required a prior extension, and as before, the 6 Division again does not oppose participation. 7 Essentially there's been no material 8 change that will compel the denial of 9 participation to either committee, so for the 10 reasons we had previously articulated, I would 11 again grant that you opportunity here. 12 Accordingly, I move to grant the Official 13 Committee and the Steering Committee the 14 opportunity to participate limited to written 15 terms already submitted and brief oral argument 16 during the Commission's consideration of the 17 Justice's pending application. 18 And I so move. Is there a second? 19 VICE CHAIR EPPS: Second. 20 COMMISSIONER SOMMELING: Second. 21 COMMISSIONER FEDORKO: Second. 22 CHAIR KASSEKERT: The motion has been 23 made and seconded. All in favor? 24 (Ayes.) 25 CHAIR KASSEKERT: Opposed? 0038 1 (No response.) 2 CHAIR KASSEKERT: Motion carries. 3 Thank you. 4 MR. BROOKS: Thank you, Madame Chair. 5 MR. OETTLE: Thank you. 6 MR. FOGARTY: Thank you. 7 MR. NANCE: Item No. 12, the petition of 8 the Trustee and Conservator for Adamar of New 9 Jersey, Inc., to extend the sale period and to 10 initiate a Section 363 sale. 11 Mr. DiGiacomo? 12 MR. DiGIACOMO: Chair, Commissioners, 13 good morning. 14 All counsel are now present. Of they 15 could put their appearances on the record, 16 please. 17 MR. MACK: Good morning, Chair, 18 Commissioners. Sean Mack from Pashman Stein on 19 behalf of Justice Stein. 20 CHAIR KASSEKERT: Good morning. 21 MR. BROOKS: Good morning, Madame Chair. 22 Gil Brooks of the firm of Wolf Block, appearing 23 on behalf of the Steering Committee of the 24 Secured Lenders. 25 MR. ADAMS: Jack Adams for the Division 0039 1 of Gaming Enforcement. 2 CHAIR KASSEKERT: Good morning, Mr. 3 Adams. 4 MR. OETTLE: Ken Oettle for the Official 5 Committee of Secured Creditors, from Sills 6 Cummis. 7 CHAIR KASSEKERT: Good morning, Mr. 8 Oettle. 9 MR. O'GARA: Madame Chair, Paul O'Gara 10 for Tropicana Entertainment, LLC, the former 11 licensee. 12 CHAIR KASSEKERT: Good morning, Mr. 13 O'Gara. 14 VICE CHAIR EPPS: There's another chair, 15 here, Mr. O'Gara. 16 MR. O'GARA: I'm fine. 17 CHAIR KASSEKERT: Mr. DiGiacomo, I think 18 I thought lost my papers. Where -- 19 MR. DiGIACOMO: Oh, I will consult 20 with -- 21 (Conferring.) 22 CHAIR KASSEKERT: All right. Since this 23 is the Conservator/Trustee's petition to extend 24 the deadline, Mr. Mack, you can proceed. 25 MR. MACK: Thank you, Madame Chair and 0040 1 Commissioners. 2 By Commission order on January 21st of 3 this year, this commission ordered Justice 4 Stein to file a petition by February 2nd to 5 seek relief, depending on how the sale process 6 had progressed by that time. And the order 7 required Justice Stein either to seek approval 8 of a stalking horse purchase agreement or to 9 file a petition seeking authority to file 10 permission seeking to initiate the sale process 11 without a stalking horse or some combination 12 thereof. 13 Of as of February 2nd, as was disclosed, 14 we did not have an agreement that was 15 acceptable to the senior lenders with Cordish 16 as we did not file that motion. We have before 17 you today our petition to initiate the sale 18 process without a so-called stalking horse. 19 As disclosed in our petition, the 20 consent and cooperation of the senior lenders 21 is going to be necessary in connection with 22 successfully completing a sale through Section 23 363. As a result of that, over the last couple 24 of weeks, more perfectly, in the last few days, 25 we've been having discussions with them about 0041 1 the structure and terms of attempting a 2 purchase agreement, of bidding processes and 3 procedures that they would be -- they would 4 consent to facilitate the sale process through 5 Section 363. 6 Our goal in using Section 363 is to 7 accomplish the sale that is statutorily 8 mandated of Justice Stein. It's a tool that 9 we're intending to use, and our preference is 10 to, to the extent possible, reach agreements 11 and get as much consent with the interested 12 parties and particularly the senior lenders 13 before initiating that process with the hope 14 that that makes the process more efficient once 15 we're into a bankruptcy forum. 16 As a result of that, we've been pushing 17 the senior lenders in our discussions to, 18 hopefully, reach some sort of agreement in the 19 coming days on a form of asset purchase 20 agreement that we could then present to the 21 Commission for approval and then move that 22 through the bankruptcy process. 23 And as I said, our preference would be 24 to initiate -- actually initiate the bankruptcy 25 process and not begin to incur those bankruptcy 0042 1 related costs and fees until we've made 2 significant enough progress in that regard. 3 And that's the petition we have before you 4 today. 5 To the extent there are any questions, 6 I'm happy to answer them. If we get into real 7 specific bankruptcy questions, Michael Sirota, 8 our bankruptcy counsel, is here as well. 9 CHAIR KASSEKERT: Thank you. 10 Let me ask, would you like to do 11 questions as each -- 12 COMMISSIONER FEDORKO: Yeah. Let me 13 ask. Let me ask a question. 14 Mr. Mack, what -- just so I understand 15 what the situation is with Cordish, is he -- 16 the reason I ask is I -- 17 MR. MACK: It's a fair question. 18 COMMISSIONER FEDORKO: I did a little 19 investigating on this on my cell phone, and the 20 Baltimore Sun had an article in the paper where 21 he's going to spend a million dollars on a site 22 in Arundel Mills, going to put 2,000 23 construction workers to -- employ 2,000 24 construction workers. 25 MR. MACK: I can't tell you what's going 0043 1 on in his mind. The representations that we 2 have received is that he's still very 3 interested, and is still willing and 4 considering increasing his offer to see if he 5 can't reach an agreement here. That's what 6 we've been told. I note that I haven't seen 7 filings for licensure with the Commission or 8 the Division on behalf of the Cordish 9 companies. So whatever that says, I don't 10 know. But he's telling us he's still 11 interested. 12 COMMISSIONER FEDORKO: Maybe some of 13 these other companies that are thinking about 14 building here should talk to him find out where 15 he's getting his money from. 16 MR. MACK: Even I know he's had some 17 success -- he had a lot of success with the 18 Seminole tribes down in Florida, so he's 19 pocketed a lot of money, which I think he's now 20 planning to use, it appears, in Baltimore and, 21 hopefully, up here as well. 22 COMMISSIONER FEDORKO: Okay. Thank you. 23 CHAIR KASSEKERT: Any other questions at 24 this point? Okay. 25 Why don't we hear next from the secured 0044 1 lenders. 2 Mr. Brooks? 3 MR. BROOKS: Thank you, Madame Chair. 4 Madame Chair, we've submitted papers in 5 connection with our position. You know, we 6 have no -- take no position with respect to the 7 request. 8 But I am prepared to say on behalf of 9 the senior lenders that we intend to 10 participate in connection with a 363 auction 11 process if that's what the Commission allows. 12 And we have, in fact, started the process of 13 working with Justice Stein in terms of 14 reviewing the APA and discussing bidding 15 procedures. 16 CHAIR KASSEKERT: Thank you. 17 Let me ask if there are questions at 18 this point for Mr. Brooks? 19 COMMISSIONER SOMMELING: No questions, 20 Madame Chair. 21 CHAIR KASSEKERT: No? 22 Okay. Mr. Oettle, for the Unsecured 23 Creditors. 24 MR. OETTLE: Thank you, Madame Chair. 25 The only difference in the position of 0045 1 the Official Committee of Unsecured Lenders 2 from the position of the other parties here, 3 since we do favor a bankruptcy for Adamar at 4 this time is that we see no purpose in 5 conducting a further bid because we see no 6 evidence in the record that conditions are 7 likely to improve. All the evidence in the 8 newspapers and on TV is that the economy is 9 troubled, jobs are being lost, and as a 10 consequence, it is unlikely -- it is very 11 unlikely that we're going to see a bid 12 acceptable to any of the constituencies in this 13 bankruptcy. 14 Now, I can't establish that for you as a 15 matter of fact. Were he don't have affidavits 16 proving it. But, then again, no one has 17 submitted any affidavits establishing that 18 there's any point to conducting a bid. Just 19 let me go into bankruptcy, and let's move 20 forward. 21 Thank you. 22 CHAIR KASSEKERT: Thank you. 23 Mr. Adams? 24 MR. ADAMS: Chair and Commissioners, you 25 have our response by letter dated February 0046 1 11th. My only observation is that I would just 2 reiterate, as we did previously, that if there 3 is some form of agreement that's going to be 4 put together that it be supplied to both the 5 Division and the Commission. According to my 6 calculation, it would have to be supplied to us 7 by this Friday, and I think we need that if 8 we're going to have you rule on any kind of 9 form agreement going into the bankruptcy. 10 Other than that, I'd be happy to answer 11 any questions you might have. 12 CHAIR KASSEKERT: Thank you. 13 And I skipped right over -- because Mr. 14 O'Gara is sitting back at the -- rather than 15 coming forward and sitting in the chair -- 16 MR. O'GARA: Hiding in the weeds, Chair. 17 (Laughter.) 18 MR. O'GARA: We've submitted papers. 19 The only thing I would urge on behalf of the 20 Tropicana Entertainment is, A, that bankruptcy 21 filing, we would urge the Commission to try to 22 have -- move as quickly as possible. I think 23 that all the parties here have a lot at sake, 24 including the Estate, and to the degree it can 25 get to a place where it can be resolved in a 0047 1 timely fashion, it will certainly preserve, you 2 know, wherewithal assets for everyone. 3 We also -- as we have said, we urge the 4 Commission to allow a two-track process, which 5 is, we understand, that the desirability of the 6 363 sale, but we urge you to consider in the 7 statute that the transfer of interest could 8 also occur through a transfer where there's a 9 reorganized company, and we have petitions 10 pending about, and we would abide by those 11 rulings. But we would certainly urge that in 12 the interest of efficiency, there be a 13 two-track process so that whatever the outcome 14 is and, in fact, if as Mr. Oettle predicts or 15 others do, that bids will not satisfy various 16 constituencies, that there's a movement that 17 goes on, and so we can move toward resolution, 18 which I think is not only the best interest my 19 client, but the State of New Jersey and all the 20 parties that are here today. 21 CHAIR KASSEKERT: Thank you. 22 MR. O'GARA: Thank you. 23 CHAIR KASSEKERT: Let me ask at this 24 point if there are any questions for any of the 25 parties? 0048 1 COMMISSIONER SOMMELING: No questions.. 2 CHAIR KASSEKERT: Commission Epps? 3 VICE CHAIR EPPS: The documents that are 4 being prepared, the bid documents and whatever 5 else is being prepared, to what degree of 6 detail -- I mean, what degree of detail can you 7 tell me about the documents? What are the 8 participants? I mean, what are we going to 9 have? 10 Mr. Brooks, do you know? 11 MR. BROOKS: Commissioner Epps, I think 12 that we've gotten form APA, an asset purchase 13 agreement. We haven't really reviewed it yet. 14 We got it yesterday. We're in the process of 15 reviewing it. We're mindful of the time 16 frames. We learned of that yesterday. So it 17 would be a form asset purchase agreement that 18 would be utilized for anyone who's interested 19 in bidding for the property and bidding 20 procedures in terms of how -- what would be the 21 requirements for someone to bid and different 22 procedures related to how the bankruptcy is 23 going to conducted, the sale process for the 24 auction pursuant to 363. And what I would 25 anticipate is that those are going to be 0049 1 reduced to writing and submitted to the 2 Commission for approval by the Commission. 3 VICE CHAIR EPPS: All right. I'm not 4 hearing what I thought I was hearing. 5 MR. DiGIACOMO: Through you, Madame 6 Chair, if Mr. Brooks or Mr. Mack can identify 7 the timetable that they would project to 8 submitting those materials? 9 CHAIR KASSEKERT: Sure. That would be 10 appropriate. Thank you. 11 MR. MACK: Obviously, we'd ideally be 12 able to get before you for before the March 4 13 hearing. But as Mr. Adams said, in order to do 14 that, it's probably requiring everything to be 15 done by this Friday or possibly by Monday. And 16 that's going to be very ambitious, to be honest 17 with you. They've just received the asset 18 purchase agreement. It's the same form that we 19 had proposed with the Cordish companies, but 20 there have been revisions to it. So that's one 21 big piece is getting through the asset purchase 22 agreement. 23 The bidding procedures and, you know, 24 what sort of floor may be set to define 25 qualified bid, what participation the senior 0050 1 lenders may play in the process, we're still 2 having those structural discussions. We don't 3 even -- we haven't even exchanged a term sheet 4 yet on that. So March 4, in order to have that 5 time, that would be ambitious. We can set it 6 for that, give ourselves that deadline. 7 Perhaps with a discretion given to the Chair or 8 some other way if we slip past that to put it 9 on for the 18th. Just trying to be realistic. 10 CHAIR KASSEKERT: Commissioner Epps? 11 VICE CHAIR EPPS: Well, I've always had 12 concerns or reservations about moving the 13 target out too far when everything was 14 speculative. If there was some notion that 15 there was something more firm that we could 16 believe that we were going to get in a 17 reasonable time, I'd be willing to suggest that 18 we extend it to the 18th to be fair to the 19 Division and the Commission to get them and 20 fully acknowledge -- I mean, and understand 21 what we're looking at before we have to rule on 22 it. 23 But, Mr. Brooks, to you, I guess I would 24 ask, what's the nature of the participation of 25 the senior lenders going to be in this process? 0051 1 MR. BROOKS: Well, I think that's got to 2 be decided. I think that the lenders would 3 have a potential interest in a credit bid for 4 the property and perhaps a stalking horse 5 credit bid. 6 VICE CHAIR EPPS: See, that information 7 would give me more confidence going forward 8 that there was a document, and we were 9 proceeding in a more sound position than what 10 had previously been anticipated. And if that 11 firms up, that would certainly give me a lot 12 more confidence in the process going forward 13 and sliding the date back because at least I 14 know we'd be working with a set of documents 15 that are more -- more real and certain, and so 16 the length of time is only to completely 17 prepare and solidify the documents as opposed 18 to waiting for some document that still has to 19 be -- meet the right number and hit the right 20 targets. So -- 21 MR. BROOKS: Sure. Yeah. I mean, I 22 understand Commission Epps. Yeah. I can 23 represent, and I've been authorized to 24 represent, that we are -- the senior -- the 25 secured lenders are interested in making a 0052 1 credit bid. And if the desired methodology is 2 a stalking horse credit bid, then they're 3 prepared to do that as well. 4 VICE CHAIR EPPS: Okay. 5 CHAIR KASSEKERT: Any other questions 6 before we recess? 7 COMMISSIONER SOMMELING: No questions. 8 CHAIR KASSEKERT: Anything else from the 9 Division? 10 MR. ADAMS: No, Chair. 11 CHAIR KASSEKERT: Any other parties? 12 All right. We'll take a brief recess. 13 (A recess was taken from 11:36 to 12:15 14 p.m.) 15 CHAIR KASSEKERT: Thank you. We'll go 16 back on the record. 17 Let me ask at this point if there are 18 any other matters that need to be brought to 19 our attention at this time, Mr. Adams? 20 MR. ADAMS: Yes, Chair. In light of 21 some of the discussion, I thought it might be 22 prudent to have Mr. Mack or someone on behalf 23 of the Conservator/Trustee address in light of 24 some of the comments that have been made 25 exactly what he foresees by way of when a 0053 1 bankruptcy filing would be made in this matter. 2 Just so that it's clear at this point. 3 CHAIR KASSEKERT: Mr. Mack? 4 MR. MACK: Commissioners, Justice 5 Stein's request today is that we be afforded 6 the time to complete our negotiations with the 7 senior lenders on an asset purchase agreement 8 and the bidding procedures, present those to 9 you, and then once those are presented and 10 approved by you, then initiate the bankruptcy 11 filing. So that would be the time line that 12 we're requesting. 13 CHAIR KASSEKERT: Thank you. 14 So I think, Mr. Adams, you want to 15 clarify that this is -- at this point we're not 16 contemplating a naked 363 sale, that the 17 process would be for the information to come 18 back. 19 MR. ADAMS: That's one aspect. And in 20 their papers, they indicated a March 2nd or 21 March 6th outside date. 22 CHAIR KASSEKERT: Right. 23 MR. ADAMS: One way or the other for the 24 filing of the bankruptcy matter. And I just 25 wanted that to be clear to you as well as us 0054 1 that, in essence, based on what they're saying 2 today -- 3 CHAIR KASSEKERT: We have a new 4 circumstances. 5 MR. ADAMS: They're extending that out, 6 potentially, at least March 18th if not later, 7 I presume. 8 CHAIR KASSEKERT: At least March 18th. 9 MR. MACK: If we can get it done by the 10 4th, or this Friday basically, we'll do that. 11 If not, we'll then have to come back on the 12 18th. 13 CHAIR KASSEKERT: Okay. 14 VICE CHAIR EPPS: Do we? Do we? 15 MR. NANCE: Yes. 16 CHAIR KASSEKERT: Yes. 17 VICE CHAIR EPPS: No. No. No. I guess 18 my question was, similarly to what Mr. Adams' 19 was saying, is when we were here before we were 20 anticipating -- you had asked for March -- you 21 had said whatever happened today, or if it 22 doesn't happen, you would be in bankruptcy by 23 March 2nd. Now, if we give you more time, 24 which arguably you probably will get, the 25 question I think is into bankruptcy by what 0055 1 date certain? I mean, how much time after that 2 meeting on the 18th do we need to move to the 3 bankruptcy court? I mean, is it the 20th, 4 which is I guess a Friday? That following 5 Monday? I mean, is there a date that we should 6 target? Is that more accurate, Mr. Adams? 7 MR. ADAMS: Yes. Because the date he 8 had mentioned previously in his papers, 9 assuming there was an agreement that we could 10 have by the 20th, have it on before you on the 11 4th, they would file on the 6th. But that -- 12 based on what I've heard so far, that's 13 basically out the window at this point. Those 14 dates are not realistic as far as the Trustee 15 is concerned. They want to extend it. And I 16 was just looking for clarification so that you 17 know -- 18 CHAIR KASSEKERT: Right. 19 MR. ADAMS: -- for sure what -- 20 CHAIR KASSEKERT: I appreciate that. 21 MR. ADAMS: -- what we're talking about 22 here. 23 MR. MACK: I think we are -- aside from 24 completing negotiations with the senior 25 lenders, we're ready to go in immediately. And 0056 1 all we're saying today is, if we can't get it 2 done on the 4th as previously set form in our 3 papers, the expectation would then be I see no 4 reason why we can't get it done to be back here 5 on the 18th and then file the necessary -- 6 VICE CHAIR EPPS: The following Monday 7 is March 23rd. The Monday after that meeting 8 on the 18th. That following Monday is March 9 23rd. That's three weeks from the March 2nd 10 date that we had already been anticipating. 11 (Conferring.) 12 MR. MACK: For various logistical 13 reasons, in terms of the filing and making sure 14 operations are not interrupted by a bankruptcy 15 filing to have the court being able to enter 16 the appropriate first-day orders, we're 17 targeting a filing on a Wednesday as the 18 optimal day for doing that. 19 VICE CHAIR EPPS: The 25th? 20 MR. MACK: If we're here -- 21 VICE CHAIR EPPS: That's a week after 22 that meeting, the Wednesday the 25th. 23 CHAIR KASSEKERT: I think what Mr. Mack 24 is representing is they would try to -- should 25 all the paperwork be filed, complete, you would 0057 1 plan on doing it earlier, but that would be the 2 outside date. 3 MR. MACK: Yeah. Right now I see no 4 reason why we'd have to go past there. I mean, 5 right now, we're leaving this room, Mr. Brooks 6 and I are going back to work on that asset 7 purchase agreement, trying to get it done on 8 the 4th. If that doesn't happen, the 18th, the 9 filing is the outside date of the 25th. 10 MR. BROOKS: I would agree. We try hard 11 for that date, the 4th. 12 CHAIR KASSEKERT: The 4th. 13 MR. BROOKS: Yeah. And see if -- 14 MR. ADAMS: All right. In light of a 15 week beyond the 18th to the 25th, I presume 16 you're asking if it's the 4th, you're going to 17 go to the 11th now? Is that -- 18 MR. MACK: That's -- 19 MR. ADAMS: As opposed to the 6th? 20 CHAIR KASSEKERT: No. I don't want 21 to -- yeah. 22 It's Mr. Sirota? 23 MR. SIROTA: Commissioners, I think that 24 most realistically, it's not going to be done 25 by the 4th. I think that Mr. Mack said it was 0058 1 remote. It's virtually impossible. So we're 2 shooting to present to you the finalized 3 documents with the cooperation of the Secured 4 Lenders by the hearing on the 18th. And then 5 we would be ready to file, depending upon the 6 logistics with the casino, as early as the 7 afternoon of the 18th, the 19th. But we've 8 used the Wednesday date as the most orderly 9 date to have payroll honored and facilitate a 10 soft landing in the proceeding. 11 CHAIR KASSEKERT: Okay. 12 VICE CHAIR EPPS: Does that change what 13 we anticipated getting? Because we were 14 looking for something -- 15 Counsel, do you understand my question? 16 Does that -- does the representations that have 17 just been -- or I'm sorry. 18 Len. The representations that have just 19 been made, does that change what we were 20 anticipating? 21 MS. FAUNTLEROY: No. 22 MR. DiGIACOMO: I don't think so, 23 Commissioner. 24 MR. FAUNTLEROY: No. 25 MR. DiGIACOMO: I think the issue of 0059 1 when to grant permission to go into bankruptcy 2 is something that may or may not be decided 3 today. And if it's not decided today, then 4 that can abide the event of the subsequent 5 materials that the Commission anticipates 6 receiving. 7 VICE CHAIR EPPS: Okay. So we're good 8 with what we anticipate receiving right now? 9 MR. DiGIACOMO: Right. 10 VICE CHAIR EPPS: Okay. 11 MR. ADAMS: Well, I just want to be 12 clear. If by some chance if it all falls 13 apart, no matter what happens, either because 14 there's no form agreement or whatever, there's 15 going to be a bankruptcy filing nonetheless, 16 after that. 17 MR. SIROTA: I wouldn't want to declare 18 that, for this reason: If the mandate is to 19 sell the casino, and the only way to sell the 20 casino, practically speaking, is through a 363 21 sale which would require secured lender 22 consent, filing a Chapter 11 without that 23 consent is to go into Chapter 11 with no exit. 24 So we're trying to make sure that Chapter 11 is 25 facilitated with a sale process which is 0060 1 designed to lead to an exit. 2 MR. NANCE: Excuse me. Could you 3 identify yourself for the record? 4 MR. SIROTA: I'm sorry. Michael Sirota 5 on behalf of Justice Stein, insolvency counsel. 6 MR. NANCE: Thank you. 7 MR. ADAMS: I interpret that to mean 8 that absent the 363 situation, there wouldn't 9 be a bankruptcy at all contemplated by the 10 Trustee at this point. 11 MR. MACK: Aside from the doing the 363 12 there's no reason to filing for bankruptcy. 13 VICE CHAIR EPPS: Okay. But the problem 14 with that is that runs afoul of the order that 15 we issued previously directing that it happen 16 one way or the other. 17 MR. MACK: At this -- right. Given the 18 Commission's order at this point, if we didn't 19 have an agreement, Justice Stein would have to 20 make a petition. I think there's language in 21 there for exceptional circumstances from the 22 order. We would have to make that presentation 23 to you. 24 MR. ADAMS: Are you clear? 25 VICE CHAIR EPPS: No. 0061 1 MR. ADAMS: I think what they're saying 2 is they're going forward with this process, 3 with a 363. But if it doesn't come to fruition 4 with the Secureds -- and I'm not saying that 5 there's any reason that it won't -- that not 6 they're not necessarily contemplating a 7 bankruptcy filing. Absent that -- 8 CHAIR KASSEKERT: I think -- I think 9 what that means is they would have to come back 10 before us. 11 MR. ADAMS: That's correct. That's 12 correct. 13 VICE CHAIR EPPS: That may occasion an 14 emergency meeting -- 15 MR. ADAMS: Yes. 16 VICE CHAIR EPPS: -- sooner. 17 CHAIR KASSEKERT: Correct. 18 VICE CHAIR EPPS: Because we'd have to 19 address that immediately. 20 CHAIR KASSEKERT: Right. 21 MR. BROOKS: Madame Chair, just if I 22 could be heard. I appreciate your indulgence. 23 One way that we could possibly get 24 around that is to prepare a concurrent plan of 25 the bankruptcy that would bankruptcy -- not 0062 1 only bankruptcy, but the anticipated plan of 2 reorganization for Adamar. And that is 3 something that we had requested. So, I mean, 4 that way, if a 363 doesn't happen, bidding 5 process, there can't be an agreement on that, 6 at least there could be a filing in the pursuit 7 of plan of reorganization. 8 CHAIR KASSEKERT: Well, yeah. I don't 9 think those issues are really ripe for us to 10 decide yet. 11 MR. BROOKS: Okay. 12 CHAIR KASSEKERT: I know there are 13 petitions pending, and at this point I don't 14 believe that that is an issue that is ripe for 15 us to determine. 16 MR. BROOKS: That's fine. I just wanted 17 to say that. 18 CHAIR KASSEKERT: Thank you. All right? 19 MR. ADAMS: Yes. 20 CHAIR KASSEKERT: Last month, the 21 Commission extended until today the deadline by 22 which Justice Stein is required to dispose of 23 Adamar's property for purposes of Subsection 24 94.14(e) [sic] of the Act. While throughout 25 today's presentations on Justice Stein's 0063 1 application for a further extension, we've 2 heard no opposition either to our granting him 3 more time or to authorizing an Adamar 4 bankruptcy filing. There are divergent views 5 on the details of the exact course to be 6 pursued, however. 7 For our part, it appeared last month the 8 Cordish company might still be prepared to 9 execute a contract as the so-called "stalking 10 horse" under the free-and-clear sale provisions 11 of Section 363 of the Federal Bankruptcy Code. 12 Thus, to accommodate the need for all involved 13 in the process to have a reasonable opportunity 14 for assessment and reply, we had set a date of 15 February 2nd, 2009, for the filing of the 16 Cordish contract with the Commission. Although 17 that did not happen, the presentations today 18 demonstrate that much has transpired in the 19 interim. 20 Significantly, the Steering Committee of 21 Secured Lenders advises that its members are 22 prepared to make a credit bid or serve as the 23 stalking horse in bankruptcy. You may recall 24 that at our previous meeting of January 21st, 25 2009, we specifically directed that the 0064 1 Conservator/Trustee file a joint petition with 2 Cordish for approval of a stalking horse bid or 3 submit a petition for approval to initiate a 4 bankruptcy without a so-called stalking horse. 5 Clearly circumstances have changed, and while I 6 remain adamant that this matter should come to 7 fruition promptly, the lenders' revised 8 representations and responses to questions 9 asked by Commissioner Epps regarding their 10 willingness to submit a credit bid or serve as 11 a stalking horse merits our consideration. 12 However, the materials that we would 13 need to review, such as the form of the 14 purchase agreement and the bidding procedures 15 incidental to that process, have not yet been 16 submitted. Pursuant to the representations of 17 counsel, it appears that these materials are in 18 the development process and should be able to 19 be submitted to the Commission by Monday, 20 February 23rd. Given the delay in this matter 21 to date, I propose that we specifically hold 22 the lenders to that representation. With that 23 date is the baseline to afford the interested 24 parties as well as this body an adequate 25 opportunity to review these documents, I would 0065 1 be prepared to extend the sale deadline to 2 March 18th, 2009, with a directive that all 3 necessary materials from Justice Stein and the 4 joint Petitioner would be filed with us and 5 served on the Division, Tropicana 6 Entertainment, and the other likely responding 7 creditors by February 21st, 2009. Responses 8 would be due by March 3rd, 2009, except for the 9 Division, which would be afforded until March 10 5th, 2009. Any reply from Justice Stein and 11 the anticipated joint Petitioner would be due 12 by March 9th, 2009. 13 While not argued today specifically, 14 much has been made in the submissions regarding 15 the technical nuances of a bankruptcy filing 16 such as where to initiate the petition. 17 Certainly Justice Stein and the responding 18 parties are welcome to address those matters 19 further in their forthcoming submissions. 20 However, with Adamar still in conservatorship, 21 a bankruptcy filing in this instance would be 22 unprecedented, a fact that certainly would 23 militate in favor of the local venue. 24 Some have suggested that a Section 363 25 sale in the current market is a fool's errand 0066 1 without necessarily foreclosing other 2 alternatives, it is plain that the Casino 3 Control Act primarily contemplates a transition 4 from a disqualified former operator to a new 5 entity that is either fully qualified or has 6 obtained ICA. Thus, in my view, a concerted 7 effort to ensure a vigorous Section 363 process 8 with the full cooperation of all interested 9 parties is essential. And although the pace 10 thus far has been daunting, a quick emergence 11 from bankruptcy would appear to be critical for 12 Adamar's continued ability to operate on a 13 sound and business-like basis, failing which, 14 the prospects might be calamitous. 15 As for pursuing parallel courses, even 16 by allowing a stand-alone plan of 17 reorganization to develop or by addressing the 18 mirror image before us through Tropicana 19 Entertainment's pending petitions, those 20 matters, in my view, are not yet ripe. In that 21 respect, the Division continues to investigate 22 the pending petitions, and the recent filings 23 for Mr. William Yung in the Delaware 24 bankruptcy, certainly suggest that the issues 25 continue to evolve. Thus, we should proceed 0067 1 cautiously as to avoid inadvertently affecting 2 matters pending before another tribunal. 3 As it has in the past, the Division 4 reiterates its call for a continuing cash 5 balance requirement, the reimposition of which, 6 in my view, is appropriate. 7 Subject to my earlier comments and the 8 conditions therein recommended, I would move to 9 extend the sale period through March 18, 2009. 10 And I so now move. 11 Is there a second? 12 VICE CHAIR EPPS: Second. 13 COMMISSIONER 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. DiGIACOMO: Thank you. 21 CHAIR KASSEKERT: Thank you. 22 We are going to recess. 23 MR. DiGIACOMO: Do you want to do? Is 24 it No. 18? 25 MS. FAUNTLEROY: Oh, yes. 0068 1 CHAIR KASSEKERT: Oh. No. 18. Okay. 2 MR. NANCE: Item No. 18, consideration 3 of the applications of the Trustee/Conservator 4 for the former casino licensee, Adamar of New 5 Jersey, Inc., for approval of fees for the 6 Conservator/Trustee, his personal counsel, 7 legal, and other consultants. 8 Miss Fauntleroy? 9 MS. FAUNTLEROY: Before you you have an 10 application for the approval of the fees. 11 MR. NANCE: Mr. Adams? 12 CHAIR KASSEKERT: Kent? Can you take it 13 outside, Kent? 14 Kent, take it outside. 15 MR. ST. JOHN: I'm sorry. I'm sorry. 16 (Laughter.) 17 CHAIR KASSEKERT: I'm going to hold you 18 in contempt, Kent. Watch out. 19 MS. FAUNTLEROY: Before you are the 20 applications for the approval of fees for the 21 Conservator/Trustee, his counsel, and several 22 consultants, Cole Schotz, Debevoise & Plimpton, 23 and JH Cohn, for the period January 1 through 24 January 31, 2009, except as to Cole Schotz who 25 has some invoices reflecting services rendered 0069 1 in December, which were inadvertently not 2 included in the December invoice approved at 3 the last meeting. 4 Here for the Division is Mary Jo 5 Flaherty, and for the Trustee/Conservator, Sean 6 Mack. 7 CHAIR KASSEKERT: Mr. Mack? 8 MR. MACK: Chair and Commissioners, you 9 have the invoices. 10 If there are particular questions, I'm 11 happy to respond to them. 12 CHAIR KASSEKERT: Thank you. 13 Let me ask if there are any questions 14 before we hear from Ms. Flaherty? 15 COMMISSIONER SOMMELING: No questions, 16 Madame Chair. 17 CHAIR KASSEKERT: Any questions? 18 VICE CHAIR EPPS: I'd like to hear -- 19 CHAIR KASSEKERT: Okay. Miss Flaherty? 20 MS. FLAHERTY: We reviewed the invoices 21 with regard to the period of January and the 22 other billings that were set form on the record 23 by the General Counsel. 24 With regard to those, they seem accurate 25 with respect to the number of hours billed and 0070 1 the rate per hour. 2 We would note that Mr. Mack noticed that 3 there were a number of "attention to" items on 4 the Debevoise items again, and he had those 5 corrected before their submission. 6 With regard to the January billings, 7 there are approximately one hour related to the 8 conflicts check. The February billings contain 9 additional amounts regarding the conflict, but 10 they are not before you today. 11 It looks, again, that the billings are 12 rather high in certain areas, including the 13 Debevoise bills. But for that we would leave 14 it to the Commission's discretion as to the 15 approval of the billings. 16 Thank you. 17 CHAIR KASSEKERT: Thank you. 18 Any question? 19 Commissioner Epps? 20 VICE CHAIR EPPS: Sean, just for the 21 edification of the Commissioners, Debevoise 22 still seems to be running a bit high. Can you 23 tell me what function they're doing so that at 24 least we understand why it's -- it's where it 25 is. 0071 1 MR. MACK: The primary work Debevoise is 2 doing is the revised asset purchase agreement, 3 which is now being discussed. You'll see some 4 of that work in the February billings. A lot 5 of the January billings attached to the 6 purchase agreement are voluminous disclosure 7 schedules which go through basically the entire 8 operation and finances of liabilities of, you 9 know, environmental, employee. And that's what 10 they have to work through, and that's what a 11 lot of the work in January was. 12 VICE CHAIR EPPS: And if I remember 13 correctly, I think you told us that heading 14 into the bankruptcy, there would be a wrap-up 15 from Debevoise because they had to get whatever 16 documents they were preparing to go in. 17 MR. MACK: Yeah. 18 VICE CHAIR EPPS: All right. 19 MR. MACK: This is all of that. You'll 20 see -- just before going in, you'll also see 21 Cole Schotz will go up as well. At the same 22 time. 23 VICE CHAIR EPPS: Okay. 24 CHAIR KASSEKERT: Any other questions? 25 COMMISSIONER SOMMELING: No questions, 0072 1 Madame Chair. 2 CHAIR KASSEKERT: Is there a motion? 3 COMMISSIONER SOMMELING: Madame Chair, 4 move to approve the following invoices: A, 5 Conservator/Trustee Stein's for the period of 6 January 1st through January 31st of 2009; B, 7 Pashman Stein for the period of January 1st 8 through January 31st, 2009; C, Cole Schotz for 9 the period of January 1st through January 31st, 10 2009. 11 CHAIR KASSEKERT: Yeah. Because I think 12 there were -- as General Counsel noted, there 13 were some bills submitted for December as well. 14 COMMISSIONER SOMMELING: Thank you, 15 Chair. Yes. 16 Including the December entries under 17 Item C; D, Debevoise & Plimpton for the period 18 of January 1st through January 31st, 2009; and, 19 E, JH Cohn for the period of January 1st 20 through January 31st, 2009, all subject to the 21 conditions imposed in the Commission's 22 Resolutions No. 08-06-04-15 and 08-06-18-21, 23 including provisions of daily cash schedules of 24 unpaid forecasts. 25 VICE CHAIR EPPS: Updated. Updated. 0073 1 CHAIR KASSEKERT: Updated forecasts. 2 COMMISSIONER SOMMELING: Updated 3 forecasts. I'm sorry. 4 COMMISSIONER FEDORKO: Second. 5 CHAIR KASSEKERT: Is there a second? 6 The motion has been made and seconded. 7 All in favor? 8 (Ayes.) 9 CHAIR KASSEKERT: Opposed? 10 (No response.) 11 CHAIR KASSEKERT: Motion carries. 12 We'll now recess till 1:30? 1:30. 13 (A recess was taken from 12:34 to 2:10 14 p.m.) 15 CHAIR KASSEKERT: We're back on the 16 record. 17 MR. NANCE: For your consideration I 18 would like to call Items No. 15 and 16, 19 petition of Column Financial, Inc., and Trimont 20 Real Estate Advisors, Inc., for relief from 21 certain conditions in the Casino Control 22 Commission Resolutions 07-03-07-13 and 23 08-01-30-14 and other relief; and cross 24 petition of Resorts International Hotel, Inc., 25 in opposition of relief sought in Petition No. 0074 1 0220901 and for a declaratory ruling as to 2 certain licensing requirements. 3 Mr. DiGiacomo? 4 MR. DiGIACOMO: Chair, Commissioners, 5 good afternoon. 6 If counsel could enter their appearances 7 for the record, please. 8 MR. O'GARA: Paul O'Gara for the 9 Petitioners on the original petition, which is 10 Column Financial, Trimont. 11 MR. BROOKS: Good afternoon, Madame 12 Chair, members of the Commissioners. Gil 13 Brooks from Wolf Block appearing on behalf of 14 Resorts International Hotel, Inc. 15 MS. FLAHERTY: Yeah. Madame Chair and 16 Commissioners, Mary Jo Flaherty, Deputy 17 Attorney General for the Division of Gaming 18 Enforcement. 19 CHAIR KASSEKERT: Thank you. 20 Before the Commission today is the 21 application by a lender and its agents for 22 permission to pursue certain default remedies 23 against Resorts and its affiliates as provided 24 in their loan agreement. For its part, the 25 casino licensee has cross-petitioned for 0075 1 declaratory rulings regarding the regulatory 2 status of the lender, Column Financial, and the 3 affiliated Credit Suisse and their agents 4 Trimont and KeyCorp. 5 If there are any preliminary motions, we 6 will hear first from the Petitioners, followed 7 by the Cross Petitioner. 8 If there are any premarked exhibits, we 9 will receive them subject to any valid sealing 10 requests at the outset before hearing the 11 opening remarks and the taking of any 12 testimony. 13 As the lenders put on their case, any 14 witnesses will be subject to cross-examination, 15 first by Resorts and then the Division, with 16 the opportunity thereafter for redirect. And 17 although during any testimony the Commissioners 18 will be free to question the witnesses, the 19 specific chance to do so will follow 20 cross-examination. 21 Once the lenders rest, then the 22 Cross-Petitioner may put on its case in chief 23 with any witnesses, the Division is subject to 24 a similar pattern of cross-examination and 25 redirect. 0076 1 After Resorts rests, we will then hear 2 from any Division witnesses in a like fashion. 3 And at the conclusion of those presentations, 4 we will hear summations from the Division, 5 Resorts, and then the lenders. Any unanswered 6 questions that the Commissioners may have for 7 counsel may then be raised before summations. 8 With that, are there any preliminary 9 motions -- any preliminary motions or any 10 premarked exhibits? 11 MS. FLAHERTY: Yes, Chair and 12 Commissioners. The Division has two exhibits. 13 D-1 would be its report of January 27, 14 2009, which is seven pages. And D-2 is the 15 Division's report of February 10, 2009, in 16 these matters. 17 I would reserve the right with regard to 18 a potential additional Division exhibit of D-3, 19 which would be our additional report of January 20 27th, depending upon the outcome of the 21 proceeding in the course of this. 22 Thank you. 23 CHAIR KASSEKERT: Thank you. 24 Anything from the Petitioners? 25 MR. O'GARA: O'Gara no, ma'am. 0077 1 MR. BROOKS: Madame Chair, we have 2 several documents. We've submitted them to the 3 Court -- to the Commission in the form of 4 certifications, and we've submitted to number 5 of those documents. But I would think that the 6 loan agreement and the two resolutions are the 7 subject matter today -- is -- the thought 8 process is they should be moved into evidence. 9 I've brought copies to move them into evidence. 10 CHAIR KASSEKERT: Okay. 11 MR. BROOKS: We didn't discuss this, but 12 I'm prepared to do that if that's the thought 13 process. 14 MR. DiGIACOMO: That's fine, Madame 15 Chair. 16 CHAIR KASSEKERT: Fine. 17 MR. BROOKS: These are the loan 18 agreements, Madame Chair. 19 MR. NANCE: Is it just one loan 20 agreement? How many -- 21 MR. BROOKS: Yes. One document. I've 22 given you eight copies in order to hand them 23 out to the parties. 24 MR. DiGIACOMO: Have Counsel -- have 25 these already -- 0078 1 MR. BROOKS: We've submitted these by 2 way of certification. 3 MR. DiGIACOMO: Certification. I 4 understand. Okay. 5 MR. BROOKS: And I don't know if it 6 would be necessary for the Commissioners to 7 have them, but I have copies for the 8 Commissioners, if I may approach. 9 CHAIR KASSEKERT: Sure. 10 MR. BROOKS: Just have to have one 11 marked, Daryl. 12 MR. NANCE: Okay. 13 MR. DiGIACOMO: Mr. Brooks? 14 CHAIR KASSEKERT: You want to have Daryl 15 mark them first? 16 MR. DiGIACOMO: Yeah, I would think -- 17 CHAIR KASSEKERT: Why don't you have 18 Daryl -- 19 MR. BROOKS: Okay. Thank you. 20 MR. NANCE: Mark the loan agreement as 21 A-1. 22 MR. DiGIACOMO: I might suggest, Madame 23 Chair and Commissioners, maybe CP-1 for Cross 24 Petitioner 1. And then if Mr. O'Gara should 25 happen to have any documents on his behalf, 0079 1 that would be P. A P series. 2 MR. NANCE: So the loan agreement will 3 be marked as CP-1? 4 CHAIR KASSEKERT: Yes. 5 MR. DiGIACOMO: Yes. 6 MR. NANCE: And this is? 7 MR. BROOKS: CP-2 would be the March 8 14th, 2007, opinion letter of Wolf Block that 9 was submitted to Column Financial. And 10 attached to that is the Resolution of the 11 Commission in connection with the approval 12 of -- for Resorts to enter into the Column loan 13 agreement. Specifically, that's Commission 14 Resolution No. 07-03-07-13. 15 And the final document would be 16 Commission Resolution 08-01-30-14, and that was 17 the resolution renewing the casino license at 18 Resorts. 19 MR. NANCE: That is CP-3. 20 MS. FLAHERTY: I would just note, Chair, 21 that I think that is part of the Commission's 22 record, and I don't think we should have that 23 marked. 24 CHAIR KASSEKERT: Marked. Right. 25 MR. NANCE: Okay. Don't mark it. 0080 1 CHAIR KASSEKERT: Mr. O'Gara, do you 2 have any exhibits? 3 MR. O'GARA: No, ma'am. 4 CHAIR KASSEKERT: Mr. DiGiacomo, are 5 there any Commission exhibits? 6 MR. DiGIACOMO: No, there are not, 7 Chair. 8 CHAIR KASSEKERT: Okay. 9 All right. Let me ask if there are any 10 objections to the admission of these exhibits, 11 and are there any sealing requests? 12 MR. O'GARA: We have not opposed them. 13 MR. BROOKS: No, Madame Chair. Except 14 with respect to the addendum from the Division, 15 we would have a sealing request in connection 16 with that, but that's not being moved at any 17 time. So as to the documents being moved at 18 this time, we have no objection. 19 CHAIR KASSEKERT: Okay. And are there 20 any other procedural matters that need to be 21 brought to our attention at this time? 22 MR. O'GARA: None that I'm aware of. 23 CHAIR KASSEKERT: Okay. 24 MR. BROOKS: None, Madame Chair. 25 CHAIR KASSEKERT: Okay. All right. 0081 1 MS. FLAHERTY: Madame Chair, I would 2 just ask with regard to the Wolf Block opinion 3 letter, is that in this binder? Which number 4 would that be? 5 MR. BROOKS: It's in the 6 supplementation. 7 MS. FLAHERTY: Oh, okay. No objection. 8 CHAIR KASSEKERT: Okay. We're now set 9 for openings statements which the parties may 10 waive and elect instead to proceed directly to 11 testimony. 12 Counsel, what's your preference? 13 MR. O'GARA: Yeah. I'd like to make a 14 statement. 15 CHAIR KASSEKERT: Sure. 16 MR. O'GARA: If I might, Chair. 17 I think we're here with what started as 18 a petition we filed for relief from certain 19 conditions, and those conditions are in the 20 resolutions which you all are familiar with. 21 They've just been introduced as resolutions 22 which you, in fact, adopted. 23 They arose out of a loan that was 24 approved by this Commission and was made by 25 Column Financial in the amount of $360 million. 0082 1 And at the time it was made, all of the 2 participating parties, as well as the 3 regulators, understood that there was a 4 contemplation that this loan would be 5 securitized. And it involved a structure which 6 involved an operating company, a project 7 company, commonly called OPTCO, PROPCO, and 8 we're here today seeking specifically approval 9 to institute foreclosure proceedings and to 10 institute other remedies which are in the loan 11 agreement which was specifically approved by 12 this Commission at the time that the loan was 13 approved with full knowledge of who the parties 14 to the loan were and what the conditions were. 15 We are now here today seeking anything more. 16 There is -- there are conditions here 17 which said that the exercise of remedies 18 required the prior approval of the Commission. 19 A fair reading of the loan agreement is that 20 what we seek to do are defined us remedies. 21 They include foreclosure. They include 22 acceleration of the loan, which is not 23 necessarily a remedy, but is associated with a 24 remedy, and so that's one of the things here 25 along with actions with respect to the accounts 0083 1 that are held by Resorts and enforcing 2 provisions of the loan agreements which provide 3 for how those accounts will be handled in the 4 event of defaults. 5 And we come here and ask your approval 6 to do that because there have been defaults. 7 It's uncontested that, in fact, there has been 8 a number of defaults, and specifically 9 defaults -- the payment defaults with respect 10 to the payment of the interest obligation of 11 the loan. 12 We are not here today seeking to operate 13 the casino. We are seeking remedies with 14 respect to the property company which is owned 15 by a company which is a nongaming CSI. We, in 16 fact, in the event of the exercise of remedies 17 would come before this Commission before 18 obtaining a deed in lieu of foreclosure -- if 19 it were offered, and there's no suggestion it 20 has been offered -- or before we obtain a 21 judgment of foreclosure with respect to the 22 status of each of the entities that it would be 23 involved in taking title to this property. 24 With respect to the operation of the 25 property, I'd invite your attention to the loan 0084 1 agreement, Section 5.1.24c -- and before you 2 turn all those pages, I'll tell you what it 3 says, and then you can check it. That provides 4 that in the event there was a foreclosure that 5 at the time that this agreement was entered 6 RIH, the licensed operator, agreed they would 7 retain -- they would remain under the terms of 8 the lease to operate as a licensed casino 9 operator for the lending parties when, if, and 10 as they obtain title to the real estate that's 11 there. So there's no issue about operation of 12 the casino. It's about the exercise of 13 remedies with respect to the PROPCO, which is 14 real estate. 15 We believe that, as the Division has 16 noted in their report, that the exercise of 17 these remedies, and the specific remedies we're 18 talking about with respect to the cash sweep 19 account, with respect to the right to exercise 20 these, are all ones which were provided for in 21 this loan agreement. All of which are going to 22 be exercised by parties who you were aware of 23 at the time of the loan agreement and who you 24 were aware of what those remedies were, and you 25 simply said that prior to the exercise of 0085 1 those, you wanted to approve it. You wanted 2 notice it was going to happen and then to 3 decide. 4 The suggestion by the borrowers has been 5 that, in fact, that was because you wanted to 6 say that each and every party who was going to 7 exercise a remedy would have to have a casino 8 license or would have to have some form of 9 license there, a gaming related CSI -- 10 something -- before there could be an exercise 11 of remedies or actions under an agreement which 12 you approved. 13 I would suggest to you that I don't 14 believe that's the case. I think evidential, 15 number one, the condition is very specific and 16 very limited. Had this Commission desired to 17 impose a condition which required a status of 18 particular lenders with respect to actions they 19 might take, actions that are authorized in the 20 Court of Chancery here in New Jersey, that you 21 would have said so, that that was a 22 requirement. 23 Additionally, this is not the only 24 OPTCO/PROPCO loan that this Commission has 25 approved. This is the only one that bears 0086 1 these conditions. Perhaps I might suggest that 2 the condition was imposed, as the Division 3 suggests in its papers and I think clearly 4 states in its papers, because the Commission 5 had a concern that before there was an exercise 6 of remedies, they wanted assurance with regard 7 to the financial stability going forward of 8 this property and the casino operation if those 9 remedies were to be exercised. That is, that 10 you didn't want to be placed in a situation 11 where a foreclosure with respect to this real 12 estate would trigger a cascade of events which 13 led to the financial instability and the -- you 14 know, uncertainty with respect to the 15 operations of the licensed operating company, 16 RIH. 17 We suggest to you, and I think we've 18 indicated in our papers, and we indicate that 19 pursuant to the agreements that the parties 20 voluntarily entered that that is not a case. 21 Number one, the very documents which controlled 22 this loan provide for that. This loan was 23 securitized and, in fact, a portion of the 24 loan, Wells Fargo acts as Trustee, is held by 25 certificate holders who have Trustee 0087 1 certificates. And another portion of the loan, 2 approximately half, is held by Colony 3 Financial, originally the lender. It has a 4 servicer, KeyBank. And that servicer has 5 obligations with respect to protection and 6 preservations of the collateral which require 7 it to advance funds, if necessary, in order to 8 make sure that that collateral, the businesses 9 inside of this building, continues to operate 10 and preserves the value of that collateral up 11 to recovery thresholds which are determined. 12 They're not only the legal obligation at 13 Key and special services that Trimont have but, 14 in fact, the Division has suggested that in 15 order to assure that that there be some kind of 16 commitment that there actually be a reserve 17 there in addition to whatever, if there would 18 be draw requests or whatever. 19 We tendered to your staff and the 20 Division, number one, a letter in which we 21 agreed to the conditions proposed by the 22 Division. And, more importantly, a document by 23 which KeyBank will deposit in an account, 24 following your approval of the exercise of 25 remedies, of sum of $15 million. That sum is 0088 1 without respect to any draws that may be made 2 by the special servicer with respect to the 3 needs of Resorts but will remain there until 4 and unless there were to be a determination 5 made that there can be no further advances. 6 And that 15 million would then become available 7 to you with our 45-day notice that we couldn't 8 make any further advances under the agreement 9 and as we're obligated. So you have an 10 absolute $15 million besides the draws that 11 would be made, if necessary, in order to 12 sustain the operation. 13 So I believe that if -- and I think that 14 a condition clearly in plain English iterates 15 that it's concerned with financial stability, 16 that we've addressed that, and addressed it in 17 a fashion suggested by the Division. And, 18 additionally, it can be found in these 19 documents in which those legal obligations go 20 to the servicer. 21 This whole servicer or special servicer 22 thing is, at times, confusing, but I would 23 suggest to you that the servicer has the 24 obligation with respect to the loan. The 25 special servicing, as described in our papers, 0089 1 is only that when there are properties where 2 there's been a default, when there's attention 3 and monitoring required that someone with that 4 particular expertise comes in and does that 5 role standing in the shoes of the servicer. In 6 this case, it's Trimont. That's what their 7 business is. We have, in fact, filed an 8 application -- completed application for 9 nongaming casino service industry licensure. 10 With respect to Key, their status had already 11 been determined. They are a national banking 12 association, and any qualification to be 13 servicer would be waived by you in the 14 resolution. 15 If, in fact, we foreclose, what will 16 happen? If we were to foreclose, or there 17 would be a deed in lieu tendered, a single 18 member LLC owned by Wells Fargo that's managed 19 by a non member, Trimont, would obtain the deed 20 to this property. They would then, as the 21 owner of the real estate with the status that 22 you give them pursuant to the agreement with 23 Resorts, have RIH continue to operate as a 24 licensee, the casino. They would do so under 25 the obligations of the pooling and servicing 0090 1 agreement, the loan agreement, to make the 2 advances necessary for the preservation of the 3 collateral. If, in fact, there would be a 4 point in time where one were to say there could 5 be no advances because we've reached the 6 advances to the point of the entire value of 7 the collateral, there would be a notice, and 8 there's $15 million that is in an account 9 that's available to stabilize the operation. 10 So there's a rolling money always available, 11 and there's a final 15 million which is in this 12 secured account. 13 I suggest to you that with respect to 14 the status if, in fact, foreclosure is going to 15 happen or if, in fact, there would be a deed in 16 lieu offered, we will file it immediately for 17 the declaratory relief as to the status of the 18 people who own the building, that is the 19 landlord, the lessor. And, as the Division has 20 indicated, it can be addressed at that time. 21 And the Division's papers even suggested the 22 method in which it can be addressed. And 23 preliminarily addressed with the status of who 24 those parties are. We know that it's a Trustee 25 for a very widely-held certificates, and it's a 0091 1 bank -- a unit of a bank holding company 2 regulated by the Federal Reserve. 3 With respect to the accounts, we seek to 4 have a cash sweep account which is -- in which 5 there's a security interest held by these 6 lenders. As I think is made plain from the 7 papers, it is, in fact, only so that they can 8 have a preservation of this collateral, and 9 it's specifically as provided in the loan 10 agreement, which loan agreement was presented 11 to the Commission, reviewed and approved by the 12 Commission. That these would be the remedies 13 that exercised upon default. These are not 14 normal remedies. These are remedies that occur 15 because there has been a default. 16 There's no suggestion that through any 17 of the servicing there's any attempt to operate 18 or interfere with the operation of the casino. 19 It is only to assure that funds that, in fact, 20 are generated at this property and at this 21 facility are utilized at this facility. And 22 that, in fact, if there are excess funds that 23 were to be generated, they are applied properly 24 to both the payments of interests and to other 25 obligations that have been occurred by the 0092 1 borrowers in conjunction with this operation. 2 The suggestion that the borrowers make 3 that your condition should be read that there 4 has to be an absolute process of casino 5 licensure for a foreclosuring borrower in this 6 PROPCO situation, is one which suggests that 7 somehow or another by your condition you 8 created some type of automatic stay, that the 9 borrowers were free to default and not pay the 10 interest obligation. To impose the obligation 11 to advance that interest with the certificate 12 holders upon KeyBank, the servicer and, in 13 fact, the remedies which were provided for, are 14 null and void. 15 I would suggest to you that any fair 16 reading of your condition and any fair reading 17 of how you've handled these loans consistently 18 indicates that, in fact, was a concern for 19 financial stability, continued operation. It 20 was not -- had nothing to do with what the 21 status of the parties was. You had addressed 22 the status of the parties in your resolution. 23 That status remains the same. And with respect 24 to what it will be as lessors is one which we 25 will address promptly when we're given the 0093 1 authority to move forward. 2 And we believe this is largely a legal 3 issue. It is largely an issue which is decided 4 by the meaning of your resolution and by the 5 plain words of it. And we suggested in our 6 papers that it's an important decision because 7 lenders who lend to businesses such as this 8 lend because they're granted certain degrees of 9 security, in this instance, a lien. A first 10 lien and the right to foreclose it. If one 11 were to suggest that those remedies were 12 subject to any number of other conditions never 13 expressed and, in fact, not implied but that 14 could be invoked by a borrower upon default 15 would suggest that that has to be clearly 16 enunciated, and, in fact, that was not your 17 intention. That was not what you enunciated, 18 and once your concern was -- what your concern 19 was was the one that we've addressed. And we 20 think it's appropriate, and we would ask that 21 you grant the relief in the condition. 22 I have present someone from the special 23 servicer to answer any questions you might have 24 about special servicing. But we believe the 25 balance of this issue is decided on the papers 0094 1 and, in fact, on these agreements which you 2 approved and have before you. 3 CHAIR KASSEKERT: Thank you. 4 Cross Petitioner? Mr. Brooks? 5 MR. BROOKS: Thank you, Madame Chair. 6 Madame Chair, members of the Commission, 7 before this loan agreement got entered into, 8 before there was an agreement between the 9 parties, the parties came to the Commission and 10 asked for the Commission's approval to enter 11 into the loan agreement. Column, represented 12 by counsel, participated in that process. The 13 Commission drafted a resolution. The 14 resolution was reviewed by the parties before 15 the Commission entered into the resolution. 16 The Commission then adopted the resolution and 17 approved Resorts entering into the loan 18 agreement. 19 The resolution was very clear. It said 20 that before the -- there was the exercise of 21 any -- or the exercise of any default remedies 22 and included the exercise of control over any 23 property or account in accordance with the 24 property account agreement or otherwise, the 25 parties had to come back, Column had to come 0095 1 back to the Commission and get approval from 2 the Commission to do that. 3 So that condition was part of the 4 resolution. It approved Resorts entering into 5 the loan agreement. Column was aware of it. 6 It was also, as you can see from what 7 we've marked as evidence as CP-2, provided to 8 Column by way of a Wolf Block letter, so that 9 they were aware of the conditions to the 10 Commission's approval allowing Resorts to enter 11 into the loan agreement. The loan agreement 12 itself in Section 10.23 -- Mr. O'Gara has 13 outlined the default agreements, but the loan 14 agreement in Section 10.23 states that all -- 15 that the agreement including all rights, 16 remedies, and powers under the loan agreement 17 could only be exercised to the extent that the 18 exercise doesn't violate gaming laws. So that 19 was something that Column agreed to when it 20 entered into this agreement, when it entered 21 into the agreement with Resorts. It was aware 22 that there was a prior approval requirement. 23 It was aware that they couldn't exercise any of 24 the remedies that have been described by Mr. 25 O'Gara if those remedies, the exercise of those 0096 1 remedies were inconsistent with the gaming 2 laws. 3 What they have suggested in terms of 4 what they've asked for in the petition, they've 5 asked for a global blanket clause to exercise 6 all remedies, but then they've asked for 7 specific remedies. And some of those remedies 8 we don't really have any objection to. There's 9 no real need for licensing. As the Division 10 pointed out, events still need to unfold in 11 connection with some of those potential 12 remedies. 13 But there are two remedies where there 14 are no events that need to unfold. We all know 15 where we're at. They've asked for a deed in 16 lieu of foreclosure. That -- even if there was 17 an appetite to provide that, and I'm not saying 18 that there is, that couldn't happen. They want 19 that deed in lieu of foreclosure to go to 20 Trimont. Trimont wasn't a party when this 21 agreement was entered into. Trimont wasn't 22 before you. Trimont is new to this agreement. 23 They were recently appointed. Trimont has 24 filed recently an application for nongaming 25 casino service industry license, but they 0097 1 haven't been licensed by this Commission 2 before. They are not a qualifier. They have 3 never qualified before. So their status is 4 that they're unlicensed, and they haven't 5 qualified before. But they want to be the 6 owner of the land underneath the casino -- of 7 the Resorts Casino. 8 Now, the Casino Control Act is very 9 clear about that. You can't own the land under 10 a casino hotel unless you're licensed. Unless 11 licensing is dealt with. Okay? And there have 12 been prior decisions by this Commission dealing 13 with owners of land under casino hotels. And 14 in those prior decisions, the Commission made 15 it clear that there was a need for that owner 16 to have a casino license. 17 Now, we're not saying that the 18 Commission is going to agree one way or the 19 other. And certainly Column, Mr. O'Gara's -- 20 they can file whatever petitions they want to 21 file. Nobody is stopping them from exercising 22 any of the remedies or filing any petitions 23 they want to file. But there can't be a 24 transfer of ownership for the land underneath a 25 casino hotel until there's a resolution of the 0098 1 license issue. And that's the point that 2 Resorts is trying to make and made with respect 3 to that request. 4 The other request is that Column wants 5 to control the Resorts bank accounts. What 6 they want to do is, they want to establish a 7 bank account that they control. All right? 8 And it's not Column; it's Trimont. It's 9 Trimont that would control this bank account. 10 And in this bank account they want all of the 11 funds, all the revenues generated by Resorts 12 Casino operation to go into their account, an 13 account they control. They would then decide 14 what gets paid. They would then decide what to 15 do with the revenues. They want to control the 16 revenues from the casino hotel. Again, the 17 Casino Control Act is very clear. It says that 18 you cannot control revenues, operations unless 19 you are appropriately licensed. 20 So what we've said, we don't know what 21 the license will be, that will be up to the 22 Commission. But that licensing has to be 23 resolved before any of these remedies -- we can 24 agree to any of these remedies. And I would 25 suggest to the Commission that before the 0099 1 Commission could allow any of those remedies 2 that the Commission would have to resolve the 3 licensing issue. And, of course, that's the 4 subject matter of our cross petition. 5 Column has also asked for -- and they've 6 asked on Trimont's behalf to do this. They 7 also want to direct what is done with respect 8 to the use the revenues. They want to direct 9 Resorts on how the revenue is utilized. That's 10 another aspect of the relief they're seeking. 11 For them to be able to direct a casino 12 licensee how to use the remedies, what to do 13 with the property, you have to be licensed. 14 These are not novel issues. Ownership of 15 property, control of a casino licensee, it 16 equals licensure. It always has. These are 17 not novel issues. This is something everyone 18 in the lending world understands. 19 Lastly, Column has requested permission 20 to review agreements, various agreements. They 21 specifically mentioned shared services 22 agreements, management agreements. And they 23 want to have the right ex post facto to 24 terminate those agreements if they decide, in 25 their judgment, that those agreements should be 0100 1 terminated. 2 Once again, what we're talking about 3 here is control. We're talking about control 4 of how a casino conducts its business, and they 5 want to do this, Trimont wants to do this, 6 without any licensing. Without any license, 7 without a licensing decision. And we're saying 8 that these things can't happen. They have to 9 be -- there has to be a resolution of those 10 licensing issues. 11 That's the petition of Resorts in 12 connection with this matter. 13 CHAIR KASSEKERT: Thank you. 14 Miss Flaherty? Do you have an opening 15 statement? 16 MS. FLAHERTY: Yes, Chair, 17 Commissioners. 18 As set forth, there has been a default 19 under the loan agreement. You have our reports 20 where we detailed our position in these matters 21 and legal argument. It does not appear that a 22 bankruptcy is in view, and the lender is 23 seeking to exercise its remedies. 24 As stated, this matter revolves around 25 two Commission resolution conditions. The 0101 1 first one is in Resolution No. 07-03-07-13 2 which dealt with the original lending. That's 3 Condition No. 4. And Resolution 08-01-30-14, 4 Condition No. 3, which was the license renewal 5 resolution. 6 The aim of the Division addressing these 7 matters relating to Resorts loans over the last 8 several months has been to facilitate within 9 our regulatory mission the continuing operation 10 and viability of the Resorts Casino Hotel 11 operation. The continued financial viability 12 of Resorts and its operation is a statutory and 13 regulatory requirement. The relief requested 14 requires the approval of the Commission because 15 of the conditions that I've cited, and it also 16 requires, in our view, a finding of continued 17 financial viability. 18 It's our position that there can be 19 sufficient assurance of Resorts' financial 20 stability by the creation of a reserve fund 21 which can be maintained, must be maintained on 22 an ongoing basis with regard to the Resorts 23 operation. 24 In our view, the reason for the 25 conditions in the financing resolution and the 0102 1 license renewal resolution from which relief is 2 sought really were to assure that there was no 3 abruptive fact in the event of a default and 4 that the casino accounts were depleted, and 5 there was no resource to continue to run the 6 casino operation. We think that it was aimed 7 at protecting the ongoing Resorts operation and 8 was not meant or imposed to otherwise adversely 9 effect the rights of petitioners or investors 10 in the securities which are involved here, both 11 of which are debt. The Division would seek to 12 enforce what, in our view, are fairly typical 13 legal remedies upon default as set forth in 14 their loan agreement. 15 Our position is that, subject to the 16 conditions which we have recommended, we do not 17 have an objection to the relief which is sought 18 because those conditions, in effect, would 19 limit or relate to the actions that want to be 20 taken, and those would require in various 21 regards notice, approval, reporting, and 22 cooperation. 23 I would specifically note two conditions 24 that we've recommended. The first would be 25 that there would need to be established a 0103 1 reserve account, including operational fund for 2 weekends and special events, which needs to be 3 maintained on a rolling, constant basis in the 4 amount of $15 million and that such reserve 5 would need to be maintained for casino 6 operations before any interest payments could 7 be made. 8 Additionally, it's our position that in 9 order for Resorts to maintain its 10 qualifications, including its financial 11 stability, that it would need to meet on an 12 ongoing basis various obligations, including 13 those to the Casino Revenue Fund, the Casino 14 Control Fund, the Casino Investment Development 15 Authority, state, county taxes, real estate and 16 other taxes, payments to patrons, vendors of 17 goods and services, and employees and that such 18 obligations would need to be met on a 19 continuing basis unless there was 45 days prior 20 notice to us that such payments would not be 21 continued. 22 Additionally, in a separate report, the 23 Division had recommended conditions to which 24 Resorts has agreed. And those conditions 25 relate to the same requirement in terms of 0104 1 funding, the ongoing operations of the casino 2 hotel, and that a $15 million reserve would be 3 maintained, that there would be reporting to us 4 in terms of a restructuring of the debt and 5 that, additionally, they would give us detailed 6 steps with respect to the costs and expenses 7 incurred with regard to the ongoing operation, 8 and we would be able to review those and report 9 to the Commission. 10 As stated, Resorts has likewise agreed 11 to those conditions which we have recommended. 12 Based on that, we would need to have 13 today representations, further representations 14 such as the Trimont letter which Mr. O'Gara has 15 referred to and representations from Resorts 16 with regard to the $15 million reserve amount 17 so that we could make a determination as to the 18 ongoing viability of Resorts at this point in 19 time. 20 CHAIR KASSEKERT: Thank you. 21 MS. FLAHERTY: Thank you. 22 CHAIR KASSEKERT: We'll now move to 23 testimony. 24 Mr. O'Gara, will you call your first 25 witness? 0105 1 MR. O'GARA: Yeah. If I might, Peter 2 Hoelzle. 3 CHAIR KASSEKERT: Mr. Hoelzle, Mr. Nance 4 will swear you in. 5 6 PETER B. HOELZLE, was duly sworn to 7 testify in this matter. 8 9 MR. NANCE: Please state your name for 10 the record. 11 THE WITNESS: Peter B. Hoelzle. 12 MR. NANCE: Thank you. 13 You may proceed. 14 CHAIR KASSEKERT: You may proceed Mr. 15 O'Gara. 16 17 DIRECT EXAMINATION BY MR. O'GARA: 18 Q. Sir, by whom are you employed? 19 A. Trimont Real Estate Advisors in Atlanta, 20 Georgia. 21 Q. And in what capacity? 22 A. As Vice President of the company. 23 Q. And is Trimont -- has Trimont been 24 appointed as a special servicer with respect to the 25 loan which we're discussing here today? 0106 1 A. Yes, it has. Trustee. 2 Q. And, now, can you describe to us, first 3 of all, what is Trimont? 4 A. Trimont is a loan servicer, an asset 5 management company that takes responsibility under 6 agreement with its clients to look after collateral 7 positions and properties that secure loans that have 8 been made and are in some sort of default or 9 nonperformance. 10 Q. All right. And was Trimont -- who 11 appointed Trimont as special servicer with respect to 12 this particular loan? 13 A. The trust for the loan. 14 Q. All right. And what is that trust? Do 15 you know? 16 A. It's the Wells Fargo -- 17 Q. It has a number, though? 18 A. Yes. It has a number. 2007 -- 19 Q. It has a lot of them, but it's the trust 20 which holds the actual documents here -- 21 A. Correct. 22 Q. -- with respect to the loan agreements? 23 A. Correct. 24 Q. And that loan is partially evidenced by 25 trust certificates it issued to a number of people who 0107 1 purchase in conjunction with this and other loans? 2 A. Correct. 3 Q. Is there portion of the loan held by 4 somebody else? 5 A. Yes. 6 Q. And do you know who that is? 7 A. It's Column Financial. 8 Q. Now, KeyBank is a servicer; correct? 9 A. KeyBank is the master servicer. Yes. 10 Q. All right. And is there any reason why 11 KeyBank would appoint a special servicer or why Wells 12 Fargo would when the loan goes into default? 13 A. Yes. Under the loan agreements and the 14 structuring of the securitization an appropriate 15 appointment for special servicer to become involved 16 when there's an event of noncompliance or default 17 under the underlying loan agreements. 18 Q. Why? 19 A. For special oversight and review and 20 evaluation of the collateral and its cash and 21 liquidity position in order to allow it to meet the 22 ongoing loan obligations. 23 Q. And this is because you do as specialty, 24 and that's not what KeyBank does? Is that a fair 25 statement? 0108 1 A. That's right. 2 Q. Now, in order to obtain this 3 appointment, is there -- do you have to have some 4 qualifications? I mean, under the loan agreement or 5 is there something in the industry that -- can you -- 6 can I just go in this business? 7 A. You have to be a rated loan -- special 8 servicer and loan servicer by a rating agency, 9 standard and Poor's, Fitch, Moody's. 10 Q. And are you so rated? 11 A. Yes, we are. 12 Q. And did you have to be rerated and have 13 your rating evaluated in conjunction with this 14 assignment? 15 A. Yes, we were. And the rating was done 16 for this assignment and rerated on December 15th, 17 2008. 18 Q. Now, where are you based? 19 A. Atlanta, Georgia. 20 Q. So you're acting now as special servicer 21 with respect to the loan and monitoring it; correct? 22 A. That's right. 23 Q. Do you have any intention of coming to 24 Atlantic City, New Jersey? 25 A. Other than for hearings such as this or 0109 1 an evaluation of the property, working together with 2 the management staff of Resorts with regard to what's 3 shown in our petition, would be the only reason to be 4 actively present here. 5 Q. All right. And you have -- as part of 6 your special servicing obligation, will you be 7 involved in the operations of RIH, the licensee or its 8 casino operations or -- 9 A. No. 10 Q. -- hotel operations? 11 A. No, we will not. 12 Q. What is it you will do? What will be 13 your role with respect to RIH as special servicer if 14 the relief is granted? 15 A. We would expect RIH to prepare a budget 16 for the operation of the property for 2009. We would 17 review that budget together with them in terms of what 18 operating needs there are of the hotel and the casino 19 and agree on that budget, the details comprising it. 20 And contingencies that might be also included in the 21 budget for its operation as a first-class hotel and 22 casino facility under its -- its current license. 23 Q. Now, you're familiar, are you not, with 24 the fact that the Division of Gaming Enforcement 25 proposed certain conditions which they expected 0110 1 compliance in order for them to recommend approval of 2 the relief that we sought? 3 A. Yes. 4 Q. You've seen that letter? 5 A. Yes. 6 Q. And you're also familiar with the fact 7 that there are financial stability requirements for a 8 casino to operate in New Jersey? 9 A. Correct. Yes. 10 Q. Now, under the servicing agreement that 11 governs what you do, should Resorts have some type of 12 financial shortfall or be unable to meet their needs 13 for one of those requirements, is a requirement for 14 the servicer or the special servicer to advance funds? 15 A. There's a requirement for the master 16 servicer to advance funds. 17 Q. That's Key? 18 A. That would -- is KeyBank, and that would 19 be on advice from us that a master servicer advance is 20 recommended and for what reason and for what purpose. 21 And it would be done in connection with our review of 22 the underlying nature of the request, the financial 23 capacity for it to be addressed by operating cash 24 flows of the project. And, if not, then recommend its 25 funding by the master servicer under the agreement it 0111 1 has as master servicer to fund such recommended 2 fundings. And that funding, of course, is subject to 3 the master servicer's final discretion as to the 4 recoverability of the advance. 5 Q. Are you aware that the service -- master 6 servicer and the special servicer have agreed to the 7 condition the Division proposed that the various 8 requirements set forth for financial stability are 9 necessary expenses of the servicer for advances if 10 appropriate? 11 A. Yes. 12 Q. Are you further aware that in addition 13 to those advances that KeyBank and Trimont have 14 entered into an agreement in which KeyBank will 15 deposit $15 million into an account which will remain 16 available for the needs of Resorts in the event that 17 you were to decide that you were not making further 18 advances? 19 A. Yes. 20 Q. And that any advances you make up to the 21 recoverability determination are beyond or without 22 regard to that 15 million that is there; correct? 23 A. That's right. That KeyBank would make. 24 Q. Yeah. That KeyBank -- 25 A. Correct. 0112 1 Q. Would that be in a KeyBank account. 2 A. Yes. 3 Q. Now, with respect to the sweep account, 4 the consolidation, what is the purpose of that 5 account? What is the purpose of consolidating all of 6 the money in that account? 7 A. The purpose is to have all operating 8 funds coming into the property from hotel and casino 9 operation to be centralized in one account for clear 10 visibility in terms of the cash available to fund the 11 operating costs of the project. 12 Q. By the "project," you mean the -- 13 A. The casino and hotel. Yes. 14 Q. Now, with respect to agreements that 15 Resorts has, if you were to review those agreements 16 and assume there were an agreement that they had that 17 you thought should be reviewed, do you have the 18 authority to terminate that agreement? 19 A. No, we don't. 20 Q. And if you were going to recommend 21 termination would, in fact, we come back here and seek 22 the approval of this commission -- 23 A. We would be back -- 24 Q. -- before we did? 25 A. -- before the Commission to seek that 0113 1 review and consensus on such an action. 2 Q. Does Trimont intend to have any role at 3 all in the operations or the gaming operations of 4 Resorts? 5 A. No. 6 Q. If Resorts were to request an advance 7 because of a shortfall, and if it were for payment of 8 property taxes, do you understand your obligation is 9 to make that advance under the agreement that the 10 condition that was imposed -- recommended by the 11 Division? 12 A. To recommend that advance be made if 13 it's not available at the property level from funds 14 available from the cash sweep account or within any 15 other reserve held by the property that it would be 16 recommended as a master servicer advance to KeyBank. 17 MR. O'GARA: I don't have any other 18 questions. 19 CHAIR KASSEKERT: Thank you. 20 Mr. Brooks? Cross-examination? 21 MR. BROOKS: Thank you. 22 23 CROSS-EXAMINATION BY MR. BROOKS: 24 Q. Mr. Hoelzle, is Trimont a bank? 25 A. No. It's a master -- it's a loan 0114 1 servicer. 2 Q. Is it a licensed lending institution? 3 A. No. 4 Q. Does Trimont have any form of licensure 5 from the Casino Control Commission? 6 A. We have made application for a casino 7 industry servicer license. 8 Q. But it doesn't have any form of a 9 license as we speak; right? 10 A. I -- the application is filed. 11 Q. But it doesn't have any form of license. 12 You haven't -- the Commission here hasn't ruled that 13 you -- your license is granted; correct? 14 A. There -- to the best of my knowledge, 15 the ruling is not final. 16 Q. And Trimont was never qualified before 17 this Commission or been found qualified by this 18 Commission, has it? 19 A. No. 20 Q. Now, in your petition -- are you 21 familiar with the petition that was submitted in 22 connection with the relief being sought from the 23 Commission? 24 A. Yes, I am. 25 Q. And -- all right. And in the petition 0115 1 one of the things that was asked for was the ability 2 to accept a deed in lieu of foreclosure; correct? 3 A. That's right. 4 Q. And if there's an acceptance of that 5 deed, Trimont would be the one accepting the deed; 6 correct? 7 A. No. 8 MR. O'GARA: If I can -- I thought I 9 laid it out before, and I just don't want Mr. 10 Brooks to misunderstand. I thought I said any 11 foreclosure, any deed, whether it be by way of 12 foreclosure or tendered, would be to a 13 single-member LLC owned by Wells Fargo. They 14 are the person who has custody of all these 15 loan documents. And that single-member LLC 16 would be owned by Wells Fargo on behalf of the 17 loan participants who are all the certificate 18 holders and Column. And the non member manager 19 would be Trimont as the servicer. But they 20 would not be a member, and they wouldn't be an 21 owner of the share. I just want to -- 22 MR. BROOKS: Well, I mean, I guess you 23 could say -- 24 Q. I mean, is any of what Mr. O'Gara -- any 25 of those representations laid out in the petition? 0116 1 A. They have been described by Mr. O'Gara. 2 Q. Okay. Are they spelled out in the 3 petition? 4 A. I -- I would to look at the petition. 5 Q. You want to see it? 6 A. Yeah. 7 MR. BROOKS: May I approach the witness, 8 Madame Chair? 9 CHAIR KASSEKERT: Sure. 10 Q. I direct your attention to Paragraph 17 11 of the petition. 12 A. (Reviewing.) 13 Q. Have you had a chance to look at that? 14 A. Yes, I looked at Section 17. 15 Q. And that paragraph says that Trimont on 16 behalf of the holders of the loan would attempt to do 17 certain things, one of which is to accept the deed in 18 lieu of foreclosure with respect to the mortgaged 19 property; is that correct? 20 A. That's what it says in 17. 21 Q. And that's the relief you requested from 22 the Commission; correct? 23 A. Yes. 24 Q. Now -- let me take that back from you, 25 if I may. Thank you. 0117 1 With respect to the bank accounts, the 2 bank account, what Trimont is proposing to do is 3 establish a bank account controlled by Trimont; 4 correct? It would be -- the bank account would be 5 controlled by Trimont? 6 A. It would be overseen by Trimont. It 7 would not be under Trimont's control. 8 Q. Who would control it? 9 A. Column would control it. 10 Q. Okay. 11 A. The lender would control it. 12 Q. So Column would control the bank 13 account. All right? And you would oversee the bank 14 account on behalf of Column? 15 A. We would oversee the uses of funds 16 coming out of that bank account, proposed, pursuant to 17 a budget that was reviewed in advance with the -- and 18 agreed with the Resorts management company as to the 19 budget of the normal first-class operation of the 20 hotel, operating needs, Capex needs, and 21 contingencies, taxes. Typically -- typical operating 22 costs and expenses of the hotel and casino. 23 Q. So it would be -- -- 24 A. Would -- monitor its disbursements from 25 that account pursuant to that budget. 0118 1 Q. You could monitor the disbursements from 2 any bank account Resorts has now; right? You can 3 request that information, and Resorts has an 4 obligation to give it to you; correct? 5 A. We can request information and budgetary 6 information and disbursal information. 7 Q. And you can request any information you 8 want regarding the finances of Resorts; correct? 9 A. Yes. 10 Q. Okay. Now, the account that you're 11 describing would be owned by Column, not Resorts; 12 correct? It would be owned by Column. 13 A. It would not be owned and controlled by 14 Trimont. 15 Q. But it would be owned by Column; 16 correct? 17 A. I need to consult with counsel on that 18 as to the specific owner. 19 Q. Okay. You can't answer the question? 20 A. I believe it is either held by Column or 21 for the trust. And I'm not certain if it's specific 22 to Column or for the trust in the securitization. 23 MR. O'GARA: I can represent what 24 the account -- 25 MR. BROOKS: Excuse me. 0119 1 CHAIR KASSEKERT: Well, I -- 2 MR. BROOKS: I'm in the middle of 3 cross-examination here. I mean, you can 4 recross. 5 CHAIR KASSEKERT: I think we can let the 6 witness answer. If he can't answer, you'll 7 have the opportunity. 8 Q. So that account won't be owned by 9 Resorts; correct? 10 A. No. 11 Q. And do you know if anybody who would be 12 in an ownership position with that account has any 13 form of gaming license from the Casino Control 14 Commission? 15 A. No. 16 Q. Do you know whether or not anybody who 17 would be in a position to own that account has ever 18 qualified -- was found qualified by the Commission? 19 A. No. 20 Q. Now, you would make decisions as to how 21 the monies in that account were then utilized; 22 correct? Trimont would make those decisions. 23 A. We would not make decision as to how it 24 was utilized. We would monitor disbursements made 25 against a budget that was approved in advance between 0120 1 Trimont, a special servicer, and the licensed operator 2 of the hotel and casino. We would not approve 3 disbursements. We would review disbursements made 4 against a preapproved budget. 5 Q. Well, you can do that now; correct? You 6 can review any disbursements, any expenditures, any 7 funds that are utilized in accounts Resorts has -- 8 A. We could ask for that information. Yes. 9 Q. Okay. But you want to control. As I 10 understand the petition you filed with this 11 Commission, you want to control the expenditures from 12 that account and the deposits to that account; 13 correct? 14 A. We want oversight on all deposits coming 15 into the account, and we want review capability on 16 disbursements being made from that account for the 17 operation of the hotel and casino. 18 Q. And you get that now from Resorts just 19 by asking Resorts; correct? 20 A. We can request information from them. 21 From Resorts. 22 Q. All right. But in the petition you've 23 asked for control of the account. You wanted control 24 of expenditures the account and deposits to the 25 account; right? 0121 1 A. We want the ability to monitor and 2 oversee, as I said, disbursements being made. 3 Q. Okay. Let me -- if I could show you 4 petition again just so -- 5 MR. O'GARA: The witness has answered 6 three times the same question. I mean, whether 7 Mr. Brooks reads the words one way and he does 8 another is -- I think he is -- 9 CHAIR KASSEKERT: Well -- 10 MR. O'GARA: He answered it three times 11 now. 12 CHAIR KASSEKERT: I don't -- I don't -- 13 I'd like Mr. Brooks to ask him because I'm not 14 sure -- I'm not sure he answered the question, 15 frankly. 16 Q. Let me show you again the petition, and 17 I'll direct your attention to Paragraph 18c. 18 A. Uh-hum. (Reviewing.) 19 Q. And in Paragraph 18c, well, take a look 20 at it, first. I'll let you. 21 A. (Reviewing.) Okay. I've reviewed c. 22 Q. Okay. And in connection with Paragraph 23 18c, you're asking -- Trimont is asking on behalf of 24 the Co-Petitioners and the note holders for the 25 ability to control over and/or -- 0122 1 A. And/or to monitor the expenditures from 2 and deposits to the property account. 3 Q. To the various accounts; correct? 4 A. Right. And I'm saying our goal is to 5 monitor expenditures from and deposits to the property 6 account. 7 Q. The goal is to monitor that account; 8 correct? 9 A. Yes. Yes. 10 Q. And you have the ability to do that 11 whether or not that account is owned by Resorts or by 12 Column; correct? 13 A. Yes. 14 Q. Thank you. 15 Now, you were asked a couple questions 16 by Mr. O'Gara in terms of agreements. 17 A. Uh-huh. 18 Q. As I understand it, Trimont is asking 19 for the right to review any agreements -- any 20 agreements that you would request, including shared 21 services agreements, intercompany agreements, and 22 things like that; correct? 23 A. That's right. 24 Q. And what you had specifically asked for 25 in terms of relief you are seeking from this 0123 1 Commission is the ability to terminate those 2 agreements if Trimont or Column determines that those 3 agreements aren't essential for Resorts casino 4 operations; correct? 5 A. We want the ability to review those 6 agreements, take a view on the basic elements of the 7 agreement, and be able to come back to the Commission 8 should we find that there are shared services or 9 financial matters within those agreements that we 10 think should be discussed with the Commission. And if 11 there's a finding that they are not essential, then we 12 would like the opportunity to recommend that they be 13 terminated or restructured. 14 Q. Okay. Now, but in terms of the relief 15 you sought from the Commission by way of your 16 petition -- 17 A. Uh-hum. 18 Q. -- you didn't mention about coming back 19 to the Commission. You mentioned the right to 20 terminate those agreements if that's what you decide 21 is in the best interests of the casino operations at 22 Resorts; correct? 23 A. Yes. 24 Q. By the way, have you -- as Resorts ever 25 refused any request you made for an agreement of any 0124 1 sort? 2 A. We've requested certain information and 3 certain agreements that haven't been delivered yet. 4 Yeah. 5 Q. Okay. What agreements? 6 A. Not that -- they haven't refused. They 7 just have not been delivered yet. 8 Q. Okay. 9 A. Detailed budget, for example, for 2009. 10 Q. Have you asked for any shared services 11 agreements? 12 A. I believe that was in our original due 13 diligence request. 14 Q. And they haven't been provided to you 15 yet? 16 A. No. 17 MR. BROOKS: I have nothing further. 18 CHAIR KASSEKERT: Ms. Flaherty? 19 MS. FLAHERTY: Yes, thank you, Chair. 20 21 CROSS-EXAMINATION BY MS. FLAHERTY: 22 Q. Sir, good afternoon. 23 A. Hello. 24 Q. Is it your understanding that you're 25 registered as a vendor with the Commission? 0125 1 A. No. No. 2 Q. No? Are you aware if you are permitted 3 to do business, the business that you're in, in terms 4 of working with Resorts at this point in time by 5 virtue of your application filing? 6 A. I know our application is filed and is 7 in review process. But as to its completion and final 8 ruling on it, I think that was the aforestated status 9 of it. 10 Q. Now, in terms of being a special 11 servicer, can you describe that business? What do you 12 do? Generally. 13 A. Generally, we oversee the collateral 14 properties. The obligations under loan agreements 15 that have that collateral -- which the collateral is 16 subject to -- to determine if there is a means to 17 resolve either default or nonperformance conditions 18 under the loan agreement with either a restructuring, 19 modification, or enforcement of the rights within the 20 loan documents and work together with the borrower and 21 counsel for lender and borrower to see if a resolution 22 is possible under a variety of resolution 23 possibilities within the loan documents. Typically 24 under a prenegotiation agreement with the borrower to 25 discuss and evaluate potential ways to resolve 0126 1 nonconformance or a default situation. 2 Q. So is that primarily advice that you 3 give? Or consulting? Or how do you describe your 4 role with regard to the borrower and the lender? 5 A. It's resolution oriented. 6 Q. Uh-huh. 7 A. Evaluating facts, circumstances, value, 8 capability. Working with consultants to determine 9 values, collateral, highest and best use, et cetera, 10 and making recommendation to the client, the lender, 11 in terms of solutions it might pursue to resolve the 12 situation of nonpayment or noncompliance. 13 Q. Now, with regard to Trimont, is that a 14 branch of its operation? Or is that all it does? 15 A. It's a branch of its operation. Asset 16 management. We are also a loan servicer, providing 17 basic financial reporting and loan payment processing 18 and reporting of cash activities under loan agreements 19 which we manage for our clients. 20 Q. But the special servicer in defaulted 21 loans is one of your specialties, would you say? 22 A. Yes, it is. 23 Q. And how many loans do you currently have 24 under servicing? 25 A. I have six at current. 0127 1 Q. How about the entire company? 2 A. Total volume is somewhere around $55 3 billion in loans. 4 Q. Uh-huh. 5 A. That are under various types of 6 servicing agreements. Special servicer and primary 7 servicer. 8 Q. Okay. And could you give me that amount 9 again? 10 A. $55 billion. 11 Q. Fifty-five billion? 12 A. Yeah. 13 Q. Okay. And now, in regard to the 14 recoverability, can you discuss that and tell us 15 what's involved in that analysis? 16 A. Recoverability in terms of master 17 servicer? 18 Q. In terms of the money that can be 19 advanced in terms of an operation that is in default 20 on a loan. Is that based on the appraisal of 21 property? 22 A. It's based on appraisal, opinion of 23 value, assessment of collateral value, both 24 improvements and land value. That's collateral for 25 our loan. And it's typically based on an M&I 0128 1 appraisal conducted within the past six months, plus 2 or minus on the collateral property. 3 Q. And has that been undertaken with regard 4 to Resorts? 5 A. Yes, it has been. 6 Q. Now, in light of your specialty in this 7 area, can you discuss any kind of time line with 8 regard to the outcome of this matter? Or its 9 potential outcomes? 10 A. Time line in terms of what? 11 Q. How long it would take to -- I guess you 12 have to talk about the different outcomes and how long 13 they may take to -- 14 A. Over the course -- 15 Q. -- unfold. 16 A. Right. That varies by -- by property 17 and complexity of loan and capability of collateral to 18 perform or perform better or to be restructured or 19 enforced in some way. That process could take, you 20 know, a number of months. It can be done on a more 21 fast-tracked basis, depending on the complexity of the 22 loan, the complexity of the default, and the 23 capability of both the collateral and/or the borrower 24 to resolve those conditions under any one of a number 25 of solutions that might be proposed. So time line 0129 1 could go from, you know, a month or two to several, 2 depending upon the course of action that's followed. 3 Q. Now, you mentioned working with a budget 4 and working with the staff of the operation? 5 A. Right. 6 Q. Now, what would be involved in that? 7 You would get the budget and review it as the first 8 step? 9 A. Yes. We've asked the budget from the 10 finance department at Resorts for this property. We 11 would review it together with them, make sure we 12 understand the nature, the expected revenues, the 13 expected operating expenses. In light of the hotel's 14 and casino's current position and projected position 15 for 2009, more revenue, less revenue, what's causing 16 that. Higher expense, lower expense, what the reason 17 is for that. Substantiation. Same with capital 18 improvement needs that are recommended in light of 19 physical inspection and/or appraisal that's been 20 completed on the project to reach an agreement on what 21 the operating budget should be for the property for 22 the upcoming fiscal year and establish that as the 23 working budget for the property for the upcoming 24 accounting period. 2009, in this case. 25 Q. And I'm not sure from what you said. 0130 1 Have you received the budget that you requested from 2 Resorts yet or not? 3 A. No. We haven't received a full detailed 4 budget for 2009. 5 Q. Now, with regard to the bank account 6 that would be established, who would be, I guess, the 7 beneficiary of that account? Who would the funds be 8 used for? What would happen to the funds in that 9 account? 10 A. The funds in that account would be used 11 to fund operating expenses and approved Capex expenses 12 that would not already be paid out of the working 13 capital reserve or the capital expense reserve within 14 the loan. Pursuant to the budget. The balance of the 15 funds above operating costs would be retained in that 16 account for the benefit -- for the property at the 17 property level, but the ownership of the funds above 18 the operating needs of the property would be for the 19 lender. 20 Q. Now, in terms of the operating needs of 21 the casino hotel, in terms of the amounts in the 22 account, would there be a reserve maintained there for 23 whatever operating requirement would be necessary 24 under the budget? Or would it be additional sort 25 of -- 0131 1 A. Right. 2 Q. -- potential extra amount to be used as 3 needed or for an emergency? How would that work? 4 A. Well, the budget has to be received, 5 reviewed, analyzed, and agreed with the licensed 6 operator of the hotel casino. I would envision that 7 reserves could be agreed for capital expenses, for 8 property taxes, for any other operating obligations 9 the casino has for the three funds that were mentioned 10 earlier and that reserves could be established for 11 each of those purposes. 12 There is also a cage cash amount that is 13 always present at the casino to operate it daily, 14 which is separate. So there would be within the 15 budget reserves agreed for specific functions and 16 purposes and contingencies. 17 Q. Now, if those amounts were insufficient 18 for the casino's operations or there was an emergency, 19 how would it work in terms of the pooling of servicing 20 agreement as to obtaining additional funds? 21 A. We would have to recommend upon requests 22 from the borrower a master servicer advance for the 23 business purpose of the property described for this 24 advance, whatever that case may be, after we have 25 looked at it, evaluated it's a bona fide expense of 0132 1 the casino or hotel, and recommend that to KeyBank to 2 be funded as a master servicer advance. They would do 3 a -- we would make a recoverability analysis of that 4 advance and then make that recommendation to KeyBank 5 to fund it. And they have discretion, then, to look 6 at that recommendation and request and the view of 7 recoverability and, in their discretion, make the 8 advance. 9 Q. Now, all these relationship requirements 10 are set forth in the agreements. Would that be 11 accurate? Your retention agreement, the pooling of 12 services agreement, the loan agreement? Pretty 13 much -- 14 A. The agreement I just -- the process I 15 just described for -- 16 Q. Uh-huh. 17 A. -- master servicer advance has been set 18 forth in a proposed agreement between Trimont and 19 KeyBank concerning master servicer advance and the $15 20 million reserve account that was described earlier on. 21 Q. Now, with regard to the relief that's 22 been requested, how does that relate to the funds to 23 be provided? Are they in relationship to each other? 24 Are the funds provided whether or not you have access 25 to -- or the ability to exercise these rights? Do 0133 1 they go together? 2 A. This is all proposed at this point, and 3 they go together. Yes. 4 MS. FLAHERTY: That's all I have. Thank 5 you. 6 CHAIR KASSEKERT: Just for my own 7 edification, so I understand what it is you do, 8 you only step in if there's a default. Is 9 that -- 10 THE WITNESS: Right. Right. We're 11 appointed pursuant to the pooling of servicing 12 agreement as a special servicer, and that 13 occurs after there's been a default. 14 CHAIR KASSEKERT: Okay. 15 THE WITNESS: Or nonperformance. 16 CHAIR KASSEKERT: And in your testimony 17 you talked about how you helped to prepare a 18 budget or review a budget. 19 THE WITNESS: We would review a budget. 20 CHAIR KASSEKERT: What particular 21 expertise do you have with respect to casino 22 gaming? 23 THE WITNESS: Specifically to casino 24 gaming we do not have a specialization as to 25 that industry. 0134 1 CHAIR KASSEKERT: So how would you know 2 if there was something in the budget that you 3 disagreed with? First of all, what would you 4 do if you disagreed with something in the 5 budget, and then second, what -- what would you 6 do to try to understand what was in the budget? 7 Because obviously -- 8 THE WITNESS: Right. Good point. 9 CHAIR KASSEKERT: -- obviously, gaming 10 is a unique business. 11 THE WITNESS: We would consult with the 12 licensed operator of Resorts International 13 Hotel Casino as to the expense level proposed 14 or the reserve level proposed or the need 15 projected for this period and determine that it 16 was reasonably supported, either by historic 17 operating results, adjust it for what's 18 expected to occur in the upcoming period. 19 Higher, lower. And if it is higher or lower, 20 justify why that adjustment would need to be 21 made. 22 CHAIR KASSEKERT: Well, what would you 23 do if they still continued to disagree with 24 them? 25 THE WITNESS: At that point we would 0135 1 come back to the Commission for advice. 2 CHAIR KASSEKERT: I'm not sure that's 3 our role. But, okay. 4 THE WITNESS: We would bring it to your 5 attention. 6 CHAIR KASSEKERT: Okay. Commissioner 7 Epps? Question? 8 VICE CHAIR EPPS: I guess my question 9 was along the same line of the Chair, but I -- 10 I don't think I understand your answer. 11 You've testified that you do a lot of 12 passive -- you seem to have a lot of passive 13 involvement as you're going to monitor, and 14 you're going to have oversight, and you're 15 going to review. Those -- to me, those words 16 seem to be passive words. Like you're not 17 going to do -- you're going to look. You're 18 just going to stand by and kind of make sure. 19 To what end? Then what? What happens if you 20 object? What authority do you have or are you 21 proposing to have in this -- in this oversight 22 function? You review and you monitor to what 23 end? 24 THE WITNESS: If there's something that 25 we think is unusual or is above or below the 0136 1 budget in terms of what was projected, we would 2 look first to bring that to the attention of 3 hotel management to understand if there's a 4 reason why this has happened. Or if there is a 5 cause for certain disbursement to have been 6 made or expense to have been incurred, and 7 determine it's appropriateness, but first in 8 consultation with management of the hotel 9 casino. 10 And if that does not result in a 11 favorable result or answer the question posed, 12 then we would look to remedies that might be 13 available under the loan documents if it was a 14 questioned expense, if there's any concept that 15 it was not appropriate or that it was made but 16 not justified within the budget, we would raise 17 it to that level. 18 VICE CHAIR EPPS: I mean, I guess -- 19 THE WITNESS: Ultimately, I would 20 believe that if we reach that conclusion, we 21 would be coming back to the Commission for the 22 information. 23 VICE CHAIR EPPS: Well, I have two 24 questions. First is, your answer seems a bit 25 peculiar to me because if you have limited 0137 1 experience in the gaming area, and if they have 2 a finance manager worth his salt, he's going to 3 be able to justify any budget he prepares. And 4 then he says -- you say, well, why is this 5 here? Well, I have to do X, Y, and Z. 6 THE WITNESS: Right. 7 VICE CHAIR EPPS: And you go, oh, okay. 8 And so it stays. So I don't understand how you 9 ever get to the point of challenging. Second 10 is, as I understand it correctly, your superior 11 is Column. Why would you come to us? Don't 12 you go to Column and get direction as to what 13 happens next? 14 THE WITNESS: Yeah. We would bring it 15 to the attention of management first, make sure 16 we understand the condition and the nature of 17 the item, expense, or revenue. If it cannot be 18 adequately determined as to its 19 appropriateness, we would bring it to the 20 attention of the lender. And if the lender 21 cannot reach a view that it was appropriate, 22 either, then we would look to exercise the 23 remedies under the loan documents to control it 24 or to monitor it, which might increase the 25 guaranty exposure that the loan guarantors have 0138 1 under the loan documents that govern the loan 2 in this collateral arrangement. 3 So there are a series of steps. First 4 we need to understand the nature of what the 5 exception is to the budget or the excess from 6 the budget or the need that wasn't anticipated 7 from a business perspective before any further 8 step would be taken. If that's explained 9 through consultation with the management of the 10 casino hotel, then it would be disposed of at 11 that point. If it's not, then we need to go to 12 the next step. 13 VICE CHAIR EPPS: Okay. Is it fair to 14 say that Trimont in this engagement is not a 15 decision maker, just an agent for some other -- 16 THE WITNESS: We're a servicer. 17 VICE CHAIR EPPS: So you're an agent to 18 Column. You serve Column. 19 THE WITNESS: We're appointed by the 20 trust. Column is a part of lender group. 21 VICE CHAIR EPPS: You serve the trust. 22 You are an agent for the trust. 23 THE WITNESS: Right. Column is a member 24 of the lender group. 25 VICE CHAIR EPPS: Right. Are you able 0139 1 to articulate what the intention of your 2 superiors are going forward? 3 THE WITNESS: The intention with regard 4 to the cash control? The budgetary control? 5 VICE CHAIR EPPS: Your oversight as 6 anticipated by seeking the remedies in your 7 petition. 8 THE WITNESS: Okay. To make sure the 9 cash control and uses of cash and revenues 10 provided by the operation of the hotel casino 11 are appropriate, are maintained at the property 12 level, and are normal and customary and 13 acceptable for the operation a the hotel casino 14 of this nature. So -- 15 VICE CHAIR EPPS: And I guess that goes 16 back to the Chair's question. What makes you 17 better equipped to make those decisions than a 18 seasoned gaming operator inasmuch as you don't 19 have gaming experience? You're simply -- you 20 said going to be -- 21 THE WITNESS: We're -- 22 VICE CHAIR EPPS: -- relying on their 23 justifications or explanations for what they're 24 doing going forward. So what are you going to 25 change in this scenario? 0140 1 THE WITNESS: Again, we're acting in the 2 role of monitor from a business judgment and a 3 reasonableness standard, applying that and 4 common, ordinary business practice to look at 5 the operating cash needs and cash expenditures 6 of this property. 7 VICE CHAIR EPPS: Okay. 8 THE WITNESS: In order to be certain 9 that the expenditures and the needs of the 10 property are met. 11 CHAIR KASSEKERT: Commissioner Fedorko? 12 COMMISSIONER FEDORKO: Mr. Hoelzle, 13 how -- here's what I don't understand. What -- 14 I'm sure Resorts wouldn't give you false 15 information. 16 THE WITNESS: Right. 17 COMMISSIONER FEDORKO: But how do you 18 know that they were giving you information 19 that's correct? 20 THE WITNESS: Well, reasonable business 21 judgment. 22 COMMISSIONER FEDORKO: Well, specific 23 casino information. 24 THE WITNESS: Looking at -- looking at 25 the underlying facts, the documents, the 0141 1 transaction records. Validating information to 2 source documents. Vouchering certain expenses 3 to invoices. Judging reasonableness of a 4 budget line item and an expenditure against 5 historic result, last twelve months, last three 6 months, last six months in order to determine 7 the reasonableness of it. If it wasn't deemed 8 to be reasonable from that review, we would 9 question it, take it to the next level. 10 COMMISSIONER FEDORKO: Yeah. But 11 suppose it was -- supposed they said they 12 wanted to get new slot machines? How would you 13 know -- 14 THE WITNESS: It would -- well, good 15 point. We would need to consult with a gaming 16 industry expert in terms of use of machines, 17 estimated useful life, the type of machine that 18 is presently in the casino versus its renewal 19 plan for the given year to determine if the 20 planned expenditure was either within the 21 budget or within the historic need for use at 22 that casino. 23 COMMISSIONER FEDORKO: Could you -- just 24 so I'm clear on this, what's the purpose for 25 the sweeping cash into the account controlled 0142 1 by Trimont? 2 THE WITNESS: To have visibility over 3 all cash coming into the enterprise from casino 4 operation and hotel operation. 5 COMMISSIONER FEDORKO: And -- 6 THE WITNESS: And to have visibility 7 over that cash and to be able to look at uses 8 of that cash pursuant to an agreed budget, as I 9 mentioned earlier. 10 COMMISSIONER FEDORKO: And another thing 11 I'm not clear on. How is Trimont -- how are 12 you compensated? Is it -- obviously, it's a 13 contract that you sign with Column, I assume? 14 THE WITNESS: Yes. It's a fee-based 15 contract. 16 COMMISSIONER FEDORKO: Okay. Thank you. 17 VICE CHAIR EPPS: I just have one more 18 question. I don't mean to beat a dead horse, 19 but if, similar to what Commissioner Fedorko 20 said, you can look at historical data -- 21 THE WITNESS: Right. 22 VICE CHAIR EPPS: -- to stay the same. 23 But you've got a company who, I think it's fair 24 to say, is somewhat trailing the industry. 25 It's trying to catch up. 0143 1 THE WITNESS: Right. 2 VICE CHAIR EPPS: At a certain point you 3 got to take a risk to try to grow the business. 4 THE WITNESS: Uh-huh. 5 VICE CHAIR EPPS: How do you say yes or 6 no to a calculated business risk or a new 7 venture that needs to grow their business? I 8 mean, clearly, you're there to monitor the 9 money and keep a tight purse. 10 THE WITNESS: Uh-huh. 11 VICE CHAIR EPPS: But you got to spend 12 money to make money. How do you make those 13 decisions from an educated standpoint not 14 having the gaming experience? How do you make 15 those decisions? I'm still not following that 16 analysis. 17 THE WITNESS: Right. As you know, and I 18 think it's clear in our petition, we do not 19 intend to enter into an operating, 20 decision-making process over this hotel and 21 casino. 22 VICE CHAIR EPPS: Stop right there. 23 THE WITNESS: We are going to -- 24 VICE CHAIR EPPS: You're -- but if 25 you're going to review the budget. 0144 1 THE WITNESS: Right. 2 VICE CHAIR EPPS: The budget ultimately 3 dictates how they operate. 4 THE WITNESS: On the basis of -- 5 VICE CHAIR EPPS: And if you're going to 6 say, no, that expenditure is too high because 7 it's off of last year by, you know, five 8 percent -- 9 THE WITNESS: We would need -- 10 VICE CHAIR EPPS: Why do we go that 11 extra five percent? 12 THE WITNESS: We would need to -- 13 VICE CHAIR EPPS: It ultimately goes to 14 operation. 15 THE WITNESS: Sure. We would need to 16 agree on the justification of the difference. 17 Is it a business volume? Is it an anticipation 18 of remarketing the casino or the hotel? And 19 these expenditures are necessary and customary 20 in line with that. Is it a business 21 contraction that would require certain costs to 22 be expended on in order to accomplish that? 23 And, accordingly, there would be a drop in 24 future expense. So it -- 25 VICE CHAIR EPPS: Now, is it your 0145 1 anticipation or understanding that your nod is 2 required before the process goes forward? I 3 mean, you review the budget, and you make -- 4 you have this oversight. But if you disagree, 5 can they proceed without your ultimate consent? 6 THE WITNESS: We would need to know why. 7 We would just need to be overviewing and 8 understanding why the need, but we couldn't 9 direct or control what the management does. We 10 can oversee the budget. We can understand 11 where and why expenses are different, and if 12 they are different, then we need to bring them 13 to attention. But we wouldn't redirect 14 management or control management directly of 15 the property or the staff that's doing it. 16 VICE CHAIR EPPS: So they can proceed 17 and do as they wish. But if you have a 18 question, they just kind of have to answer your 19 question -- 20 THE WITNESS: Yes. 21 VICE CHAIR EPPS: But then keep moving? 22 THE WITNESS: We are in an oversight 23 role. We are not operating. We are not 24 controlling, but we are monitoring the activity 25 and the cash flows. And if they're not in 0146 1 compliance with the budget, which was agreed in 2 advance, then we have the right and obligation 3 to notice the lender on that. And if it can't 4 be resolved, then resort to other remedies. 5 But it is in a monitoring role that this is 6 conducted. 7 VICE CHAIR EPPS: Okay. 8 CHAIR KASSEKERT: Commissioner 9 Sommeling? 10 COMMISSIONER SOMMELING: Is your firm or 11 are you familiar with the loan agreement 12 between Column and RIH? I mean, have you 13 familiarized yourself with what is required 14 there with respect to cash management and the 15 establishment of accounts in the operation of 16 the casino under that agreement? 17 THE WITNESS: Right. Yes, I am. 18 COMMISSIONER SOMMELING: You have? 19 And there are a number of cash 20 management accounts that must be established 21 according to what the agreement requires; is 22 that not right? 23 THE WITNESS: Right. And in a default 24 setting like we're in now, yes. 25 COMMISSIONER SOMMELING: Well, in or out 0147 1 of a default setting. Because there are -- 2 THE WITNESS: There's a number of 3 accounts there were in place or required to be 4 in place. 5 COMMISSIONER SOMMELING: And as you 6 progress in your oversight of these accounts or 7 the budget -- 8 THE WITNESS: Right. 9 COMMISSIONER SOMMELING: -- is that done 10 in conjunction with what the agreement 11 requires, first and foremost with respect to 12 the establishment of the accounts and the 13 disbursements of those accounts? 14 THE WITNESS: Yes. 15 COMMISSIONER SOMMELING: So you'd have 16 to align it with the -- 17 THE WITNESS: We would have to align it 18 with what the existing loan documents -- 19 COMMISSIONER SOMMELING: And in that 20 process, you would probably have to be familiar 21 with what it is the casino uniquely does 22 because it's a casino. 23 THE WITNESS: Correct. 24 COMMISSIONER SOMMELING: That would have 25 to be consistent with what the loan agreement 0148 1 requires? 2 THE WITNESS: Yes. 3 CHAIR KASSEKERT: Any other questions? 4 COMMISSIONER FEDORKO: I have one more 5 question. 6 THE WITNESS: Sure. 7 CHAIR KASSEKERT: Commissioner Fedorko? 8 COMMISSIONER FEDORKO: You mention you 9 don't -- you do not control, but you have 10 oversight. 11 THE WITNESS: We have oversight, yeah. 12 COMMISSIONER FEDORKO: What do you do 13 when you find something that's egregious, let's 14 say? 15 THE WITNESS: We have to review the 16 situation, understand the underlying facts, and 17 if it's considered to be an exceptional item, 18 exceptional expense or use of cash, we need to 19 bring it to the attention of the lender group, 20 our client. And if the consensus or 21 understanding cannot be reached on the matter 22 then, then I would envision us coming back to 23 the Commission for a review of the matter. 24 COMMISSIONER FEDORKO: Okay. 25 THE WITNESS: And, of course, this is a 0149 1 process we are about to undergo. We have not 2 completed this type of review on Resorts 3 Atlantic City to this point. It is all to be 4 done in cooperation with the management of the 5 property and the casino, understanding the 6 budgetary needs, the ongoing needs, Capex, 7 contingencies, et cetera. Composite basis to 8 understand what's needed to maintain and 9 operate the facility under its license and in a 10 condition -- first-class condition. 11 COMMISSIONER FEDORKO: All right. Then 12 this is a question Column is going to have to 13 answer because, if you find somebody doing 14 something wrong, then what's the -- what do you 15 do? I mean, so I'll hold that question until 16 Column. 17 THE WITNESS: Okay. 18 COMMISSIONER SOMMELING: I have another 19 question. One more question. 20 CHAIR KASSEKERT: Commissioner 21 Sommeling? Go ahead. 22 COMMISSIONER SOMMELING: I just want to 23 understand if I have this clear in my mind. 24 With regard to the loan agreement -- 25 THE WITNESS: Uh-huh. 0150 1 COMMISSIONER SOMMELING: -- when Column 2 decided to go into a loan with Resorts, there 3 must have been some understanding that -- 4 regarding the spending of money to operate the 5 casino. 6 THE WITNESS: Right. 7 COMMISSIONER SOMMELING: Which there are 8 a variety of things. 9 THE WITNESS: An operating budget. 10 Sure. 11 COMMISSIONER SOMMELING: Right. What it 12 takes. That would have been consistent with 13 what Column would have expected the casino 14 management and the borrowers to do. I mean, 15 that's just part of what the loan entails. 16 THE WITNESS: Part of the customary -- 17 COMMISSIONER SOMMELING: Right. 18 So they're not doing anything wrong in 19 the casino operation. Say, they're going to 20 advance their marketing, you know, the amount 21 of money they spend on marketing or advertising 22 or, as Commissioner Fedorko pointed out, slot 23 machines. 24 THE WITNESS: Right. 25 COMMISSIONER SOMMELING: That would not 0151 1 be inconsistent with what the casino could do, 2 rightfully do? 3 THE WITNESS: That's right. That's 4 correct. It's a normal and customary operation 5 and expense of a casino hotel; to market 6 itself, to market its rooms, to market the 7 casino, and to equip the casino in line with 8 the license requirements it has. And -- 9 COMMISSIONER SOMMELING: So they could 10 shift money, amounts of money, between accounts 11 to achieve those purposes. 12 THE WITNESS: Within budgetary -- 13 COMMISSIONER SOMMELING: Within 14 budgetary -- yeah. 15 THE WITNESS: Within plan and within 16 what's normal and customary to operate a 17 facility of the nature it is. Yeah. I think 18 that -- what you're describing is a normal and 19 customary business function. 20 COMMISSIONER SOMMELING: Thank you. 21 CHAIR KASSEKERT: Commissioner Epps? 22 VICE CHAIR EPPS: Why can't you do any 23 of what you propose right now without any 24 answer from us? 25 THE WITNESS: I think at this point 0152 1 because the -- the loan is in default, and 2 we've made a petition to do these things, and 3 it's been opposed, and certain resolutions have 4 been sought and motions made for those 5 resolutions. We are here before the 6 Commission. 7 VICE CHAIR EPPS: Okay. 8 THE WITNESS: Yeah. 9 CHAIR KASSEKERT: Mr. O'Gara? 10 MR. O'GARA: Yeah. Just two things. 11 12 REDIRECT EXAMINATION BY MR. O'GARA: 13 Q. Number one, you were asked by Mr. Brooks 14 if you were asked for agreements from Resorts, and you 15 said you hadn't gotten them yet? 16 A. Uh-huh. 17 Q. How long ago have you asked for them? 18 A. They were first requested in November. 19 Q. And now with respect to the issue -- and 20 I realize you're not a lawyer, but everybody talks 21 about control the account. They're talking about this 22 property account, would be established -- 23 A. Right. 24 Q. -- and who owns it. I'm going to show 25 you the loan agreement and show you Section 3.1 here. 0153 1 A. Uh-huh. 2 Q. For its account where it says borrower 3 shall -- talks about who establishes and owns this 4 account, et cetera. 5 A. Uh-huh. 6 Borrower shall simultaneously herewith 7 establish and hereby covenant to maintain an account, 8 the property account, which property account bank or 9 banks into which borrower shall deposit or cause to be 10 deposited all gross income from operations and 11 forfeited security deposits. 12 Q. Okay. And then I'll -- 13 A. It's under "cash management." 14 Q. I'll send you, if I could -- 15 A. Right. 16 Q. -- to Section 3.18. And it's headed, 17 what? "Security interests"? 18 A. Security interests. 19 Q. All right. And what does it says? 20 A. Subject only to permitted encumbrances, 21 borrower hereby grants to lender a first priority 22 security interest in each of the accounts and the 23 account collateral as additional security for the 24 debts. 25 Q. So is it fair to say that the borrower 0154 1 owns the account, and the control is through a 2 security interest that's provided in this agreement? 3 A. Yes. 4 Q. Now, with respect to your role with this 5 loan, you said you don't have any gaming expertise? 6 A. Right. 7 Q. Do you know in conjunction with the 8 servicing of this loan, has the lenders hired gaming 9 consultants as well? 10 A. Gaming counsel, yes. And we're 11 seeking -- 12 Q. Do you also know that they've hired a 13 consultant? Are you aware of that? 14 A. Yes. 15 Q. And do you know who it is? 16 A. Yes. 17 Q. Who is it? 18 A. Innovations. 19 Q. Okay. And they're -- 20 CHAIR KASSEKERT: Who? I'm sorry. 21 VICE CHAIR EPPS: Innovations Group. 22 A. Innovations. 23 Q. And they are, in fact, people who have 24 been in the gaming industry and have, in fact, gaming 25 expertise and consists of former gaming executives. 0155 1 A. That's correct. 2 Q. And they are available to you? I mean, 3 you're looking at budgets or asking questions. 4 A. Right. 5 Q. You do have your own consultants, right, 6 that you would talk to? 7 A. We have consultants available for 8 budgetary review or Capex review and nature of an 9 application of gaming machinery and/or equipment as 10 it's required. 11 Q. Well, if you have a question like, what 12 is this thing, and why are they buying it? You have 13 somebody you can ask; right? 14 A. We have a resource for that. 15 Q. So you can go back and question them 16 about it? 17 A. Yeah. First we use normal, customary 18 business judgment, and if it's not something that we 19 think is reasonable or explainable with the facts we 20 have, then we would seek expert advice. 21 Q. And I think just one more question, 22 following up what I think Commissioner Fedorko was 23 asking. He said if you found something wrong. 24 A. Right. 25 Q. For example, in the course of your 0156 1 normal activities, you found the unlikely trash can 2 full of hundred dollar bills, I mean, I assume you 3 don't go through some process of normal thing. You go 4 to your lender and tell them, excuse me, I have a 5 problem here; right? 6 A. Uh-huh. 7 Q. Is that how it works? 8 A. Yes. 9 Q. All right. Thank you. 10 CHAIR KASSEKERT: Anything on recross? 11 MR. BROOKS: Yeah. 12 13 RECROSS-EXAMINATION BY MR. BROOKS: 14 Q. What was the answer to the last question 15 Commissioner Epps asked you? The difference is you 16 want to control the account. You want the money to be 17 in an account. In an account you own. 18 A. We want visibility over the cash. 19 Q. Okay. Commissioner Epps asked you, did 20 you have the right to monitor? Did you have the right 21 to ask any questions you want about any of the 22 accounts that Resorts presently maintains? And the 23 answer to that is yes; correct? 24 A. Yes. We have the right to ask. 25 Q. But the difference here is you want the 0157 1 money, the money that is made at Resorts, to be in an 2 account that is owned by Trimont or Column, somebody 3 in the lender group? 4 A. Column -- someone in the lender group. 5 Some -- the appropriate party in the lender group. 6 Q. Now, Mr. O'Gara showed you the loan 7 agreement. You went through the establishment of the 8 account by the borrower. 9 A. Uh-huh. 10 Q. And the fact that the lender would have 11 a security interest in that account; correct? 12 A. That's correct. 13 Q. But that's not what you're saying -- 14 that's not what you're proposing. I want to just make 15 sure I'm clear about this. What you're proposing is 16 something completely different; correct? You want to 17 establish an account owned by the lending group; 18 correct? Not by the borrower but the lending group; 19 correct? 20 A. A controlled account. Yes. 21 Q. Okay. So that's different than what is 22 in the loan agreement; correct? 23 A. Yes. 24 Q. Okay. Now, I just want to make sure 25 that I'm clear, too. There's a lot of back and forth. 0158 1 A. Uh-huh. 2 Q. And things seem to be changing a little 3 bit from what you're requesting in this petition. So 4 I want to make sure I'm clear about this. 5 In terms of the budget, you talked about 6 the budget. You talked about how the process would 7 work, and you've explained a lot. 8 A. Uh-huh. 9 Q. I just want to make sure I'm clear on 10 this. The money would be sitting in an account you 11 controlled, the lending group controls; correct? 12 A. Yes. 13 Q. So if Resorts wanted to make an 14 expenditure from that account -- 15 A. Uh-huh. 16 Q. -- on an item it felt was necessary for 17 its casino operations but the lender group disagreed, 18 Resorts couldn't spend that money. That expenditure 19 would be in your account, controlled by you; correct? 20 A. If it was outside the agreed budget and 21 not explainable or justifiable for the business 22 purpose it sought, then it would be questioned, and it 23 would be brought to the attention of the lender group. 24 Q. But you implied that Resorts still had 25 the ability to go forward and still do what it wants. 0159 1 But if Resorts wanted -- I want to make sure we're 2 clear here. The money is in your account. It's in 3 the account the lending group controls. And if it's 4 an expenditure Resorts wants, for whatever reason, 5 maybe it's something that they didn't foresee in their 6 budget but they think it's absolutely necessary for 7 their business, but you disagree, the lending group -- 8 consulting with whoever it wants to consult with -- 9 disagrees, Resorts can't make that expenditure from 10 that account, can it? 11 A. I think we need to agree to a standard 12 to govern that. That if there was an emergency or an 13 event that was unanticipated in the budget, then some 14 guidelines would have to be reached and agreed to on 15 some sort of emergency basis if there was such an 16 expenditure required. 17 Q. So the answer is, no, Resorts couldn't 18 make that expenditure until you decided they could; 19 correct? 20 A. On a particular item like that? Yes. 21 MR. BROOKS: Nothing further. 22 CHAIR KASSEKERT: Miss Flaherty? 23 MS. FLAHERTY: Yes. 24 25 RECROSS-EXAMINATION BY MS. FLAHERTY: 0160 1 Q. Could Trimont request money that was 2 not currently available in the account or to Resorts 3 if you thought it was appropriate or the best interest 4 of the casino to enhance the operation? How -- and 5 that follows with some of the Commissioners' 6 questions. Do you have the ability to make this not 7 only sort of survive but fully function? 8 A. Uh-huh. I think I understand your 9 question to be, if there are situations within the 10 operation of the hotel casino that weren't fully 11 anticipated in the budget, would there be some 12 possibility to come back and reconsider? Or pursue an 13 alternative. 14 Q. If someone came up with a great 15 marketing idea, they thought it was a great marketing 16 idea, and they presented it -- 17 A. Uh-huh. 18 Q. -- and you said, yes. I think that 19 would really enhance operations. Could you proceed 20 then to fund that? How would that work? 21 A. I believe we would have to bring that 22 back to the lender group for review. Understanding 23 what the benefit and the anticipated impact of that 24 marketing program or capital improvement, renewal of 25 certain gaming equipment, et cetera, what the impact 0161 1 would be and reach agreement to move forward with it. 2 It wouldn't be done unilaterally. But I think there 3 would need to be a forum to look at something like 4 that. 5 MS. FLAHERTY: That's all I have. 6 A. A flexible budget, if you will. 7 Understand and anticipate the changing needs. 8 CHAIR KASSEKERT: Let me try asking this 9 this way. 10 Obviously, if a loan is in default -- 11 THE WITNESS: Uh-huh. 12 CHAIR KASSEKERT: -- you as the servicer 13 and the borrower want to see as much money 14 coming back to cure that default as possible; 15 correct? 16 THE WITNESS: Correct. Yes. 17 CHAIR KASSEKERT: Okay. 18 THE WITNESS: In -- I'm sorry. 19 CHAIR KASSEKERT: So you look at the 20 budget, and you decide that there are -- let's 21 not even take the casino. In the hotel there 22 are 150 housekeeping people. 23 THE WITNESS: Uh-huh. 24 CHAIR KASSEKERT: And you decide, well, 25 we've got to cut somewhere. You know, we don't 0162 1 need 150. We only need a hundred. What 2 would -- would that be a recommendation you 3 would make? 4 THE WITNESS: We would seek advice on 5 that. We would look at the business volume, 6 per se, that's expected and the historic cost. 7 The projected future -- I'm just hypothetically 8 saying -- 9 CHAIR KASSEKERT: Uh-huh. 10 THE WITNESS: This is how we might do 11 it. The occupancy or the use expected. And 12 the historic head count, if you will, needed to 13 deliver and maintain and conduct the business 14 in the first -- in a first-class manner and 15 review that situation. 16 CHAIR KASSEKERT: So if everything was 17 consistent, if the head count was the same, the 18 occupancy was the same, but you're trying -- 19 your goal is to try on get as much money back 20 for the lenders you possibly can, what's your 21 recommendation then? Do you cut the 50 22 housekeeping people? 23 THE WITNESS: That requires discretion 24 and review of the specific facts. 25 CHAIR KASSEKERT: But would that be 0163 1 something you would do? Would that be 2 something you would recommend under the terms 3 of your agreement? Or could recommend, 4 hypothetically. 5 THE WITNESS: We first need to recommend 6 expenses and operating procedures that enhance 7 the value of the collateral to make the 8 collateral perform and enable the collateral 9 revenues to meet the debt service of the loan. 10 And ultimately to be restructured, refinanced, 11 if you will, to pay off the loan. But the 12 first goal of this evaluation and monitoring is 13 to ascertain that the property is maintained 14 and operated as its licensed and as it's 15 structured. 16 CHAIR KASSEKERT: But, again, would 17 this -- let me just -- would this be a 18 recommendation you would make? Could that be 19 among the recommendations that you would make, 20 that there's too many staff people? Or 21 there's, you know -- other expenditures are not 22 necessary? I mean -- 23 THE WITNESS: That would have to be 24 evaluated on a specific case-by-case basis. 25 CHAIR KASSEKERT: Okay. I don't think 0164 1 you're going to answer my question. 2 THE WITNESS: I can't -- I can't tell 3 you without knowing and understanding the 4 absolute facts whether -- 5 VICE CHAIR EPPS: This -- 6 THE WITNESS: An evaluation of that 7 nature would be made. And if it's part of the 8 overall budgeting process upfront, we're 9 evaluating the budget together with the 10 management of the hotel to say, going forward 11 we expect X, for example, to be our occupancy 12 and X to be our casino revenue capability. We 13 expect -- as in the borrower, operator saying 14 we expect that this could be completed on a 15 different basis with a different complement of 16 people, and we are as licensed operator -- 17 casino operator and owner of the hotel 18 projecting to do this. We would look at it. 19 CHAIR KASSEKERT: Commissioner Epps? 20 THE WITNESS: Okay? 21 VICE CHAIR EPPS: The current management 22 team is operating this facility in this 23 economic environment. 24 THE WITNESS: Right. 25 VICE CHAIR EPPS: Clearly not intending 0165 1 to have a negative result. But with whatever's 2 happened, they've had difficulties. 3 THE WITNESS: Correct. 4 VICE CHAIR EPPS: You come in, and you 5 maintain status quo, and you continue to do 6 what you're going to do. That would be okay to 7 your superior? Or is it your job to -- because 8 maintain -- clearly, if you come in, and 9 they're saying we're doing everything we're 10 supposed to do. We're not doing anything 11 extraordinary, and this is just a result -- 12 THE WITNESS: Uh-huh. 13 VICE CHAIR EPPS: -- isn't it -- it 14 seems to me your objective is to change status 15 quo in some way which benefits the lender 16 because the lender needs to see some money out 17 of this property that they're not seeing. So 18 to the Chair's question, it seems to me that 19 your objective has to be to somehow change 20 status quo to the lender's favor. Doesn't that 21 have to be your objective? Because status quo, 22 if you're going to go in there and maintain 23 status quo in the environment -- 24 THE WITNESS: Uh-huh. 25 VICE CHAIR EPPS: -- and the economy is 0166 1 going to have whatever effect it has on the 2 operation, then what is your purpose? 3 THE WITNESS: We have to -- and our 4 purpose is to evaluate together with management 5 the licensed managing entity at the property of 6 its capability and possibility to improve 7 operations or to address economic situations 8 that it's affected with, downturn in gaming 9 revenues, less occupancy, and look at its plan 10 to address that, together with, if necessary, 11 expert advice. And look through that venue, if 12 you will, to a possibility or a solution to 13 improve results or at least address the 14 economic situation the property may be in at 15 this time and for the coming year. So it's 16 done together with. 17 VICE CHAIR EPPS: I don't have any other 18 questions. 19 CHAIR KASSEKERT: Commissioner Fedorko? 20 Anything on redirect or recross? 21 MS. FLAHERTY: No, Madame Chair. 22 MR. BROOKS: No, Madame Chair. 23 CHAIR KASSEKERT: Okay. You may step 24 down. 25 THE WITNESS: Thank you. 0167 1 CHAIR KASSEKERT: Mr. O'Gara, could you 2 call your next witness? 3 MR. O'GARA: Yeah. Stephen Yankauer. 4 CHAIR KASSEKERT: Mr. O'Gara, do you 5 plan to call anyone from Column today? 6 MR. O'GARA: Just Steve. Steve is from 7 Credit Suisse, Column. 8 CHAIR KASSEKERT: Credit Suisse, Column. 9 Okay. 10 11 STEPHEN YANKAUER was duly sworn to 12 testify in this matter. 13 14 MR. NANCE: Please state your name for 15 the record. 16 THE WITNESS: Stephen Yankauer, 17 MR. NANCE: Would you please spell your 18 last name for the record? 19 THE WITNESS: Y-a-n-k-a-u-e-r. 20 MR. NANCE: Thank you. 21 CHAIR KASSEKERT: You can proceed, Mr. 22 O'Gara. 23 MR. O'GARA: Thank you. 24 25 DIRECT EXAMINATION BY MR. O'GARA: 0168 1 Q. Mr. Yankauer, by whom are you employed? 2 A. I'm an employee of Credit Suisse. 3 Q. And what is -- what's the nature of your 4 employment, first of all, your position? 5 A. I'm a senior work officer of Credit 6 Suisse. 7 Q. And what is the relationship of Credit 8 Suisse to Column Financial? 9 A. Column Financial is a wholly-owned 10 subsidiary of the Credit Suisse entity. 11 Q. And with respect to the matter we're 12 here today, do you have the authority from Credit 13 Suisse to speak and act on Column Financial? 14 A. Yes, I do. 15 Q. Now, on, number one, this loan, was I 16 correct in saying that the loan's in a couple of 17 parts? One part is in the certificates and the other 18 part is held by Column? 19 A. That is correct. 20 Q. And how -- does Column hold a 21 significant portion of the loan? 22 A. Approximately $180 million. 23 Q. And, as such, with respect to what goes 24 on with the servicer and certain things that happen, 25 do you have a status as a certain kind of holder? 0169 1 A. Yes. We're the directing class holder. 2 Q. What does that mean, Steve? 3 A. That means that we can make certain 4 major decisions. 5 Q. With respect to the loan? 6 A. With respect to the loan. 7 Q. All right. Now, one of the things I'd 8 like to -- I think there was some questions about it, 9 and I'd like to straighten out. You've heard the 10 discussion about the bank account and who would own 11 the bank account and the security interest? 12 A. Yes, I have. 13 Q. And can you clarify for us what this 14 language in the loan agreement means? Who owns the 15 bank account? 16 A. Yes. The bank account would be owned by 17 the borrower, and the lender would like a security 18 interest in that account. 19 Q. And is that what is meant by a 20 controlled account? 21 A. Yes, it is. 22 Q. So it's their account, but we have a 23 security interest in the cash. If something were to 24 happen, we have that first call on that cash? 25 A. That's absolutely correct. And that is 0170 1 clearly something that we cannot obtain in any other 2 manner through having the cash flow through an account 3 which he have pledged to us. We're looking for a 4 security interest in that account. 5 Q. But the account is a Resorts account. 6 Resorts controls it. Resorts writes the check. 7 Resorts decides what to do. 8 A. That is correct. 9 Q. With respect to the servicer and the 10 special servicer, you're aware that -- who the 11 servicer, the master servicer of the loan is? 12 A. Yes, I am. 13 Q. And who is that? 14 A. KeyBank. 15 Q. And why is it KeyBank undertaking the 16 special servicing role? Do you know or do you have 17 any indication of why? 18 A. Well, we understand that Trimont has 19 much more expertise in the area of defaulted loans, 20 and we feel they are a -- they are better suited to 21 manage this position. 22 Q. So Key is -- Key is the servicer of a 23 lot of loans, then? 24 A. That is correct. They are master 25 servicer for, you know, hundreds of billions of loans, 0171 1 I would imagine. I don't know the precise number. 2 Q. And Trimont was selected as the special 3 servicer? 4 A. That is correct. Their staffing and 5 attention to specific details with respect to the 6 loans is -- they're much better suited in terms of the 7 number of loans per staff person and attention. 8 Q. And with respect to their role here, 9 will they be running the hotel if there were to be a 10 foreclosure or deed in lieu of foreclosure? 11 A. Absolutely not. 12 Q. Who's going to have responsibility for 13 the casino operations? Who's going to have 14 responsibility for what goes on in that building? 15 A. Well, clearly, Resorts has all 16 responsibility for this hotel and casino up until a 17 point where the casino would change hands and a new 18 manager would be appointed. 19 Q. And that would be someone who is 20 licensed to operate it; correct? 21 A. Only so. Yes. 22 Q. With respect to a question Mr. Brooks 23 had asked, he asked whether you asked Resorts for the 24 documents or agreements or whatever you get. Have 25 you, in fact, requested information from them? 0172 1 A. We have requested lots of information. 2 Yes. 3 Q. And has all that been obtained yet? 4 A. Not to my knowledge. No. 5 MR. O'GARA: I don't have any other 6 questions. 7 CHAIR KASSEKERT: Mr. Brooks? 8 Cross-examination? 9 10 CROSS-EXAMINATION BY MR. BROOKS: 11 Q. When you say not to your knowledge, are 12 you saying that none of the information you requested 13 was provided by Resorts? 14 A. No. Just that not all of the 15 information was presented. 16 Q. Have you been conducting due diligence 17 at Resorts for a number of months now? 18 A. Yes, we have. And substantial 19 information has been provided. But not all of the 20 information. 21 Q. But substantial information has been 22 provided to you by Resorts. 23 A. Yes. That's correct. 24 Q. Okay. In fact, wasn't a shared 25 service -- a shared services agreement provided to 0173 1 you, Credit Suisse, on October 30th, 2008? 2 A. My understanding is that certain details 3 of the shared services agreement were shared but not 4 all elements of that agreement, and we were told 5 specifically that certain elements of that agreement 6 were none of our business. 7 Q. Okay. You weren't given the agreements? 8 A. I don't believe we were given all of the 9 agreements related to. 10 Q. Has Resorts provided you with budget 11 information? 12 A. Not for the calendar year 2009. 13 Q. On January 18th they didn't -- Resorts 14 did not provide you with budget information? 15 A. Not to my knowledge. 16 Q. Now, Credit Suisse, you're in a 17 subordinate position to the senior securitized portion 18 of the loan; correct? 19 A. That's a fair statement. 20 Q. Column -- Column -- and you're actually 21 Column; correct? You represent Column? 22 A. I'm representing, in my capacity here 23 today, Column. Yes. 24 Q. Column -- or Credit Suisse hasn't 25 obtained any kind of license from the Casino Control 0174 1 Commission in New Jersey, has it? 2 A. No. 3 Q. Has Column or Credit Suisse ever been 4 found qualified after a -- submitting the applications 5 to the Casino Control Commission? 6 A. Well, I must say that affiliates of 7 Credit Suisse are licensed casino operators but not in 8 the state of New Jersey. 9 Q. Is Column -- is Column one of those? 10 A. No. 11 Q. Now, I just want to make sure I'm clear 12 about the bank account. Is it your testimony here 13 today that what you're suggesting by way of your 14 petition is that the bank account will be owned by 15 Resorts and will be controlled by Resorts but 16 monitored by Trimont and Column? 17 A. It is -- I think that is generally 18 correct. We are asking in our petition for a 19 controlled account which would be owned by the 20 borrower but that would have a pledge in a security 21 interest for the benefit of the lenders. 22 Q. Okay. Now, who will control 23 expenditures from that account? 24 A. The borrower would control expenditures 25 from that account. 0175 1 Q. So it's your testimony here today that 2 if Resorts decides that it wants to spend money from 3 that account, that they control what or how that money 4 will be spent? 5 A. Well, the expenditures would be made 6 pursuant to a budget and released, you know, pursuant 7 to that budget. 8 Q. Now, Mr. Hoelzle testified that the 9 account would be owned by the lending group. He just 10 misspoke? 11 A. I believe he misspoke. Yes. 12 Q. All right. Okay. 13 MR. BROOKS: If I could, can I approach, 14 Madame Chair? 15 CHAIR KASSEKERT: Sure. 16 Q. I'm going to show you the petition. Are 17 you familiar with the petition that was filed 18 connection with this? 19 A. I'm generally familiar. I can't say i 20 remember every single position. 21 Q. Were you consulted in connection with 22 the filing? 23 A. I was consulted. Yes, I was. 24 Q. Just if you would, take a look at 25 Paragraph 18c of the petition. 0176 1 A. Sure. (Reviewing.) 2 Yes, sir? 3 Q. All right. Have you had a chance to 4 review that? 5 A. Yes. 6 Q. Okay. And that talks about Trimont on 7 behalf of the Co-Petitioners in the note or Column 8 being the Co-Petitioner and the note holders being the 9 folks you've described, will either obtain -- and it's 10 and/or. It says obtain control and/or monitor 11 expenditures from the deposits. 12 A. I don't see reference to Trimont. 13 Q. It's in the first part of 18? 14 A. To the extents practicable and permitted 15 under the loan agreements, the PSA, participation 16 agreement and by applicable law to obtain control 17 of -- so possibly in -- okay. At the top of 18, I see 18 there is a reference to Trimont. Yes. Right. 19 Q. Okay. So it would be Trimont who would 20 be in a position to obtain control and/or monitor the 21 accounts. The expenditures from the accounts and the 22 deposits into the account; correct? 23 A. It does say that. Yes. 24 Q. Okay. Now, but now your testimony here 25 is today that you're not looking for control. You're 0177 1 only looking to monitor. Am I right about that? 2 A. My testimony is that we are seeking a 3 security interest in a borrower controlled account. 4 And that is -- yes. A borrower controlled account. 5 And that is the manner under which we would obtain the 6 request here in 18. 7 Q. Does that say that anywhere in 18? That 8 you're only seeking a security interest in the 9 account? 10 A. I don't believe it was necessary to go 11 into that level of detail for this agreement. 12 Q. But it doesn't say it anywhere in 18; 13 correct? 14 A. I don't see it particularly referenced 15 there. But I must say that is a very common 16 structuring that lenders use in these types of 17 situations. 18 Q. Don't you already possess a security 19 interest in the account by virtue of the loan 20 agreement? 21 A. The borrower doesn't have the obligation 22 to deposit all the revenues into accounts that we have 23 a security interest in, and, my understanding, as of 24 this moment, they are not depositing that money into 25 the account which we have a security interest. So we 0178 1 may have an account which we have security interest 2 over, but it is not being utilized in a manner which 3 gives us the visibility that we like. 4 Q. Just so I'm sorry clear, in connection 5 with what's being sought here by virtue of this 6 petition, Column has a account. They are not seeking 7 to own the account. No one -- 8 A. We're not seeking to own the account. 9 Q. It would be owned by Resorts; correct? 10 A. That is correct. But we would have a 11 security interest in that account, pledged effectively 12 a lien over that account. 13 Q. But Resorts would make decisions with 14 respect to how the cash in that account is utilized? 15 A. The decisions -- the only decisions that 16 a lender would typically have is a negative effect. 17 In effect, a negative control. Meaning, it would have 18 a veto power to the extent there was something 19 egregious that we saw that bothered us that they we 20 thought was a waste of resources or for something 21 outside of the property. 22 The lender's looking for gross 23 misappropriations, you know, obvious signs of 24 troubling warning. Expenditures that, you know, far 25 seed the scope and purpose of, you know, purpose of 0179 1 the account. 2 Q. Now, that Resorts -- aren't they already 3 obligated to give you any information that you want 4 with respect to the money going into the accounts, the 5 monies being expended from the accounts? 6 A. I would suppose that there are 7 obligations to, upon request, provide certain 8 information, but this would give us a more complete 9 visibility into the picture. 10 Q. Why? Why would it be more visible if 11 they already will tell you what's in the account? 12 A. Typically, securities in the account, we 13 can see what's happening. It would be some visibility 14 into the daily flows in and out. 15 Q. Can't you request that information 16 today? 17 A. Seems like a very tedious request. 18 Actually, you have to, you know, deal with that on a 19 moment-by-moment basis. Certainly, Resorts has an 20 obligation to operate a hotel casino in a first-class 21 manner. And to, you know, bother them every single 22 day asking for that, I think it would be quite 23 burdensome. 24 Q. Well, then, what's the point of having 25 the security interest? 0180 1 A. Well, the point of the security interest 2 is, we would like a security interest in the cash as 3 well as -- you know, we have a security interest 4 clearly in the property upon a default. The 5 mechanisms are set such that the lender may have a 6 security interest in the cash. And that is an 7 important fact to us. 8 Q. So if you have a security interest in 9 the cash and you decide that -- if there's already 10 default. We know that; correct? 11 A. Uh-huh. 12 Q. All right. So you would be in a 13 position, then, to exercise whatever remedy you could 14 with respect to sweeping that cash; correct? 15 A. We would. But, clearly, our intent is 16 to have an operating casino. We as the lender are 17 interested in maximizing the value of our collateral. 18 And maximizing the value of our collateral means that 19 we have an open and running casino that, you know, 20 ultimately one day we can sell or Resorts can sell 21 and, you know, we repay our loan. So the remedy that 22 you described, although I guess it would potentially 23 be in the scope of our abilities, clearly would be 24 anathetical to maximizing the value of collateral. 25 Q. But it's something you could do if you 0181 1 wanted to do it; correct? 2 A. I suppose. But I believe, you know, 3 again, that would be just an egregious use of our 4 authority in that manner. 5 Q. But I just want to make sure that I'm 6 clear about this. Resorts gets to control how the 7 money is spent; correct? 8 A. Resorts -- the way -- the proper 9 procedure, I believe it was described over and over 10 again by Mr. Hoelzle. The way in which it should work 11 is that the borrower should prepare a budget. The 12 lender should allow the monies to flow out of the 13 account with respect to that budget. Any major 14 variances from that budget should be discussed. To 15 the extent that there is, you know, a business case 16 for that and it brings value to the property, the 17 lenders should be perfectly willing to allow that 18 money to flow. And the only thing that the lenders 19 would be looking to stop would be obvious 20 misappropriations of cash, dividends up to the equity 21 ownership, for example, where we're not being paid 22 interest and the equity, you know, was looking to take 23 money out of the property. Gross misappropriations of 24 cash, different varieties. 25 Q. But you can monitor all those things 0182 1 today; right? 2 A. Yes. Theoretically speaking, but 3 completely impractical. 4 Q. But if you have that -- what you've 5 described in place, that control mechanism you've 6 described in place -- you control the expenditure. So 7 if Resorts wants to make an expenditure that you don't 8 approve of, you can tell Resorts that they cannot make 9 that expenditure. 10 A. I think the -- 11 Q. Is that what you're suggesting? 12 A. It depends on your definition of 13 "control." I would argue that what we have is 14 negative control. And our intent is to, you know, 15 have a first-class operating casino hotel which would 16 maximize the value of our collateral which is in our 17 best interest and everyone's best interest in this 18 case. 19 Q. But if there's a dispute between you and 20 Resorts as to what is best -- how best to achieve that 21 goal in terms of the expenditure of funds, you want 22 the ability to stop Resorts from using those funds; 23 correct? 24 A. In the grossest scenario, yes. We could 25 actually stop that from happening. We might exercise 0183 1 further remedies if we felt so -- so -- we felt an 2 expenditure was so significant and unrelated to the 3 operation of the property, we could exercise other 4 remedies, and we could move to foreclosure. We could 5 move to replace the manager. You know, within our 6 loan documents we have a number of remedies of which 7 that could be one. 8 MR. BROOKS: I have nothing further. 9 CHAIR KASSEKERT: Miss Flaherty? 10 MS. FLAHERTY: Yes. 11 12 CROSS-EXAMINATION BY MS. FLAHERTY: 13 Q. Good afternoon. Hi. 14 With regard to Column, it is the 15 licensed lending institution? 16 A. Yes. 17 Q. And Credit Suisse is a bank holding 18 company and financial holding company with its 19 affiliates? 20 A. Yeah. We're a Swiss -- a Swiss bank 21 with, obviously, US operations. 22 Q. And with regard to the Resorts 23 operation, if you were to be granted your relief, 24 would you maintain the current management for a year 25 or up to a year? 0184 1 A. Well, I guess it depends on a number of 2 factors. We are interested in maximizing the value of 3 the collateral, and it is our intent to, obviously, 4 have a licensed operator managing the property. If we 5 can come to a mutually satisfactory arrangement with 6 current management, absolutely, yes, we would be happy 7 to maintain the management for a year or possibly 8 longer. 9 However, we do feel obligated to look to 10 other licensed operators in the state of New Jersey 11 and to determine, you know, what is the best course of 12 action. But I do believe that the current operator 13 has an obligation to continue managing for one year in 14 the event that we take title to the property. 15 Q. Now, with regard to the default 16 situation, what is your goal? Is it to maintain the 17 operation? To have interest paid? What are you 18 looking for? 19 A. Well, we don't believe there's enough 20 cash flow at present to pay any interest on this loan. 21 If there was any interest paid clearly -- excuse me -- 22 clearly, would not be going to Column Financial. It 23 would be going to the senior stake holders. But, then 24 again, I don't believe there is any money to pay 25 interest. And our primary goal right now is to 0185 1 preserve the collateral and ultimately get it into the 2 state that we could maximize the value for us to 3 close. 4 Q. How, do you view your position with 5 regard to the CMBS? Did you sponsor the CMBS and -- 6 A. Yes. Credit Suisse and, you know, 7 Column Financial -- Column Financial originated the 8 loans that are in that CMBS transaction and Credit 9 Suisse with -- originated the bonds and sold the 10 bonds. So we sealed that deal. 11 Q. And you are in second position to them 12 now? 13 A. We are in second, junior position. 14 That's correct. 15 Q. Now, there was a mention of the account 16 that was the account that held the funds of Resorts in 17 which you held the security interest. What happened 18 to that account and the funds in the account? Do you 19 know? 20 A. I -- my understanding, and it's limited 21 because I haven't watched every single number in this 22 case and others have watched those numbers much more 23 closely than myself, is that the cash balances at the 24 property have been dwindling over time and come down 25 to a figure in which the, you know, borrower has 0186 1 decided that it can't pay debt service anymore. So 2 it's effectively maintaining a protectional stance. 3 Q. Now, with the new account in which there 4 would be a security interest that would be held at 5 KeyCorp? Rather than Credit Suisse? Or how would 6 that -- 7 A. We don't have any retail banking here in 8 US. So it clearly would not be a Credit Suisse 9 account. It would been a major bank such as KeyBank 10 or Chase or any other major US financial institution 11 that would give us the appropriate pledges and liens 12 that we would desire. 13 MS. FLAHERTY: That's all I have. Thank 14 you. 15 CHAIR KASSEKERT: Commissioner Fedorko? 16 COMMISSIONER FEDORKO: Mr. Yankauer, you 17 have mentioned the phrase which caught my 18 attention, because it's been mentioned here in 19 the last several months, "first-class 20 operation." Can a facility go into default and 21 yet still be a first-class operation? 22 THE WITNESS: I guess I have to be 23 honest and say I don't know what the precise 24 definition of a "first-class hotel operation" 25 is. 0187 1 COMMISSIONER FEDORKO: Nor do I. 2 (Laughter.) 3 THE WITNESS: Class B or Class C or B, 4 is probably sort of a real estate parlance. 5 But, clearly, a property can go into default, 6 can continue to operate along the same lines 7 that it was, and, you know, may even, you know, 8 improve over time, you know, depending on the 9 economics -- the economy, I should say -- and 10 the specifics of the market environment. Or 11 could deteriorate. You know, if it was not 12 provided the capital to continue or the economy 13 further south. 14 COMMISSIONER FEDORKO: Have you made any 15 determination with regard to Resorts in that 16 regard? 17 THE WITNESS: Well, our -- our goal at 18 this stage is to continue the operations of the 19 property. You know, we believe that an 20 operating property is likely to generate more 21 value to all the stakeholders you know, in this 22 case than a shut property. I think that's a 23 very simple truth. And, you know, we believe 24 that there may be, you know, potential 25 operational efficiencies and different ways of 0188 1 thinking that could improve the situation at 2 Resorts, but we certainly have no conclusions 3 as to exactly what that would be. We would, 4 you know, clearly surround ourselves with 5 experts. We have even asked the current 6 management for their thoughts and ideas as they 7 know the property better than anyone else as to 8 what they think ought to be done to improve the 9 cash flows and improve the situation. 10 COMMISSIONER FEDORKO: With regard to 11 the information that you have not gotten yet 12 from Resorts, is it because it's so voluminous? 13 It takes time to put it together? I mean, 14 what -- 15 THE WITNESS: I don't want to draw any 16 conclusions as to why we haven't received 17 certain types of information. You know, some 18 of it may be just they haven't, you know, 19 generated a budget or don't want to share that 20 budget with us or, you know, they feel certain 21 documents are, you know -- either, you know, 22 privileged or confidential or not part of the 23 property that they should share with us. 24 COMMISSIONER FEDORKO: My final 25 question. You've lent money to corporation X. 0189 1 You find out that they're lying to you. 2 They're not giving you the right information. 3 What do you do? 4 THE WITNESS: Well, I think we have a 5 number of remedies. I mean, first and 6 foremost, you know, if we don't believe the 7 current management, we likely have rights to 8 terminate the management agreement. We would 9 only do that if it was a replacement 10 management. In this case it would clearly have 11 to be, you know, licensed -- an entity that's 12 licensed in the state of New Jersey, a 13 licensee, effectively, in this situation. We 14 have the right to foreclose, and that's 15 something that we've asked for in this 16 situation. And, you know, those would be our 17 primary remedies. 18 You know, if there was financial 19 information that related to the payments and 20 expenditures, and we thought that we were being 21 be frauded in some way, the payment of those 22 amounts, you know, it would be, you know, in 23 essence, waste, we might, you know, withhold 24 those amounts. Clearly, amounts that have been 25 incurred and owing, we have to think very 0190 1 carefully about. You know, we don't want to 2 create liabilities, you know, at the property 3 or at the borrower. Vendors need to get paid. 4 You know, that's something very serious. You 5 know, we take -- as a lender, just in general, 6 we take the role of being lender very 7 seriously. We do not want to get ourselves 8 into the operations of a property unless we own 9 that property. Generally, I hear the phrase 10 bantered about, lender liability. Borrowers 11 don't like when we involve ourselves in their 12 business in ways that are inappropriate. 13 COMMISSIONER FEDORKO: Thank you. 14 CHAIR KASSEKERT: Go ahead. 15 Well, I guess -- I guess, you know, it's 16 real easy to see the circumstances when 17 something catastrophic happens. There's fraud. 18 There's something like that. But I mean -- I 19 mean, I think your goal is to maximize 20 whatever -- whatever -- and do whatever you can 21 do to retain the funding and get your loan paid 22 back; isn't it? I mean, isn't that your 23 ultimate goal? 24 THE WITNESS: Our ultimate goal is, I 25 think, you know, similar to what you're saying, 0191 1 maximize the value of the collateral and 2 ultimately get ourselves or as many of the 3 stakeholders as possible repaid in this case. 4 That's correct. 5 CHAIR KASSEKERT: Well, and again, say, 6 you look at the property, and you think there 7 are too many housekeepers or there are too many 8 slot techs, or there are too many dealers. I 9 mean, aren't you -- if your goal is to retain 10 as much of the money possible, aren't you going 11 to weigh in on those kinds of issues? 12 THE WITNESS: Absolutely -- absolutely 13 not. We cannot as a lender make the decision 14 as to who to fire, who to retain, what capital 15 expenditures to make. I would describe it as 16 negative controls at best. And, again, we 17 would take, you know, very seriously the 18 prospect of invoices that have been generated 19 for services already rendered, you know. Not 20 paying those will only generate further 21 liabilities with the firm. 22 However, we can consult. We can 23 discuss, and, you know, question whether there 24 are actions that are, you know, whether they 25 are alternatives that the borrower hasn't 0192 1 considered. Just as business people may, you 2 know, confer and conference. But we can only 3 make the types of decisions you described if we 4 were an owner of the property. It's really not 5 our business to hire or fire or to make, you 6 know, specific capital expenditures. 7 That's why lenders generally, you know, 8 create a budget, set expectations, and fund in 9 accordance with those budgets. When the 10 situation changes, and the circumstances 11 change, then, you know, we would discuss that. 12 You know, if a borrower came back to me and 13 said, we're going down this path, this 14 particular path, and circumstances have 15 changed, and we need to do some things 16 differently, we would welcome that opportunity 17 to have a discussion to see if there's a better 18 path forward. But we -- 19 CHAIR KASSEKERT: What if you continue 20 to disagree? What if you had this conversation 21 or you consulted and Resorts says, the heck 22 with you. We're still going to do this. What 23 would you do? 24 THE WITNESS: Well, in a defaulted loan 25 situation, then I think our best remedy, if 0193 1 there's a continued disagreement, would be to 2 exercise our remedy of foreclosure and take the 3 property away. That would be our best resort. 4 But until we own the property, we have no right 5 to be handling that. And, frankly, if we did 6 own the property, we would just be owning the 7 property, and we would be, you know, hiring a 8 licensed operator, probably through an 9 operating lease, and they would be making those 10 decisions with an expert in the field that's 11 licensed. 12 CHAIR KASSEKERT: Commissioner Epps? 13 VICE CHAIR EPPS: I need some education 14 in some of these things, because I'm not a 15 finance guy. I'm thinking that somehow there's 16 a deficiency here that -- something I'm 17 missing. So can you define for me "security 18 interest"? What does that mean? What is a 19 security interest in a bank account? 20 THE WITNESS: Okay. And I'm not a 21 lawyer, so I will defer to the lawyers to 22 define that, but I'll give you my best business 23 person's interpretation. 24 VICE CHAIR EPPS: Well, I'm a lawyer, 25 and you're a business person so maybe we can -- 0194 1 (Laughter.) 2 THE WITNESS: Between the two of us, 3 maybe we can come to a conclusion. 4 I believe it's technically done through 5 filing a UCC. There would be a pledge 6 agreement where the borrower would pledge the 7 proceeds in that account as additional 8 collateral for the loan. And a UCC would be 9 filed against that account that says that the 10 lender is the one who is sticking up its hand 11 and first in line to receive those proceeds if 12 the lender foreclosed. 13 VICE CHAIR EPPS: Okay. So that means 14 I'm the guy with the account, and you have the 15 security interest. Day to day I can pay my 16 bills and write checks as much as I want. 17 Unless and until you say, that's it. You've 18 defaulted. I'm coming in to collect. I'm 19 exercising my permission by this document, and 20 I'm taking everything. Is that a fair 21 understanding of it? 22 THE WITNESS: And I guess there could be 23 multiple ways that it could be constructed, and 24 I'm not sure we've gotten down to the fine 25 detail, but if we need to do that, we can 0195 1 certainly do that and agree to something. 2 There could be a blocked account in the most 3 extreme where nothing passes through unless the 4 lender actively says, yes, that money will pass 5 through in accordance with the budget. Or you 6 could have a pledge where the money would 7 automatically pass through unless the lender 8 actively triggered a stoppage to that account. 9 VICE CHAIR EPPS: Now, in all of these 10 situations in this -- with this account with 11 this security interest, is there a necessary 12 triggering mechanism that has to happen for 13 those things to occur, or are they always 14 available from the be -- from the inception of 15 this account? 16 THE WITNESS: It depends on how you 17 structure it. I think you can structure it 18 either way. 19 VICE CHAIR EPPS: Well, let me ask it a 20 different way. 21 THE WITNESS: Okay. 22 VICE CHAIR EPPS: What you're seeking in 23 this matter, a bank account with security 24 interests, are you seeking an account that has 25 an automatic trigger, or is this a triggering 0196 1 mechanism that has to occurred before you can 2 exercise those? 3 THE WITNESS: In all honesty, I have not 4 had that level of conversation with my counsel 5 to determine what we think the best course of 6 action was. And if there was concern with that 7 particular provision, we would be happy to 8 structure something that would make this 9 commission happy. 10 VICE CHAIR EPPS: I guess what concerns 11 me is one is control and one is not. If you 12 have an automatic trigger that can stop a 13 trans -- an expenditure from happening -- 14 THE WITNESS: Uh-huh. 15 VICE CHAIR EPPS: -- then you're 16 exercising control over that account. 17 THE WITNESS: Right. 18 VICE CHAIR EPPS: And so that there we 19 have a situation that is on the one hand. If 20 there has to be a mechanism that has to occur 21 before you can exercise those remedies, if you 22 will -- 23 THE WITNESS: Uh-huh. 24 VICE CHAIR EPPS: -- then it's a 25 different -- seems, to me, a different 0197 1 situation. 2 THE WITNESS: Sure. One trigger that we 3 would be interested in and talked a little bit 4 about before this hearing, one example might be 5 if the borrower filed for bankruptcy, that 6 would be a trigger that we might be interested 7 in. Again, it's a trigger. It's just a 8 trigger. I have to emphasize that an operating 9 hotel and casino is in our best interest 10 because that will maximize value, but it would 11 at least allow us to have a discussion over the 12 cash collateral, which is what's really 13 important to us. 14 VICE CHAIR EPPS: And, I guess, we're 15 still not clear, and you've said you're not 16 exactly sure as you sit here today what the 17 intention is, but that would be of some 18 interest to me because if it is an account with 19 a security interest that has a trigger 20 mechanism as opposed to an account with a 21 security interest that always has the ability 22 to put a damn up, those are two different 23 situations and, I think, we need more 24 information -- 25 THE WITNESS: Would you give me a moment 0198 1 to consult with my counsel? 2 VICE CHAIR EPPS: Sure. 3 THE WITNESS: Would that be okay? 4 (Conferring.) 5 THE WITNESS: Just confirming what I 6 thought. 7 VICE CHAIR EPPS: Okay. 8 THE WITNESS: Yeah. We would be happy 9 with an account that had an automatic 10 distribution to the borrower in accordance with 11 a budget, and the only trigger being, you know, 12 bankruptcy of the borrower. 13 VICE CHAIR EPPS: Automatic 14 distribution. 15 THE WITNESS: So -- so, in other words, 16 we would automatically distribute the money 17 in -- any monies in accordance with the budget, 18 that borrower would have a right to draw money 19 out of the account in accordance with the 20 budget. 21 VICE CHAIR EPPS: Now you lost me again. 22 I thought it was -- if it's the borrower's 23 account, it seems to me that the borrower is 24 putting in, and the borrower is taking out. 25 THE WITNESS: That's right. 0199 1 VICE CHAIR EPPS: And you just holding a 2 security interest, but now you're saying you're 3 going to distribute. 4 THE WITNESS: I'm sorry. I'm saying it 5 happens automatically, so I'm using the word 6 "distribute." I guess you could equally use 7 the word "drawing." It would allow from 8 automatic draws from that account in accordance 9 with a budget. 10 VICE CHAIR EPPS: Okay. And define for 11 me, as you used it in your testimony, "negative 12 control." 13 THE WITNESS: Negative control, to me, 14 is just the right to consent to something or 15 not. So if there's a -- typically it's in the 16 form of a major decision. The borrower wants 17 to sell the property, and, you know, pay off 18 the loan not in accordance with its terms, we 19 would have the right to consent to that or not. 20 That's a negative control. 21 VICE CHAIR EPPS: But day-to-day 22 operations you have no say in. 23 THE WITNESS: No say. 24 VICE CHAIR EPPS: Is that what you're 25 saying? 0200 1 THE WITNESS: That is correct. 2 VICE CHAIR EPPS: Okay. And, lastly -- 3 I only had a few questions. 4 We asked the -- Mr. Hoelzle about the 5 account on several occasions, and then you 6 testified that he had answered the question 7 over again, and I guess to your satisfaction. 8 So, again, you're a business person, and I am 9 not. Apparently he said it more clearly to 10 you, but I still didn't understand. What is it 11 about their function with respect to this 12 account that I'm not getting? Because you seem 13 to understand what he was saying but -- 14 THE WITNESS: Well, I think -- I think, 15 actually, Mr. Hoelzle and I are differing in 16 one piece of testimony. I am saying that it 17 will be a borrower-owned account that the 18 lender will have a lien on. I think Mr. 19 Hoelzle thought that it might be an account 20 owned by somebody else, which is not the case. 21 It is not owned by -- 22 VICE CHAIR EPPS: Okay. 23 THE WITNESS: Does that -- 24 VICE CHAIR EPPS: Now, the concept of 25 oversight and review, you agree with it. 0201 1 THE WITNESS: Yes. 2 VICE CHAIR EPPS: But, and again I'll 3 ask the question. Couldn't Trimont have 4 that -- Trimont is your agent -- 5 THE WITNESS: Uh-huh. 6 VICE CHAIR EPPS: Couldn't Trimont have 7 that now? Wouldn't you -- 8 THE WITNESS: It is theoretically 9 possible for every day Trimont to call up 10 Resorts and ask for the kind of information 11 that would give them insight into, you know, 12 where -- what monies came in that day and what 13 monies went out. But that, A, seems very, very 14 tedious to me; and, B, would not provide the 15 security interest to cash in collateral which 16 is something that the lenders are seeking. 17 VICE CHAIR EPPS: Now, lastly, with 18 respect to this account with a security 19 interest -- and it probably doesn't happen this 20 way, but the only bank accounts I know about -- 21 you get a bank statement at the end of the 22 month. 23 THE WITNESS: Uh-huh. 24 VICE CHAIR EPPS: Would Column get a 25 bank statement and Resorts get a bank 0202 1 statement? Would the bank have to issue two 2 bank statements, and you get the same ones at 3 the same time? Or this is different. 4 THE WITNESS: This is slightly out of my 5 area of expertise, but my sense is the way 6 these accounts work, there probably are 7 statements at the end of each period, but more 8 important, there are screens that, you know, 9 people can go look on over the, you know, 10 internet. 11 VICE CHAIR EPPS: Right. 12 THE WITNESS: Or a computer service and 13 can see the money coming in and out on a daily 14 basis. 15 VICE CHAIR EPPS: Now, is that access 16 that Trimont would otherwise not have? 17 THE WITNESS: Yeah. That is something 18 that would likely not have without that. 19 VICE CHAIR EPPS: Okay. That's all. 20 CHAIR KASSEKERT: Commissioner 21 Sommeling? 22 COMMISSIONER SOMMELING: Just one 23 question, really. 24 If you put everything in place that 25 you're speaking about now, what are you seeking 0203 1 beyond this with respect to the property and 2 the loan obligation by the borrower? 3 THE WITNESS: Well, right now -- 4 COMMISSIONER SOMMELING: How is that 5 going to play out, you think? 6 THE WITNESS: Right now at this moment 7 we're not seeking anything other than what you 8 described. We are in discussions with the 9 borrower for a deed in lieu. We have not come 10 to any resolution there. And if we cannot, we 11 may very well exercise our remedies and, you 12 know, ultimately ask, you know, come back to 13 this Commission and, you know, ask for the 14 Commission's approval of an ownership structure 15 and a licensing arrangement under that new 16 structure. But that is not the matter for 17 today, and we're not presenting any such 18 structure at this moment. 19 COMMISSIONER SOMMELING: So, then, this 20 would be the first step in what you consider 21 might be the resolution? 22 THE WITNESS: That is correct. 23 COMMISSIONER SOMMELING: Down the other 24 end. 25 THE WITNESS: That's correct. 0204 1 COMMISSIONER SOMMELING: Okay. That's 2 all. 3 CHAIR KASSEKERT: Any other questions? 4 Commissioner Epps? 5 Anything on redirect? 6 MR. O'GARA: No, ma'am. 7 CHAIR KASSEKERT: Anything on recross? 8 MR. BROOKS: Yes, Madame Chair. 9 10 RECROSS-EXAMINATION BY MR. BROOKS: 11 Q. I just want to make sure I'm clear 12 because a lot of this information is not in the 13 petition, and so I just want to make sure I'm clear. 14 A. Sure. 15 Q. Who chooses the bank this account is to 16 be set up in? 17 A. It would have to be a mutually agreeable 18 bank. It would be a major financial institution. 19 Q. Resorts already has bank accounts; 20 correct? 21 A. To my knowledge, yes. Of course. 22 Q. Okay. What's wrong with those? 23 A. If it is an account that they are 24 willing to deposit all of the daily revenue, from the 25 casino hotel into, and we have a security interest 0205 1 over, then likely we could use one of those accounts. 2 That's directly possible. 3 Q. You wouldn't want to have a voice and 4 say in what bank is chosen for this purpose? 5 A. We're only interested in it being a 6 major financial institution that is a household name, 7 you know, that has a credit rating that would be 8 appropriate. You know, total cash, balances of cash, 9 and those are really our only interests. The money is 10 safe. The same interest, I think, that Resorts would 11 have. 12 Q. And all -- you want all the money, all 13 the revenues generated from operations at Resorts, all 14 of it to go into this account? 15 A. Yes. That is what the loan documents 16 actually say the borrower is obligated to do. We are 17 only seeking the right to have that actually happen in 18 accordance with the loan documents. 19 Q. So all the revenues go into this 20 account, and Resorts can only use those funds which 21 you've approved by way of a budget; correct? 22 A. Well, that's what I just proposed, was 23 that we would agree to a budget. We haven't received 24 a budget, so it's difficult to opine on that at this 25 moment. But we've approved many budgets in the past 0206 1 for many loans, including this loan, and we would 2 automatically release the cash pursuant to that 3 budget. 4 Q. Okay. I just want to make sure I'm 5 clear. You would -- the first thing you would have to 6 happen is for Resorts to give you a budget as to how 7 it's going to use the cash. And if they want to use 8 the cash in any way that's not covered by that budget, 9 they can't do it? 10 A. No. It's not that they can't do it. 11 Then we'll have a conversation over it. And as long 12 as they justify the business purpose and it makes 13 sense, then we'd be happy for them to utilize -- 14 Q. You'll have the ability to block any 15 expense without your approval? 16 A. We have what I described before as a 17 negative control. Absolutely. 18 MR. BROOKS: Nothing further. 19 MS. FLAHERTY: I just have one question. 20 21 RECROSS-EXAMINATION BY MS. FLAHERTY: 22 Q. The money that would go into this 23 account that we've been discussing would be the 24 revenue, but that would be the amount of money that's 25 in excess of what's needed for casino operational 0207 1 funds? 2 A. Absolutely. 3 Q. And special funds in terms of weekend 4 and other events and fluctuations in terms of what 5 their needs would be to operate the facility? 6 A. First and foremost, we would want to 7 insure that the property comply with all of its gaming 8 requirements and regulations. And so, obviously, that 9 would be automatically. Yes. 10 Q. Thank you. 11 CHAIR KASSEKERT: Anything else? 12 Commissioners? 13 COMMISSIONER SOMMELING: No questions, 14 Madame Chair. 15 MR. DiGIACOMO: Madame Chair, I have one 16 question. 17 CHAIR KASSEKERT: Sure. 18 19 RECROSS-EXAMINATION BY MR. DiGIACOMO: 20 Q. Would it be an account maintained in a 21 bank in New Jersey? 22 A. I do not know who the current -- where 23 the current bank accounts are held off the top of my 24 head and have no -- you know, no opinion one way or 25 the other on the Bank of New Jersey. But if that was 0208 1 something that was in the borrower's interest, and we 2 were amenable to that, we would be happy to do that. 3 CHAIR KASSEKERT: We're going to take a 4 brief five-minute recess. 5 You may step down, sir. 6 Do you have any other witnesses, Mr. 7 O'Gara? 8 MR. O'GARA: No. I have no other 9 witnesses. 10 CHAIR KASSEKERT: Okay. Take just a 11 very quick five-minute recess. 12 (A recess was taken from 4:38 to 4:50 13 p.m.) 14 CHAIR KASSEKERT: We'll go back on the 15 record. 16 Let me ask again, Mr. O'Gara. Any more 17 witnesses? 18 MR. O'GARA: No, ma'am. We have no 19 further witnesses. 20 CHAIR KASSEKERT: Okay. Mr. Brooks? 21 MR. BROOKS: Madame Chair, I would call 22 Nicholas Ribis. 23 CHAIR KASSEKERT: Thank you. 24 Mr. Ribis? 25 NICHOLAS L. RIBIS was duly sworn to 0209 1 testify. 2 3 MR. NANCE: Please state your name. 4 THE WITNESS: Nicholas L. Ribis, 5 R-i-b-i-s. 6 CHAIR KASSEKERT: You can. 7 MR. NANCE: Thank you. 8 CHAIR KASSEKERT: You may proceed. 9 MR. BROOKS: Thank you, Madame Chair. 10 11 DIRECT EXAMINATION BY MR. BROOKS: 12 Q. Mr. Ribis, could you please state for 13 the record your position relative to Resorts 14 International Hotel, Inc., the owner and licensee in 15 connection with Resorts Atlantic City? 16 A. Yes. I am a partner, Vice Chairman, and 17 Chief Executive Officer. 18 Q. Now, Mr. Ribis, have you been 19 interacting, and people on your behalf at Resorts, 20 been interacting with the representatives of the 21 creditor, Column, Credit Suisse? 22 A. Yes, we have. Most recently, we've 23 interacted with Mr. Hoelzle and Mr. Yank -- Yankauer? 24 THE WITNESS: Do I have this right 25 Steven? I apologize. 0210 1 A. But before that, there was -- for about 2 six months, there were different people from Credit 3 Suisse up until about late November, early December 4 that I dealt with. 5 Q. Have you been providing them with 6 information? 7 A. We start -- in June or early July, they 8 hired a consultant, Innovative Group, and there must 9 have been 20 trips down to Atlantic City. Every 10 document that was ever produced in our Atlantic City 11 facility was turned over to the Credit Suisse group 12 then, their lawyers, Innovative Group. 13 And I just learned something here today 14 that I just want to clarify on the record. A, in 15 January, we supplied everybody, including Mr. 16 Yankauer, and we have our e-mail, through our 17 consultant Imperial with our budget. Now, it may just 18 be confused that he didn't get it. But certainly 19 Credit Suisse has gotten it. And I don't mean to be 20 recriminatory here, but I want to be clear. 21 As to another document which was -- 22 Q. Shared services agreement? 23 A. Shared services agreement. We checked 24 again, and we can produce this for the Commission and 25 the Division. There's an e-mail in which that 0211 1 document was supplied in October. I think it was 2 October 23rd. 3 Q. And your -- 4 A. After every other document in creation 5 has been available and supplied as asked for. 6 Q. And you're prepared to substantiate that 7 to the Commission? 8 A. Yes, Mr. -- Mr. Matejevich, my Chief 9 Financial Officer, has copies of those e-mails. 10 Q. Now, in connection with the Column loan, 11 is there an existing security interest on the part of 12 Colony with respect to bank accidents? 13 A. Although I am a lawyer, I didn't do the 14 lawyering on this, but I am told by my counsel that 15 there is an existing security interest on everything 16 that we have, including bank accounts. 17 Q. Has Column had an opportunity to monitor 18 the bank accounts and the information with respect to 19 the bank account? And when I say "Column," I'm 20 talking about Column, Trimont. 21 A. Well, just so we all understand, this is 22 a two-part loan. There was a CMBS piece, which has a 23 special service server, a master server, and Trimont 24 who acts on behalf of that group, which is a senior 25 lender. They were the senior lender. Column 0212 1 Financial is subordinate lender, which is Credit 2 Suisse, which is a not a syndicated loan. So it's 3 about 50/50, 180 and 180. Credit Suisse is a 4 subordinate loan, and Trimont represents the senior 5 loan group, which is a -- widely disbursed CMBS loan. 6 Q. And they have -- representatives of 7 those organizations have access to the bank account 8 information? 9 A. Yes. Of course. Under our loan 10 agreement, A, we're required; B, we're glad to give 11 the information; and C, since then, any information I 12 was asked for was given to them even before we stopped 13 making our interest payment in October. 14 Q. Now, Mr. Ribis, I want to draw your 15 attention to several reports submitted by -- to the 16 Commission by the Division of Gaming Enforcement in 17 connection with this matter. In the reports the 18 Division has recommended to the Commission that 19 Resorts maintain a cash balance on an ongoing, rolling 20 basis of $15 million. On behalf of Resorts, are you 21 willing to commit to maintain the 15 million rolling 22 cash balance? 23 A. I think we've done through you, and I 24 can again certify that we have $15 million in that 25 account. In fact, we have over $20 million in total 0213 1 cash at the property right now. 2 We're in the midst of a thousand-year, 3 once-in-a-lifetime perfect storm. This is -- we're 4 trying to preserve this asset, which I think we've 5 done a wonderful job. The management group which has 6 been headed for the last eight months by John 7 Pasqualoni has righted the ship in a very, very bad 8 environment. We'll be cash positive in February. So 9 we expect that cash to grow to almost $30 million by 10 the at the end of the year, with a very moderate 11 budget. We did not and don't feel the need to file a 12 bankruptcy. 13 And I do want to say that I agree with 14 my former boss and partner, Donald Trump, when he said 15 about excessive fees, costs, consultants and what it 16 does to a company when you have to pour your company 17 into a bankruptcy. My desire here -- because I love 18 Resorts. I like the property, the people there. Most 19 of them have worked there for 25 years. It's a place 20 that I call home. It's where I started my legal 21 career when I was young buck, a long, long time ago. 22 We have no desire to walk away from the property, and 23 we have no desire file a bankruptcy under any 24 circumstances. We're paying our vendors currently. 25 Our employees are taken care of. Our casino fees are 0214 1 paid. And we have almost $20 million in the bank. I 2 just don't want to see that disrupted by any knee-jerk 3 reactions, and we don't intend to under these 4 circumstances do that. And I don't think Credit 5 Suisse or Trimont would like to see that. 6 Q. Now, have financial projections been 7 prepared for the Commission and Division for 2009? 8 A. Yes. 9 Q. Okay. Now, with respect to those 10 projections, do they include a base case reflecting 11 management's expectations for the year? 12 A. Yes, of course. 13 Q. Now, without revealing details regarding 14 those projections since they are confidential, how 15 have the base case projections stacked up against the 16 requirement to maintain the $15 million cash balance? 17 A. I said that we'd grow the balance to 18 about 29 million by the end of the year. Under the 19 base case. 20 Q. Now, it's no secret to anybody that the 21 United States economy has been in a tailspin. The 22 Atlantic City gaming market has felt the impact of the 23 global economic situation as well as competition from 24 neighboring states. Do the base projections take into 25 account that situation? 0215 1 A. Yes. Under John Pasqualoni's auspices, 2 Eric Matejevich and Frank McCarthy took into 3 consideration all those problems we're dealing with 4 today. 5 Q. So they are reflected in the base case 6 projections? 7 A. Yes. 8 Q. Now, is Resorts engaged in any 9 cost-cutting measures that are likely to provide for 10 the base case projections? 11 A. Sadly to say, as all casinos throughout 12 the country, and especially in Atlantic City, we have 13 had cost reductions, substantial employee reductions. 14 We're trying to preserve as many full-time equivalents 15 as we can. Since Mr. Pasqualoni arrived at the 16 property, we've substantially reduced our daily 17 operating costs trying to survive, as I call it, the 18 perfect storm that we're in right now. It's not a 19 place that any of us want to know to be. It's 20 something that was hoisted upon this country. And 21 let's hope we can find the right answers through TARP 22 and, you know, the stimulus package and all those 23 things we hope will help us, and we think they will. 24 And we fully desire to get through this and have a 25 strong operating property. 0216 1 Q. Have you taken any recent operational 2 steps in order to -- that would impact the base case 3 projections? 4 A. Only on -- only from the cost side. 5 Yes. We've reduced our costs so that we reflect the 6 level of business that we're facing right now. 7 Q. Now, Mr. Ribis, with respect to the $15 8 million cash balance, what steps would Resorts take if 9 there was a problem with maintaining that cash balance 10 for a given month? 11 A. If there was no problem, we would 12 immediately notify the Division and Commission. And 13 if it was a short-term problem, I don't -- I don't 14 think that there would be an immediate anything to do. 15 But if there's a problem that needed supplemental 16 cash, I as a partner can commit to this Commission, 17 I've been there before with Resorts as recently as 18 this August when we provided $3.7 million, and I put 19 my money in. I'm prepared to do that, and I will go 20 to my partner and ask him for his portion of it. 21 Q. Now, Mr. Ribis, there's been some 22 discussions with the Commission in the past regarding 23 the status of Colony Investors IV and Colony's 24 commitment to Resorts. Can you describe the current 25 status of Colony Investors IV and provide the 0217 1 Commission with a representation of where Colony 2 stands with respect to Resorts at this point in time? 3 A. Colony IV is a fund that is now over 4 eight years old. Colony IV is a fund that's -- that 5 has no more funds left in it. It's an old fund. 6 Colony is in its fund VIII at this time. So Colony IV 7 doesn't have the financial directability to make cash 8 infusions into the property at this time, as I 9 understand the way it works. That doesn't mean Colony 10 won't do what has to be done on a short-term basis to 11 make sure we meet our Casino Control Commission 12 requirements. 13 Q. Now, Mr. Ribis, are you familiar with 14 Colony Capital's interest in Stations casinos? 15 A. I'm familiar with it from what I've 16 read. Yes. 17 Q. You don't have any involvement in that 18 ownership interest, do you? 19 A. No, I don't. 20 Q. There's been recent reports in various 21 publications that Stations is seeking to file for 22 bankruptcy protection as part of a prepackaged 23 restructuring, and as part of that plan, Colony will 24 contribute funds to boost the Station's balance 25 sheets. Are you familiar with those reports? 0218 1 A. Well, I've read the filings and the 2 reports. That's a Colony XIII investment, which is 3 the most recent fund. I think they've invested over 4 $2 billion in equity into Stations about 17 months 5 ago. And at the present time, from what I read, they 6 are trying to negotiate with their bondholders and 7 debt holders in anticipation of filing the bankruptcy. 8 That's what I've read. 9 Q. Colony Investors XIII, though, is a 10 current operating fund? 11 A. Yes. It's most current. 12 Q. Now, Mr. Ribis, are you on behalf of 13 Resorts willing to commit to the Commission that 14 Resorts will cooperate with the Commission and 15 Division staffs to establish a financial reporting 16 system in order to monitor the financial condition of 17 Resorts and the cash position at Resorts? 18 A. I don't have to -- I don't have to sit 19 here and say we're going to do something. I think my 20 past history shows this Commission and the Division we 21 do what we have to do, and what we're required to do, 22 and more. The Division has full access to our 23 financial records. Always will. Anything more that 24 they need will, we'll supply. And anything more the 25 Commission or staff needs, it's available, and there's 0219 1 no question that we will comply. Integrity is the 2 cornerstone of this industry. And I say that because 3 I mean it. 4 Every person in this industry had to be 5 licensed. Down to the -- down to the porter on the 6 floor, everybody has to get a license. When I 7 practiced law, I represented many, many people that 8 had to get licensed up until 1989. And it's maybe an 9 intrusive process, but it's the process that we follow 10 in this state. I'm not giving a speech. It's what I 11 believe in. But integrity in our regulatory system 12 and in our regulators, the Division and Commission, is 13 what this Act -- Casino Control Act was passed for. 14 And that's all we say, that we are bound by that 15 integrity. And I continue -- I will continue to be 16 bound by it. 17 Q. Are you prepared to allow Commission and 18 Division staffs to monitor the expenditures and 19 deposits to all of Resorts' bank accounts? 20 A. Yes. 21 Q. Are you prepared to allow the Commission 22 and Division staffs to monitor the use of revenues by 23 Resorts to fund operations at Resorts? 24 A. Of course. 25 Q. Now, obviously, Resorts hasn't been able 0220 1 to resolve the debt financing issues relating to the 2 Column loan, but are you willing on behalf of Resorts 3 to provide the Commission and Division with a detailed 4 proposal to deal with the debt financing issues in a 5 reasonable time frame to be established by the 6 Commission? 7 A. Sure. And I -- I think that the 8 Commission knows and that we -- "we" meaning Credit 9 Suisse, Trimont, and myself -- have been dealing 10 cooperatively for the last month and a half, two 11 months, in an attempt to find our way through this 12 forest right now. And we all hope, as Mr. Yankauer 13 said, to find our way through cooperatively, which is 14 the best thing for Credit Suisse, for Resorts, and for 15 the owners of this property. 16 MR. BROOKS: I have no further 17 questions, Madame Chair. 18 CHAIR KASSEKERT: Mr. O'Gara, 19 cross-examination? 20 21 CROSS-EXAMINATION BY MR. O'GARA: 22 Q. Mr. Ribis, with respect to the budget, 23 does it include any provision for resumption of 24 interest payments on the debt? 25 A. No. 0221 1 Q. And with respect to the cash that's 2 available, if there were a $15 million balance 3 requirement, would you have any contemplation of using 4 excess cash to make some arrangement to pay on the 5 interest that's accrued and has not been paid since 6 October? 7 A. It would seem to me, Mr. O'Gara, that 8 would be part of the discussions that we will have and 9 have had in the past. As I said, the team change with 10 Credit Suisse. But we've had past discussions as far 11 as picking the debt, lowering the dealt, changing the 12 debt. It's very complex, but the answer is yes. 13 Q. And with respect to -- with our 14 misunderstanding with the 2009 budget, certainly if it 15 was a misunderstanding, that would be available and 16 Mr. Yankauer now can -- 17 A. He could walk over with Mr. Matejevich 18 to the property. Or with Mr. McCarthy, anybody that's 19 available. I see that both Peter and Kate are here 20 from Trimont. And, you know, it's available. That's 21 not something that we're hiding from them. We gave it 22 to them already. 23 (Conferring.) 24 MR. O'GARA: I have no further 25 questions. 0222 1 THE WITNESS: Thank you, Mr. O'Gara. 2 CHAIR KASSEKERT: Miss Flaherty? 3 MS. FLAHERTY: Yes, Chair. 4 5 CROSS-EXAMINATION BY MS. FLAHERTY: 6 Q. Good afternoon, Mr. Ribis. 7 A. Hello. 8 Q. With regard to the reserve account that 9 Mr. Brooks has discussed with you, the $15 million 10 balance is projected in the budget; is that correct? 11 A. Could you -- yes. I think -- yes. The 12 $15 million was based upon a base case budget. Yes. 13 Q. And that would be maintained throughout 14 the next period of time, one year? Would that be 15 correct? 16 A. It will -- it will be maintained as long 17 as it's required to be maintained, and I think it's 18 for the rest of the year. I don't have the resolution 19 or letter in front of me. But, yes. 20 Q. Now, with regard to Colony IV which, as 21 you said, is a fund that's been closed and there is no 22 funding available from that, what would be the sources 23 for which the funding would come in the event that 24 Resorts needed money in the event that it did not meet 25 its budget? Would there be a credit line at Colony 0223 1 or what sources would be available? 2 A. I can't speak for Colony. It comes out 3 of my bank account, but I'm sure that they have the 4 capacity to be able to do that, if necessary. 5 Q. Okay. And with regard to the financial 6 reporting system that the Division has requested to 7 monitor the financial condition and cash position of 8 Resorts, you will charge your staff to establish that 9 system in cooperation with us? 10 A. Yes. 11 Q. Is that correct? 12 A. Yes. 13 Q. Okay. Now, with regard to the proposal 14 to deal with the debt financing issues, what time 15 frame do you see as reasonable? What have you been 16 pursuing in that regard to deal with this issue? 17 A. Well, I can't speak for Mr. Yankauer or 18 Mr. Hoelzle from Trimont, but we are preparing 19 something for them as we speak, as Mr. Yankauer 20 mentioned, which we'll have to them by the end of the 21 week. They probably need a couple of weeks to review 22 it and talk to us. But I think a 30-day period would 23 be plenty of time. If you're not going to get it done 24 then, you're probably not going to get it done. 25 MS. FLAHERTY: That's all I have. Thank 0224 1 you. 2 THE WITNESS: Thank you. 3 CHAIR KASSEKERT: Thank you. 4 Questions from the Commissioners? 5 Commissioner Epps. 6 VICE CHAIR EPPS: Sure. Mr. Ribis, when 7 we were here before you were speaking to us 8 about Colony IV. And I think that, if I 9 understand correctly, it's a fund that runs a 10 certain period of time and then wraps up. 11 THE WITNESS: That's correct. 12 VICE CHAIR EPPS: And I think that 13 '09 -- the time between '07 and '09 was that 14 wrap-up period. Is it due to end or expire or 15 whatever those fund do? 16 THE WITNESS: I don't know. We're both 17 lawyers, and I don't have a clue on that. Yes. 18 From what I understand, the fund -- '09 is when 19 it wraps up, and there are a couple of open -- 20 maybe one or two open investments, meaning 21 Resorts and maybe something else. That doesn't 22 mean we can't find a way to get through the 23 time period they have to go to their investment 24 committee to extend a time period, as I 25 understand it. 0225 1 VICE CHAIR EPPS: Okay. And in the past 2 you've told us that Colony has a history of 3 coming to the aid and not shying away from its 4 responsibility, and it would likely come to the 5 aid of Resorts. 6 THE WITNESS: Yes. Yes. 7 VICE CHAIR EPPS: But when things 8 started going bad in late '08, what happened? 9 Why didn't Colony come in if you could -- 10 THE WITNESS: Among -- well, you know I 11 made a phone call. I can assure you they 12 wanted to, but I think what happened is that 13 they're dealing with investments all over the 14 world at a time when every investment is in 15 trouble, whether it's Stations or other 16 investments they have in gaming or in real 17 estate or in Asia or in Europe. I think none 18 of us could have predicted sitting back two 19 years ago where the world would be today, and 20 that's what happened. I don't think there's 21 any ill motiva -- I know there's no ill 22 motivation. It's just the way the world is 23 right now. 24 VICE CHAIR EPPS: So going forward, is 25 it unlikely that Resorts would look to Colony 0226 1 for any extraordinary help? 2 THE WITNESS: Well, with the -- with the 3 question of the 15 million, I think that's 4 workable. But if you're talking about 5 contributing towards mortgage payments and 6 paying some -- I think Resorts has to figure 7 that out on its own with me in conjunction with 8 the banks. 9 VICE CHAIR EPPS: Going forward, in 10 absolutely a tough economy and from a position 11 of somewhat disadvantage with respect to 12 amenities and things that you have at your 13 facility -- 14 THE WITNESS: I disagree with that. 15 VICE CHAIR EPPS: Well -- 16 THE WITNESS: I'm only kidding. Only 17 kidding. 18 VICE CHAIR EPPS: How do you get -- how 19 do you catch up in this race and do what you 20 have to do -- 21 THE WITNESS: That's a good question. 22 VICE CHAIR EPPS: -- for you? 23 THE WITNESS: I saw where this was going 24 earlier. And it's always -- it's always hard 25 to do this, but I had to change management. 0227 1 Not that I didn't like my last manager as a 2 person. But I saw what was going on. I saw 3 what was happening, and I had to bring in a 4 professional, someone that's run properties in 5 Atlantic City, outside of Atlantic City. He's 6 a seasoned pro. Understands Resorts. That's 7 where he worked for years. He worked for me at 8 two different places. So I went and I 9 convinced John Pasqualoni, who is essentially 10 kind of semiretired, to come back. And in 11 eight months we've seen the improvements. And 12 you'll see the improvement this month because 13 we'll be positive cash flow. He had to make 14 tough decisions on where to spend his Capex, 15 where to cut employees, where to spend less, 16 when to close a restaurant. And those are the 17 things that a crisis manager can do. It's a 18 whole different mindset than when things are 19 going great. 20 But I believe you will see that 21 Resorts -- its new tower is one of the most 22 popular buildings in Atlantic City. The 23 problem is, it's only got 470 rooms, and we 24 have an older tower. Under John's program, 25 which Credit Suisse will be looking at, we 0228 1 think we could work through some redoing of the 2 rooms and the hallways in the old tower, add 3 some new restaurant amenities, do the things we 4 need to do because we have this perfect storm. 5 But out of perfect storms, maybe some good 6 comes. Maybe we can get an umbrella and avoid 7 the raindrops. And that's what I'm going to be 8 presenting, and that's what I believe can 9 happen here. 10 I'm not saying that we're going to be -- 11 that this town will be back to where it was two 12 years ago. I wish we were. But I think that's 13 going to take some time. And I think you see 14 from recent events in what's happened with 15 properties in this town that declines in cash 16 flow are dramatic and fast and really happened 17 in the last five months of this year. Almost 18 disastrous. 19 VICE CHAIR EPPS: I guess the purpose of 20 my question is and -- and I'm not being 21 critical of Resorts -- but if you look at the 22 monthly numbers, you guys are in the back of 23 the pack. And if your testimony was you're 24 undergoing cost-cutting measures to maintain in 25 this bad environment, how do you cut back to 0229 1 move forward? 2 THE WITNESS: That's a good question. 3 We're a private company. I'm not concerned -- 4 when John came in, we were overspending on our 5 customers in ways that didn't make any sense. 6 So what he did was create an environment where 7 when you spend time money, it's not for the 8 gross. It's what dribbles down to the bottom 9 line, what we make. So you may see our top 10 numbers be larger losses than other people. 11 But that's not because it hasn't been planned. 12 It literally has been planned that way because 13 when you get your costs in line, and you take 14 out -- take out a lot of expensive marketing 15 that they do here because public companies are 16 almost forced to say, oh, we're only down ten 17 percent. We're not down 15 percent on their 18 gross. But the fact is, if you look at their 19 cash flows, their EBIDTAs, they've declined 20 more than we have at Resorts. And what you're 21 going to find out is we'll be able to hand back 22 those marketing programs as we go forward. New 23 marketing programs. Because we had to get rid 24 of a lot of things. New marketing programs. 25 It's tough out there. It's tough to get people 0230 1 to come. So you have to be smart with your 2 dollars. And I think John is very smart with 3 our dollars and Frank McCarthy and the 4 operating team there. That's what we're doing. 5 It's a new operating team. Other than Frank, 6 who has been our Chief Financial Officer, it's 7 essentially a new operating team over the last 8 seven months. 9 And I know it doesn't answer your 10 question. And I'm not -- I would rather not 11 have to decline in my gross revenues of 20 12 percent or 25 percent. But it was almost 13 necessary in order to cull out a lot of 14 unprofitable business that was coming to the 15 property and giving away too much coin and too 16 much food and too much everything in order to 17 get people to want to come to your property. 18 Because it has good service and good food and 19 good amenities and clean rooms and clean 20 property. You go to Resorts, it's a clean 21 property. I can tell you that much. 22 VICE CHAIR EPPS: That's all I have 23 right now. 24 CHAIR KASSEKERT: Commissioner 25 Sommeling? 0231 1 VICE CHAIR EPPS: Right now. 2 COMMISSIONER SOMMELING: Nick, 3 everything you've told us, I think is what you 4 believe in your heart's going to happen now and 5 in the future for Resorts. But, that aside, 6 the debt that you have incurred and that is now 7 due and overdue, you said you were going to 8 work on a plan, or you were working on a plan. 9 Are you telling us that you want -- you're 10 trying to make an arrangement with the lenders 11 that will be acceptable wherein you can begin 12 again? 13 THE WITNESS: We're trying. 14 COMMISSIONER SOMMELING: Well, to take 15 up what it is in terms of your obligations to 16 the lenders? I know -- I'm not asking you if 17 you can pay the full amount or anything like 18 that. 19 THE WITNESS: You know me a long time, 20 Commissioner. 21 COMMISSIONER SOMMELING: I know. 22 THE WITNESS: And I'll answer it as 23 direct as I can without getting into any 24 specific talks. A, if I had a crystal ball two 25 years ago, I would have never taken on this 0232 1 debt. Never, ever, ever. It was a mistake. 2 And I'm man enough to say it. I didn't -- I'm 3 equity owner. I have not taken ten cents in 4 equity out of Resorts in eight years. Not one 5 dime. The debt -- looking back, we saw growth. 6 We didn't see where -- in other words, it went 7 this way, and then it went straight down. So 8 the best we could do is to see if there's a 9 combination that makes sense between me, the 10 bank, Colony, Trimont. It's a very, very 11 complex situation and one we hope to be able to 12 talk through and work out. And I -- I can't 13 tell you if it's 50/50 or 30 percent or 25 14 percent. But everybody's working in good 15 faith. That's what I can tell you. 16 COMMISSIONER SOMMELING: That answers my 17 question. Thank you. 18 CHAIR KASSEKERT: Commissioner Fedorko? 19 COMMISSIONER FEDORKO: Mr. Ribis, you 20 mentioned that you were going to be cash 21 positive by the end of February. Is that 22 realistic? 23 THE WITNESS: Oh, yeah. Yeah. 24 John? I'm here. I'm making a 25 representation that you and Frank gave me; is 0233 1 that correct? You expect to be cash positive 2 February? 3 MR. PASQUALONI: As we sit right now, 4 the answer would be yes. 5 THE WITNESS: Yes. And I believe him. 6 And if I don't, he'll hear me March 1st. 7 COMMISSIONER FEDORKO: You own probably, 8 if not the oldest, one of the oldest casino 9 buildings in the country. How do you compete 10 with that? How do you make that work? 11 THE WITNESS: That's why we -- that's 12 why we put up that beautiful new tower with a 13 plan to do an extensive renovation next-door, 14 new rooms. And then eventually take down the 15 old tower. That's what we always planned to do 16 and build out on the pier. And as it's 17 happened, we're not being able to do that. So 18 the best we can do is to get our debt load 19 where it works for us, where we can operate 20 what we have successfully and get back to some 21 semblance of sanity in our operations. 22 And I know the numbers around town, and 23 I know without mentioning properties the 24 declines in this town. And whether they are 25 new properties or old properties or just-built 0234 1 towers, they're all suffering about the same 2 degree. And that's because of the economy, 3 competition, part of your smoking -- you know, 4 the smoking issues. So, yes, it's an older 5 property. But I don't use that as an excuse. 6 I think that we have a lot of things there that 7 people come to see. We have a great theater. 8 We have a great history. And we're still the 9 first casino in Atlantic City. So I think all 10 those things may not make us $80 million in 11 cash flow but, we were making 30 to 35 million, 12 and I don't see why we can't get back to that 13 level of cash flow. I wouldn't be sitting here 14 today. If I didn't believe it, I would just 15 give them the keys or file bankruptcy and go 16 home. 17 COMMISSIONER FEDORKO: I read an 18 article, and I believe it was Miss Parmley's 19 article in the Inquirer, Andrew Barnett was 20 quoted as saying Atlantic City has had its 21 heyday. What do you think about that? 22 THE WITNESS: Well, you know, I like 23 Andrew Barnett. But Andrew likes to go to Las 24 Vegas, I guess. But I can tell you this much. 25 I have a casino in Las Vegas. I think the 0235 1 press has been disingenuous with respect to 2 Resorts. 3 There was a front-page article that I 4 don't want to talk about where there were 5 letters to the editor, one from John and many 6 others, where they quoted an operator who's not 7 building here, who's closed down his project, 8 and says we should put a wrecking ball to 9 Resorts. Shame on the Atlantic City Press. 10 Shame on them for writing an article like that. 11 I have employees who worked there for 25 years 12 who put their blood and guts into this property 13 just as I have and just as other people have. 14 And for that -- that, to me, is muckraking. 15 It's not appropriate. Write what you want 16 about financial condition, but don't use a 17 quote from 2007 and put an article in that 18 destroys my -- the morale of the people that 19 work at this place. It's terrible. I've never 20 been so upset with an article in my entire 21 life. 22 So, yes, she wrote the article. And 23 Andrew Barnett was quoted in the article and as 24 I said, I like Andrew, but I'll decide for 25 myself, not an analyst, whether Resorts is 0236 1 going to be good or bad or Atlantic City is 2 going to survive. There's a lot of analysts 3 that write that Atlantic City is yesterday's 4 news. I don't agree with that. 5 COMMISSIONER FEDORKO: Do you see any 6 light at the end of the tunnel? 7 THE WITNESS: Not right now. 8 COMMISSIONER FEDORKO: Do you see -- 9 THE WITNESS: It's a -- to be honest 10 with you, it's a pretty dark tunnel. It's a 11 pretty long tunnel. You know, all I can do is 12 what I can do. And we have to live in this 13 environment, and we have to save our firepower, 14 and we got to keep our property moving forward. 15 And I know lenders have their responsibilities 16 and lawyers have their responsibilities. 17 Consultants have their responsibilities. But 18 our responsibility is to recognize where we 19 are, where we're here, not because of ill 20 motivation, bad management, bad properties. 21 We're here because the world is here. And I -- 22 all I know is, you know, get down on my hands 23 and knees every day and say a prayer. Pray to 24 my mother up in heaven that she comes up with a 25 good idea because we need one. Because I don't 0237 1 see anything on the horizon. 2 Although, I've noticed -- and John and I 3 have been talking about this -- the last three 4 or four weekends -- the weekdays are still very 5 difficult -- have been a little bit better, a 6 little bit more volume, little bit more 7 interest in our entertainment. So maybe we're 8 edging towards people wanting to do something, 9 but it's difficult. And I can tell you, it's 10 just as difficult in Las Vegas. Just as 11 difficult. 12 COMMISSIONER FEDORKO: Did you have a 13 good Presidents' weekend? 14 THE WITNESS: Yes, we had a good very -- 15 John? Yeah. We had a very strong Presidents' 16 weekend. In fact, I don't want to use the 17 number, but Saturday was it -- yeah. 18 Saturday's number was as good as I've seen in 19 the last eight months. Our number. And it 20 wasn't great whole percentage. It was just 21 volume. I was there Saturday. I came down 22 intentionally. I try to spend every other 23 Saturday in Atlantic City now. I can tell you 24 that the volume of people at my two properties 25 was very, very, very good. We had some good 0238 1 entertainment. We had the Commodors at the 2 Hilton, and we had Howie Mandel at Resorts, 3 both theaters packed. Busy before and after. 4 All the food outlets were busy. So I think 5 there's a possibility that we maybe get -- if I 6 can -- if we stop the decline and just get a 7 leveling for a period of time, that would help. 8 Since September, it's been straight down every 9 month. On a volume basis. 10 COMMISSIONER FEDORKO: Thank you. 11 CHAIR KASSEKERT: Commissioner Epps? 12 COMMISSIONER SOMMELING: Go ahead. 13 VICE CHAIR EPPS: I just have an 14 entertainment question, and I don't want to go 15 too far down this thing, but just since you 16 started it, it's a just a curiosity for me. 17 Even in a bad economy, the Boardwalk Hall again 18 topped the charts for its size for its venues 19 with sellouts and whatever in Atlantic City, 20 which suggests to me that there are still 21 things people will come to Atlantic City for. 22 Is it -- now I know entertainment on one side 23 ends up being costly. Is it something that you 24 guys looked at to -- 25 THE WITNESS: Yes. 0239 1 VICE CHAIR EPPS: -- to bump up the-- 2 THE WITNESS: We've bumped the -- both 3 my operators know I believe strongly in 4 entertainment. I think it's important. 5 Something you need at your property. Something 6 people look for other than eating and drinking 7 and playing, playing table games or slot 8 machines. We're trying to put together an 9 event before the summer in May at Boardwalk 10 Hall that makes sense as a joint -- as a joint 11 property presentation. We were very successful 12 when we did Barry Manilow, not last year but 13 the year before. So we're -- I'm waiting for 14 them to come to me and tell me. It's something 15 that I agree with you. I think that hall is 16 one of the best amenities we have here, and its 17 underutilized. 18 CHAIR KASSEKERT: Commissioner 19 Sommeling? 20 COMMISSIONER SOMMELING: I think I 21 just -- I don't want to belabor this. I just 22 want to know if you and the lenders have some 23 sort of schedule in the near future to resolve 24 the issue of the debt and I know -- 25 THE WITNESS: We have no -- I want to be 0240 1 honest. We have no schedule. But we have made 2 progress in putting together our thoughts and 3 with the lender coming back and asking me for a 4 particular type of information, which we're 5 getting together for them, and we'll have to 6 them on Friday. I can't speak for them. We'd 7 rather -- we'd rather get it resolved sooner 8 rather than later. I can tell you that much. 9 COMMISSIONER SOMMELING: Thank you. 10 CHAIR KASSEKERT: Anything else? 11 I have nothing else. 12 Anything on redirect? 13 MR. BROOKS: No, Madame Chair. 14 CHAIR KASSEKERT: Anything on recross? 15 MR. O'GARA: No. 16 MS. FLAHERTY: No, Madame Chair. Thank 17 you. 18 CHAIR KASSEKERT: Thank you. You may 19 step down. 20 THE WITNESS: Thank you. Thank you. 21 CHAIR KASSEKERT: Any other witnesses? 22 MR. BROOKS: No, Madame Chair. 23 CHAIR KASSEKERT: Okay. We'll now move 24 to closing statements. 25 Division, I think you go first. 0241 1 MS. FLAHERTY: Yes. Thank you, Chair. 2 The Division hopes that it's provided 3 information concerning the specific background 4 of this matter and our analysis pertinent to 5 the resolutions of the petitions which are 6 pending before the Commission. 7 There's been a lot of discussion with 8 regard to detailed contractual terms and, 9 obviously, the agreements address many of the 10 matters that are relevant to issues before you 11 today. These are primarily contractual matters 12 that have been entered by the parties setting 13 forth their duties and obligations. And it is 14 our view that, for the most part, those 15 agreements that have been presented to us 16 should control those matters. 17 Additionally, we have attempted to 18 address arguments that have been made. We have 19 set forth legal matters in our papers with 20 respect to precedence and other cases that the 21 Commission has considered that seem to be 22 somewhat similar to this. 23 In addition, there are lease 24 arrangements that have been entered. The 25 Commission under the statute has the authority 0242 1 to require a person to be a casino licensee, a 2 casino service industry, and in some cases has 3 decided that the person should not be 4 designated. For a long time the lessor under 5 Resorts, the lessors under those agreements did 6 not come in and did not submit to any kind of 7 licensure, even nongaming licensure for the 8 first 20 years of Resorts. The licensees -- 9 the lessors under the Trump Plaza property also 10 are nongaming casino service industries. 11 In that regard, we also want to note 12 that we see that the lenders are attempting to 13 exercise default remedies. That is not unique 14 to the casino industry. There have been other 15 instances where lenders have gotten involved in 16 matters where there has been a default and have 17 entered negotiations and discussions and have 18 tried to work out matters and have pursued 19 their remedies. We do believe that there are 20 many potential outcomes to this matter still. 21 I think that that's evident because the parties 22 have stated that they're still in discussions 23 about how this may come to pass and how this 24 facility will be owned in the future. I don't 25 think that the regulatory agencies can make a 0243 1 decision as to who should be what because we'd 2 really be giving advisory opinion as to an 3 untold number of possibilities at this stage, 4 and I don't think that that's really what we 5 want to get into. 6 In addition to that, I would just say 7 that we've noticed some concerns relevant to 8 the investment and lending activities, and the 9 importance, I think, of really trying to 10 enhance and encourage investment in Atlantic 11 City, especially now. 12 The Division's concern within a 13 statutory mission, as I've stated today, is to 14 maintain the financial viability of the Resorts 15 AC casino hotel operation. We believe that our 16 position premised upon the conditions set forth 17 in our reports can facilitate and, hopefully, 18 accomplish that end. The agreement by the 19 Petitioners, Column and Trimont, and the Cross 20 Petitioner, Resorts, to the conditions which 21 we've recommended are of crucial significant, 22 and we really want to ensure that Resorts has 23 the operational funds in that amount of $15 24 million so that it can continue in operation 25 and can continue to employ its employees and do 0244 1 business and pay its vendors and do everything 2 that it needs to do. 3 Thank you very much. 4 CHAIR KASSEKERT: Thank you. 5 Mr. Brooks? 6 MR. BROOKS: Thank you, Madame Chair. 7 The petition that we're dealing with has 8 requested certain relief. And what we've -- we 9 haven't tried to dictate to anyone what the 10 default remedies -- Resorts has hasn't told 11 anyone what default remedies they can utilize. 12 We haven't tried to raise these issues as an 13 effort to thwart, to prevent anyone from doing 14 what they're capable of doing or what they want 15 to do in terms of the loan documents. 16 The issues were raised in good faith 17 because what we were being asked to do or what 18 we were being told they would like to do -- the 19 lenders would like to do with respect to some 20 of the assets, in particular the bank accounts, 21 the property owned under the casino hotel 22 raised licensing issues. Resorts is a 23 licensee. It has conditions to its license. 24 It has requirements it has to meet under the 25 Act. Resorts was just exercising its duties in 0245 1 terms of addressing these issues, and that's 2 what's brought us here today. 3 In terms of the land under the casino, I 4 think it's pretty clear that there has to be a 5 decision with respect to licensing. Whatever 6 the decision will be, it will be. Mary Jo 7 brought up the four ground leases. Of course, 8 they are very, very small pieces of property 9 and not the entire property. We're talking 10 about the property underneath the casino and 11 hotel. But that's not our decision. That's 12 the Commission's decision. And whatever 13 applications we made in that regard will be 14 made. But we can't be in a position to even 15 deal with that issue, ownership of land 16 underneath a casino hotel, until there's -- we 17 know somebody can be licensed. I mean that, I 18 think, is fundamental. 19 We heard a lot about bank accounts. And 20 I'm not sure -- as I stand here today, I really 21 know exactly what's being asked. That kind of 22 changed and moved as the witnesses went along. 23 And I'm not trying to say that to be pejorative 24 to any of the witnesses. But I do know what 25 was asked for in the petition. The petition 0246 1 was pretty clear that there's an effort to 2 control expenditures and deposits into the 3 accounts. They want to control the money. And 4 now we heard that they want to own the account 5 but then not own the account. Just have a 6 security interest. They have a security 7 interest already. But they want to have a 8 security interest. Then there's negative 9 control. I think what we heard, frankly, what 10 it all comes down to is they want to -- the 11 lenders want to control the money. They want 12 to know where it's at. They want to control 13 it. 14 Now, monitoring it? That's not a 15 problem. They have the right to do that now. 16 You heard Mr. Ribis' testimony. There's going 17 to be a monitoring system, financial system in 18 place for the Division, the Commission. They 19 have the ability to monitor cash in, cash out. 20 How everything is being spent. There's no 21 doubt about that. Whatever agreements they 22 want, they'll get. Whatever budget they 23 want -- within reason. There may be privileges 24 that would be involved in certain agreements. 25 But we've given them a lot of information. 0247 1 We're prepared to do it again. We're prepared 2 to have full transparency in terms of the 3 operation. 4 What they're looking for is not 5 monitoring. At least as far as what I can 6 tell. It did move a little bit. But as far as 7 I can tell, they want control. And with 8 control of revenue from a casino hotel. 9 Dictating how that revenue can be expended, you 10 have to have a license. I mean, the Act is 11 clear in that regard. Or there at least has to 12 be some ability for this Commission to address 13 the licensing issue before you can control how 14 revenues of a casino hotel are utilized. 15 Now, it didn't get as much testimony, 16 but there's also the request to review 17 agreements and decide -- the language is in the 18 petition. Decide what agreements determining. 19 You know, not -- did not mention anything about 20 coming back to you in the petition but 21 describe -- decide what agreements should be 22 terminated. If you want to control the 23 agreements a casino hotel can enter into, 24 you're controlling operations. And to control 25 operations, you have to be -- you have to deal 0248 1 with licensing. 2 And these are -- this is not new news. 3 This is not going to chill the financial 4 community. This is nothing earth shattering. 5 This is something that has long been known. 6 This is New Jersey. The New Jersey gaming 7 environment is heavily regulated as it should 8 be. As it should be. Mr. Ribis alluded to 9 that in his testimony. Integrity is hugely 10 important. It always has been in this 11 industry. 12 This Commission has made some tough 13 decisions in the last couple years. Tough 14 decisions that were made not because of the 15 message it sent to the lending community, not 16 because of the message it sent to people who 17 wanted to come into this community, but because 18 it was the right thing to do vis-a-vis the 19 Casino Control Act. And you've been vindicated 20 in that regard. 21 And so those are the issues. Those are 22 the things that have to be deal with before you 23 can control or own. And that's all we've 24 brought to the Commission. That's all we've 25 said. The lenders cannot be in a position to 0249 1 own land under the facility or control our bank 2 account -- control our bank accounts, control 3 our revenues until they're properly licensed 4 until that's addressed by you. These are not 5 entities that have ever qualified. 6 I know Colony -- Credit Suisse, they're 7 banks. There is some assurances there, 8 although recently and lately, I'm not so sure. 9 All right? That's something you'll have to 10 decide on. They'll have to make applications 11 if they want owner control. They're not just 12 banks that lend money and have a mortgage. 13 They are banks that want to control operation. 14 They want to control revenue. That's 15 different. That's different. They've never 16 qualified. They've been waived. They've been 17 exempted. They've never qualified. 18 Trimont, not a bank, not a licensed 19 lending institution. It would be the entity 20 that controls. It's the entity that represents 21 the senior portion of that debt obligation. So 22 I think these are issues that have to be 23 resolved by the Commission by way of the 24 licensing, and that's what we've asked in terms 25 of the cross petition, and that's where we're 0250 1 at today. We do not believe they should be -- 2 that the lenders can be in a position of 3 control until the licensing issue is resolved. 4 Thank you. 5 CHAIR KASSEKERT: Thank you. 6 Mr. O'Gara? 7 MR. O'GARA: Thank you. 8 I think everybody is right. It's pretty 9 simple. Resorts borrowed a lot of money. They 10 stopped paying the interest on it. They've 11 defaulted. And the lenders are here pursuant 12 to the agreements that Resorts and the lenders 13 negotiated that everybody signed and agreed on 14 that you reviewed and asking simply to be able 15 to exercise the remedies under that agreement. 16 Not asking to operate a casino. Not asking to 17 become -- do anything unusual. They're asking 18 to be able to, A, foreclose; and, B, to have a 19 security interest in certain accounts to have 20 the loan serviced. And we ask only that you 21 give us that permission to pursue those legal 22 remedies. 23 Certainly, they'll be discussions. 24 There can be discussions. But the lenders 25 explained, say they want the right to exercise 0251 1 these remedies, and they're remedies which 2 everyone agreed to. They were voluntarily 3 entered into. 4 We suggested, and I believe that Miss 5 Flaherty has indicated the Division agrees, 6 also, that certainly if those remedies were to 7 be consummated, even if we were to get a deed 8 in lieu, if we were to foreclose and own title 9 of the real estate -- and it's the real estate 10 only we're talking about that -- that we would 11 prior to that file the appropriate application 12 with the Division to determine status of the 13 owners of the real state that would enter into 14 agreement with the operator, presumably 15 Resorts, pursuant to their 12-month obligation. 16 And that issue can be resolved. It doesn't 17 have to be resolved prior to the exercise of 18 remedies. 19 We've asked only to exercise those 20 remedies, and we would say to you that, in 21 fact, these are things that lenders look to. 22 And that's why lenders lend capital. I know 23 Mr. Brooks says it makes no difference to the 24 lenders. My clients are lenders and suggest 25 those remedies are very important. They're 0252 1 what they consider. And the security is the 2 reason they lend. And we're asking only that 3 those agreements be read to mean what they say. 4 And that with the assurance that you 5 have from these lenders with respect to the $15 6 million that Miss Flaherty -- with respect to 7 the servicing advances, the financial stability 8 assure as you simply allow us to go forward. 9 And as we go forward, perhaps solutions will be 10 found. And we ask you to begin that process so 11 that we can have those remedies. 12 Thank you. 13 CHAIR KASSEKERT: Thank you. 14 We're going to take a recess. 15 (A recess was taken from 5:36 to 5:50 16 p.m.) 17 CHAIR KASSEKERT: Thank you. We'll go 18 back on the record. 19 Oh, we'll wait for Mary Jo. 20 MR. DiGIACOMO: Yeah. 21 CHAIR KASSEKERT: Thank you. 22 Obviously, given the volume of material, 23 both written and oral, that we must synthesize 24 in this matter, I believe that the appropriate 25 course is to reserve decision with the 0253 1 expectation that we will announce our 2 determination at the next public meeting. 3 In the interim, all parties are urged to 4 meet with our staff an effort to develop a 5 proposal for our consideration that would 6 narrow the range of issues to be decided so 7 that we can better focus on only those that 8 remain controverted. It is in that context 9 that I offer the following comments: 10 Throughout the presentations here today, 11 it became apparent that are areas of consensus. 12 However, not surprisingly, the proposal to 13 control the so-called cash reserve accounts and 14 to review and displace certain agreements have 15 drawn the most attention. Even in those areas, 16 however, some information is now being shared, 17 so perhaps there will be a narrowing of the gap 18 in what is controverted there as well. 19 A central tenet under the Casino Control 20 Act recognizes that, with limited exceptions, 21 the need for qualification arises whenever the 22 ability to control a casino licensee is 23 manifest. Certainly, each Commissioner will 24 sift through all that has been presented in 25 order to discern if Trimont and its principal 0254 1 will be crossing the line between control where 2 qualification and further licensure are 3 necessary, and the less-intrusive monitoring 4 role that may not necessitate any further 5 regulatory action at present. If the parties 6 can agree where that bright line is, all the 7 better. 8 Unless one of my colleagues on the 9 Commission is prepared to make a motion to 10 decide the matter now, as Chair, I would simply 11 close this item for today with the expectation 12 of returning with our ruling in two weeks. 13 Is there any motion? 14 COMMISSIONER FEDORKO: Motion. 15 CHAIR KASSEKERT: No. 16 (Laughter.) 17 CHAIR KASSEKERT: Say no. No motion. 18 COMMISSIONER FEDORKO: Motion to 19 adjourn. 20 CHAIR KASSEKERT: We still have the 21 public portion. 22 COMMISSIONER FEDORKO: I know. 23 MR. NANCE: In accordance with 24 Resolution No. 08-12-19-22 -- 25 MR. O'GARA: Thank you. 0255 1 MR. DiGIACOMO: Thank you, Madame Chair. 2 MR. NANCE: -- the next closed session 3 of the Commission shall be held on March 4, 4 2009, at 9:15 a.m. in the Commission offices. 5 It is now time for the public 6 participation portion of the meeting. 7 CHAIR KASSEKERT: Anyone from the public 8 wish to be heard? 9 MS. RIVERA: Yeah. 10 CHAIR KASSEKERT: Please come forward. 11 MS. RIVERA: Madame Chair -- 12 MS. FAUNTLEROY: You want to get order? 13 CHAIR KASSEKERT: Yeah. Can we -- the 14 meeting is not completed yet, so can you take 15 it outside, please? 16 MR. O'GARA: Sorry. 17 CHAIR KASSEKERT: Thank you. 18 MS. RIVERA: Well, I was going to say 19 good morning, Madame Chair, but actually, it's 20 good evening at about this time and -- 21 CHAIR KASSEKERT: Can you state your for 22 the record, please. 23 MS. RIVERA: Yes. Sharon Rivera, and 24 I'm a representative of the UAW International 25 Union. 0256 1 CHAIR KASSEKERT: Thank you, Sharon. 2 MS. RIVERA: And I would just like to 3 make a brief statement that Mr. Al Wellings is 4 going to be providing some information here 5 today as a representative of the UAW. He also 6 is a dealer at the Tropicana. 7 MR. WELLINGS: Good afternoon, early 8 evening, Madame Chair, Commissioners. 9 MR. NANCE: Would you state your name 10 again, please? 11 MR. WELLINGS: My name is Al Wellings. 12 MR. NANCE: A long-term resident and 13 have worked at -- as a dealer for 23 years at 14 Tropicana. I'm here as a representative of the 15 UAW, as what Sharon said, bargaining team. 16 We understand that labor relations are 17 not normally the purview of the Commission. 18 But due to the unique relationship with the 19 Commission and the Tropicana, we feel it's very 20 important to draw your attention to the serious 21 state of labor relations with your appointed 22 Conservator, Justice Stein. 23 The UAW was certified as exclusive 24 representative of slot technicians, poker 25 dealers, and table games dealers over a year 0257 1 ago. Initially, Justice Stein pledged 2 cooperation during negotiations. Since that 3 time, we have experienced numerous violations 4 of the National Labor Relations Act that 5 include surface bargaining, changes in terms of 6 condition of employment, and failure to 7 negotiate disciplinary actions. Most recently, 8 Justice Stein has authorized management to 9 increase the cost of health care by drastically 10 increasing premiums, deductibles, 11 emergency-room visits, hospitalization, et 12 cetera, as well as threatening to lay off 13 employees with no rational explanation for 14 these actions. 15 Two years ago there were 42 -- 41 slot 16 technicians at Tropicana. Today there are 23, 17 and they are threatened to lay off five. They 18 cannot keep up with their workload now. Under 19 Stein's direction, the casino is threatening to 20 lay off slot techs, yet they advertising to 21 hire additional slot techs. None of this make 22 any sense. Dealers and slot technicians are 23 the workers that bring profits into the casino. 24 It would not be conducive to increased revenues 25 and profits when customers wait in line to play 0258 1 slot machines and poker and table games. As 2 you may be aware, slot technicians recently 3 voted over 90 percent margin in fair of a 4 strike authorization vote. Dealers are 5 considering the same action. We don't want to 6 strike. We want other casinos in Atlantic City 7 to have a fair contract. 8 We believe that resolving this labor 9 dispute, the Tropicana will be much more 10 attractive property. We, in fact, want the 11 Tropicana to be the most successful casino in 12 Atlantic City and are willing to seek 13 cooperative solutions to make that happen. But 14 in order to do this, he need a negotiating 15 partner we will work with to reach a fair and 16 equitable agreement. 17 As long-term members of this community 18 and loyal employees, we respectfully request 19 that the Commission assume responsibility for 20 Justice Stein's action and direct him to 21 negotiate in good faith with us by 22 understanding proposed benefit cuts, cease the 23 threat of layoffs, and seek to finalize a 24 contract as soon as possible. 25 We workers are still struggling to 0259 1 ensure working at a casino is a viable career 2 as promised over 30 years ago. 3 Thank you for your time. 4 CHAIR KASSEKERT: Thank you. We 5 appreciate your coming, and we'll take your 6 comments under advisement. 7 MS. RIVERA: Thank you. 8 CHAIR KASSEKERT: Is there anyone else 9 from the public who wishes to be heard? 10 (No response.) 11 CHAIR KASSEKERT: Seeing no one, I'll 12 declare that portion of the meeting closed and 13 entertain a motion to adjourn. 14 COMMISSIONER SOMMELING: Motion to 15 adjourn. 16 COMMISSIONER FEDORKO: Second. 17 CHAIR KASSEKERT: The motion has been 18 made and seconded. All in favor? 19 (Ayes.) 20 CHAIR KASSEKERT: Opposed? 21 (No response.) 22 CHAIR KASSEKERT: Motion carries. 23 (Public Meeting 09-02-18 was adjourned 24 at 5:57 p.m.) 25 0260 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: February 23, 2009 23 My Commission Expires on July 10, 2009 24 ID No 2062871 25