1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 RE: Amended and Supplemented Petition of the Steering 5 Committee of Secured Lenders for approval of an organizational structure and for other relief (PRN 6 1590901); and Amended and Supplemented Petition of Tropicana 7 Entertainment, LLC, et al., for a declaratory ruling concerning inter alia, the qualification status of 8 William J. Yung, III (PRN 3390801) 9 - - - - - - - - - - - - - - - - - - - 10 AM SESSION 11 Monday, July 27, 2009 12 Atlantic City Commission Offices 13 Joseph P. Lordi Public Meeting Room - First Floor 14 Tennessee Avenue and Boardwalk 15 Atlantic City, New Jersey 08401 16 11:00 a.m. to 12:45 p.m. 17 18 19 Certified Court Reporter: Charles Iuliano 20 - - - - - - - - - - - - - - - - - - - - - - - - - - - 21 ATLANTIC CITY COURT REPORTING, LLC 22 CERTIFIED COURT REPORTERS AND VIDEOGRAPHERS 23 125 ATLANTIC AVENUE, SUITE 416 24 ATLANTIC CITY, NEW JERSEY 08401 25 (609) 345-8448 www.accourtreporting.com 2 1 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 MICHAEL C. EPPS, VICE CHAIR WILLIAM T. SOMMELING, COMMISSIONER 4 SHARON ANNE HARRINGTON, 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 TRACY E. RICHARDSON, COUNSEL 10 DIVISION OF GAMING ENFORCEMENT: 11 DEPUTY ATTORNEYS GENERAL JOHN E. ADAMS, JR., DEPUTY ATTORNEY GENERAL 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S : 2 DUANE MORRIS, LLP BY: GILBERT L. BROOKS, ESQ. 3 AND: ERIC D. FRANK, ESQ. FOR: THE SECURED LENDERS 4 STEARNS & WEINROTH, PC 5 BY: PAUL M. O'GARA, ESQ. FOR: TROPICANA ENTERTAINMENT 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 I N D E X 2 3 OPENING REMARKS: PAGE: 4 BY MR. BROOKS 14 5 BY MR. ADAMS 17 6 7 WITNESSES: 8 9 MARC KIESELSTEIN: 10 BY MR.BROOKS 18 11 BY MR. ADAMS 41 12 VICE CHAIR EPPS 43 13 COMMISSIONER SOMMELING 52 14 COMMISSIONER HARRINGTON 53 15 16 SCOTT CHARLES BUTERA: 17 BY MR. BROOKS 54 18 BY MR. ADAMS 86 19 CHAIR KASSEKERT 90 20 COMMISSIONER SOMMELING 93, 101 21 VICE CHAIR EPPS 94 22 - - - - - 23 24 25 5 1 E X H I B I T S : 2 DIVISION NO. DESCRIPTION EVD 3 D-1 DGE letter report, 6-11-09 to Chair X 4 Kassekert from DAG John E. Adams Re: PRN 3390801 5 D-2 DGE letter, 6-12-09, to Chair 6 Kassekert from DAG John E. Adams X 7 PETITIONER NO. DESCRIPTION EVD 8 9 P-1 Findings of facts, conclusions of law X and Order confirming First Amended 10 Joint Plan of Reorganization of Tropicana Entertainment, LLC, and certain of its 11 Debtors affiliates under Chapter 11 of the Bankruptcy Code 12 P-2 Amended Chapter 11 Plan [First Amended X 13 Joint Plan of Reorganization of Tropicana Entertainment, LLC, and certain of its 14 debtor affiliates under Chapter 11 of the Bankruptcy Code (confirmed version)] 15 P-3 Disclosure statement for the First Amended X 16 Joint Plan of Reorganization of Tropicana Entertainment, LLC, and certain of its 17 debtor affiliates under Chapter 11 of the Bankruptcy Code (solicitation package version) 18 P-4 Plan Supplement in support of Debtors' X 19 First Amended Joint Plan of Reorganization of Tropicana Entertainment, LLC, and certain 20 of its debtor affiliates under Chapter 11 of the Bankruptcy Code 21 P-5 Notice of Amendment to Plan Supplement in X 22 support of Debtors' First Amended Joint Plan of Reorganization of Tropicana Entertainment, 23 LLC, and certain of its debtor affiliates under Chapter 11 of the Bankruptcy Code 24 P-6 Second Notice of Amendment to Plan Supplement X 25 in support of Debtors' First Amended Joint Plan of Reorganization of Tropicana 6 1 continued E X H I B I T S : 2 PETITIONERS NO. DESCRIPTION EVD 3 Entertainment, LLC, and certain of its X 4 Debtor affiliates under Chapter 11 of the Bankruptcy Code 5 P-7 Corporate structure chart as of petition date X 6 P-8 Amended description of restructuring X 7 transaction of OpCo 8 P-9 List of assumed executory contracts and X unexpired leases 9 P-10 Additional supplement to list of assumed X 10 Contracts 11 P-11 Order (A) authorizing the Debtors to enter X into an Asset Purchase Agreement for the sale 12 of the Tropicana Atlantic City Hotel and Casino and the Debtors' related assets free 13 and clear of all liens, claims, encumbrances, and interests; (B) granting the Debtors' 14 authority to consummate the transactions contemplated in the Asset Purchase Agreement; 15 (C) granting the Debtors' authority to grant a Limited Intellectual Property License to 16 the purchaser of the Tropicana Atlantic City; and (D) granting other related relief 17 P-12 Order pursuant to 11 UCS 105, 363, 365, and X 18 1113 and Bankruptcy Rules 2002, 6004, and 6006 approving (I) Asset Purchase Agreement, 19 (II) sale of substantially all of the Debtors' Assets free and clear of all liens, claim, 20 encumbrances, and interests, (III) authorizing the assumption and assignment of executory 21 contracts, unexpired leases, and collective bargaining agreements, and (IV) granting other 22 related relief 23 P-13 Business Plan for reorganized OpCo X 24 P-14 Form of Reorganized OpCo corporation charter X 25 7 1 Continued E X H I B I T S : 2 PETITIONERS NO. DESCRIPTION EVD 3 P-15 Form of reorganized OpCo corporation X 4 By-laws 5 P-16 Amended for of OpCo warrant X 6 P-17 Description of OpCo Management and X Director Equity Incentive Program 7 P-18 Summary of principal terms and conditions X 8 for Tropicana Entertainment, Inc., $150,000,000 senior secured credit facilities 9 P-19 Lender spreadsheets X 10 P-20 Form 8-k filed with the SEC by Tropicana X 11 Entertainment, LLC, on 4-8-09, re: Stipulation for entry of Judgment with Park 12 Cattle Co. 13 P-21 Supplemental memorandum in support of the X Debtors' motion for an Order authorizing 14 the Debtors to (A) assume and assign amended leases for the Lake Tahoe Horizon Casino and 15 (B) assume amended lease for the MontBleu Resort Casino & Spa properties 16 P-22 Term sheet for amendments to MontBleu X 17 ground leases 18 P-23 Term sheet for amendments to Horizon Tahoe X ground leases 19 P-24 Order authorizing the Debtors to (A) assume X 20 and assign amended leases for the Lake Tahoe Horizon Casino and (B) assume amended lease 21 for the MontBleu Resort Casino & Spa properties 22 P-25 Order approving resolution of trustee motion X 23 P-26 Limited irrevocable proxy X 24 P-27 Amended form of Litigation Trust Agreement X 25 8 1 continued E X H I B I T S : 2 PETITIONERS NO. DESCRIPTION EVD 3 P-28 Motion to reject lease or executory contract X 4 (Motion of the Debtors for an Order authorizing the Debtors to reject certain 5 service agreements effective as of 4-30-09) filed by Tropicana Entertainment, LLC 6 P-29 Order authorizing the Debtors to reject X 7 Certain service agreements effective as of 4-30-09 8 P-30 Consent in lieu of a special meeting of the X 9 Board of Tropicana Entertainment Holdings, LLC, 6-6-08, accepting William J. Yung, III, 10 Resignation as CEO, appointing Butera CEO and accepting Joe Yung's resignation as Senior VP 11 P-31 Consent in lieu of a special meeting of the X 12 Board of Tropicana Entertainment Holdings, LLC, 9-2-08 13 P-32 Consent in lieu of a special meeting of the X 14 sole manager of each subsidiary of Tropicana Casino and Resorts, Inc., 1-14-09, 15 reaffirmation of officers of certain corporate subsidiaries of TCR 16 P-33 Consent in lieu of a special meeting of the X 17 board of certain corporations, 1-14-09, reaffirmation of officers of certain corporate 18 subsidiaries of TCR 19 P-34 6-19-08, William J. Yung, III, resignation X as CEO from TEH subsidiaries 20 P-35 William J. Yung, III, resignation from Board X 21 of Tropicana Entertainment Holdings and its subsidiaries 22 P-36 6-19-08, Joseph Yung resignation as Senior X 23 Vice President from subsidiaries 24 P-37 Declaration of Scott C. Butera in support of X Confirmation of the First Amended Joint Plan 25 of Reorganization of Tropicana Entertainment, 9 1 Continued E X H I B I T S : 2 PETITIONERS NO. DESCRIPTION EVD 3 LLC, and certain of its Debtor affiliates 4 under Chapter 11 of the Bankruptcy Code 5 P-38 Tropicana Entertainment, LLC, Amended X Regulatory Gaming Compliance Committee 6 Program as of 1-13-09 7 P-39 10-15-08 meeting minutes of TEH Regulatory X Gaming Compliance Committee 8 P-40 1-13-09 meeting minutes of TEH Regulatory X 9 Gaming Compliance Committee 10 P-41 4-16-09 meeting minutes of TEH Regulatory X Gaming Compliance Committee 11 P-42 January 2009 Tropicana Entertainment Code X 12 of business conduct and ethics 13 P-43 1-14-09 Alix Partners - transition update X Presentation to Tropicana Entertainment, LLC, 14 Board of Managers 15 16 17 18 19 20 21 22 23 24 (Exhibits retained by Commission.) 25 10 1 (11:00 a.m. hearing commences.) 2 MR. NANCE: This is to advises the general 3 public that in compliance with Chapter 231 of the 4 Public Laws of 1975 entitled the Open Public 5 Meetings Act, the New Jersey Casino Control 6 Commission on July 21, 2009, filed with Secretary of 7 State at the State House, Trenton, New Jersey, a 8 notice of this hearing. On July 21, 2009 copies 9 were mailed to subscribers. 10 Members of the press will be permitted to 11 take photographs. And we would ask that this be 12 done in a manner which is not disruptive to the 13 Commission and which does not interfere with the 14 public's right to observe the hearing. 15 The use of cellular telephones in the 16 public meeting room while the Commission is in 17 session is prohibited. 18 Would everyone please stand for the pledge 19 of allegiance. Thank you. 20 (Pledge of allegiance recited.) 21 CHAIR KASSEKERT: Good morning. 22 MR. NANCE: The matter for this morning is 23 the amended and supplemented petition of the 24 steering committee of secured lenders for approval 25 of an organizational structure and for other relief 11 Opening Colloquy 1 PRN 1590901) and; 2 Amended and supplemented petition of 3 Tropicana Entertainment, LLC, et al, for a 4 declaratory ruling concerning, inter alia, the 5 qualification status of William J. Yung, III, 6 (PRN 3390801). 7 CHAIR KASSEKERT: Mr. DiGiacomo. 8 MR. DI GIACOMO: Good morning, Chair, 9 Commissioners. I think at this time it would 10 probably be appropriate for counsel to enter their 11 appearances. 12 CHAIR KASSEKERT: Thank you. 13 MR. BROOKS: Good morning Madam Chair. 14 Gilbert Brooks from the firm of Duane Morris, on 15 behalf of the steering committee. 16 MR. ADAMS: Jack Adams, DAG, Division of 17 Gaming Enforcement. 18 CHAIR KASSEKERT: And good morning. Today 19 the Commission is considering an amended petition 20 from the steering committee of secured lenders 21 seeking approval of the organization structure that 22 they propose using to the company that will buy the 23 Tropicana Casino Hotel. 24 Without objection the Commission has 25 consolidated that matter with a related petition the 12 Opening Colloquy 1 Tropicana Entertainment filed seeking a ruling that 2 William J. Yung, III no longer exercises any 3 influence or control over it. 4 It bears noting that the Tropicana 5 Entertainment has withdrawn its companion petition 6 seeking statements of compliance. And unless there 7 is an objection the Commission will administratively 8 dismiss as moot another Tropicana Entertainment 9 petition that sought to stay the conservator from 10 selling the property. 11 MR. DI GIACOMO: Madam Chair, I would note 12 for the record, I believe Mr. Paul O'Gara is in the 13 audience. 14 Mr. O'GARA: We have no objection, Chair. 15 CHAIR KASSEKERT: Thank you. The 16 Commission will take testimony today in furtherance 17 of its consideration of these consolidated matters. 18 Before hearing the witnesses, there are 19 also a number of exhibits that have been pre-marked 20 and identified on the list that Mr. Nance has 21 prepared and shared with the parties. Mr. Nance. 22 MR. NANCE: Yes. Chair, we have from the 23 Division of Game Enforcement, we have Exhibits D-1 24 and D-2. D-1 is the DGE letter report dated June 25 10, 2009 to Chair Kassekert from John Adams, Deputy 13 Opening Colloquy 1 Attorney General, regarding Petition RN 1590901. 2 D-2 is a DGE letter dated June 12, 2009 3 to Chair Kassekert from John Adams, Deputy Attorney 4 General, regarding Petition Number 1590901. 5 The Petitioner submitted 42 exhibits, 6 which are listed on my -- excuse me, 43 exhibits, 7 pre-marked as P-1 through P-43. 8 MR. DI GIACOMO: Chair, I believe that 9 those exhibit lists have been shared with counsel 10 for the parties. Rather than have Mr. Nance 11 identify each of them, it may be better if there is 12 no objection? 13 CHAIR KASSEKERT: Right. Let me just 14 inquire. Are all counsel satisfied that the list 15 prepared by the Commission staff accurately is 16 identified in the pre-marked exhibits? 17 MR. BROOKS: Yes, Madam Chair. 18 MR. ADAMS: Yes. 19 CHAIR KASSEKERT: Very good. There's been 20 no sealing request. Each exhibit will be so 21 identified and entered for the record, and should be 22 referred to by its corresponding exhibit number. 23 Are there any other procedural matters to 24 be brought to our attention at this time? 25 MR. BROOKS: None all, Madam Chair. 14 Opening Colloquy 1 MR. ADAMS. None at all. 2 CHAIR KASSEKERT: We are now set for 3 opening statements, which the parties may waive and 4 elect to instead proceed directly to testimony. 5 Counsel, what is your pleasure? 6 MR. BROOKS: Briefly, Madam Chair. I 7 want to thank the Commission for scheduling a 8 special hearing in connection with the application. 9 We on behalf of the Steering Committee appreciate 10 the time given to this application. It's an 11 important step for us, and I want to thank the 12 Commission again for doing that for us. 13 We intend to present the testimony, Madam 14 Chair, of six witnesses here today. And I like to 15 just briefly introduce them to the Commission 16 before they are called. 17 We have with us from the Icahn 18 Organization Vincent J. Intrieri and Ken Shea. And 19 we also have with us from the Adamar Organization 20 Mark Giannantonio, and from Tropicana Entertainment 21 Scot Butera and Mark Rubinstein. Lastly, Madam 22 Chair, we have from the firm of Kirkland and Ellis 23 Marc Kieselstein. Thank you, Madam Chair. 24 On April 29 2009 the Commission approved 25 the asset purchase agreement and set the stage for a 15 Opening Remarks By Mr. Brooks 1 bankruptcy filing on behalf of Adamar and an auction 2 process in the bankruptcy court. 3 On June 12, 2009 the bankruptcy court in 4 New Jersey approved the sale pursuent to the auction 5 of the Tropicana Atlantic City to the secured 6 lenders in connection with the credit bid that the 7 secured lenders had made in that bankruptcy 8 proceeding. 9 On June 24, 2009, the Delaware Bankruptcy 10 Court approved the sale to the lenders of certain 11 assets that were involved in that bankruptcy, but 12 were related to Tropicana Atlantic City. 13 So at this point the bankruptcy courts 14 have now signed off the issued sale orders in 15 connection with the assets to be sold to the lenders 16 pursuent to the asset purchase agreement. 17 In accordance with the asset purchase 18 agreement, it's now necessary for the lenders to 19 designate the buyer who will acquire the Tropicana 20 Atlantic City. 21 There are, essentially, two options for 22 the lenders. One is a standard ownership structure 23 and the second one would be an ownership structure 24 involving reorganized Tropicana Entertainment. 25 Now, that is a possibility in this case 16 Opening Remarks By Mr. Brooks 1 because of the fact that the lenders are going to 2 own both assets. The loan reorganized Tropicana 3 Entertainment as a consequence of the bankruptcy in 4 the plaintiff reorganization involving that matter, 5 they are going to own the Tropicana Atlantic City as 6 a consequence of the present bid, which has now been 7 approved by the bankruptcy court. 8 And because the reorganized -- because the 9 lenders are the owners of both assets and because of 10 the synergies and cost-savings related to both 11 assets, it would be the lenders' preference that 12 they be able to integrate Tropicana Atlantic City 13 with the ownership structure of reorganized 14 Tropicana Entertainment. 15 Of course, given the Commission's prior 16 decision with respect to Tropicana Entertainment, 17 and more specifically William Yung and entities 18 controlled or owned by Mr. Yung, understandably that 19 request has to be looked at carefully. 20 So through the exhibits we introduced into 21 evidence and the testimony we intend to present here 22 today, we hope on the part of the Steering Committee 23 to show the Commission that the Yung group will have 24 no equity or interest in reorganized Tropicana 25 Entertainment, the interest of the Yung Group will 17 Opening Remarks By Mr. Adams 1 be canceled and have no further force and effect. 2 And but for the one-time payment of cash related to 3 the ownership of unsecured notes and allowed 4 administrative claims, the Yung Group will have not 5 continuing business relationship of any sort with 6 the reorganized Tropicana Entertainment and its 7 subsidiaries. 8 And, finally, we hope to demonstrate that 9 by allowing Tropicana Atlantic City to integrate 10 with the ownership structure of the reorganized 11 Tropicana Entertainment will not only be in the 12 interest of the lenders, but also a benefit to 13 Tropicana Atlantic City. Thank you. 14 CHAIR KASSEKERT: Thank you. Before we 15 hear from Mr. Adams, let me just clarify. 16 Mr. O'Gara, are you planning to question any 17 witnesses? 18 MR. O'GARA: No, ma'am. 19 CHAIR KASSEKERT: Okay. Thank you. 20 Mr. Adams. 21 MR. ADAMS: Thank you, Chair. My comments 22 will be brief. You have before you numerous written 23 materials that have been submitted with respect to 24 these petitions. We have our reports. You are now 25 going do hear testimony and additional evidence 18 Opening Remarks By Mr. Adams 1 which will relate to all of the issues that are 2 before you. In effect, the testimony will 3 supplement, I believe, or clarify, probably add 4 something to the written materials you already have 5 before you. 6 We believe that after you hear all that 7 testimony, hear the entire presentation, you will 8 have every fact necessary before you, whether in 9 written form, testimonial form, or otherwise, 10 whereby you will then be able to render your 11 decision. 12 CHAIR KASSEKERT: Thank you. Mr. Brooks, 13 would you like to call your first witness. 14 MR. BROOKS: Thank you, Madam chair. Call 15 Marc Kieselstein. 16 CHAIR KASSEKERT: Mr. Nance will swear you 17 in. You are not admitted in New Jersey, correct? 18 MR. KIESELSTEIN: I am not admitted in New 19 Jersey. 20 MARC KIESELSTEIN sworn. 21 CHAIR KASSEKERT: You may proceed. 22 MR. BROOKS: Thank, Madam Chair. 23 BY MR. BROOKS: 24 Q. Mr. Kieselstin, by whom are you employed 25 and in what capacity? 19 Marc Kieselstein - by Mr. Brooks 1 A. Kirkland and Ellis, LLC, I'm a partner in 2 the restructuring group. 3 Q. Could you briefly describe your practice 4 and the types of matters you typically handle? 5 A. Typically, complex cooperate 6 restructuring, both in and out of court, typically 7 on the company or debtor side. 8 Q. Kirkland and Ellis was retained to 9 represent Tropicana Entertainment and its direct and 10 indirect subsidiaries, correct? 11 A. That's correct. 12 Q. And did the representation include a 13 potential bankruptcy restructuring? 14 A. When we were engaged it was apparent very 15 quickly that an out-of-court restructuring here 16 would be very challenging. So a bankruptcy was 17 certainly one of the possibilities. We knew that as 18 soon as we were engaged. 19 Q. Is it safe to say that you were one of 20 the principal attorneys at Kirkland and Ellis who 21 worked on the bankruptcy restructuring aspect of the 22 representation of Tropicana Entertainment? 23 A. I led the engagement. 24 Q. Did there come a point in time when a 25 decision was made to file a bankruptcy petition on 20 Marc Kieselstein - by Mr. Brooks 1 behalf of Tropicana Entertainment? 2 A. Yes, in late April. And we filed in 3 early May after getting the necessary paperwork 4 done. 5 Q. And what type of bankruptcy petition did 6 you file on the Tropicana? 7 A. Voluntary petition under Chapter 11 of 8 the Bankruptcy Code, which deals with 9 reorganization. 10 Q. And why was a petition filed under 11 Chapter 11 for Tropicana Entertainment? 12 A. It was clear right off the bat that there 13 were valuable assets here, that the best way to 14 maximize value was to seek to reorganize these 15 entities as going concerns rather than liquidate or 16 sell those assets. 17 Q. Did there come a point in time when 18 Tropicana Entertainment proposed a plan of 19 reorganization? 20 A. Yes, in early 2009. 21 Q. And can you explain, generally, for the 22 Commission, how the reorganization works in the 23 context of the Chapter 11 bankruptcy filing? 24 A. Chapter 11 plans the ultimate goal of a 25 Chapter 11 reorganization. In essence, it is a 21 Marc Kieselstein - by Mr. Brooks 1 court-sanctioned contract that replaces the 2 pre-petition claims and equity interest of and 3 against the debtor with treatment that is specified 4 under the plan of reorganization. And, in turn, 5 those pre-petition obligations and interests are 6 canceled and extinguished. 7 Q. Were you involved in the preparation of 8 the plan of the reorganization proposed by Tropicana 9 Entertainment? 10 A. Yes, heavily involved. 11 Q. Did there come a point in time when the 12 plan or reorganization proposed by Tropicana 13 Entertainment was amended? 14 A. Yes. It's typically the case in a large 15 Chapter 11, the filing of the plan starts the 16 conversation. We work with our various constituents 17 in an effort to have a consensual a plan as 18 possible. 19 COMMISSIONER EPPS: Mr. Brooks, do me a 20 favor. You are familiar with your questions. Can 21 you ask him a little bit slower. Because I almost 22 don't know what he's answering because you are going 23 really fast. But you're familiar with it. So, I'm 24 sure you worked with it. But if you can slow down, 25 I'll know what he is telling me. Because I don't 22 Marc Kieselstein - by Mr. Brooks 1 know what you asked him. 2 MR. BROOKS: I sure will. Thank you, 3 Commissioner Epps. 4 BY MR. BROOKS: 5 Q. Were you involved in the preparation of 6 the amendments to the plan of reorganization? 7 A. Yes. Those amendments were the fruit of 8 the discussions and negotiations of various parties. 9 I was involved in my team every step of the way. 10 Q. Let me show you a document we marked into 11 evidence as Exhibit P-2. Do you recognize this 12 document? 13 A. I do. 14 Q. And is this document -- is this document 15 the plan of reorganization that was presented by 16 Tropicana Entertainment to the bankruptcy court for 17 approval? 18 A. That certainly appears to be. I note 19 it's court-stamped. So, yes, I believe it is. 20 Q. Let me show you, also, a document we also 21 marked into evidence as P-3. Were you involved in 22 the preparation of this document? 23 A. I was. 24 Q. And what was this document? 25 A. This is a disclosure statement which 23 Marc Kieselstein - by Mr. Brooks 1 accompanies the plan. It's the equivalent of a 2 prospectus for bankruptcy purposes. Its purpose is 3 to allow people entitled to vote on the plan to make 4 an informed decision with all the facts and risk 5 factors and other pertinent information at their 6 disposal. 7 Q. Was the disclosure statement amended from 8 time to time? 9 A. Yes. Again, that's typical. As you go 10 down the process you incorporate the edits and 11 suggestions of various parties. 12 Q. Let me show you what we marked into 13 evidence as Exhibit 4. Do you recognize this 14 document? 15 A. I do. 16 Q. And can you tell us what this document 17 represents? 18 A. This is a plan supplement in support of 19 the plan of reorganization. And it's typically the 20 case in a significant size Chapter 11. There are 21 items that are finalized after you file your plan, 22 but before you go to get your plan confirmed. 23 Typically things around corporate govenorence, lists 24 of contracts to be assumed and/or rejected, a 25 variety of other ancillary issues. Those are 24 Marc Kieselstein - by Mr. Brooks 1 typically contained in a plan supplement. 2 Q. Was the plan also supplemented further, 3 in terms of the bankruptcy process in this case, in 4 connection with Tropicana Entertainment? 5 A. Yes. Everything tends to get amended a 6 number of times as you go down the road, because 7 there are so many parties in the process. And this 8 document, along with the others, would also have 9 been amended as we went down that path. 10 Q. Did there come a point in time when the 11 bankruptcy court considered the Tropicana 12 Entertainment plan of reorganization? 13 A. Yes. The confirmation hearing was in 14 early May of 2009. 15 Q. And what did the bankruptcy court do in 16 connection with the Tropicana plan of 17 reorganization? 18 A. The bankruptcy court confirmed the plan, 19 finding that it satisfied all the legal 20 pre-requisites of the bankruptcy code. 21 Q. Let me show you what we marked into 22 evidence as Exhibit P-1. Is this the order of the 23 bankruptcy court? 24 A. This is the confirmation order. The 25 colloquial -- this is the order where the court 25 Marc Kieselstein - by Mr. Brooks 1 makes its specific written findings that the plan 2 complied with the various provisions of the 3 bankruptcy code that are necessary to achieve that 4 end. 5 Q. Now, as a consequence of the entry of the 6 confirmation order, is Tropicana Entertainment in a 7 position to consummate the plan of reorganization? 8 A. Yes. The confirmation order, one of the 9 things it does is to, in essence, give the court's 10 blessing and authorizes the company to go forth and 11 consummate its plan; that is to say, implement, 12 effectuate the plan, and actually emerge from 13 Chapter 11. 14 Q. Now, focusing a little bit on the 15 confirmation order and the execution of the plan of 16 reorganization. Tropicana Entertainment is 17 currently a limited liability company. Is that 18 status going to change as a part of the plan of 19 reorganization? 20 A. Yes. One of the features of our 21 bankruptcy plan is to convert the limited liability 22 structure into a corporate structure. And that 23 allows us to provide equity to creditors, part of 24 the currently they are getting under the plan. 25 Q. Who will own the issued shares of the 26 Marc Kieselstein - by Mr. Brooks 1 reorganized company, reorganized Tropicana 2 Entertainment? 3 A. The vast majority of the shares of 4 reorganized Tropicana are going to be owned by the 5 senior lenders, who had claims that are secured by 6 liens on various assets. They are first in the 7 pecking order in the bankruptcy universe. And, 8 accordingly, in this case, given the values, they 9 are receiving the lion's share of the equity. 10 Q. Will Tropicana Casino and Resorts, 11 William Yung, or any entity owned or controlled by 12 Mr. Yung have an ownership interest in the equities, 13 securities of reorganized Tropicana Entertainment? 14 A. Not a single share. None, whatsoever. 15 Q. Why is that? 16 A. Well, as a matter of bankruptcy 17 priorities, the equity sits at the bottom of the 18 totem pole. There is simply insufficient value here 19 for there to be any real argument that the 20 hold-equity was entitled to any distribution. And 21 this, again, is putting aside any particular actions 22 of Mr. Yung or the companies he controls. Simply, 23 it's a matter of Bankruptcy 101. He was way way way 24 out of money, so would not receive any equity just 25 by the operation of the bankruptcy code. 27 Marc Kieselstein - by Mr. Brooks 1 Q. Could you discuss for the Commission the 2 impact of Section 1145 of the Bankruptcy Code on the 3 issuance of the equity securities by the reorganized 4 Tropicana Entertainment? 5 A. Yes. Section 1145 of the Code is a 6 special provision that permits debtors that are 7 reorganizing to issue equity that is freely 8 transferable and tradable without going through the 9 full Securities and Exchange Commission process. 10 The policy behind that is, when I touched 11 on the disclosure statement, again, that's the 12 proxy, or the equivalent of an SCC registration 13 statement and the bankruptcy judge's finding that 14 disclosure statement to be adequate, is deemed to be 15 the equivalent of SCC approval. 16 Thus, the shares issue of the plan 17 pursuent to 1145 are freely tradable, which is an 18 important feature of creditors who are seeking that 19 currency. 20 Q. Now, Tropicana Entertainment had various 21 liabilities and debts. Will reorganized Tropicana 22 Entertainment and its subsidiaries, as well as the 23 property they own, be subject to any successor 24 liabilities in connection with those liabilities and 25 debts? 28 Marc Kieselstein - by Mr. Brooks 1 A. No, it will not be. The whole point of 2 the plan, as I touched upon earlier, is to supersede 3 those pre-petition claims with the treatment under 4 the plan. So it's, in essence, an ovation of all 5 the pre-petitions and obligations the company had. 6 And one set has been replaced and superceded by the 7 plan treatment. Those claims are forever 8 extinguished. And, in fact, there is an injunction 9 that prevents creditors from seeking to assert those 10 pre-petition claims. 11 Q. In connection with the plan of 12 reorganization, there is an assertion by Mr. Yung 13 that he has administrative claims related to the 14 bankruptcy. Could you describe the administrative 15 claims that he asserts he has? 16 A. Yes. As I think people are aware, there 17 were a number of services that were provided 18 historically by the Columbia Sussex side of the 19 organization. The way the organization was run by 20 Mr. Yung, Tropicana had very little of its own 21 infrastructure; thus, was forced to rely for a time, 22 even post-bankruptcy, on those shared services. And 23 I think those claims, which we dispute, arise from 24 the provision of those services, a number of things 25 that were allegedly paid by Columbia Sussex or other 29 Marc Kieselstein - by Mr. Brooks 1 entities controlled by Mr. Yung on the account of 2 Tropicana. Again, that is a matter of dispute. 3 Q. What will happen with those 4 administrative claims when the plan of 5 reorganization is consummated? 6 A. When the bankruptcy judge retains 7 jurisdiction over unresolved claims, both 8 pre-petition, unsecured claims, as well as 9 administrative claims that have been asserted during 10 the case, there will be a process, there will be 11 discovery. And ultimately, if the claims are not 12 consensually resolved, the judge would issue a 13 ruling finding whether those claims were valid or 14 invalid. 15 Additionally, deciding whether even if the 16 claims are valid, they are subject to setoff because 17 of other actions that may have given rise to counter 18 liabilities against Mr. Yung's entities. That's a 19 typical process. It happens even after one emerges 20 from bankruptcy. 21 Q. Now, as a consequence of that process, if 22 Mr. Yung has -- or if his entities have a claim that 23 is sustained it will result simply in the payment of 24 cash, correct? 25 A. It's administrative claims must be paid 30 Marc Kieselstein - by Mr. Brooks 1 in cash, unless the claimant agrees to some other 2 form of currency. Here, obviously, it would not be 3 an option for us. We would have no interest in 4 providing non-cash currency here. That would be 5 unacceptable to us, and others I suspect. And so 6 that claim would be paid in cash if it ever were 7 allowed. 8 Q. Now, the plan of reorganization set out 9 the terms of a possible rights offering. And we are 10 showing you a section of P-2 in evidence. It's 11 actually paragraph 149 on page 16. Could you 12 explain to the Commission what was contemplated with 13 respect to the possibility rights offering? 14 A. The purpose of the rights offering was, 15 at the time the plan was filed there was at least a 16 notion of dispute about value, where the bond 17 holders thought the company was worth more than the 18 company and the secured creditors thought it was -- 19 the rights offering, in essence, it's an opportunity 20 for one to put one's money where one's mouth is, 21 and, in essence, to offer cash which would have been 22 used to pay down the claim of the secured creditors, 23 making more equity available for the junior bond 24 holders. 25 It's often a way to bridge over evaluation 31 Marc Kieselstein - by Mr. Brooks 1 disputes. If people really believe that the company 2 is worth more, then they ought to be happy to fork 3 over money, for lack of a better term, in the rights 4 offering context. 5 Q. What happened to the rights offering in 6 terms of the confirmation order? 7 A. Nobody signed up. It was available in 8 the plan, but nobody dug into their pocket and wrote 9 that check. It really never became operative. 10 Q. So there are no equity securities of 11 reorganized Tropicana Entertainment that would be 12 offered in connection with the rights offering? 13 A. Right. 14 Q. I'm going to turn your attention to the 15 issuance of warrants. And in that regard we're 16 going to bring up Exhibit P-3 in evidence. Does the 17 plan of reorganization call for the issuance of 18 warrants when the plan is consummated? 19 A. It does. 20 Q. Who will the warrants be issued to? 21 A. The warrants are available to the 22 unsecured Creditors of Tropicana. It's 23 predominately the note-holders as well as other 24 general unsecured creditors. 25 Q. What were the terms of the warrants in 32 Marc Kieselstein - by Mr. Brooks 1 connection with the Tropicana Entertainment plan of 2 reorganization? 3 A. Yes. In essence, this is another way to 4 bridge over evaluation disputes. To the extent that 5 the company outperforms its financial projections as 6 embedded in the plan, such that the secured 7 creditors, in essence, are going to be paid in full, 8 their full recovery in terms of their equity, there 9 would be an ability for the unsecured creditors to 10 exercise these warrants for up to 15 percent of the 11 company. The warrants would sit out there for four 12 years. And, again, it's one of those things that 13 will only be exercised if it makes economic, 14 rationale sense to do it. Which means that the 15 company is doing very, very well. At present no 16 one, I think, would exercise until they would see 17 what the post-exit performance of the company would 18 be. 19 Q. Do warrants entitle the holder of the 20 warrants to any voting rights or other rights as a 21 shareholder of the reorganized Tropicana 22 Entertainment? 23 A. No. The warrants, until such time as 24 they are actually exercised, confer no actual equity 25 rights or rights of shareholders in terms of 33 Marc Kieselstein - by Mr. Brooks 1 governance, or things along those lines. If they 2 ever were to be exercised for 15 percent of the 3 company, then they would have those pro rata rights 4 of any other shareholder. 5 Q. In connection with the terms of the 6 warrants in the Tropicana Entertainment bankruptcy, 7 are there any regulatory restrictions on the 8 issuance of the warrants? 9 A. Yes. There was specific provisions that 10 are meant to ensure that any party exercising the 11 warrants would not be -- would not be a party that 12 would cause regulatory or licensing problems for the 13 company. So it's a pre-requisite that those 14 problems not occur before we would distribute the 15 warrants to any party. 16 Q. I believe Mr. Yung and/or entities 17 Mr. Yung controls owned approximately $35.9 million 18 in unsecured notes. Will Mr. Yung or any entity he 19 controls be issued warrants when the plan of 20 reorganization is consummated? 21 A. No, he wouldn't. The plan was very 22 specific that, notwithstanding Mr. Yung or whatever 23 entities he owns, those bonds, notwithstanding their 24 status as a bond holder, along with all the other 25 bond holders, they would not receive warrants under 34 Marc Kieselstein - by Mr. Brooks 1 any circumstance. That if in fact their bond claims 2 held up, again, we are not subject to setoff, we are 3 subject to subordination under the bankruptcy court 4 because of other actions. Any distribution on 5 account of that $35 million in bonds would be -- not 6 be the warrants, but a cash equivalent of the 7 warrants. So under no circumstance would Mr. Yung 8 or any entities he controls receive a single share 9 on account of those warrants or the warrants 10 themselves. 11 Q. Do you have an idea of the amount of cash 12 Mr. Yung will receive in lieu of warrants? 13 A. Well, valuation of warrants is always a 14 tricky business. However, if we did go through the 15 exercise of attempting to value the warrants, and by 16 our reckoning the value of his $35 million of bonds 17 in terms of a distribution here would be between 50 18 and $100,000 in cash. 19 Q. Mr. Kieselstein, the plan of 20 reorganization references the establishment of a 21 litigation trust. And that's P-27 in evidence, 22 document representing litigation trust. What is the 23 purpose of the litigation trust? 24 A. Litigation trust was established to 25 provide a mechanism for asserting causes of action 35 Marc Kieselstein - by Mr. Brooks 1 against insiders here, predominately Mr. Yung and 2 entities he controls, and is viewed, I think, by the 3 unsecured creditors and others as a potential source 4 of recovery that may in fact be far more valuable 5 than the warrants we just spoke of. 6 There was an extensive investigation, 7 positive action done, brought by the creditors 8 committee during the case, as well as special 9 counsel to the board of Tropicana. And the 10 litigation trust which would be activated upon 11 emergency bankruptcy would make decisions about 12 whether to pursue that litigation. 13 Q. Who is funding the costs associated with 14 the litigation trust? 15 A. The senior secured creditors are lending 16 money to the litigation trust in order to fund 17 pursuit of that litigation; again, should the 18 litigation trust choose to do so, the litigation 19 trustee. And that would be repaid, in essence, from 20 the proceeds of the recovery, if any. 21 Q. Mr. Kieselstein, the plan of 22 reorganization also provides for a management and 23 director equity incentive program. That's P-17 in 24 evidence. What can you tell us about this program? 25 A. It's very typical in significant Chapter 36 Marc Kieselstein - by Mr. Brooks 1 11 for there to be a management equity plan that is 2 forward-looking. That is to say, to incentivize the 3 management and to align its interest with the 4 shareholders going forward to bring in the best 5 possible future performance for the reorganized 6 company. So it's very typical to have that sort of 7 forward-looking program for the management team. 8 Q. And who will determine if any of the 9 equity securities set aside pursuant to this program 10 are issued? 11 A. That would be the new board, which was 12 selected, in essence, by the senior secured 13 creditors, who will be the predominant owners of the 14 enterprise going forward. 15 Q. Is there any possibility that the 16 equities securities set aside in connection with the 17 incentive program will be issued to Mr. Yung or any 18 entity controlled by Mr. Yung? 19 A. None, whatsoever. Because Mr. Yung will 20 have absolutely no connection with the company going 21 forward, and, thus, to incentivize him. 22 Q. Mr. Kieselstein, as part of the plan of 23 reorganization, will reorganized Tropicana 24 Entertainment and its subsidiaries be assuming or 25 rejecting various contracts and leases? 37 Marc Kieselstein - by Mr. Brooks 1 A. Typically, yes. Typically part of the 2 bankruptcy tool box, if you will, is the ability of 3 a debtor to shed itself of burdensome contracts and 4 not have to pay hundred cent dollars for the future 5 damages, if you will, from getting rid of that 6 contract. 7 Typically, along the way, in a case, the 8 debtor will get rid of contracts. And by the time 9 the debtor confirms its plan it must make a decision 10 about which contracts it will assume or reject. 11 That's the end of the period, of the option period, 12 if you will, for the debtor. So we will do what any 13 other debtor does, which is assume contracts we like 14 and get rid of contracts we don't like. 15 Q. There were documents that were prepared 16 and submitted to the bankruptcy court in connection 17 with that process? 18 A. Yes. Part of the plan supplement I 19 touched on a moment ago includes lists of contracts 20 to be assumed, contracts to be rejected, and the 21 like. 22 MR BROOKS: For purpose of the record, 23 Madam Chair, Exhibits P-9 and P-10 in evidence 24 involve the selection or rejection in the assumption 25 contracts. 38 Marc Kieselstein - by Mr. Brooks 1 BY MR. BROOKS: 2 Q. Will there be any executory contract or 3 lease that will be assumed, that will result in a 4 contractual relationship of Mr. Yung or any entity 5 controlled by Mr. Yung? 6 A. No. My understanding is we are exiting 7 all of the contractual relationships that existed 8 between the Columbia Sussex entites, any entities 9 Mr. Yung controls, and reorganized Tropicana. 10 Q. In terms of contracts that may have 11 existed with Mr. Yung or entities he controls, what 12 will happen to those as part of the plan of 13 reorganization? 14 A. They will be rejected. 15 Q. Mr. Kieselstein, you testified earlier 16 that the reorganized Tropicana Entertainment will be 17 a corporation. Was there a certificate of 18 incorporation and by-laws prepared in connection 19 with the reorganized Tropicana Entertainment? 20 A. Yes, there was. And, again, this is part 21 and parcel of the whole plan supplement process. 22 Sort of a blocking and tackling. Those types of 23 documents would typically be imbedded in a plan 24 supplement. 25 Q. Let me show you what we marked in 39 Marc Kieselstein - by Mr. Brooks 1 evidence as Exhibit P-14. Is that the certificate 2 of incorporation for reorganized Tropicana 3 Entertainment? 4 A. It certainly appears to be. 5 Q. Let me show you what we marked into 6 evidence as P-15. Are those the by-laws for 7 reorganized Tropicana Entertainment? 8 A. Yes. 9 Q. In terms of the certificate of 10 incorporation, P-14, were any provisions made to 11 deal with New Jersey Gaming Laws? 12 A. Yes. We, obviously, were very sensitive 13 to make sure that we were -- that our corporate 14 documentation was in all means compliant with New 15 Jersey Gaming Law, and obviously the other 16 jurisdictions in which we operate as well. 17 Q. Mr. Kieselstein, you testified regarding 18 the consummation of Tropicana Entertainment plan of 19 reorganization. I just want to make sure I'm 20 correct about a couple of things. 21 When the plan of reorganization is 22 consummated, am I correct in assuming that Mr. Yung 23 and the entities controlled or owned by Mr. Yung 24 will not have any equity or any form of ownership 25 interest in the reorganized company? 40 Marc Kieselstein - by Mr. Brooks 1 A. That is absolutely correct. 2 Q. Am I also correct in assuming that 3 neither Mr. Yung or any entity he controls will have 4 any form of control over the reorganized company or 5 its subsidiaries? 6 A. Zero, nil. None, whatsoever. 7 Q. Am I also correct in assuming that any 8 contractual -- existing contractual relationship 9 with Mr. Yung will be of no further force and effect 10 when the plan of reorganization is consummated? 11 A. It's my understanding we no longer need 12 those contracts. Thus, they will be terminated pre- 13 immergence. 14 Q. Other than the payments we talked about 15 to be made to Mr. Yung, there will be any form of 16 business relationship with Mr. Yung or any entities 17 controlled by Mr. Yung when the plan of 18 reorganization is consummated? 19 A. No. And I would add that those, whether 20 those payments ever get made, even in the form of 21 cash, as we discussed, is very much an open question 22 and will be determined by a judge down the road. 23 MR. BROOKS: I have no further questions, 24 Madam Chair. 25 CHAIR KASSEKERT: Mr. Adams, any 41 Marc Kieselstein - By Mr. Adams 1 cross-examination? 2 BY MR. ADAMS: 3 Q. Just a couple of questions. Mr. Brooks 4 asked you about Section 1145, shares that are going 5 to be issued. I think I understood your testimony 6 to indicate that because of that mechanism the 7 shares will be publicly traded, is that correct? 8 A. Correct. The plan contemplates a public 9 company. And the shares that would be issued at 10 immergence will be freely tradable thereafter by 11 those creditors receiving it. 12 Q. Reference has been made to consummation 13 of the plan. Is there a timetable for that at this 14 point? 15 A. As soon as possible. There are a number 16 of preconditions, including regulatory approvals, 17 finalization of documents and the like. I think 18 those are going to take a bit of time. But everyone 19 is working as hard as they can to consummate the 20 plan as soon as possible. 21 MR. ADAMS: I have nothing further. 22 CHAIR KASSEKERT: Thank you. 23 BY CHAIR KASSEKERT: 24 Q. Mr. Kieselstein, just a couple of 25 questions from me before I ask the other 42 Marc Kieselstein - By Mr. Adams 1 commissioners. Who actually retained your law firm? 2 A. Tropicana Entertainment was our client. 3 That was -- in fact, I never had any communication 4 with Mr. Yung before I was retained. 5 Q. And what individual from Tropicana 6 Entertainment retained you? 7 A. I think probably Donna Moore was the one 8 who I had the most direct contact with. She would 9 have signed our engagement letter. 10 Q. For the record, Donna Moore is who? 11 A. She was at the time the general counsel 12 for Tropicana Entertainment. 13 Q. So she was a representative of Mr. Yung 14 even though you did not specifically deal with 15 Mr. Yung? 16 A. That's true. 17 Q. Can you just clarify something for me 18 with respect to the litigation trust. How much is 19 in that trust? 20 A. I believe the amount -- and I may be -- 21 my memory may be faulty. I believe approximately 22 two and a half million dollars, or thereabouts, what 23 is going to be loaned into the litigation trust to 24 fund the litigation. But I would have to check the 25 number. And I'll get back to you if I'm wrong on 43 Marc Kieselstein - by Vice Chair Epps 1 that. 2 Q. That's to cover any future litigation 3 with respect to anything that deals with this. But 4 all those decisions would ultimately be made by the 5 bankruptcy judge or? 6 A. Well, the decision on whether to commence 7 the litigation would be vested with the litigation 8 trust itself. And, obviously, any litigation the 9 litigation trust would bring would likely be heard 10 in front of the bankruptcy court, who would make the 11 ultimate ruling. 12 A. Can any of those monies be utilized in 13 terms of -- instead of going to litigation, in terms 14 of settlement? 15 A. I don't believe -- I'm not sure. I don't 16 know the answer to that question. 17 CHAIR KASSEKERT: Let me see if my fellow 18 Commissioners have any questions. Mr. Epps. 19 BY VICE CHAIR EPPS: 20 Q. Just to go to the Chair's first question. 21 You were, essentially, retained by the organization 22 led by Mr. Yung? And the outcome of your retention, 23 or your work, was to get rid of Mr. Yung from his 24 own company? 25 A. Yes. That's not an unusual dynamic in 44 Marc Kieselstein - by Vice Chair Epps 1 bankruptcy. When we're brought in companies are 2 usually either insolvent or in the zone of 3 insolvency. They have a duty to maximize value 4 primarily to the benefit of the creditors. And so 5 when we are hired we make it very clear that the 6 chips will fall where they may, and, you know, the 7 priorities of the bankruptcy code will dictate the 8 ultimate outcome. That was made clear at the 9 outset. That is what happened here. 10 Q. Okay. The shares that were developed by 11 virtue of re-immergence, you said the senior lenders 12 will own a vast majority. Are there more shares 13 than there are senior lenders, so that there are 14 other people who will have shares? 15 A. I think, as I may have touched on, it's a 16 management equity plan. And 7 percent of the shares 17 would be reserved subject to whatever program the 18 new board wanted to put in place to incentivize 19 management going forward. So there would be -- 20 that's why I didn't say all the equity, because 21 there will be some amount of shares reserved for 22 management, number one. 23 Number two, to the extent of the warrants 24 I spoke about were ever exercised, we obviously have 25 to have authorized shares available to give to the 45 Marc Kieselstein - by Vice Chair Epps 1 folks who were exercising their warrant should that 2 ever come to past. 3 Q. So if we take it as one hundred percent, 4 you cut out seven percent for the management plan, 5 that's 93 percent. Of that 93 percent, there is 6 another portion that's not really available to 7 anybody because it has to be reserved for the 8 warrant. Do we know what percentage of that 93 is 9 reserved? 10 A. Up to 15 percent of the company would be 11 available to purchase through the warrants. Which 12 isn't to say everyone who has a warrant would choose 13 to exercise the warrant. But that's the amount that 14 could occur if those warrants were exercised. 15 Q. Other than that reserve, the balance is 16 all senior lenders? 17 A. The balance is all senior lenders. 18 Q. You spoke of pre-petition claims. I 19 understand those are all extinguished, they go away 20 by the bankruptcy process. Then you spoke about, I 21 think, agreements of contracts that were in place, 22 and they can either be retained or dismissed at the 23 new organization's pleasure, whichever makes it a 24 better operating structure for the reorganized 25 entity, is that fair? 46 Marc Kieselstein - by Vice Chair Epps 1 A. A slight clarification. The debtor, 2 before it's reorganized, before it goes out the door 3 of immergence, has to make the decision about 4 whether it's assuming or rejecting those contracts. 5 That is actually something the debtor and its 6 existing board makes the decision on. It's one of 7 those lists were in the plan supplement. So it's a 8 pre-emergence decision, obviously, to the extent 9 senior lenders have strong views on particular 10 contracts. 11 We will obviously take that into account. 12 Those contracts when rejected give rise to 13 pre-petition claims. So even if you reject a 14 contract six months into the bankruptcy, for 15 bankruptcy purposes it's deemed to be a pre-petition 16 claim and treated as other pre-petition claims. 17 Q. These contracts that we are speaking of, 18 when the company in bankruptcy is an ongoing 19 concern, as in this case, are those existing 20 operational contracts, too, like day-to-day 21 suppliers of pens, or toilet paper, things of that 22 nature? 23 A. Absolutely. If you had the high priced 24 toilet paper supplier and you can go out and get a 25 lower price one, you have the ability to reject that 47 Marc Kieselstein - by Vice Chair Epps 1 contract in favor of the lower price contact. And 2 the rejection damages claim for that high price 3 provider would be anticipated. 4 Q. Have those -- are all of those addressed 5 here, the lists that you've given us, is that what 6 we see? 7 A. Yes. It has to be a comprehensive list. 8 If you don't decide, the bankruptcy code decides for 9 you. So you come up with a comprehensive list. 10 Q. Now, where we see assuming debtor entity, 11 there seems to be several different entities. Who 12 are they and how do they shape out? Because it 13 seems like these contracts go all over. 14 A. There are a number of debtors. The 15 debtors are consolidated for administrative 16 purposes. So they were all treated by the judge. 17 You know, once a month we'd have a hearing that 18 covered matters related to all debtors. 19 Obviously, there were primary operating 20 debtors that had most of the operating contracts. 21 And under our plan we would have dealt with the 22 contracts of each of our operating debtors. So it 23 would have covered the entire landscape. 24 Q. Now, in this list, how is the Atlantic 25 City concern identified? 48 Marc Kieselstein - by Vice Chair Epps 1 A. I'm not sure what you mean by the 2 Atlantic City concern. 3 Q. The ongoing operation that is Atlantic 4 City, that may or may not assume some of these 5 contracts or the ones that currently exist with 6 their current operation, how would we find them in 7 the list? 8 A. That actually would be Justice Stein and 9 the Adamar Bankruptcy. He was operating those -- 10 that entity, and would have been dealing with those 11 contracts. 12 Q. So they don't show up in this list? 13 A. The Atlantic City ones would not show up 14 in that list. 15 Q. Okay. So, then, is there a way for us to 16 identify which of the existing contracts in this 17 agreement would impact the Atlantic City operation? 18 A. I think to the extent there were sort of 19 centrally-located contracts that would be utilized 20 going forward, if we're assuming them to help run 21 Atlantic City, if the Commission were to grant all 22 the applications, I couldn't point them out to you 23 specifically. And I don't even know for a fact that 24 there are any that would fit that category. 25 Q. So in this situation these would be at a 49 Marc Kieselstein - by Vice Chair Epps 1 higher level than drilled down Atlantic City -- 2 A. I think they would be simply in the 3 Adamar universe as opposed to the Tropicana 4 universe. 5 Q. Okay. The rights offering that you 6 referred to, it was available to whom? 7 A. To every -- all the bond holders and the 8 general unsecured creditors. When they got their 9 ballot to vote on a plan, they also had a box they 10 could check to exercise their privilege to 11 participate in the right offering, and an envelope 12 for them to enclose their check if they were 13 inclined to do so. As I noted, not much of a 14 turnout. 15 Q. Just so I can understand this, this 16 rights offering would have cost the unsecured bond 17 holders more money? 18 A. It would have been a decision by them to 19 put up some of their cash in order for them to get 20 in on some of the equity of the reorganized company. 21 Q. That would convert them to what status? 22 A. They would have been shareholders then. 23 Had there been a large turnout for the rights 24 offering and there would have been a significant 25 cash payment of the senior secured creditors, then 50 Marc Kieselstein - by Vice Chair Epps 1 there would have been equity available for those 2 participating in the rights offering. 3 Q. And no one chose to participate? 4 A. I think -- I believe there was a minimum 5 threshold to make it administratively worth anyone's 6 while and to get to the point where the banks were 7 recovering control. That threshold was not even 8 approached. 9 Q. The warrants we just spoke about briefly, 10 the warrants that are available, you said they were 11 reserved. Those are available to what universe of 12 people? 13 A. Again, the same universe, the bond 14 holders and the general unsecured creditors. 15 Q. And is there a limited number of warrants 16 or do the -- does the universe of potential people 17 outnumber the available warrants? How is that? 18 A. It would be pro rata, in essence. So if 19 you comprise five percent of the unsecured credit 20 universe, you can sign up for -- exercise five 21 percent of the warrants, basically. 22 Q. Okay. So is it possible that someone can 23 get locked out of that warrant situation further 24 down the line? 25 A. Well, again, if they are junior to the 51 Marc Kieselstein - by Vice Chair Epps 1 unsecured creditors, it basically means they're 2 equity holders. And here the equity holder is 3 Mr. Yung. And this was unavailable to him or the 4 entities he controls on any basis, either as a bond 5 holder or an equity holder. So the answer is, there 6 is no one below that would be eligible. 7 VICE CHAIR EPPS: Those are all the 8 questions I have. 9 BY CHAIR KASSEKERT: 10 Q. Clarify one thing Commissioner Epps asked 11 you, so I understand this. I think P-14 and 15 have 12 all these lists of contracts that Tropicana would or 13 could enter into for various services. Now, we all 14 know that one of the hallmarks of Columbia Sussex -- 15 9 and 10. I'm sorry. -- one of the hallmarks of 16 Columbia Sussex was that they did a lot of those 17 services for the various casinos. Do exhibits P-9 18 and P-10 represent any company, any entities 19 controlled by Columbia Sussex? 20 A. Yes. It's basically every contract that 21 we have. And the Yung contracts, as you know, are 22 just a subset of that. But it would cover all of 23 his various entities that were counterpart. 24 Q. Are those ongoing contracts or just 25 current contracts or past contracts? 52 Marc Kieselstein - by Vice Chair Epps 1 A. I think they are past contracts that 2 continued into the bankruptcy period because we 3 didn't have our own infrastructure to replace them 4 with. That's been remedied. 5 CHAIR KASSEKERT: These are proper 6 questions that would be better suited for 7 Mr. Butera. Mr. Sommeling. Ms. Harrington. 8 BY COMMISSIONER SOMMELING: 9 Q. There's been a lot said today about 10 Mr. Yung being totally disenfranchised from this 11 process. I'm just wondering, is there a possibility 12 Mr. Yung would have any future claims, through 13 bankruptcy court or otherwise, that would put him in 14 any kind of control or any kind of claim, if you 15 will, on the new Tropicana? 16 A. Well, there was a bar date in the case. 17 So anyone with an unsecured claim was required to 18 bring that. And, thus, that's the bond claim, the 19 bonds Mr. Yung or entities he controls owns. His 20 administrative claim has already been asserted and 21 is the subject of an ongoing dispute and discovery 22 and the like. 23 As I sit here I can't envision what else 24 there might be. And, as I said, the claims that he 25 or his entities could assert would be payable only 53 Marc Kieselstein - By Commissioner Sommeling 1 in the form of cash. And here either the cash 2 equivalent of the warrants for his bond claim or 3 hundred percent cash dollars for the administrative 4 claim if they were to hold up and run the gauntlet 5 that I talked about. 6 I can't imagine or envision any other type 7 of claim, and certainly not any that would end up 8 with him having any equity ownership. 9 BY COMMISSIONER HARRINGTON: 10 Q. My only question would be, is whether 11 there is anything that would prevent him from buying 12 the publicly-traded shares and ultimately exercising 13 some influence in that way? 14 A. Again, I think other than the 15 regulatory -- and I'm not the expert on regulatory 16 stuff -- that would prevent him from becoming the 17 holder subject to licensure. Then if he wants to go 18 out in the open market and buy 50 shares, could we 19 stop it? I'm not enough of a securities watcher. 20 I'm just a bankruptcy jock. So I don't know the 21 answer to that question. But it's hard to imagine 22 him making another 4A here. 23 CHAIR KASSEKERT: Anything on 24 re-examination? 25 MR. BROOKS: Nothing further, Madam Chair. 54 Colloquy 1 MR. ADAMS: No questions. 2 THE COURT: You may step down. Thank you. 3 (Witness excused.) 4 CHAIR KASSEKERT: Mr. Brooks, you can call 5 your next witness. 6 MR. BROOKS: Madam Chair, I call Scott 7 Butera. 8 SCOTT CHARLES BUTERA, sworn. 9 CHAIR KASSEKERT: You may proceed. 10 BY MR. BROOKS: 11 Q. Mr. Butera, can you state your current 12 position, for the record? 13 A. I'm the president and chief executive 14 officer of Tropicana Entertainment Holdings and 15 Tropicana Entertainment, LLC. I'm also a member of 16 the board of managers of both of those entities. 17 Q. For purposes of the record, can you give 18 us the benefit of your professional background? 19 A. Yes. I spent 15 years of my initial 20 career as an investment banker, always in lodging, 21 gaming, and leisure industries. I went on to become 22 president and chief operating officer of Trump 23 Entertainment Resorts, and guided them through their 24 restructuring from 2002 to 2005. 25 Prior to joining Tropicana I was the chief 55 Scott Charles Burera - by Mr. Brooks 1 operating officer of the Cosmopolitan Hotel and 2 Resort, which is a large development project in Las 3 Vages, Nevada. 4 Q. I assume that in connection with your 5 employment with Trump you were found qualified and 6 otherwise licensed by the Commission? 7 A. I was. In fact, I still hold a license 8 today. 9 Q. What was your position when you were 10 first hired in connection with Tropicana 11 Entertainment? 12 A. I was the president and chief 13 restructuring officer. 14 Q. When, approximately, were you hired? 15 A. March 19, 2008. 16 Q. Could you explain for the Commission the 17 circumstances related to your hiring? 18 A. Certainly. I was contacted by the 19 company's then legal counsel, Mobank Tweed and 20 Hadley, as well as their official advisor, Lazard 21 Fraier, who explained to me that the company had 22 just been denied a license in Atlantic City, was 23 operating under a forbearance agreement with its 24 senior lenders, and was about to default on its 25 subordinated loans. And they asked me if I would be 56 Scott Charles Butera - by Mr. Brooks 1 interested in coming in and help the company guide 2 its way through a restructuring process both 3 financially and operationally. 4 Q. Did you interview with Mr. Yung prior to 5 being hired? 6 A. I did not. 7 Q. Could you describe for the Commission 8 what steps you initially took after you were hired 9 as the chief restructuring officer? 10 A. After I was hired as president and chief 11 restructuring officer I spent a great deal of time 12 assessing the financial operational condition of the 13 company. I also spent a great deal of time talking 14 to the various constituents of the company, which 15 would include its lenders, both senior and junior 16 lenders, as well as its employees, employee 17 representatives. 18 We spent a lot of time with various 19 regulatory authorities that we were operating with, 20 as well as venders and suppliers, and anyone who 21 would come in contact with the company, to try and 22 assess what the relationships were like with those 23 various parties. 24 What we found is that there were a number 25 of business practices that the company had, both 57 Scott Charles Butera - by Mr. Brooks 1 operationally, in the front of the house and in the 2 back of the house, that were damaged and 3 fundamentally unsound. 4 We also found that the company didn't have 5 the resources at that time to mend those problems. 6 So what we had to do is go out and hire third-party 7 professionals to come in and start the process of 8 restructuring the company. 9 Q. Take a look, if you would, at Exhibit 10 P-30 in evidence. First, before I ask you a 11 question in connection with this document, who is 12 Joseph Yung? 13 A. Joseph Yung is the son of William Yung, 14 who was the vice president of the company when I 15 first joined. 16 Q. P-30 in evidence is a consent in lieu of 17 a special meeting. And in connection with this 18 consent William Yung resigned as chief executive 19 officer of Tropicana Entertainment Holdings and 20 Joseph Yung resigned as senior vice president of the 21 same company. What were the circumstances that led 22 to these changes? 23 A. That happened in June, after we had been 24 operating under Chapter 11 protection for 25 approximately two months. 58 Scott Charles Butera - by Mr. Brooks 1 I had a great deal of negotiations with 2 our constituents. It was clear to most involved 3 that if the company was going to correct itself 4 that Mr. Yung needed to be removed from any kind of 5 operational control or oversight of the company. 6 There was a great deal of inertia -- I'm sorry, a 7 great deal of initiative on that front. 8 And Mr. Yung finally did agree to accept 9 the circumstance whereby he would resign and we 10 would accept four new members to the board of 11 directors. 12 Q. Now, in connection with the June 6 13 consent, you were also appointed as the chief 14 executive officer, correct? 15 A. That is correct. 16 Q. Both in terms of your initial retention 17 and then your appointment as chief executive officer 18 on June 6, did you have any understanding with 19 Mr. Yung or any entities controlled by Mr. Yung that 20 notwithstanding his resignation, that you would be 21 acting on his behalf or protecting his interest? 22 A. Under no circumstances of that nature. 23 Q. On June 6, 2008 the limited liability 24 company agreement for Tropicana Entertainment 25 Holdings was amended and restated. What was the 59 Scott Charles Butera - by Mr. Brooks 1 purpose of the amendment? 2 A. The amendment was to authorize new board 3 of directors to the company, which included myself, 4 three independent members, and at the time Mr. Yung. 5 Q. So Mr. Yung remained as board managers at 6 that time? 7 A. That is correct. 8 Q. Take a look, if you would, at P-34 and 9 P-36 in evidence. Pursuant to those documents, on 10 June 19, 2008 Mr. Yung resigned as the chief 11 executive officer of a number of Tropicana 12 Entertainment subsidiaries, and Joseph Yung resigned 13 as senior vise president of the same group of 14 subsidiaries? 15 A. That is correct. 16 Q. Ten days later, on June 29, 2008, you 17 were appointed as the president and chief executive 18 officer of Tropicana Entertainment and its 19 subsidiaries? 20 A. Correct. 21 Q. Can you discuss with the Commission the 22 circumstances which led to the resignation and your 23 appointment? 24 A. Again, it was -- most of the initiative 25 had come from our constituents who felt very 60 Scott Charles Butera - by Mr. Brooks 1 strongly that Mr. Yung needed to resign from the 2 company so we can accomplish the objectives that the 3 new management team wanted to set forth. And 4 Mr. Yung agreed to those provisions. 5 Q. With respect to your appointment in 6 connection with the events of June 19th and June 29, 7 2008, did you have any form of agreement with 8 Mr. Yung or any entities he controlled that 9 notwithstanding the changes, that you would be 10 acting in his capacity, or in your capacity to 11 protect his interests or any favor for Mr. Yung? 12 A. Absolutely not. In fact, there was very 13 involved and heavily, influential on the outcome of 14 Mr. Yung actually resigning from his position as 15 chief executive officer. 16 Q. Now, this time Tropicana Entertainment 17 has filed for bankruptcy protection. What was your 18 role in terms of the bankruptcy process? 19 A. My role was to ready the company for 20 bankruptcy, to work with our advisors, both our 21 legal advisers and our financial advisors. 22 I was principally involved in negotiations 23 with our various constituents. I was working with 24 the company in terms of trying to remedy a lot of 25 the back-of-the-house functions that were important 61 Scott Charles Butera - by Mr. Brooks 1 for the filing, including getting our accounting and 2 compliance measures in order. 3 I was involved in arranging the financing, 4 debtor and possession financing, for the company so 5 that it will have cash flow to operate once it 6 filed. 7 Q. So it would be safe to assume that you 8 were familiar with matters being addressed by the 9 bankruptcy court? 10 A. That is correct. 11 Q. Do you recall a motion being filed in the 12 bankruptcy seeking the appointment of a trustee? 13 A. Yes. 14 Q. Take a look at what we marked into 15 evidence as Exhibit D-25. This is an order of the 16 bankruptcy court approving a resolution of the 17 applications to appoint a trustee. What occurred in 18 connection with Mr. Yung that led to the entry of 19 this order? 20 A. Well, again, our constituents were quite 21 adamant that Mr. Yung needed to be removed from the 22 company in order for us to object our restructuring 23 rules. And as a way of putting pressure on that 24 outcome, they filed a trustee motion, which was an 25 attempt to have Mr. Yung removed and have a trustee 62 Scott Charles Butera - by Mr. Brooks 1 put in his stead. 2 Q. What happened to resolve that motion? 3 A. To resolve that was the result of a long 4 settlement process, which was heavily negotiated. 5 Mr. Yung agreed to remove himself from the board of 6 directors, the board of managers. He also agreed to 7 sign an irrevocable proxy giving up all of his 8 rights to appoint, remove, or redirect any of the 9 board of managers or any of the management of the 10 company. 11 Q. Take a look, if you would, at P-26 in 12 evidence. Is this the irrevocable proxy Mr. Yung 13 eventually provided? 14 A. Yes, it is. 15 Q. If you can look at P-35 in evidence. Was 16 this document provided by Mr. Yung to verify his 17 resignation from the board of Tropicana 18 Entertainment? 19 A. Yes, it is. 20 Q. Take a look, if you would, at Exhibit 21 P-31 in evidence. This is a September 2, 2008 22 consent in lieu of special meeting which is issued 23 by the Tropicana Entertainment Board of managers. 24 What were the circumstances that led to the issuance 25 of this document? 63 Scott Charles Butera - by Mr. Brooks 1 A. This was, again, the result of the 2 settlement of the trustee motion, and is a document 3 setting forth that the board of managers, which no 4 longer included Mr. Yung, had the sole right to 5 govern the company and that management would report 6 solely to that board of managers; which, again, did 7 not include Mr. Yung. 8 Q. Now, the consent in lieu also mentions 9 proceeding as expeditiously as possible with the 10 separation of administrative back-office functions 11 from Yung and his related entities in order to 12 approve a permanent separation in that regard. Did 13 Tropicana Entertainment at this point have a 14 transition plan in place with respect to that 15 effort? 16 A. We did have a transition plan in place. 17 I know the directive was expeditiously. But because 18 Tropicana had so limited resources and because most 19 of the back-of-the-house particular work was being 20 done out of Kentucky, we had spent a good deal of 21 time to recreate most of the back-of-the-house. We 22 had to retain staff, we had to purchase systems, and 23 we had to train staff, and make sure everything was 24 done in compliance with the rules and regulations, 25 both from a gaming standpoint and from a finance 64 Scott Charles Butera - by Mr. Brooks 1 standpoint. But we did have that plan in place. 2 And we worked with a company called Alex Partners, 3 developed a very comprehensive transition plan. 4 Q. Take a look, if you would, at Exhibit 5 P-43 in evidence. Could you explain what that 6 document represents? 7 A. Yes. At each of our board of managers, 8 Alex Partners and myself would give an update to the 9 board as to the progress of our transition from 10 Columbia Sussex. 11 Q. Before we focus on the specific 12 back-office functions that were being transferred, 13 at the time of the consent in lieu of September of 14 2008, where were most of those back-office functions 15 being performed? 16 A. Most of them were being performed out of 17 Columbia Sussex offices in Kentucky. 18 Q. Where were you primarily operating from 19 at that point? 20 A. My office was located in Las Vegas, 21 Nevada. And the people who I recruited to join me 22 as the new corporate team were all based in Las 23 Vegas, Nevada. 24 Q. Did you operate at all from Kentucky? 25 A. No, sir. 65 Scott Charles Butera - by Mr. Brooks 1 Q. Now, did the corporate headquarters 2 eventually shift to Las Vegas? 3 A. Yes, sir. It shifted in July of 2008. 4 Although, by that time most of the new corporate 5 executives who had been hired were already housed in 6 Las Vegas. 7 Q. Let's focus on some of the specific 8 administrative back-office functions being shifted. 9 Tell us about the shift with respect to recruiting? 10 A. Recruiting was always -- since I joined 11 the company, had been handled out of Las Vegas, both 12 with myself and eventually our head of human 13 resources, a gentleman named Kass Palmer. So we 14 handled all the recruiting of the new corporate 15 team. We did have oversight of recruiting at the 16 property level, as well, based in Las Vegas. 17 Q. With respect to recruiting, has that 18 function been completely shifted away from Yung, any 19 entities controlled by Mr. Yung? 20 A. Yes sir. And has been for quite some 21 time. 22 Q. Can you tell us about the transaction 23 with respect to IT? 24 A. IT was a very intense process. Because 25 one of the things we found is Columbia Sussex liked 66 Scott Charles Butera - by Mr. Brooks 1 to perform a lot of functions manually, including 2 payroll and purchasing and accounts payable, and 3 just things that you just normally would have much 4 more systematic. 5 So what we had to do is we had to go out 6 and assess what we wanted to purchase. Again, we 7 were being somewhat judicious with our money at that 8 point in time. 9 But, essentially, we hired an IT 10 professional, an IT staff. We purchased the systems 11 that we needed, that are all housed in an off-site 12 development in Las Vegas, Nevada. 13 We started to enter into licensing 14 contracts with various providers that were necessary 15 to manage our business. And we trained our staff 16 and performed various tests in front of compliance 17 officers and regulators to make sure that things 18 were functioning. 19 Q. Has the transition with respect to IT 20 from Yung and Yung-related entities been completed? 21 A. It has been completed, yes. 22 Q. We talked a little bit about real estate 23 facilities. But just to confirm, as of now there 24 are no continued -- or is there any continued 25 relationship with Yung or Yung-related entites in 67 Scott Charles Butera - by Mr. Brooks 1 terms of real estate facilities? 2 A. No. 3 Q. Let's talk about the transition with 4 respect to payroll? 5 A. Payroll is very similar to what we talked 6 about on the IT function. We went out and purchased 7 various payroll systems. We contracted with a 8 third-party provider to administer those systems, a 9 company called Outsourcing Partners International. 10 They are a leading payroll company. All of our 11 staff was trained on how to administer payroll. 12 They were all extremely damaged. I think 13 when I jointed the company, in the first year 14 Columbia Sussex Company had issued five W2's to 15 employees. If you can imagine that. So we had to 16 spend a lot of time making sure our payroll 17 functions were operating correctly, that peoples' 18 tips were being accounted for correctly. We had to 19 spend a lot of time with regulators. 20 But as we sit here today, all of our 21 payroll is housed, both in our corporate staff and 22 our various properties, because we also do 23 centralized payroll functions. And now we have 24 adequately trained staff. All of our systems are in 25 clear compliance. 68 Scott Charles Butera - by Mr. Brooks 1 Q. How many people, approximately, are 2 employed in Las Vegas in terms of -- 3 A. We have approximately 30 professionals in 4 our corporate office. 5 Q. Tell us about the transition to accounts 6 payable? 7 A. Accounts payable was a similar function. 8 We went out and rolled it, took a decentralized 9 system toward accounts payable, monies towards our 10 properties, to manage accounts payable. So we set 11 up systems, we trained staff, made sure they were 12 functioning. 13 As we sit here today, all accounts payable 14 resides mostly at our property, with some small 15 accounts payable at our corporate office. 16 Q. Tell us about the transition with respect 17 to the treasury function? 18 A. Treasury is something that in October, 19 the October-fall period of 2008, we transferred to 20 the corporate office. We went out and hired an 21 individual who helped us establish our treasury 22 function. We developed staff. We consolidated bank 23 accounts, in many cases changed bank accounts. 24 So right now our treasury has been 25 completely revamped, both at the corporate level and 69 Scott Charles Butera - by Mr. Brooks 1 as well as the property level, with all of the 2 properties reporting up the corporate. 3 Q. Is there any relationships, continuing 4 relationship, with respect to the treasury function 5 with Yung or Yung-related entites? 6 A. None, whatsoever. 7 Q. Let's talk about the transition with 8 respect to general accounting. What can you tell us 9 about that? 10 A. General accounting was probably our 11 biggest challenge. There were very odd accounting 12 practices when I joined the company, most of which 13 were the result of trying to operate manually. 14 We had to go in, purchase accounting 15 systems. We had a license, which is called an 16 Infinity Software Program, which is the industry 17 standard. 18 We had to hire significant staff because a 19 lot of the accounting was done by Columbia Sussex 20 professionals in Kentucky. So we had to hire 21 directors of finance at a lot of our properties and 22 train them as to how to use Infinity and how to come 23 up with a general state of accounts. 24 The various methodologies for accounting 25 were very inconsistent along our properties. We had 70 Scott Charles Butera - by Mr. Brooks 1 to consolidate that, make sure everything was done 2 in a very consistent basis. 3 As we sit here today, all accounting 4 systems have been upgraded and are up to speed and 5 are functioning and are led by our corporate team in 6 Las Vegas. 7 Q. So there is no continuing relationship at 8 all with Yung or Yung-related entities with respect 9 to accounting? 10 A. No. 11 Q. Let's talk about the transition with 12 respect to risk management? 13 A. Some of our other practices, we 14 established our own risk management office. We have 15 a risk management professional who works with us. 16 We established new relationships with providers to 17 assist us in risk management. So we we are no 18 longer wed to any of the third-party providers that 19 Columbia Sussex was using. So I believe as of the 20 fall, from a risk management standpoint, we are 21 fully functioning. 22 Q. With no relations with Yung or 23 Yung-related entities? 24 A. That is correct. 25 Q. What about the transition with respect to 71 Scott Charles Butera - by Mr. Brooks 1 health and welfare benefits? 2 A. Same thing. We went out and hired our 3 own independent agent, Connor and Strum, go out and 4 revamp our benefits programs. 5 Our benefits programs were very 6 problematic when I joined the company. They were 7 very expensive to the company, they were very 8 expensive to our employees. Create a lot of 9 employee morale problems. So we had to go out and 10 completely redo our benefits for all of our staff, 11 both union and nonunion staff. 12 And as we sit here today, as of January 1, 13 2009 all of our benefits are on a Tropicana 14 Entertainment program with new providers who have 15 solely conducted this for Tropicana Entertainment, 16 not Columbia Sussex. 17 Q. So there is no continuing relationship 18 with respect to health and welfare benefits with 19 respect to Yung or Yung-related entities? 20 A. No. 21 Q. What about the transition with respect to 22 purchasing? 23 A. Purchasing is, again, the same thing. 24 The company had longstanding contracts, some of 25 which we renegotiated, some of which we rejected. 72 Scott Charles Butera - by Mr. Brooks 1 We hired our own purchasing professionals. 2 We are going to an automated system. And 3 right now all purchasing is handled out of Las 4 Vegas, Nevada, with some small purchasing functions 5 at our various properties. 6 Q. And no continuing relationship with Yung 7 or Yung-related entities with respect to purchasing? 8 A. No. 9 Q. What about -- okay. Now, in terms of 10 P-43 in evidence, it talks about next steps with 11 respect to transition activities. And it's page 16 12 of P-43. At this point in time have all those steps 13 been implemented? 14 A. Yeah. This is a document from January of 15 2009. At this point all of these steps were 16 implemented. And we are completely independent of 17 Columbia Sussex and have rejected all of the service 18 contracts that were related to back-of-house 19 operations. 20 Q. There's been a complete separation from 21 the back-office functions from Mr. Yung and 22 Yung-related entities? 23 A. That is correct. 24 Q. How would you describe that transition, 25 your transition with respect to the administrative 73 Scott Charles Butera - by Mr. Brooks 1 back-office functions? 2 A. It was a very long, comprehensive 3 process, and one that I think was completed very 4 successfully under the circumstances. And I feel 5 very good that we can function as an independent 6 company and stay in compliance and meet all the 7 regulatory obligations. 8 Q. I want to focus you on an event involving 9 the accounts payable function. Do you recall 10 Tropicana Entertainment submitting a hundred 11 thousand dollar check to New Jersey Casino Control 12 Fund in October 2008? 13 A. I think that was in relationship to our 14 petition of compliance. I do recall that. 15 Q. What can you tell us about the 16 circumstances surrounding the submission of the 17 check? 18 A. We filed our submission for compliance. 19 We were informed that it would be treated as a 20 licensing, that we needed to present our fee. I 21 immediately authorized payment of that fee. 22 Q. Now, when you say you authorized it, was 23 that something that was done where you were in Las 24 Vegas? Were you in Las Vegas at the time? 25 A. I've always been in Las Vegas. That's 74 Scott Charles Butera - by Mr. Brooks 1 correct. 2 Q. Was that check when you authorized it, 3 was that something that was done -- the cutting of 4 that check, was it done in Las Vegas? 5 A. No. It was done through an automated 6 system through Bank of America. It was done with 7 automated -- what they call plates that were 8 engraved. 9 Q. Where was that done at? Where was that 10 check cut out? 11 A. From a local office of the Bank of 12 America. 13 Q. Was that in Las Vegas or was that at that 14 point -- 15 A. I believe it was. I don't believe -- I 16 don't recall where the exact bank account was drawn 17 from. But it was an existing -- we were in the 18 process of restructuring out treasury. So it would 19 have been an existing bank account. Which has 20 subsequently been changed over. 21 Q. Were accounts payable still done in 22 Kentucky at that point or was it being done in Las 23 Vegas? 24 A. It was in the process of being 25 transitioned. There were still functions being done 75 Scott Charles Butera - by Mr. Brooks 1 in Kentucky at that point. 2 Q. Do you recall who signed that check? 3 A. It's come to my understanding that 4 Mr. Yung's signature is on that check. 5 Q. Did you see the check with Mr. Yung's 6 signature before it was sent? 7 A. I have not seen the check then or now. 8 No, I did not. 9 Q. In terms of that account, do you have any 10 understanding why Mr. Yung's signature was on that 11 check? 12 A. It came to my understanding that the 13 plates with new signatory names had not been 14 engraved yet. The plate they had on file still had 15 Mr. Yung's signature. 16 Q. Was that check sent to you before it was 17 sent to New Jersey? 18 A. No, sir. 19 Q. Is Mr. Yung still a signer on the bank 20 account? 21 A. No. 22 Q. Is Mr. Yung a signer or signatory on any 23 bank account that belongs or is controlled by 24 Tropicana Entertainment or its subsidiaries? 25 A. No. All of our new bank -- we have new 76 Scott Charles Butera - by Mr. Brooks 1 banking relationships now with new banks that all 2 have newly engraved plates with my name and the name 3 of our chief financial officer on them. 4 Q. I think you already covered this, but has 5 the accounts payable process been totally separated 6 from operations in Kentucky? 7 A. Yes, sir. 8 Q. Now, in discussing the transition of the 9 administrative back-office functions, you talked 10 about several officers and some people in 11 management. I want to ask you about some other 12 individuals, if you don't mind. Is Glenn Kohler 13 currently employed by Tropicana Entertainment? 14 A. No. 15 Q. How about Jeffrey Silver? 16 A. No. 17 Q. Donna Moore? 18 A. No. 19 Q. Kevin Preston? 20 A. No. 21 Q. Brian Doyle? 22 A. No. 23 Q. How about Karen Grugler? 24 A. Karen Grugler is the vice president and 25 head of internal audit. Karen joined the company in 77 Scott Charles Butera - by Mr. Brooks 1 April of 2007. She spent twelve years in the 2 internal audit department at the Hyatt Corporation, 3 before that at Caesars' World. 4 I spent a fair amount of time with Karen. 5 I found her to be very proficient. We've been 6 commended from time to time on our internal audit 7 functions. So she has remained with the company. 8 Q. How about Tide Gerny? 9 A. No. 10 Q. John Jacob? 11 A. No. 12 Q. Larry King? 13 A. No. 14 Q. Donald Nisel? 15 A. No. 16 Q. Robert Little? 17 A. No. 18 Q. Ted Mitchell? 19 A. No. 20 Q. Rosemary Mitchell? 21 A. No. 22 Q. Dennis Morgan? 23 A. No. 24 Q. I like to ask you about several officers 25 in management personnel who are with Tropicana 78 Scott Charles Butera - by Mr. Brooks 1 Entertainment. Could you let us know a little bit 2 about Richard Baldwin? 3 A. Richard Baldwin is our chief financial 4 officer. He joined us -- prior to being chief 5 financial officer was shuffle master, which is an 6 equipment manufacturer based in Las Vegas. He also 7 worked in the accounting department of IDT 8 Corporation. 9 Q. How about Charles Barry? 10 A. Chuck Barry is our new head of security 11 and surveillance, who spent most of his career in 12 the Hilton Organization and Park Place, head of 13 security and surveillance. 14 Q. How about Kass Palmer? 15 A. Kass Palmer is our head of human 16 resources. He spent most of his career at the Boyd 17 Corporation, and most recently worked for a company 18 called Olympia Development, which is a development 19 company in Las Vegas, Nevada. 20 Q. How about Rihad Shalby? 21 A. Rihad Shalby? 22 Q. Yes. 23 A. Chief marketing officer. He spent a lot 24 of time, again, at the Hilton Organization, also 25 worked for Coast Casinos, which is a local based 79 Scott Charles Butera - by Mr. Brooks 1 casino company in Las Vegas. And then spent a lot 2 of time as a consultant. He's an expert in database 3 development and database management. 4 Q. How about Joseph Long? 5 A. Joseph Long is the head of information 6 technology for the company. He spent most of his 7 career at the Park Place and Harrah's Organizations. 8 Q. How about Laurel Westheimer? 9 A. Laurel Westheimer is our new head of 10 compliance. She spent a lot of time here in the 11 Hyatt Corporation and also worked for Mandelay Bay 12 in a compliance capacity. 13 Q. I want to direct your attention, 14 Mr. Butera, to negotiations with the Park Cattle 15 Company. Were you involved in negotiations with 16 Park Cattle? 17 A. I was. 18 Q. With respect to what properties? 19 A. With respect to two Lake Tahoe 20 properties, both the Lake Tahoe Horizon Property and 21 the MontBleu Property. 22 Q. Could you give the Commission some 23 background with respect to Tropicana Entertainment's 24 relationship with Park Cattle? 25 A. When I joined the company Tropicana had a 80 Scott Charles Butera - by Mr. Brooks 1 very difficult relationship with Park Cattle. Park 2 Cattle is the land leaser underneath both the 3 properties that I mentioned. 4 They were very frustrated with the way the 5 properties had been maintained. They were very 6 frustrated with the business practices that were 7 going on in Lake Tahoe. In fact, had entered into a 8 very significant lawsuit with Mr. Yung and with the 9 company. Which ended up in a settlement whereby 10 Mr. Yung agreed to pay $160 million of monies to 11 Park Cattle, as well as agreed to certain provisions 12 which if tripped would trigger a $250 million 13 stipulated judgment against Mr. Yung and against the 14 company Tropicana Entertainment. 15 Subsequent to that I spent a lot of time 16 with folks at Park Cattle -- they do have new 17 management -- to repair those relationships. 18 I think that as we stand here today, the 19 relationship with Park Cattle is very good and very 20 cooperative. 21 We worked with them just prior to 22 commencing our bankruptcy proceeding to restructure 23 our situation up in Lake Tahoe, whereby we agreed to 24 amend our lease under the MontBleu asset, which was 25 a very good asset for the company. 81 Scott Charles Butera - by Mr. Brooks 1 We got approximately $2 million of rent 2 relief for the next two years there. We were 3 relieved from certain KAFEX requirements, that we 4 felt were inefficient, that needed to be made there. 5 And we entered into some cooperative marking 6 agreements. We also extended our lease on that 7 property by ten years. 8 With regard to the Horizon Property, the 9 Horizon is a very old property. It's unprofitable. 10 It was badly in need of significant capital for 11 repair. We did not find it viable to operate that 12 property going forward. 13 In fact, we contemplated rejecting the 14 lease on that contract so that we can get rid of it. 15 We ended up settling with Park Cattle, whereby we 16 agreed to sort of hand over the lease to that to 17 Columbia Sussex, and for a very small period of time 18 agreed to manage it. 19 Very limited casino function there, where 20 the casino was limited to a 200-machine function, 21 and we would simply manage it for 120 days, until 22 Park cattle can be licensed to manage it themselves. 23 Q. Let me back up a step with respect to the 24 MontBleu. The amendments to that lease, was there a 25 document provided to the bankruptcy court which 82 Scott Charles Butera - by Mr. Brooks 1 covered the amendments to that lease? 2 A. Yes, there was. There was a term sheet 3 that was provided. It was approved by the 4 bankruptcy court. 5 Q. That document, for the record, is P-22 in 6 evidence. In connection with MontBleu, is there any 7 continuing relationship at all with Yung or 8 Yung-related entities? 9 A. No. 10 Q. Now, in terms of Lake Tahoe Horizon, I 11 believe you talked about a split, or a split in 12 ownership. Who owns the casino floor in terms of 13 the Lake Tahoe Horizon? 14 A. We don't own anything. It's owned by 15 Park Cattle. Part is owned by Park Cattle and it's 16 leased to Park Cattle by Columbia Sussex. We are 17 simply managing the casino for Park Cattle. 18 Q. So you own nothing, Tropicana 19 Entertainment owns nothing? 20 A. We have a 30-person staff. It's very 21 limited. We make a few hundred thousand dollars in 22 the summertime. Otherwise, it's a fairly break-even 23 operation. And, again, it's very short term in 24 nature. 25 Q. Your relationship, though, you talked 83 Scott Charles Butera - by Mr. Brooks 1 about managing the casino for a period of time, 120 2 days. I believe you mentioned there could be an 3 extension, up to another 120 days? 4 A. There were two 60-day extension options 5 if the licensing process for Park Cattle should take 6 longer. 7 Q. Who is that arrangement with? Who were 8 you in contact with? 9 A. Park Cattle. 10 Q. Are you with -- is Yung or any 11 Yung-related entities involved in that relationship? 12 A. No. 13 Q. In terms of the hotel function, does 14 Tropicana Entertainment or any if its subsidiaries 15 have any involvement with that hotel? 16 A. With the Horizon, absolutely not. 17 Q. Lake Tahoe Horizon? 18 A. Absolutely not. 19 Q. As a consequence of the settlement, is 20 there any form of business relationship -- and when 21 I say settlement, the settlement with Park Cattle -- 22 is there any form of business relationship between 23 Tropicana Entertainment with Mr. Yung or any group? 24 A. No. None, whatsoever. 25 Q. Mr. Butera, as part of the plan of the 84 Scott Charles Butera - by Mr. Brooks 1 reorganization will the equity securities of 2 reorganized Tropicana Entertainment be registered 3 with the Security Exchange Commission? 4 A. Yes, they will. 5 Q. Can you give us some idea of the current 6 status of the Form 10 filing in that regard? 7 A. The Form 10 filing will be filed in the 8 next 15 to 20 days. 9 Q. Mr. Butera, in conjunction with the plan 10 of reorganization, has Tropicana Entertainment 11 developed a business plan? 12 A. Yes, we have. 13 Q. Can you give us an overview of this 14 preliminary business plan? 15 A. Absolutely. Our goal is to become a 16 permanent gaming company, focusing on the Tropicana 17 brand and the Tropicana image. We want to operate 18 in the upper scale, in the values segment. 19 CHAIR KASSEKERT: Wait a minute, 20 Mr. Brooks? 21 MR. BROOKS: I'm sorry. P-13. 22 BY MR. BROOKS: 23 Q. Okay. 24 A. Our goal is to significantly improve our 25 product offerings, mostly our gaming products 85 Scott Charles Butera - by Mr. Brooks 1 offerings. We want to be somewhat a gaming 2 hospitality center as a company and work with other 3 qualified third-party providers for food and 4 beverage and entertainment and other venues for our 5 customers. 6 We want to spend lot of time getting to 7 know our customers. We are going to emphasize 8 customer service. We want to leverage our national 9 portfolio. In fact, we have diversity across the 10 county. We are spending a lot of time installing 11 best practice procedures. We are going to become a 12 lot more quantitative oriented than the company has 13 been in the past, in terms of analyzing our 14 marketing and promotional activities, as well as our 15 results of operations. So, as I mentioned, the idea 16 is to become a family company, emphasize the plan. 17 We are actually launching a new campaign 18 in the next month, which we think is quite exciting, 19 and go to value-oriented gaming hospitality company 20 in the United States. 21 Q. Mr. Butera, if I can, I want to talk a 22 little bit about timing in terms of the consummation 23 of the Tropicana Entertainment, the reorganized plan 24 of the Tropicana reorganization. What does the 25 timing look like in terms of the ability to 86 Scott Charles Butera - by Mr. Brooks 1 consummate that plan? 2 A. In order to consummate, five of our seven 3 newly-appointed board members need to be licensed, 4 as well as our largest holder. And we are assuming 5 that will be done in late fall or early winter. 6 Q. So the plan of reorganization that's been 7 approved by the bankruptcy court should be able to 8 be consummated in the late fall, early winter? 9 A. Yes. 10 MR. BROOKS: I have nothing further, 11 Mr. Butera. 12 CHAIR KASSEKERT: Mr. Adams, 13 cross-examination. 14 BY MR. ADAMS: 15 Q. Let's just deal with Park Cattle. You 16 mentioned a couple of times about the licensure 17 procedure that's being pursued right now. You 18 mentioned Park Cattle. Is it actually Park Cattle 19 that's seeking the license or is it a Yung entity 20 that's seeking the license? 21 A. It could be either. Both are seeking a 22 license. And it could be either Park Cattle or 23 Columbia Sussex. But it would not be our company. 24 Our company would no longer be involved. 25 Q. Do you know the present status of that 87 Scott Charles Butera - by Mr. Adams 1 license application for either Park Cattle or 2 Columbia Sussex? 3 A. Based on my conversations with our 4 counsel, they tell me it's in process and it's 5 underway. I don't know the exact time for 6 completion. 7 Q. When you say your counsel, who are you 8 referring to here? 9 A. Our company's counsel who is working with 10 Park Cattle. 11 Q. Is it Mr. Rubinstein? 12 A. That's our in-house counsel. This would 13 be our external Nevada base counsel. 14 Q. The 120 days that has been referenced in 15 extensions, how much is going by of that initial 120 16 days, from your perspective? 17 A. We entered into that agreement on June 18 15, 2009. And I should mention the expiration of 19 that 240 days -- the expiration of that 240 days, if 20 there is no resolution on license our company has 21 the ability to walk away from that situation. Which 22 is what we will do. 23 Q. As far as -- I just want to make clear 24 that, will any monies during the time that you're 25 managing the casino operations be paid by your 88 Scott Charles Butera - by Mr. Adams 1 company in Tropicana or any Tropicana-affiliated 2 company to Yung or any Yung entites? 3 A. No. None, whatsoever. 4 Q. So if any money has to be paid from that 5 operation, it would go to Park Cattle? 6 A. That's correct. Although, we're simply 7 managing. So that's fairly unlikely. And the 8 reason Park Cradle wanted to maintain this 9 relationship is because they have development plans 10 for hospitality features at that cite, and they 11 wanted to preserve certain zoning rights, which are 12 very hard to get in Lake Tahoe. It's a very 13 restrictive area. 14 So, really, the reason for doing it this 15 way was to preserve our relationship, which is a 16 good one right now, with Park Cattle. 17 Q. There were some references in some of the 18 documents submitted to severing completely a 401(k) 19 plan that the company have had as of July 1, 2009? 20 A. That has been completed. 21 Q. That has been completed? 22 A. That has been completed, yes. 23 Q. So what is the current status with 24 respect -- 25 A. We manage the 401(k) internally. We have 89 Scott Charles Butera - by Mr. Adams 1 a committee that receives it. There is no 2 oversight. It's been managed through Fedality 3 Investments. 4 Q. Varies service contracts, service 5 agreements that have previously been in place 6 between Columbia Sussex or related Columbia Sussex 7 Companies and Tropicana, are there any at all that 8 currently remain between Tropicana and Columbia 9 Sussex? 10 A. All of the service contracts have been 11 rejected and are terminated. 12 Q. So there is really no other -- or if 13 there is please tell me -- functions that are being 14 handled by Columbia Sussex by Mr. Yung, is that 15 correct? 16 A. Thankfully, no. 17 Q. You mentioned you have approximately 30 18 people in the Las Vegas corporate? 19 A. That is correct, 30 professionals. To 20 bring consistency across our properties, we've taken 21 somewhat of a top-down approach to managing, 22 accounting, marketing, things of that nature. So 23 there are some functions that we have in Las Vegas 24 that might otherwise be at the property level, but 25 because the properties aren't ready to handle them 90 Scott Charles Butera - by Mr. Adams 1 on their own we are taking a centralized approach at 2 this point. That may change over time. 3 Q. You heard Mr. Kieselstein testify about 4 the warrants, the rights offering, and stocks that 5 are going to be issued? 6 A. Yes. 7 Q. Is it your understanding that, pursuant 8 to these plans, Mr. Yung has no equity interest, and 9 that that interest has extinguished by the 10 bankruptcy court? 11 A. That's my understanding. 12 Q. Is that based on your personal knowledge 13 as well as consultation with your counsel? 14 A. Yes. 15 Mr. ADAMS: I don't have anything 16 further. 17 BY CHAIR KASSEKERT: 18 Q. Mr. Butera, you testified that you were 19 retained on March 19 of 2008 you were contacted by 20 Mill Bank Tweed and lazard, is that correct? 21 A. Yes. 22 Q. When you were retained was there any sort 23 of press release issued with respect to your being 24 retained to taking this new role? 25 A. I believe there was a press release 91 Scott Charles Butera - By Chair Kassekert 1 issued. 2 Q. Who was involved in speaking for the 3 company with respect to that press release? 4 A. At that time it would have been Mr. Yung, 5 who was the CEO of the company. 6 Q. Do you know the name of the public 7 relations firm that handled that press release? 8 A. I believe it was -- I don't recall off 9 the top of my head, but I believe it was a firm in 10 that might have been -- a gentleman by the name of 11 Hud Inglehart. 12 Q. Who is Mr. Inglehart? 13 A. Mr. Inglehart was Donna Moore's husband. 14 And he can advise you of the name of the firm. 15 Q. And who is your current public relations 16 firm? 17 A. We had contact with Beacon Advisors, 18 continued. They played a limited role for us. But 19 in Atlantic City, in other matters, we were working 20 with a company called Winning strategies. So 21 Winning Strategies handled Atlantic City matters. A 22 company called FD Consultants handled our bankruptcy 23 matters. And Mr. Inglehart and Beacon were retained 24 for a period of time. 25 Q. And do you still have a contract with 92 Scott Charles Butera - By Chair Kassekert 1 Mr. Inglehart? 2 A. Very limited contract with Mr. Inglehart. 3 He does almost no work for us, and hasn't done any 4 work for us in months. 5 Q. Can you just -- 6 A. He gets paid if he does something. 7 Q. And do you recall the last time it was 8 that you used him? 9 A. It was probably a month or so ago. 10 Q. Can you just -- I know Mr. Brooks asked 11 you on direct with respect to the signature on the 12 check which allowed you to apply for licensing here 13 in New Jersey. And your testimony was that this was 14 a stamp, or a plate signature, is that correct? 15 A. That's correct. 16 Q. When was Mr. Yung's plate, or stamp, 17 deleted from this checking account? 18 A. When we completely redid our bank 19 accounts. And I believe the last check with his 20 name on it might have been in January or February of 21 2009. We had our banking relationships completely 22 changed over. 23 Q. And as of this day who are the signatures 24 on your check? 25 A. Myself, Chief Financial Officer Richard 93 Scott C. Butera - by Commissioner Sommeling 1 Baldwin. 2 CHAIR KASSEKERT: Ms. Harrington. 3 Mr. Sommeling. 4 BY COMMISSIONER SOMMELING: 5 Q. Scott, I want to get clear on the record 6 your total reorganization of the Tropicana brand as 7 it applies to all of your properties. 8 A. Yes. 9 Q. When the sale, the approved sale of 10 agreement is completed and the Tropicana of AC is 11 now newly owned, none of your entites will have any 12 relationship to Tropicana AC? That would be a 13 stand-alone property in Atlantic City and in New 14 Jersey? 15 A. Yeah. I believe the purpose of what we 16 are going through now is to determine what the 17 structure will be for the ownership of that company. 18 But we have entered into a licensing agreement for 19 the name Tropicana. Should it result in the case 20 you are talking about, we do have a licensing 21 agreement in place. 22 Q. But, in effect, the new owners will be 23 Mr. Ichan and all the other investors? And that 24 probably would be a stand-alone property here in 25 this state? 94 Scott C. Butera - by Commissioner Sommeling 1 A. I suppose it could be. I guess that's 2 what we are deliberating on. But to the extent that 3 it does happen, we would have similar ownership. 4 And we have a licensing agreement in place for the 5 name to continue. 6 COMMISSIONER SOMMELING: That's all I 7 have. 8 CHAIR KASSEKERT: Mr. Epps. 9 BY VICE CHAIR EPPS: 10 Q. The first question is, back to the 11 hiring. Although you said Mill Bank contacted you, 12 at the time was it necessary for Yung to approve you 13 in the position that you were entering in to the 14 Tropicana? 15 A. Technically he had to sign my employment 16 agreement, yes. 17 Q. So he had to bring you on with his 18 blessing before that happened? 19 A. He was the chief executive officer and 20 sole board of managers -- was a sole member of the 21 board of managers. So, yes, he was the one that 22 brought me on. 23 But my recruiting was done completely 24 independent, didn't involve him. The negotiations 25 and provisions of my employment were completely 95 Scott Charles Butera - by Vice Chair Epps 1 independent of his involvement. 2 Q. Once you came on, what was your business 3 relationship with him day to day? 4 A. When I joined the company, Mr. Yung was 5 very frustrated. And, in fact, he kind of washed 6 his hands of the company and allowed me to basically 7 operate on a daily basis without his involvement. 8 And I would report to him periodically certain 9 events that were taking place. 10 Q. What type of things would you have to 11 report to him on? 12 A. Financial results, mostly. And to the 13 extent we entered into any agreements, like a 14 forbearance agreement with a lender, which we did 15 with our unsecured lender, or like the Park Cattle 16 agreement, things that he needed to officially sign 17 and transaction-wise I had to get his approval at 18 that time. 19 Q. Now, I need you to put on a -- sort of an 20 act of admission a little bit, for you to explain to 21 me. Yung expended a great deal of capital to 22 acquire Tropicana? 23 A. Yes. 24 Q. Then he ran into some problems, and also 25 seems like he completely walked away from that 96 Scott Charles Butera - by Vice Chair Epps 1 investment pretty much voluntarily. How does that 2 go about? How does that happen? 3 A. Well, Mr. Yung purchased the Aztar 4 Corporation at a really bad time in the market, at a 5 time when capital markets were very accessible. He 6 put a fair amount of leverage on the entity. I 7 think he knew at the time he was taking a somewhat 8 risky debt with the market. 9 He then saw a great deal of deterioration 10 in the first year after he had purchased that asset. 11 He also has another business, Columbia Sussex, which 12 was still healthy and still required his time. 13 I think he realized that having not been 14 involved in destination markets or major casino 15 operations, he didn't necessarily have the expertise 16 or the experience to manage those businesses well. 17 And I think he was getting a great deal of attack on 18 his personal character, which I think had an effect 19 on him. 20 So I think for Mr. Yung, in order to 21 preserve, he was, I guess, aware enough to realize 22 that his value in Tropicana was nil, that he still 23 had an opportunity at Columbia Sussex, he wanted to, 24 I guess, maintain banking relationships on the 25 Columbia Sussex side. So he was willing to 97 Scott Charles Butera - by Vice Chair Epps 1 acquiesce to a lot of the concessions, I think, on 2 Tropicana as a way of preserving the one entity that 3 he believed still had value, in preserving 4 relationships that he needed to preserve that value, 5 Sussex. 6 Q. If I understand you correctly, putting it 7 into a term we use here often, silos, his hotel 8 silo, I guess, is Columbia Sussex and his gaming 9 kind of destination-related silo was the Aztar 10 section? 11 A. Right. 12 Q. So to preserve his reputation, or 13 whatever, in the hotel leisure section, he kind of 14 just walked away from the the gaming destination 15 section? 16 A. Yes, that's true. 17 Q. And that was the extent of his loss in 18 that regard? 19 A. That's correct. As you can imagine, many 20 of the mostly finance providers and service 21 providers provide services to both sides. So in 22 order, again, to preserve his relationships and 23 preserve his value at Sussex, he was willing to 24 acquiesce to the demands of the creditors at the 25 Tropicana side. 98 Scott Charles Butera - by Vice Chair Epps 1 Q. So, then, following the story along, you 2 step into what remains of the gaming Aztar side of 3 that, and your job is to try and move that through 4 and resurrect it in some fashion that will make it 5 either a successful operation or at least attractive 6 to a perspective buyer? 7 A. That is correct. 8 Q. We referenced document P-30, which was 9 the agreement where you guys were -- I guess Yung 10 left the organization in some form and you became 11 chief executive officer, president. Who was 12 Mr. Robert -- I don't know how to say that name. 13 A. Cojenski? 14 Q. Cojenski? 15 A. Cojenski. Soon after I joined the 16 company and realized the accounting function was 17 significantly damaged, there was a gentleman named 18 Ted Mitchell who was providing the chief financial 19 officer function for both Columbia Sussex and for 20 Tropicana Entertainment, which you can imagine was 21 very inefficient, was very strapped. We needed to 22 hire an individual right away. 23 I had known Mr. Cojenski from my time in 24 Cosmopolitan Resort. He was the chief financial 25 officer at the property level for Cosmopolitan. I 99 Scott Charles Butera - by Vice Chair Epps 1 brought him on to help me reconstruct the 2 accounting. He served as the company's chief 3 financial officer prior to hiring Mr. Baldwin? 4 Q. Then you kept Kevin Preston at that time 5 as senior vise president of casino operations? 6 A. At the time. He is no longer with us. 7 Q. How long did that relationship persist? 8 A. I believe Mr. Preston completely exited 9 the company in the winter of 2008, beginning of 10 2009. 11 Q. Who is your casino operations vice 12 president now? 13 A. As we sit here today, I manage most of 14 the operations now in our casino properties with the 15 help of our general manager. 16 Q. So casino operations falls under your 17 area of responsibility? 18 A. Yes. All of our general managers report 19 to me. 20 Q. Okay. The Lake Tahoe Horizon situation, 21 I think I had the same question Mr. Adams had. But 22 now you are saying they are parallel licenses that 23 are pending, both Columbia Sussex and Park Cattle? 24 A. Park Cattle is looking -- is seeking 25 licensing, Columbia Sussex is seeking licensing. 100 Scott Charles Butera - by Vice Chair Epps 1 I'm not sure how it will get resolved within the 120 2 days, but as soon as one of those entities gets 3 licensed we'll transfer the license to either Park 4 Cattle or Columbia Sussex. 5 Q. And it's going to be a completely 6 seamless turn-key operation? Once they are in, 7 you're out, and no overlap? 8 A. Yeah. And all we have right now are 200 9 gaming devices. There are no table games. We 10 ceased all table game operations there. It's really 11 run more like what we call a route operation, if you 12 were to go to a small restaurant, some of the things 13 that are being proposed in other jurisdictions. So 14 it's really just run with a few slot technicians, 15 some security personnel. 16 Q. In your business plan that you made 17 reference to right at the end of your testimony, the 18 Horizon is in your plans, though, even 19 prospectively, was that prepared at a time when 20 something was different? 21 A. That business plan, yes. That might have 22 been prepared at the time we still had the Horizon. 23 We also have another property named Horizon in 24 Pittsburgh, Mississippi. That might have been an 25 old plan. 101 Scott C. Butera - by Commissioner Sommeling 1 Q. Going forward you have no plans for 2 Horizon? 3 A. No. We are very happy with our situation 4 at MontBleu. One is enough in Tahoe. 5 VICE CHAIR EPPS: I have nothing further. 6 BY COMMISSIONER SOMMELING: 7 Q. Scott, during your testimony, reference 8 to the transition update with the companies, there 9 was no talk about the audit committee functions. 10 Because that was a part that we were very interested 11 in during the licensing denial for Mr. Yung and 12 Company, explain to us now how that audit committee 13 would function? 14 A. Sure. For starters, when we formed our 15 board of managers, we formed three subcommittees, 16 which included a compliance committee. Actually, 17 Bradford Smith, former chairman of the Commission 18 here, sits on the committee with myself. Litigation 19 committee and audit committee, which is headed by a 20 board member, Michael Corrigan, who is a long-time 21 partner at Price Waterhouse and Coopers, and served 22 as the chief financial officer. 23 Our internal audit team, which consists of 24 twelve individuals housed in Las Vegas, reports to 25 that committee, reports to Mr. Corrigan. They 102 Scott C. Butera - by Commissioner Sommeling 1 produce periodic updates. They report to the board, 2 each of the board meetings and special meetings. 3 And they are completely independent of all of our 4 work; and, again, report directly to that 5 subcommittee. 6 Q. The licensee in New Jersey, yourself, as 7 far as your casino license is concerned, you're 8 familiar as to how the audit committee functions? 9 A. Yes. 10 Q. Reporting live functions in the State of 11 New Jersey under our rules? 12 A. Yes. 13 Q. And that is the intention of the 14 corporation, to follow those rules? 15 A. Yes. We are going to work with the 16 management team of Tropicana to make sure all of 17 those rules are being followed, continued to be 18 followed. And, certainly, at the corporate level. 19 Q. And this would be an independent audit 20 committee, not a committee of compliance and audit 21 together? 22 A. That's absolutely correct. We have two 23 separate committees. I know other companies 24 structure differently. We thought given the 25 sensitivity it makes sense to have two separate 103 Scott C. Butera - by Commissioner Sommeling 1 committees at this point. 2 Q. I have just one more question to the 3 Chair. In reference to the check that Mr. Yung had 4 signed -- or signed through the plates, his name, 5 was the date of that check, was he still authorized 6 as of the date of that check? I'm just -- 7 A. It was under that banking arrangement. 8 They still had authorization for his signature. 9 Again, when we brought in a gentleman named Pat 10 Murphy to work with us to restructure our treasury, 11 right at that time. That subsequently has been 12 changed. But, yes, he was authorized at that time. 13 CHAIR KASSEKERT: Anything on redirect? 14 MR. BROOKS: No. Thank you. 15 CHAIR KASSEKERT: Mr. Butera, you may step 16 down. 17 THE WITNESS: Thank you very much. 18 (Witness excused.) 19 CHAIR KASSEKERT: It's now quarter of one. 20 Why don't we break for lunch. I ask we reconvene at 21 2:00. 22 MR. BROOKS: That will be fine, Madam 23 Chair. Thank you. 24 (12:45 p.m. luncheon recess.) 25 - - - - - 104 Scott C. Butera - by Commissioner Sommeling 1 C E R T I F I C A T I O N 2 3 4 5 I, Charles A. Iuliano, a Certified Court 6 Reporter, Registered Professional Reporter, and 7 Notary Public for the State of New Jersey, 8 Identification Number 30492, do hereby certify the 9 foregoing is a true and accurate transcript of the 10 hearing by me, on the date and place hereinbefore 11 set forth. 12 I FURTHER CERTIFY that I am neither attorney, 13 nor counsel for, nor related to or employed by any 14 of the parties in the action in which this 15 deposition was taken, and further that I am not a 16 relative or employee of any attorney or counsel 17 employed in this action, nor am I financially 18 interested in the outcome of this case. 19 20 _________________________________ 21 CHARLES A. IULIANO, C.S.R., R.P.R. 22 LICENSE CERTIFICATION 23 #30X100063200 24 DATED: JULY 28, 2009 25 My Notary Commission expires September 2, 2011