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 PM 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 2:14 p.m. to 4:35 p.m. 17 18 19 Certified Court Reporter: Darlene Sillitoe 20 - - - - - - - - - - - - - - - - - - - - - - - - - - - 21 ATLANTIC CITY COURT REPORTING, LLC 22 CERTIFIED COURT REPORTERS AND VIDEOGRAPHERS 23 1125 ATLANTIC AVENUE, SUITE 416 24 ATLANTIC CITY, NEW JERSEY 08401 25 (609) 345-8448 www.accourtreporting.com 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 WITNESSES DIRECT CROSS REDIRECT RECROSS 3 MARC RUBINSTEIN 4 By Mr. Brooks 10 By Mr. Adams 24 5 KENNETH SHEA 6 By Mr. Brooks 33 By Mr. Adams 42 7 MARK GIANNANTONIO 8 By Mr. Brooks 56 9 VINCENT J. INTRIERI By Mr. Brooks 70 10 By Mr. Adams 82 11 12 13 14 15 16 17 18 19 20 21 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 Rubinstein - direct - Brooks 1 (The PM Session of the Special Meeting 2 was commenced at 2:14 p.m.) 3 CHAIR KASSEKERT: We'll go back on the 4 record. 5 Mr. Brooks, you may call your next 6 witness. 7 MR. BROOKS: Thank you, Madame Chair. 8 Madame Chair, call Marc Rubinstein. 9 CHAIR KASSEKERT: Mr. Rubinstein, Mr. 10 Nance will swear you in. 11 12 MARC H. RUBINSTEIN, having been first 13 duly sworn to tell the truth, testified as 14 follows: 15 16 MR. NANCE: Please state your name for 17 the record. 18 THE WITNESS: Mark Rubinstein. That's 19 R-u-b-i-n-s-t-e-i-n. 20 MR. NANCE: Thank you very much. 21 CHAIR KASSEKERT: You may proceed. 22 MR. BROOKS: Thank you, Madame Chair. 23 24 DIRECT EXAMINATION BY MR. BROOKS: 25 Q. By Mr. Rubinstein, by whom are you 11 Rubinstein - direct - Brooks 1 employed and in what capacity? 2 A. I'm Senior Vice President of Law and 3 Administration and Corporate Secretary for Tropicana 4 Entertainment. 5 Q. Would it be safe to say that you are the 6 Chief Legal Officer of Tropicana Entertainment? 7 A. That's correct. 8 Q. Could you please provide the Commission 9 with the benefit of your professional background. 10 A. I have been with Tropicana exactly one 11 year tomorrow. Prior to that I was with the 12 Cosmopolitan Resort & Casino under development in Las 13 Vegas for a little over two years. Before that I 14 spent six years as general counsel for Wynn Resorts, 15 took that company public, and opened its properties in 16 Las Vegas and in Macau. And before Wynn I was seven 17 years with the Caesars World organizations as general 18 counsel of its Nevada properties. 19 Q. Could you describe for the Commission 20 the circumstances surrounding your hiring by Tropicana 21 Entertainment? 22 A. Yes. I voluntarily left the 23 Cosmopolitan in approximately mid April of '08 and 24 began looking for employment, talked to a number of 25 gaming companies as well as some law firms, and one of 12 Rubinstein - direct - Brooks 1 the companies I was talking to was Tropicana 2 Entertainment. As a result of my relationship at 3 Cosmopolitan with Scott Butera and Bob Kocienski, 4 towards the end of June, early July of '08, I 5 interviewed with the three independent directors of 6 Tropicana Entertainment in Las Vegas and shortly 7 thereafter was offered a position and accepted. 8 Q. Was William Yung or any individuals or 9 entities associated with Mr. Yung involved with your 10 hiring? 11 A. Not -- not at all. 12 Q. Do you have an employment agreement or 13 any other contractual relationship with Mr. Yung or 14 any entity he controls? 15 A. No, I don't. 16 Q. After you were hired by Tropicana 17 Entertainment, did you do anything with respect to 18 their gaming compliance program? 19 A. Yes, I did. They had a fairly 20 rudimentary compliance program. They had just created 21 an independent compliance committee, and I immediately 22 went to work to develop -- as a result of my 23 experience and also the acquisition and control 24 approval we received in Nevada in late August of '08, 25 immediately implemented -- or at least drafted a 13 Rubinstein - direct - Brooks 1 compliance program that was more comprehensive and 2 formal than what was in place with my predecessor and 3 submitted that to Nevada Gaming in the fall of '08 and 4 subsequently got approved in early '09. And we've 5 been basically following its tenets even before 6 approval, starting in about October of '08 through the 7 present. 8 Q. Let me show you what we've marked into 9 evidence as Exhibit P-38. Does this document 10 represent the compliance program that you were talking 11 about? 12 A. Yes, it does. 13 Q. Now, let's take a look at the program, 14 if you could. Describe for the Commission, if you 15 would, the purposes of the program. 16 A. Well, the purposes are fourfold. You 17 know, first of all, to monitor compliance with the 18 gaming laws that would be applicable to the business 19 of the company and its affiliates. Second, to perform 20 due diligence with respect to the employees and 21 prospective directors and managers, vendors, and 22 others associated with the company. Also, our 23 performing due diligence with respect to any proposed 24 transactions and associations. And finally advising 25 the manager, which in this case is the board of 14 Rubinstein - direct - Brooks 1 managers, of any new gaming law compliance issues or 2 situations that might adversely effect the regulatory 3 good standing of the company in the jurisdictions 4 where it operates. 5 Q. If -- let's take a look at the 6 definition of "affiliate," if we could. If Tropicana 7 Atlantic City were permitted to be integrated into the 8 ownership structure of reorganized Tropicana 9 Corporation, would Tropicana Atlantic City be an 10 affiliate for purposes of this program? 11 A. Yes. At this point it would be 12 controlled by the company and, therefore, would be an 13 affiliate. 14 Q. Does the affiliate -- definition of an 15 affiliate specifically just -- not include anyone? 16 A. Yes. It specifically excludes the -- 17 William Yung and all the entities that he owns or 18 controls. 19 Q. Could you talk a bit for us about the 20 compliance committee? Mr. Butera talked a little bit 21 about that. Can you again identify who's on it and 22 what the compliance committee does? 23 A. Sure. The Compliance Committee is a 24 two-member committee. Bradford Smith is the Chairman. 25 Scott Butera is the other member. And it meets the 15 Rubinstein - direct - Brooks 1 requirements in that we have at least one independent 2 director serving on the committee, and that's Mr. 3 Smith. The company [sic] is basically responsible for 4 the oversight of all the compliance activity of the 5 company and has the direct report myself as the Chief 6 Compliance Officer. Beneath me, Laura Westheimer, who 7 is recently hired as Corporate Compliance Officer in 8 place of Rick Yuhaze (phonetic), and then individual 9 compliance officers at the various properties who 10 report directly to Laura. And these are all direct 11 reports. These are not dotted-line reports. 12 Effectively functions as an independent -- independent 13 department throughout the company. 14 Q. Okay. Does the Compliance Committee 15 meet in any regular intervals? 16 A. The committee meets at least quarterly. 17 Q. In connection with those meetings, are 18 there reports prepared? 19 A. There are minutes -- well, there's a 20 report prepared to the committee for its review prior 21 to and at the meeting. And the report is reviewed in 22 very much detail at the meeting. And as a result of 23 the meeting, minutes are taken and issued and 24 ultimately submitted to the regulators in Nevada. 25 Q. Let me show you what we've marked into 16 Rubinstein - direct - Brooks 1 evidence as Exhibit P-39. Let's start with P-39. 2 A. Sure. 3 Q. Could you talk to us a little bit about 4 that document? 5 A. Yes. That is the copy of the minutes of 6 the October 15, 2008, compliance committee meeting. 7 That's the first meeting that I was able to 8 essentially prepare for and take the committee through 9 after my employment began in July. And you can see, 10 it's a very comprehensive set of meeting -- meeting 11 minutes. Very formal, as any board committee would be 12 operated. 13 In this particular meeting, this is when 14 the formal compliance program that I brought to the 15 company was adopted and approved for submittal to the 16 Nevada Gaming Commission for its approval. 17 Q. Let's take a look, if we could, at P-40 18 in evidence. Could you talk a little bit about that 19 document for us? 20 A. Again, this is the subsequent set of 21 minutes for the next quarterly meeting of the 22 committee. And this is where we kind of got into the 23 formal sequence of going through the compliance 24 officer's report section by section, reviewing such 25 things as material transactions, material litigation, 17 Rubinstein - direct - Brooks 1 transactions with vendors that meet specific dollar 2 thresholds so that, you know, the company is very much 3 aware of who we're doing business with and 4 everything's transparent. As well as advising the 5 committee of all the regulatory contacts that we have 6 in various jurisdictions. Places like Mississippi and 7 Louisiana, we have regular visits from regulators, and 8 we make sure we document those and report those up to 9 the compliance officers ultimately up to me and 10 summarize for the committee at its next meeting. 11 Q. Take a look for me, if you would, at 12 Exhibit P-41. 13 A. Okay. This is a copy of the April '09 14 minutes, which is the third quarterly meeting after I 15 began and the first formal meeting after the 16 compliance plan was approved by the Nevada Gaming 17 Commission. And this set of minutes actually was 18 submitted to the Nevada Gaming Commission about a week 19 ago because these minutes were actually approved at 20 the July 14th committee meeting. 21 Q. And after they're approved, they go to 22 the Nevada Gaming Commission? 23 A. They must be submitted within ten days. 24 In this case they were submitted, I think, a day or 25 two after the meeting. 18 Rubinstein - direct - Brooks 1 Q. Does the compliance committee have a 2 compliance officer -- or a compliance function? 3 A. It does. Technically I'm the Chief 4 Compliance Officer, and I report directly to them on 5 the compliance matters. 6 Q. Now, in connection with reports to 7 compliance, who would those reports come from in terms 8 of the different departments in the company? 9 A. A number of -- a number of departments 10 are involved in the compilation of the materials that 11 are required by our compliance program. For 12 example -- well, you see in the program, it says that 13 representatives of several departments will provide 14 reports and/or attend the committee meetings. And 15 those departments will include finance, internal 16 audit, legal and compliance, human resources, casino 17 operations, purchasing, and security and surveillance. 18 Although I would note that surveillance, 19 for the purposes of compliance with New Jersey 20 statutes and in anticipation of hopefully getting a 21 favorable ruling from this body, our surveillance 22 director for surveillance matters in the course of the 23 independent audit committee. 24 Q. Talk to us a little bit, if you would, 25 about at he independent audit committee? 19 Rubinstein - direct - Brooks 1 A. The independent audit committee is 2 comprised of also two members, both of whom are 3 independent directors. Michael Corrigan is the 4 chairperson of that committee and Bradford Smith also 5 sits on that committee. 6 Q. Let's take a look, if we could, at 7 Section VII.vi of the program. Could you focus for us 8 on the type of information the compliance officer or 9 the committee member would bring to the compliance 10 committee? 11 A. Well, there's a lot of information, as 12 you can see from the whole program that will be 13 brought before the compliance committee, but 14 specifically this is one of the key facets of the 15 program, and that is any prosecution or administrative 16 action taken against the company or any executor or 17 key employer of the company or its affiliates would be 18 brought to the attention of the committee. In most 19 cases for informational purposes if it was a serious 20 infraction, it would be require some further 21 investigation on the part of the company that 22 compliance committee would direct that investigation 23 either through my office or, if necessary, for this 24 egregious enough situation possibly through 25 independent counsel, which it has the authority to 20 Rubinstein - direct - Brooks 1 engage. 2 Q. Take a look, if you would, at Section 3 VIII.ii of the program. Could you talk to us a little 4 bit about what that section of the program 5 constitutes? 6 A. Sure. Once a year the compliance 7 committee chairman will reach out to the chairman of 8 the Nevada Gaming Control Board to determine if a 9 face-to-face meeting is desired by the chairman of the 10 board. And typically, in my experience -- and I've 11 been doing this in Nevada for -- in-house for about 16 12 years -- those meetings are typically waived but in 13 lieu thereof, a summary report is submitted by the 14 compliance committee chairman to the chairman of the 15 board, basically highlighting the committee's 16 activities during the preceding calendar year. 17 Q. And would that be something you would be 18 willing to do in connection with the New Jersey Casino 19 Control Commission if there was an integration of the 20 Tropicana Atlantic City with respect to the 21 reorganized Tropicana Entertainment? 22 A. Absolutely. I mean, we have no problem 23 sharing the information that's generated by this 24 committee with any of our regulators. That happens at 25 this point to be the only one that requested it. 21 Rubinstein - direct - Brooks 1 Q. Let's take a look, if we could, at 2 Exhibit P-42 in evidence. Tell us a little bit about 3 this document. 4 A. Sure. One of the facets of the 5 compliance program is the requirement to have a 6 written set of compliance policies. And basically 7 what we did was develop this code of business conduct 8 and ethics which, frankly, is probably, you know, good 9 operating procedure for any company, inside or outside 10 the gaming business. But, as you can see, the code 11 acknowledges the fact that, you know, we are in the 12 privileged license business and that our, you know, 13 our business' survival depends, in large part, on 14 reputation for integrity and regular business conduct. 15 So the code outlines the basic principles of how we 16 expect all our employees, line staff all the way up to 17 the board of managers -- or board of directors of 18 future corporations to behave. 19 Q. Let's take a look, if we could, at Page 20 7 of this document and, in particular, the section of 21 the code dealing with seeking guidance. Could you 22 talk to us a little bit about that? 23 A. Yes. Well, again, this is a code of 24 conduct. It's basically a set of general policies. 25 And, like any set of rules or regulations, it is 22 Rubinstein - direct - Brooks 1 subject to interpretation. And the background or the 2 reason for this particular provision is simply to 3 encourage someone rather than try and interpret the 4 code, where they have a question to reach out for 5 either a compliance officer, legal department, or any 6 other resources that might have been identified in 7 that particular section of the code. 8 Q. Look, if you would, at the section of 9 the program -- or the code, I should say, dealing with 10 reporting violations. Could you talk to us a little 11 bit about what that requires? 12 A. Yes. Again, encouraging free 13 communication by our employees with respect to any 14 suspected violations of law or code or any company 15 policy requiring an immediate report to the supervisor 16 or to the compliance for our legal department and 17 emphasizing the fact that the -- the reporter will not 18 necessarily be subject to retaliation in the case of a 19 good-faith report. 20 Q. I want to go back to, if we could, to 21 one of the minutes that we've moved into evidence, 22 Exhibit P-40 in evidence. And in particular, I'd like 23 to try to focus on Section VI of the minutes. It 24 talks about a whistle-blower hot line. Could you talk 25 about that to us -- for us a little bit? 23 Rubinstein - direct - Brooks 1 A. Yes. It's my understanding that under, 2 you know, our prior ownership with Columbia Sussex 3 there was a lot of employment-related and 4 compliance-related issues that really were never acted 5 on by management. So it what was put in place was a 6 whistle blower hot line that would allow employees to 7 report freely either by telephone or through the 8 internet to the compliance department for 9 investigation into those alleged -- into those 10 complaints and any alleged violations. 11 And what this particular set of minutes 12 reflect is the fact that since the company has -- 13 since Tropicana Entertainment essentially became an 14 independent company in the summer of '08 through the 15 beginning of '09 and that seven-month period, that the 16 frequency of complaints was down dramatically. 17 Q. Mr. Rubinstein, as a Chief Legal Officer 18 of Tropicana Entertainment and focusing on reorganized 19 Tropicana Entertainment, when the company emerges from 20 bankruptcy pursuant to the approved plan of 21 reorganization, will William Yung or any entity owned 22 or controlled by Mr. Yung have any ownership 23 interested in the reorganized Tropicana Entertainment? 24 A. No. 25 Q. Will he have or any entity he owns or 24 Rubinstein - cross - Adams 1 controls -- "he" being Mr. Yung -- any ownership 2 interest in any subsidiary of Tropicana Entertainment? 3 A. No. 4 Q. Will Mr. Yung or any entity he owns or 5 controls be in a position to exercise any form of 6 control or influence over reorganized Tropicana or its 7 subsidiaries? 8 A. No. 9 Q. And, to the best of your knowledge and 10 belief, will Mr. Yung or any entity he owns or 11 controls be in a position to exercise any form of 12 control or influence over any of the key employees of 13 reorganized Tropicana or its subsidiaries? 14 A. No. 15 MR. BROOKS: I have nothing further. 16 CHAIR KASSEKERT: Thank you. 17 Mr. Adams? 18 MR. ADAMS: Yes, Chair, thank you. 19 20 CROSS-EXAMINATION BY MR. ADAMS: 21 Q. Ms. Westheimer will report to you? 22 A. She does report to me. 23 Q. She does report to you. 24 And her title is Compliance Officer? 25 A. That's correct. 25 Rubinstein - cross - Adams 1 Q. Okay. Do you view her as having 2 replaced Mr. Yuhaze? 3 A. Yes and no. 4 Q. Okay. Just elaborate on it. 5 A. Mr. Yuhaze was a Corporate Vice 6 President, and due to the breadth of his experience, 7 not only as compliance area but regional manager with 8 the company, he had a lot more familiarity with the 9 company and, therefore, we were a lot more willing to 10 give him decision-making authority. Whereas Miss 11 Westheimer, even though she's got extensive compliance 12 experience, she's new to the company. And we kind of 13 brought her in in what I would consider a director 14 level position where she would have to consult with 15 me, and I would ultimate -- make any ultimate 16 decisions. Although, frankly, to the extent there are 17 any real decisions, those would be made by the 18 compliance committee. 19 Q. Right. I just wanted to probe further. 20 A. Sure. 21 Q. She is going to report certain 22 information to you, but then you have a duty to then 23 report to the compliance committee? 24 A. That is correct. 25 Q. And you will be responsible for making 26 Rubinstein - cross - Adams 1 any determinations and recommendations, not her? 2 A. That is correct. And I will -- I will 3 also make all the day-to-day administrative decisions 4 to run the department? 5 Q. Just switching gears a little bit. Park 6 Cattle? 7 A. Uh-hum. 8 Q. You've heard Mr. Butera's testimony 9 about that? 10 A. Uh-hum. 11 Q. Is that your understanding? And do you 12 have anything you want to add to that if there is 13 anything to add? 14 A. My understanding is that the primary 15 applicant for the slot machine concession, if you 16 will, is Lake Tahoe Realty I, which is a subsidiary of 17 Columbia Sussex. I do understand that Park Cattle has 18 had an application pending. I don't know whether that 19 application has been activated. We have monitored the 20 progress of the Lake Tahoe Realty I application. It 21 is proceeding. As of two weeks ago we were told the 22 Nevada agents were heading to Kentucky to do their 23 fieldwork, and that's the latest report we have. 24 Again, the 90 days started ticking 25 June -- or the 120 days started ticking June 13th. 27 Rubinstein 1 The 90-day period where we're supposed to essentially 2 take the temperature of the gaming control board for 3 how far they think they have gotten and how far they 4 still think they have to go, we'll know that on 5 September 15th. 6 Q. Would it be fair to say that you will be 7 the primary point person and the person charged with 8 responsibility of keeping an eye on this and advising 9 the requisite committees and/or management of 10 Tropicana? 11 A. Yes. Along with Michael Alonso, the 12 Jones Vargas law firm. 13 Q. The outside firm that's handling that? 14 A. That's correct. 15 MR. ADAMS: I have nothing further. 16 CHAIR KASSEKERT: Okay. Questions from 17 the Commissioners? 18 Commissioner Epps? 19 VICE CHAIR EPPS: I just lost it. 20 Oh. You said that the surveillance 21 person would report separately. Is that only 22 in the case of if the New Jersey -- if you had 23 to fit into the New Jersey model? Or is that 24 always at -- 25 THE WITNESS: That's been the case 28 Rubinstein 1 since -- I'd have to pull up the minutes to see 2 which internal audit committee minutes or board 3 minutes approved that. That's been the case, I 4 want to say, since at least October of '08. 5 Again, we felt that we wanted New Jersey back. 6 We were making every preparation to do right by 7 New Jersey regulations in terms of our conduct 8 in all the things you've heard about, as Scott 9 indicated that we've done, you know, 10 occupationally to separate ourselves from the 11 Yung organization. We felt that was one more 12 facet to demonstrate our commitment to the 13 compliance in anticipation that we would 14 someday be back in New Jersey. 15 VICE CHAIR EPPS: So surveillance 16 reports directly to the audit committee? 17 THE WITNESS: Yes. 18 VICE CHAIR EPPS: Now, does internal 19 audit also report directly to the audit 20 committee? 21 THE WITNESS: Yes. 22 VICE CHAIR EPPS: And you were asked if 23 there is any relationship to Yung or his 24 affiliates. Has the new company completely 25 severed its organizational structure from the 29 Rubinstein 1 Columbia Sussex organization? Or are there any 2 remnants that are still -- 3 THE WITNESS: There is one one-percent 4 ownership in the Lighthouse Point, that is 5 technically owned by the Yungs. We are 6 stepping our way through a couple of 7 transactions to transfer that one percent to 8 Tropicana Entertainment. Basically what that's 9 going entail is getting -- getting Columbia 10 Sussex off as a guarantor of the property lease 11 in Vicksburg. That will be approved, we 12 believe, in the August 12th Delaware omnibus 13 bankruptcy hearing, and that will allow us to 14 pay the City of Vicksburg its cure amount. And 15 once we do that, they will sign off or release 16 Columbia Sussex from its Vicksburg guaranty. 17 And as consideration of that transaction in 18 Vicksburg, Columbia Sussex will essentially 19 convey its one-percent interest in the 20 Lighthouse Point in Greenville to Tropicana 21 Entertainment. So that's really the only loose 22 end in terms of -- and it's really, it's a -- 23 it's a one-percent interest in, you know, no 24 control, no influence, no involvement 25 whatsoever by Columbia Sussex since the time 30 Rubinstein 1 I've joined the company. 2 VICE CHAIR EPPS: All right. 3 CHAIR KASSEKERT: Commissioner 4 Sommeling? 5 Commissioner Harrington? 6 COMMISSIONER SOMMELING: In your 7 definitions of the regulatory gaming compliance 8 program -- 9 THE WITNESS: Yes. 10 COMMISSIONER SOMMELING: One of the 11 definitions says "controlling person." The 12 definition says, means a person who possesses 13 the power to direct or cause the direction or 14 management or policies of a person. 15 THE WITNESS: Right. 16 COMMISSIONER SOMMELING: The controlling 17 person wouldn't direct any member of the audit 18 committee, would it? Or am I just stating a 19 fact? 20 THE WITNESS: I think you're stating a 21 fact. 22 COMMISSIONER SOMMELING: So, in other 23 words, that would not happen? 24 THE WITNESS: To my knowledge, it 25 wouldn't. 31 Rubinstein 1 COMMISSIONER SOMMELING: I'm going by 2 the definition that's in your program. 3 THE WITNESS: Yeah. I see the 4 definition. I guess it depends on how it's 5 used in the program. 6 COMMISSIONER SOMMELING: Yeah. Or who 7 the -- would that be their title, or would that 8 just be something that they would be empowered 9 to do? 10 THE WITNESS: No. It's just -- again, 11 it's a definition to pick up something in the 12 program where the reference is made to a 13 controlling person. And I'd have to scroll 14 through the whole program to tell you why that 15 definition is in there. I know it's a good 16 reason. It's to make sure that when we pick up 17 the -- I think it's connected with the term 18 affiliate. When we pick up an affiliate that 19 we understand who a controlling person is for 20 the purposes of the definition of affiliate. 21 COMMISSIONER SOMMELING: Okay. Thank 22 you. That's all. 23 CHAIR KASSEKERT: Commissioner 24 Harrington? Any questions? 25 COMMISSIONER HARRINGTON: No. 32 Shea - direct - Brooks 1 CHAIR KASSEKERT: Anything on redirect? 2 MR. BROOKS: No, Madame Chair. 3 CHAIR KASSEKERT: Anything on recross? 4 MR. ADAMS: No. 5 CHAIR KASSEKERT: You may step down. 6 Thank you. 7 Next witness. 8 MR. BROOKS: Madame Chair, call Ken 9 Shea. 10 CHAIR KASSEKERT: Mr. Nance will swear 11 you in. 12 MR. NANCE: Raise your right hand. 13 14 KENNETH SHEA, having been first duly 15 sworn to tell the truth, testified as follows: 16 17 MR. NANCE: Please state your name for 18 the record. 19 THE WITNESS: Kenneth Shea. 20 MR. NANCE: Thank you. 21 CHAIR KASSEKERT: You may proceed. 22 MR. BROOKS: Thank you, Madame Chair. 23 24 DIRECT EXAMINATION BY MR. BROOKS: 25 Q. Mr. Shea, by whom are you employed and 33 Shea - direct - Brooks 1 in what capacity? 2 A. I'm currently employed by Icahn Capital, 3 LP. It's a hedge fund in New York City. 4 Q. You realize in general the Commission is 5 familiar with your background, but for purposes of the 6 record, could you provide the Commission with a 7 description of your professional background. 8 A. Sure. I joined Icahn Capital in -- 9 I joined Icahn in June of 2008. And 10 prior to that, I spent 12 years at Bear Stearns 11 investment bankers in Wall Street where I ran the 12 firm's gaming, lodging, leisure, investment banking 13 practice. 14 Q. Let me focus, if I could, with your 15 employment with Bear Stearns. Did there come a time 16 when you were employed by Bear Stearns that you got 17 involved with the effort to sell Tropicana Atlantic 18 City? 19 A. Yes. 20 Q. And could you describe your involvement 21 in that regard? 22 A. Sure. I think Justice Stein had been 23 appointed the Conservator of the Tropicana Atlantic 24 City in the tail end of 2007. And I think Justice 25 Stein ran a process where he interviewed a bunch of 34 Shea - direct - Brooks 1 investment banks to help assist in the sale of that 2 property. And I won that assignment in December of 3 2008. I think I was appointed in January -- excuse 4 me -- December '07, January of '08. 5 Q. And what did you do after your 6 appointment? 7 A. What we typically do. This is kind of a 8 standard process or assignment that you would get as 9 an investment banker, but you prepared a selling 10 memorandum that described the property and its 11 operations and its history, and then you reach out to 12 a group of potential buyers, both strategic buyers or 13 the casino companies' potential buyers, and we 14 canvassed well in excess of a hundred potential buyers 15 of the property at that time. 16 Q. And were you successful at that point in 17 terms of selling the asset? 18 A. Ultimately, no. But initially there 19 was -- there was a fair amount of interest in the 20 property. And if -- if people think back to where the 21 economy was in late 2007, early 2008, the economy had 22 not yet fallen off a cliff. Things got progressively 23 worse pretty quickly after we took on the assignment. 24 But in the initial stages of that process, there were 25 three or four folks that had expressed significant 35 Shea - direct - Brooks 1 interest in the asset. 2 Q. In terms of the sale effort, did -- what 3 role or, if any, did financing play in connection with 4 the sale effort? 5 A. Financing is always a significant issue 6 in any transaction of this size. I mean, at the time, 7 we had received initial indications for, you know, 8 upwards of $950 million for the company. And 9 typically, you know, people would be looking for a 10 significant amount of financing to help finance that 11 acquisition. And what was happening in early 2008 was 12 the financing markets started to deteriorate pretty 13 rapidly. In fact, Bear Stearns ultimately went out of 14 business in June of 2008. But at the time we were in 15 the market trying to sell the Tropicana, it was about 16 the same time that the financing markets were 17 collapsing. 18 Q. Could you describe for the Commission 19 your duties and activities in connection with Icahn 20 Capital? 21 A. Sure. I essentially have responsibility 22 for many of the same sectors I had responsibility for 23 at Bear Stearns. So I -- I'm looking for investment 24 opportunities in the gaming, lodging, leisure, real 25 estate sectors of the economy. 36 Shea - direct - Brooks 1 Q. Did you have any connection with your 2 duties at Icahn Capital in analyzing the Tropicana 3 investment? 4 A. Yes. I did. When I joined Icahn in 5 July of '08, we took a look at a lot of companies in 6 the sectors that I was familiar with from my career at 7 Bear Stearns. And Tropicana was one of the names that 8 we took a hard look at. But we decided to pass on 9 that investment opportunity in July, and it wasn't 10 until November of 2008 where we got involved in that 11 transaction again. 12 Q. Are you generally familiar with the plan 13 of reorganization for Tropicana Entertainment? 14 A. Yes. I am. 15 Q. Does that plan of reorganization 16 contemplate that Tropicana Entertainment will enter 17 into a new credit facility? 18 A. Yes, it does. 19 Q. Could you describe for the Commission 20 what the details are with respect to that credit 21 facility? 22 A. Sure. Sure. It's a -- 23 Q. And just for the purposes of the 24 record -- 25 CHAIR KASSEKERT: I'm sorry. What was 37 Shea - direct - Brooks 1 the exhibit number? 2 MR. BROOKS: 18. Exhibit P-18 in 3 evidence. 4 CHAIR KASSEKERT: Thank you. I'm sorry. 5 MR. BROOKS: No problem. 6 A. When Tropicana Entertainment ultimately 7 emerges from bankruptcy, it's going to have certain 8 obligations it has to address, the largest of which is 9 the $65 million debtor possession financial that Mr. 10 Butera helped to arrange on the way into bankruptcy. 11 So we've agreed to provide a fully underwritten $150 12 million credit facility that's comprised of $130 13 million term loan and a $20 revolving credit facility. 14 A $130 million term loan is essentially going to be 15 used to -- half of that will essentially be used to 16 repay the debtor possession loan, and then a good 17 chunk of the remainder will be used to pay 18 pre-petition claims and fees for legal counsel and 19 accountants and all the other people that have done a 20 lot of work on this project for the last year or so. 21 It's our belief that when Tropicana Entertainment 22 emerges from bankruptcy, they will have roughly, you 23 know, 20-ish million dollars in excess of availability 24 under this facility, and I think a similar amount, 25 maybe 20 to $25 million in excess cash on the balance 38 Shea - direct - Brooks 1 sheet at Trop Entertainment. And this credit facility 2 was put in place strictly for Tropicana Entertainment 3 as Tropicana Atlantic City was a separate entity and a 4 separate issue. 5 Q. Now, if Tropicana Atlantic City was part 6 of the reorganized Tropicana structure, would it have 7 potential access to this credit facility? 8 A. Yes. I mean, we'd have to figure out a 9 way to kind of integrate -- you know, the Trop AC into 10 this facility. Having said that, the Tropicana 11 Atlantic City is in relatively good financial 12 condition today, has approximately $54 million of cash 13 in its balance sheet. It does not have debtor 14 possession financing that's going to have to satisfy 15 upon emergency bankruptcy. There are certain 16 pre-petition claims that will have to be addressed, 17 but it's not on the order of the claims that are at 18 the parent company. 19 Q. What led Icahn to being involved in 20 negotiation of the exit financing? 21 A. I'm sorry. What was that question? 22 Q. What led Icahn to be involved with 23 the execution -- 24 A. Sure. Sure. 25 It was actually an idea of mine in that 39 Shea - direct - Brooks 1 in talking with Scott -- Scott, you know -- the 2 capital markets are still in pretty difficult shape. 3 And when the exit financing had to be put in place a 4 couple of months ago, it's my understanding Scott and 5 his management team had approached a number of the 6 banks in Wall Street, and none of the banks on Wall 7 Street were prepared to commit to the financing. 8 They -- in banking parlance, there's a concept of best 9 efforts financial transaction. And what that means is 10 the banks will tell you that we think we can get your 11 deal done. We're not making any promises. You're 12 going to go out to market, and we may come up with the 13 money. We may not come up with the money. And 14 oftentimes they want to charge you a lot of money 15 upfront to take that shot, and then they come up 16 empty-handed, and the company's pay for the effort. 17 So what Vince Intrieri and I talked 18 about was, well, why don't we provide the exit 19 financing? So we proposed $150 million exit financing 20 that would be fully underwritten by Icahn Capital, and 21 then we subsequently went to the senior lenders in the 22 credit facility of Tropicana Entertainment and offered 23 them participations in the facility. So I think at 24 the end of the day, we at Icahn are probably providing 25 75 to $85 million of the facility, and the other banks 40 Shea - direct - Brooks 1 that were in the credit facility of Tropicana 2 Entertainment will pick up the rest of that facility. 3 Q. Now, Mr. Shea, as an analyst and someone 4 who's familiar with the gaming industry, how do you 5 think the credit facility will impact the reorganized 6 Tropicana Entertainment in terms of its ability to 7 compete in the domestic gaming marketplace? 8 A. Sure. I think -- I think what's 9 happened since the first time I came before this 10 Commission back in January of '08, and the gaming 11 industry in particular is that the gaming industry was 12 an industry that a lot of financial sponsors took 13 interest in. And a lot of transactions were conducted 14 around the same time frame that Bill Yung tried to 15 acquire Aztar. And peak earnings were levered with 16 peak amounts of debt. And then the economy took a 17 significant turn for the worse. And so I think that 18 one of the benefits you have here with Tropicana is 19 you're going to have a relatively clean balance sheet 20 relative to the rest of the industry. 21 You think back to what Bill Yung paid 22 for this company. He -- he paid approximately $2.7 23 billion for the whole company. If you think about the 24 capital structure, it was a-billion-three of bank debt 25 roughly, 960 million of junk bonds, and 450 million of 41 Shea - cross - Adams 1 equity. The equity's worthless. The junk bonds are 2 worthless. And we paid 27 cents on the dollar for the 3 billion-three of bank debt. So we're emerging a much 4 stronger and healthier company than it was when it 5 went in. So, to your point, I think we're going to be 6 able to compete fairly well in the industry. 7 Q. Do you see an advantage for Tropicana 8 Atlantic City to be part of that ownership structure? 9 A. I do. I think that -- I think that, you 10 know, reuniting Trop AC with Trop Entertainment, 11 putting the company back together again under one roof 12 with consistent marketing strategies and business 13 strategies and the ability to bring, you know, 14 everyone back together in one place, I think will be 15 good for Trop AC and Trop Entertainment as well. 16 MR. BROOKS: I have no further 17 questions, Madame Chair. 18 CHAIR KASSEKERT: Cross-examination, Mr. 19 Adams? 20 MR. ADAMS: Yes. Thank you, Madame 21 Chair. 22 23 CROSS-EXAMINATION BY MR. ADAMS: 24 Q. Mr. Shea, is this credit facility 25 secured or unsecured? 42 Shea - cross - Adams 1 A. Secured. 2 Q. Assuming the Tropicana Atlantic City 3 property comes into the Tropicana family, so to speak, 4 does it envision that this will be secured by the 5 Tropicana Atlantic City facility as well? 6 A. Ultimately, although when we sold the 7 Tropicana -- when we sold the credit facility to the 8 other banks that are participating in the loan, they 9 were specifically told that they were not getting this 10 as collateral. 11 Q. So it will not be processed as 12 collateral? 13 A. That hasn't been determined because we 14 haven't brought it back into credit yet. 15 Q. Do you view that as an open issue that 16 will be discussed at some point in the future? 17 A. At some point. When it probably come 18 in, it will be as a secured facility, but it's not 19 part of the collateral package today. 20 Q. The interest rate is 12 percent, as I 21 understand it? 22 A. I think it's 15 percent. 23 Q. Fifteen? 24 A. Yeah. 25 I thought it was. If you see 12 in the 43 Shea 1 term sheet -- I thought it was 15. But if it says 12 2 in the term sheet, that's what it is. 3 Q. You had mentioned that, in effect, as 4 that credit facility, 70 to 75 is being provided by 5 Icahn; is that correct? 6 A. We underwrote the entire 150, and then 7 we offered it up to the other banks, and we're holding 8 75-ish. 9 Q. The other banks are taking the rest? 10 A. Yes. 11 MR. ADAMS: I have nothing further. 12 CHAIR KASSEKERT: Thank you. 13 Questions from Commissioners? 14 Commissioner Sommeling? 15 COMMISSIONER SOMMELING: I'm just trying 16 to digest what you had just said with reference 17 to Tropicana AC. At this point Tropicana AC is 18 not part of this deal? I mean, they want to 19 bring it back, make it a part of the whole 20 reorganization structure, being one company 21 with several locations like it used to be. 22 THE WITNESS: That's correct. 23 COMMISSIONER SOMMELING: But at the 24 present time, it's not? Is that correct? 25 THE WITNESS: That's correct. 44 Shea 1 COMMISSIONER SOMMELING: And that there 2 is some possibility that it could become part 3 of the present deal? 4 THE WITNESS: That's correct. 5 COMMISSIONER SOMMELING: All right. But 6 that's not been resolved? There's been no 7 decision with that regard? 8 THE WITNESS: You're talking about the 9 financing? 10 COMMISSIONER SOMMELING: Yeah. 11 THE WITNESS: Right. The financing -- 12 Tropicana Atlantic City today did not need an 13 exit facility to come out of bankruptcy. 14 Tropicana Entertainment did because when 15 Tropicana Entertainment went into bankruptcy, 16 they, you know -- eight other casinos, nine 17 other casinos, they had other important capital 18 requirements. Another financial institution 19 came in and provided a loan called a debtor and 20 possession facility, went into bankruptcy. 21 That loan has to be repaid when it comes out. 22 So almost half of the facility we're talking 23 about is going to repay that bankruptcy loan. 24 Trop AC had sufficient capital on its way in 25 that it didn't need this financing. So when we 45 Shea 1 provided this facility, Trop Atlantic City was 2 not part of the borrowing mix. 3 COMMISSIONER SOMMELING: Okay. That's 4 all. Thank you. 5 CHAIR KASSEKERT: Commissioner 6 Harrington? 7 Commissioner Epps? 8 VICE CHAIR EPPS: Can you distinguish 9 the companies who would be a shareholder in the 10 Trop AC matter as opposed to the company that 11 is a lender in the Tropicana Entertainment 12 reemergence? 13 THE WITNESS: The short answer is yes. 14 We can do that. Essentially, if you think back 15 to the capital structure of the entire company, 16 the credit facility that we purchased at Icahn, 17 the bank debt, the million-three-fifty of bank 18 debt that we paid 27 cents for, that class of 19 security holders, they are currently the equity 20 in the reconstituted company regardless of 21 whether or not this Commission puts the two 22 companies back together. Because it -- before 23 the two companies were separated, they were 24 one, and they borrowed all that money. So our 25 claim -- you know, you realize how we got to 46 Shea 1 this position. We used some portion of our 2 claim. Trop Entertainment own -- owes 3 a-billion-three-fifty to the banks. We used 4 part of that claim and said, you know what? 5 We're going to take $200 million of that claim, 6 and we'll offer to buy Atlantic City with that 7 200. So it was the same bank debt that we paid 8 27 cents for. We just allocated some of it to 9 Atlantic City and left the rest of it at 10 Entertainment. 11 VICE CHAIR EPPS: I guess my question 12 is, that -- I understood that transaction. 13 That organization that did that was Icahn 14 Capital? 15 THE WITNESS: We're the largest holder 16 of the bank debt, but there were other, you 17 know, creditors that are involved. 18 VICE CHAIR EPPS: And Icahn Capital is 19 also providing the 150 -- 20 THE WITNESS: Correct. With -- 21 VICE CHAIR EPPS: -- facility. 22 THE WITNESS: With the same -- we only 23 offered to syndicate that $150 million to other 24 people that own the bank debt like us. So 25 there -- those former lenders or the former -- 47 Shea 1 or the current equity holders, and they could 2 also be participating in this exit financing. 3 VICE CHAIR EPPS: So it's the same 4 universe of -- 5 THE WITNESS: Correct. 6 VICE CHAIR EPPS: -- lenders in the 7 original transaction -- 8 THE WITNESS: Correct. 9 VICE CHAIR EPPS: -- that are both the 10 Trop AC debt offerers or -- 11 THE WITNESS: Correct. 12 VICE CHAIR EPPS: -- or the bid offerers 13 and the $150 million credit facility 14 provider -- same universal. 15 THE WITNESS: Correct. We're the debt 16 and the equity now. 17 VICE CHAIR EPPS: Okay. Can you briefly 18 tell me the difference between interest in 19 Tropicana in July of '08 and interest in 20 Tropicana in November of '08? What transpired 21 to make it more attractive in November? 22 THE WITNESS: Sure. In July of '08 -- 23 again, I had known the Icahn organization for 24 four or five years before joining them. I had 25 done financings. I had sold the property in 48 Shea 1 Atlantic City to Pinnacle. I sold the stuff in 2 Las Vegas to Whitehall, which is a subsidiary 3 of Golden Sachs, and so very familiar with the 4 gaming industry. And one of the things we 5 looked at was Tropicana. In July of '08, I 6 think the bank debt was trading 80 cents on the 7 dollar, and the bonds at 960 million of junk 8 bonds were probably trading, you know, in the 9 40-cent range. And I thought it was too 10 expensive at that time. We all thought it was 11 too expensive at that time. What happened 12 between July and November was the economy got 13 progressively worse and highly leveraged 14 companies like the Tropicana started to 15 unravel. Their debt securities started to 16 implode. And what was trading at 80 cents on 17 the dollar in July was trading at 27 cents on 18 the dollar in November. And that's when we 19 decided it was, you know, an interesting 20 investment opportunity. 21 VICE CHAIR EPPS: Okay. 22 That was all I had. 23 CHAIR KASSEKERT: Okay. If this 24 Commission makes a determination, Mr. Shea, 25 that Tropicana AC should be a stand-alone 49 Shea 1 company, how will your plans differ than if the 2 company was put back together in terms of what 3 support you will provide, in terms of what you 4 will do? 5 THE WITNESS: Sure. I think -- I think 6 that the support that we'll provide, I don't 7 think changes, regardless of how it's 8 structured. I think organizationally it's more 9 efficient to have them under one roof. But 10 we -- we own both entities now. You know, the 11 bank debt is now the equity in both entities. 12 And so we have a vested interest in making sure 13 that everything does well going forward. I 14 think it's really one of kind of operational 15 efficiency if they're combined. It doesn't 16 change our commitment to either -- either 17 entity. 18 CHAIR KASSEKERT: And should you -- 19 should the company be put back together -- and 20 perhaps I might have asked this question of Mr. 21 Butera as well when he was up here. But in 22 terms of Mr. Icahn's investment, do you foresee 23 a situation similar to what we saw with 24 Columbia Sussex in terms of back-of-the-house 25 management? And that might be a better 50 Shea 1 question for Mr. -- now that I ask -- 2 THE WITNESS: I'm not sure exactly what 3 you mean by that. But I think that -- like Mr. 4 Yung did not have a great reputation, I think 5 Mr. Icahn has had a good -- I mean Carl Icahn's 6 been in the gaming industry for a long time. 7 He was in Atlantic City. He's been licensed in 8 Atlantic City, in Nevada, and he likes the 9 industry. And he's a previous licensee and a 10 previous, you know, owner of casinos. And so I 11 think he's probably viewed differently than Mr. 12 Yung. 13 CHAIR KASSEKERT: Okay. Thank you. 14 VICE CHAIR EPPS: I did have one other 15 question. 16 CHAIR KASSEKERT: Commissioner Epps? 17 VICE CHAIR EPPS: And I don't know, 18 again, if this should have been asked at 19 another time. But going forward, what are 20 the -- what is the source, and then what is the 21 potential plans for any Capex in the Atlantic 22 City market? 23 THE WITNESS: Sure. Just -- I mean, as 24 a general rule, you know, there's maintenance 25 capital expenditure, and there strategic 51 Shea 1 capital expenditure, and I think maintenance is 2 the stuff you do to kind of keep your house in 3 order. On the strategic front, it's really an 4 investment. What's the return on invested 5 capital? So do you add a thousand room tower 6 on the property? You do is if you could get a 7 good return on your money. I think there, you 8 know, Mark Giannantonio and his team in AC 9 have, you know, a list of capital projects 10 that, you know, we've been talking about, and 11 we'll take under consideration. And -- but at 12 the end of the day, does this investment 13 produce a return on your capital? And so I 14 think it's kind of that kind of analysis that 15 will drive strategic capital expenditure as 16 opposed to maintenance capital expenditure. 17 VICE CHAIR EPPS: And what will be the 18 source of any capital improvement, that 19 strategic capital improvement in this 20 situation? Will it have to be an another 21 facility or is it something -- 22 THE WITNESS: Source of financing? 23 VICE CHAIR EPPS: Yeah. 24 THE WITNESS: Yeah. I think that we are 25 taking a pretty conservative approach on 52 Shea 1 capitalization going forward. I think that, 2 you know, we -- Vince Intrieri, who's the next 3 witness, and I were on the Steering Committee 4 on bankruptcy for Tropicana, and the other 5 creditors wanted to put a lot more debt on this 6 company. And we did not believe that the 7 company should be saddled with a bunch of debt 8 in the current environment coming out. So this 9 company is going to be adequately capitalized 10 out of the gate. You're going to have roughly 11 45 million of excess availability on Trop 12 Entertainment. You have 54 million of cash in 13 Atlantic City. And, you know, we're going to 14 have nine casinos all told, and we're going to 15 evaluate capital projects across the portfolio. 16 If we need to go outside for additional 17 capital, this will be a public company. It 18 will have access to the public capital markets. 19 It will have access to the bank market. And 20 relative to the other casino companies that are 21 all pretty heavily levered right now, you're 22 going to have a company with $150 million of 23 debt and roughly, you know, a $120 million of 24 cash flow. So when you think about some of the 25 other companies in Atlantic City, they are 53 Shea 1 levered at eight, nine, and ten times debt to 2 EBITDA, where we're going to be levered at, you 3 know, less than two times. 4 VICE CHAIR EPPS: Well, along that line, 5 coming out with the relatively lien balance 6 sheet, do you -- is that a good time to try to 7 put yourselves in a better competitive 8 advantage with respect to whatever you might 9 need to do to compete or to take a step up as 10 one of one of the driving forces in the market? 11 Or do you just remain status quo and take your 12 place in line? How do you project that going 13 forward? 14 THE WITNESS: I mean, look. I don't 15 think the economy's out of the woods yet. And 16 I don't -- I don't give a lot of credence to 17 the green shoots that people think are out 18 there. And so I think our position is going to 19 be relatively conservative for a while until 20 you get a better indication this economy has 21 really recovered. I think the unemployment 22 rate continues to go up. You know, housing is 23 still a major problem, and the consumers are 24 fundamentally broke. So I don't think you want 25 to go out over your skis in terms of the 54 Shea 1 current environment. 2 CHAIR KASSEKERT: Commissioner 3 Sommeling? 4 COMMISSIONER SOMMELING: What would be 5 the debt -- or what is the debt-to-equity ratio 6 for Tropicana Atlantic City by itself? What 7 would be the debt-to-equity ratio if Tropicana 8 became part of the entire company again? And 9 what would be the debt-to-equity ratio for the 10 company that is not -- the other companies that 11 are not part of Tropicana AC at this point? 12 THE WITNESS: Sure. I'd have to -- I'd 13 have to look at a current balance sheet to 14 calculate debt to equity because my brain's 15 kind of wired towards debt to EBITDA. In -- 16 you know, in my business, it's how much debt 17 can you put against how much cash flow? 18 Because equity is really an accounting -- it's 19 assets minus liabilities. But what does a 20 business generate in cash flow? So in terms of 21 debt to EBITDA, what I think about, you know, 22 again, you're going to have $150 million of 23 debt on Trop Entertainment, and Trop 24 Entertainment excluding Atlantic City has about 25 75 million EBITDA. So that's over two times. 55 Shea 1 75, $80 million of EBITDA. For the trailing 2 12-month period ended December of '08, Trop AC 3 had 55 million of EBITDA, and other than trade 4 payables, they didn't have any external debts. 5 So, I mean, I'd have to defer to Mark 6 Giannantonio on the current kind of working 7 capital debt position of Trop AC. But I think 8 about -- I think about Entertainment being 9 levered at two times. And I think when you put 10 Entertainment and AC back together again, 11 you're levered at less than two times. You're 12 going to have $150 million of debt against, 13 essentially, 120 million of EBITDA. 14 COMMISSIONER SOMMELING: That's all. 15 CHAIR KASSEKERT: Anything on redirect? 16 MR. BROOKS: No, Madame Chair. 17 CHAIR KASSEKERT: Recross? 18 MR. ADAMS: No further questions, Madame 19 Chair. 20 CHAIR KASSEKERT: You may step down. 21 Thank you. 22 Call your next witness. 23 MR. BROOKS: Thank you, Madame Chair. 24 Call Mark Giannantonio. 25 CHAIR KASSEKERT: Mr. Nance? 56 Giannantonio - direct - Brooks 1 2 MARK GIANNANTONIO, having been first 3 duly sworn to tell the truth, testified as 4 follows: 5 6 MR. NANCE: Please state your name for 7 the record. 8 THE WITNESS: Mark Giannantonio. 9 MR. NANCE: Spell your last name for the 10 record. 11 THE WITNESS: It's 12 G-i-a-n-n-a-n-t-o-n-i-o. 13 MR. NANCE: Thank you very much. 14 CHAIR KASSEKERT: You may proceed. 15 MR. BROOKS: Thank you, Madame Chair. 16 17 DIRECT EXAMINATION BY MR. BROOKS: 18 Q. Mr. Giannantonio, by whom are you 19 employed and in what capacity? 20 A. I am the President and Chief Operating 21 Officer of Tropicana Atlantic City. 22 Q. For purposes of the record, would you 23 provide us with the benefit of your professional 24 background. 25 A. Sure. For -- since August 2007, I've 57 Giannantonio - direct - Brooks 1 been the President and Chief Operating Officer here in 2 Atlantic City. Prior to that, from January 2007 3 through August, I was Executive Vice President of 4 Operations for a resort here in AC. And from about 5 2000 through January 2007, I was Vice President of 6 Hotel Operations and Marketing Administration. Prior 7 to that -- I've been employed at the Trop for about 8 20-plus years. Prior to that, I've had various 9 positions within the company from Senior Financial 10 Analyst to Executive Director of Casino Service and 11 Marketing and so forth. 12 Q. Have you had an opportunity at this 13 point to meet with the lenders, the lending group, or 14 the group, the new equity in connection with Tropicana 15 Atlantic City? 16 A. Sure. Yes, I have. I guess some weeks 17 back I, myself, and a few members of my team made a 18 trip up to New York, and we met with the senior 19 lenders. We did a pretty comprehensive overview of 20 our operations here in Atlantic City from, you know, 21 some previous run rates to our current status, to some 22 forecasts, as well as management structure, some of 23 the marketing initiatives and business initiatives 24 that we were working on to continue to try move the 25 needle here in Atlantic City. 58 Giannantonio - direct - Brooks 1 Q. Are you generally familiar with the 2 lenders in terms of who they represent? 3 A. I am. Yes. 4 Q. Do you have any particular -- do you see 5 any particular advantage with respect to this lending 6 group, in particular Icahn? 7 A. I do. You know, for one, clearly the 8 Icahn group and Carl Icahn has gaming experience both 9 in Nevada and New Jersey, and I think that's a real 10 positive as we move forward. 11 Q. Do you have any view as to how stable 12 ownership will impact Tropicana in terms of its 13 continued performance in the marketplace? 14 A. Sure. You know, we -- as everyone knows 15 here in the room, we've been operating as a 16 stand-alone for quite some -- you know, 18 months or 17 so. And I -- you know, I think after a short period 18 of time, we've been able to stabilize and to be very 19 competitive. But I think sound corporate backing 20 really helps you to move the needle even more. So I'm 21 pretty convinced that, you know, having ownership is 22 going to be a positive as we merge out of bankruptcy 23 with ownership. Clearly, it's going to be a positive. 24 You know, for example, this past weekend 25 we had a very high-end party at the Trop, and the buzz 59 Giannantonio - direct - Brooks 1 is already happening with our customers about emerging 2 from bankruptcy and Carl Icahn and, frankly, it's very 3 positive, and I feel the same way with regard to our 4 employees. 5 Q. Do you see any advantage for Tropicana 6 Atlantic City if it was permitted to be part of the 7 ownership structure of reorganized Tropicana 8 Entertainment? 9 A. I do. I think there's many advantages. 10 Without a doubt. Yes. 11 Q. Could you talk about some of those for 12 us? 13 A. Sure. You know, certainly coming out of 14 the gate with, you know, a clean balance sheet, with a 15 strong, sound, corporate company that's above us in 16 addition with regard to having many, many 17 opportunities for synergies within an organization, so 18 the parent company -- we're part of nine properties. 19 There's a lot of synergies from marketing and 20 database. We immediately can, you know, cross-market 21 our properties, have one card, one player's card. 22 There are economies of scale that will help, you know, 23 run our properties more efficiently. For example, 24 when you're looking to purchase big-ticket items such 25 as health care, you know, we're doing that across the 60 Giannantonio - direct - Brooks 1 brand. You're able to pick up some efficiencies and 2 purchasing power. So there are a lot of benefits. 3 Q. Do you -- how about -- or what impact do 4 you think it could have in terms of the synergies when 5 it comes to financing or capital improvements? 6 A. Well, again, I think coming out of the 7 gates with a clean balance sheet, they'll be more 8 access to capital. Better access to capital. 9 Q. And that's just in terms of financing, 10 capital improvements, or anything that you're talking 11 about in terms of from the property? 12 A. Well, you know, clearly, you know, the 13 property in Atlantic City -- I think it's been written 14 about the perfect storm in Atlantic City where, you 15 know, you read about three elements of it. You read 16 about regional competition, the market meltdown, and 17 the Yung era. But what you don't really read about is 18 the three properties in town, the heavyweights, that 19 have added major capitalization projects over the last 20 year, and that certainly has helped those properties. 21 You know, clearly, with a clean balance sheet, we're 22 able to reinvest in our property with smart growth 23 capital projects that will help us be competitive. 24 MR. BROOKS: I have nothing further, 25 Madame Chair. 61 Giannantonio 1 CHAIR KASSEKERT: Mr. Adams? 2 MR. ADAMS: I have no questions. 3 CHAIR KASSEKERT: Questions from the 4 Commissioners? 5 VICE CHAIR EPPS: I don't have anything. 6 CHAIR KASSEKERT: I guess I just have 7 one question. 8 You lived through -- and maybe this will 9 sound a bit rhetorical. But you lived through 10 the Columbia Sussex era. You've lived through 11 the conservatorship with Justice Stein. You've 12 lived -- you're now, you know, hopefully in the 13 future will be living through a new management 14 structure. Given what you've experienced under 15 the Columbia Sussex regime, what 16 recommendations would you make to Mr. Icahn 17 about moving forward with this property? 18 THE WITNESS: Well, I get the sense that 19 he views things a little differently. You 20 know, I certainly get the fact that Bill Yung, 21 you know, was over leveraged and so forth and 22 had immediate challenges financially. I don't 23 get a sense with the Icahn folks that, you 24 know -- we're going to try to drive top-line 25 revenue and try to do things smart and 62 Giannantonio 1 effectively. And having lived through a lot of 2 these experiences, I'm pretty convinced that 3 this is a good fit for us. It's a good fit at 4 the right time. 5 CHAIR KASSEKERT: How about with respect 6 to the management of the property itself? 7 THE WITNESS: Well, I clearly, you 8 know -- and I certainly would like to 9 absolutely say one of the greatest assets of 10 our property is the 3400 employees that we 11 have. They are highly skill, very 12 professional. You probably won't find a 13 greater group of employees in Atlantic City, 14 bar none. I think the management team at the 15 Trop has been diligent and dedicated, loyal. 16 And, you know, really has made every effort to 17 make Tropicana Atlantic City successful. They 18 have supported their employees. They've 19 supported each other in this endeavor. And 20 certainly, you know, in supporting employees, 21 that means we're supporting the customer as 22 well. You know, we're a fiercely competitive 23 group. And I think that, you know, it's a good 24 fit. I'd like to think that right now this is 25 a good recipe for success. 63 Giannantonio 1 CHAIR KASSEKERT: Commissioner Epps? 2 VICE CHAIR EPPS: In the time that you 3 have been stand-alone, as we've used that term, 4 have you maintained market share? 5 THE WITNESS: We have. Yes. You know, 6 just to give a little brief history, coming out 7 of the gates, once the license was lost, we 8 immediately repaired some of the service issues 9 that we had. We added about 260 people back to 10 the organization. Within six weeks every union 11 issue that we had -- and there were some, you 12 know, and I credit our team -- every union 13 issue was resolved. And we launched a big 14 campaign that really put us back in the game. 15 And I think some of you are aware of that 16 campaign. It was called "Experience the 17 Difference." We spent a lot of money, but it 18 was necessary because we had such brand -- an 19 image -- a bad image. And in doing so, not 20 only did we maintain market share, we grew 21 market share. 22 Right -- and last summer we had a 23 terrific summer. We exceeded both months. 24 July and August of '08, we exceeded our 25 forecasts of both revenues and EBITDA. And 64 Giannantonio 1 then, of course, the market meltdown occurred 2 coupled with -- and I'd like to say the 3 additional expansions around town. 4 But, you know, I think we're now 5 getting, you know, back on track. We've 6 survived a very difficult period of time. As I 7 think Ken mentioned we have, you know, over $50 8 million in the bank. And we started -- we had 9 900,000. So, you know, we're truly dedicated 10 to the success of this property. And I 11 certainly am dedicated to the success of this 12 conglomerate work. I think it will be good for 13 Atlantic City. I think Carl Icahn and the 14 lenders are committed, appears they are 15 committed. Pretty convinced from what I hear. 16 So I'm pretty excited about this. 17 VICE CHAIR EPPS: Coming out of a 18 bankruptcy with an owner, getting that cloud -- 19 the title bankruptcy and everything off of you, 20 coming out from under that cloud, how do you 21 think that positions you going forward with 22 respect to this town and market share and 23 driving your product? Does it -- 24 THE WITNESS: Well, I mean -- 25 VICE CHAIR EPPS: Does it matter, I 65 Giannantonio 1 guess? 2 THE WITNESS: Well, I think that we all 3 know what that property can do. You know, I 4 really feel like we're getting our legs. You 5 know, we're hurt by the economy. People -- the 6 same people that were coming last year are 7 spending about 15 percent less. So as the 8 economy bounces back, if nothing else changes, 9 maybe they'll spent only six percent less. 10 Maybe we'll start to get some growth in their 11 spending. But I agree with Ken. I don't think 12 we're out of the woods, and I think that, you 13 know, we're diligent. We have to be very 14 prudent on how we spend our money. We can't 15 forget about the core elements of what running 16 a good gaming company is all about. You know, 17 it's our dedication to our employees. And, 18 again, I think they are pretty charged up about 19 us coming out of bankruptcy. I think there's 20 certainly confusion with us being in 21 bankruptcy, both Trop Entertainment and us 22 being in bankruptcy at different periods of 23 time. It has been confusing to customers. 24 And, you know, it's music to my ear, the fact 25 that we'll eventually be out of bankruptcy. 66 Giannantonio 1 It's something we can put behind us and grow. 2 CHAIR KASSEKERT: Yeah. Commissioner 3 Sommeling? 4 COMMISSIONER SOMMELING: Mark, 5 obviously, you are -- you approve of the 6 reorganizational structure that has emerged as 7 being proposed for Atlantic City as well as the 8 other Trop properties that currently exist. 9 And I guess my question to you is, do you feel 10 comfortable with that arrangement, the way the 11 organization has been proposed to you after 12 your meeting in New York? 13 THE WITNESS: I do. I mean, it only 14 makes sense if the lenders of both entities, 15 you're going to have some -- there's big 16 advantages of having it all in one -- one 17 corporation. Clearly, one of the benefits will 18 be the fact that they'll be, as I mentioned, 19 you know, economies of scale and purchasing 20 benefits. They'll also be, you know, Trop AC 21 having the ability to send one of our premium 22 customers to Lake Tahoe for a ski vacation. 23 We'll reciprocal. Someone from Evansville 24 coming to Atlantic City. And almost emulating 25 the Harrah's model with Total Rewards. Trop 67 Giannantonio 1 can ultimately move to having a one card type 2 of a database. And above all, you know, 3 immediately we're in the benefit of having a 4 larger database, so whatever our database is 5 right now, once we merge, we feel we'll be able 6 to market to the total database. I think it's 7 all very good, and I do support it. 8 COMMISSIONER SOMMELING: In reference to 9 the Tropicana as it undergoes its new 10 reorganization and operation in the future, do 11 you see any difficulty in conforming in the new 12 Tropicana plan with any of the regulatory 13 concerns or requirements such as the audit 14 committee? 15 THE WITNESS: Commissioner, I do not. 16 You know, as far as Atlantic City goes, the 17 executive team there, the management staff are 18 very skilled. They're very dedicated. And as 19 we've been operating our last 18 months or so 20 without ownership, you know, we will -- we will 21 conform to whatever -- you know, certainly in 22 Atlantic City we'll conform to what we, you 23 know, are conforming to right now. So I think 24 it will be an easy adaptation. Things have -- 25 you know, I hear a lot of people say, you know, 68 Giannantonio 1 how difficult things are. It's been fairly 2 smooth sailing, and I think that's what happens 3 when you do things correctly. You know, it's 4 not as -- 5 COMMISSIONER SOMMELING: Just one last 6 question. Commissioner Epps had just touched 7 on it a little bit, about Capex. Have you 8 decided -- I don't think -- I wouldn't think 9 you'd decided at this point, but I'm assuming 10 that Tropicana will continue to improve itself. 11 It's always been a competitive property to my 12 recollection. 13 THE WITNESS: Yes. 14 COMMISSIONER SOMMELING: And I assume 15 there's been some talk about what might 16 transpire in the future for Tropicana. Can you 17 enlighten us at all on that? 18 THE WITNESS: Yeah. I -- you know, over 19 the last 18 months, we've been spending our 20 reasonable share of dollars on maintenance 21 capital and certainly have done some small 22 capital projects, small growth capital 23 projects, I'll call them. But we have a list 24 of projects, as Mr. Shea had mentioned, that we 25 think could move the needle here in Atlantic 69 Intrieri - direct - Brooks 1 City. And I think, given the right analysis 2 and the right time frame, I think we'll -- 3 we'll take the property to the next level. 4 COMMISSIONER SOMMELING: That's all, 5 Madame Chair. 6 CHAIR KASSEKERT: Thank you. 7 Anything on redirect? 8 MR. BROOKS: No, Madame Chair. 9 CHAIR KASSEKERT: Anything on recross? 10 MR. ADAMS: No questions. 11 CHAIR KASSEKERT: You may step down. 12 Thank you. 13 You can call your next witness. 14 MR. BROOKS: Thank you, Madame Chair. 15 Call Vincent Intrieri. 16 CHAIR KASSEKERT: Mr. Nance? 17 MR. NANCE: Would you raise hand, 18 please? 19 20 VINCENT INTRIERI, having been first duly 21 sworn to tell the truth, testified as follows: 22 23 MR. NANCE: Please state your name for 24 the record. 25 THE WITNESS: Vincent Intrieri, 70 Intrieri - direct - Brooks 1 I-n-t-r-i-e-r-i. 2 MR. NANCE: Thank you. 3 CHAIR KASSEKERT: Thank you. You may 4 proceed. 5 THE WITNESS: Thank you. 6 MR. BROOKS: Thank you, Madame Chair. 7 8 DIRECT EXAMINATION BY MR. BROOKS: 9 Q. Mr. Intrieri, by whom are you currently 10 employed? 11 A. I'm a Senior Managing Director at Icahn 12 Enterprises. 13 Q. And could you tell us a little bit about 14 Icahn Enterprises? Give us some background. 15 A. Icahn Enterprises is a public company. 16 We have a hedge fund. We have a variety of other 17 businesses, manufacturing businesses, rail car 18 business. We have a scrap steel business. We have a 19 big interest in a sausage casing business. We have an 20 XO Communications. Number of businesses. Previously 21 we owned oil and gas companies, and we owned Icahn 22 Gaming, which consisted of three casinos in Las Vegas, 23 more -- two local casinos, and one the Stratosphere, 24 you've probably see on TV all the time, the largest 25 building out there. And we own the Sands Casino at 71 Intrieri - direct - Brooks 1 one time. I think 2001 through 2004. 2 Q. When you owned the Sands, I assume Icahn 3 Enterprises was licensed in connection with the 4 ownership of the Sands? 5 A. Yes. 6 Q. Now, we've heard a little bit of talk 7 today about the credit facility that previously 8 Tropicana Enterprises [sic] or Tropicana Enterprise's 9 utilized to acquire the Aztar assets. Are you 10 familiar with that credit facility? 11 A. Yes, I am. 12 Q. And Icahn, it would be safe to say, owns 13 a significant percentage of that credit facility? 14 A. Yes. We own in excess of 40 percent of 15 the credit facility. 16 Q. Are you familiar with a steering 17 committee formed by the lenders in connection with 18 that credit facility? 19 A. Yes. 20 Q. Is Icahn a member of the steering 21 committee? 22 A. Yes. 23 Q. Have you been authorized to make 24 representations here before the Commission on behalf 25 of the steering committee? 72 Intrieri - direct - Brooks 1 A. Yes, I have. 2 Q. Now, you've heard us talk about a couple 3 of potential ownership structures for Tropicana 4 Atlantic City in connection with the successful credit 5 bid. On behalf of the Steering Committee, could you 6 make a -- could you represent to the Commission here 7 today what the Steering Committee's preference is in 8 terms the potential ownership structure for the buyer 9 of Tropicana Atlantic City? 10 A. Yes. Obviously, we defer to the 11 Commission to whatever structure it deems appropriate. 12 But if the Steering Committee had -- had its druthers, 13 we think that the structure where the Tropicana 14 overall entity and Tropicana Atlantic City are pulled 15 together is the most efficient structure that can be 16 put together, for a variety of reasons that I think 17 Mark Giannantonio has testified to and Ken Shea. 18 From my perspective, there's three or 19 four critical elements that I'd like to address a 20 couple of questions that were asked earlier to Mr. 21 Shea and Mr. Giannantonio. Number one, synergies from 22 putting the two together are, we think, tremendous 23 from the perspective of purchasing, marketing, a 24 variety of accounting types of issues. Auditors, 25 lawyers, the costs and expenses that would be saved 73 Intrieri - direct - Brooks 1 together are -- will be immense. That's number one. 2 Number two, from a marketing 3 perspective, I think Mr. Giannantonio talked about 4 being able to cross-market properties. You know, 5 being able to have Trop AC type of gamers be able to 6 win or get a trip out to Tahoe during the winter to go 7 skiing and do things like that is a great benefit to 8 Atlantic City. And, conversely, to the other 9 properties, it's a great benefit to be able at a local 10 casino in Louisiana or Indiana or out in Ari -- Nevada 11 to be able to say, you know, we can send you to the 12 East Coast to Atlantic City and, you know, you can 13 enjoy the beach and other opportunities here. So 14 that's number two. 15 Number three, I'm not sure, Madame 16 Chair, who the question was asked of, but talked about 17 back office. Personally, I think the back office, the 18 way it was done here is -- in my opinion. This is 19 just speaking for me personally, not for the Icahn 20 organization -- was insane. To put back office at a 21 location in Kentucky -- I'm not even sure how that 22 saved money, but maybe it did. My idea of that would 23 be that the properties all work together to save 24 money, and they do it collegiately, and I think that 25 can be done very easily here. What we add from the 74 Intrieri - direct - Brooks 1 Icahn organization is, you know, we have a lot of 2 companies within our umbrella, and we have people at 3 the corporate office that are experts in purchasing, 4 and they're able to put all of the companies together 5 from a purchasing perspective and try to get savings 6 that way. And those savings go directly to the 7 companies that do the purchasing. 8 Insurance. We have insurance experts up 9 in New York that put all these companies together. 10 And I mean in this day and age, when -- I mean, 11 insurance is an arcane type of product, anyway. No 12 one really understands it. But people know they need 13 it when they get on a board they want D & O insurance. 14 And do you know what you're paying for it? No. But I 15 know I want it. 16 (Laughter.) 17 A. And so, you know, we put our groups 18 together, and we -- we have purchasing power to be 19 able to save all of the companies a lot of money by 20 doing that. Medical insurance is the same thing. I 21 mean, if you put together a bunch of groups, you can 22 get better coverage and cheaper costs. And we can -- 23 you know, it can be helpful to all of the different 24 companies that are involved. 25 The fourth thing. That was the third 75 Intrieri - direct - Brooks 1 thing. The fourth thing with respect to putting them 2 together, if they're put together, then from the 3 perspective -- I think someone mentioned earlier in 4 the day about stock options, the seven percent that's 5 reserved. If these companies are put together, it 6 will be a much broader -- it will have a -- the 7 company will have a bigger breadth and depth. And 8 those options will be able to be utilized by the 9 company to drive performance and make sure that the 10 organization is incentivized [sic] to perform well. 11 So, hopefully, I didn't get too long 12 winded there. 13 Q. No. Perfect. Thank you, Mr. Intrieri. 14 I want to turn your attention, if I 15 could -- or let me finish up with one thing. 16 So it would be save to say that the 17 preference of the Steering Committee is for the 18 Tropicana Atlantic City to be part of the ownership 19 structure of reorganized Tropicana Entertainment; is 20 that correct? 21 A. That's the preference. 22 Q. Let me talk a little bit about the board 23 of directors at the reorganized Tropicana 24 Entertainment. Were you involved or the Steering 25 Committee involved at all with respect to selecting 76 Intrieri - direct - Brooks 1 the directors? 2 A. Yes. 3 Q. Could you describe that process for the 4 Commission. 5 A. Yes. The Steering Committee formed a 6 smaller steering committee within the Steering 7 Committee that was comprised of myself, and I think 8 two other people from the committee. Everyone from 9 the Steering Committee put forward names. We got 10 names from the investment banker that was involved. 11 Q. Lazard? 12 A. No, it wasn't Lazard. It was the one 13 from the creditors. I can't remember their name right 14 now. I try to forget about them. 15 (Laughter.) 16 A. Anyway, they gave names. There was a 17 list of about 10 or 12 people in addition to the 18 current board that was there. We interviewed those 19 people. Two of the seats were decided upon. Since we 20 had a such a big ownership position, two of the 21 people, Mr. Icahn, and Hunter, Hunter Gary, as 22 previous Ken were -- I'll talk about that if asked. 23 The two of those were determined they were going to be 24 on that board because of the ownership interest. Then 25 Scott Butera, who the current CEO, was on the board, 77 Intrieri - direct - Brooks 1 and he would remain. And we interviewed -- I think 2 there were three or four other people on the current 3 board. We interviewed those people and decided 4 collectively that Michael Corrigan. You know, quite 5 frankly, we were a little new to the game. Some of 6 the other committee members had been in the process 7 for a long time. But we had no idea -- at least I 8 didn't. I mean, the lawyers told us that none of 9 these guys were involved with Yung and things like 10 that. But I didn't do my own investigation. 11 Corrigan, we kind of did. And, you 12 know, we found that he was clean, from our 13 perspective. No -- not involved with Yung at all. 14 And I'm told all the other guys were not involved with 15 Yung, either. But, you know, we just decided rather 16 than go through -- we just wanted one of those guys. 17 Then there were three or four other guys 18 that came on to the board. Christenson, I think, is 19 the senior guy at Stations, kind of understands this 20 business, you know. We have a lot of -- you know, he 21 had local casinos at Stations. Ours are not 22 necessarily so much local casinos as regional casinos 23 in the Midwest. But, you know, he understands it. We 24 think he's a great addition to the board. 25 Stephen Deckoff. He was the -- he's the 78 Intrieri - direct - Brooks 1 managing member of a company by the name of Black 2 Diamond. It's a hedge fund that was involved with the 3 Steering Committee from day one. He stepped up and 4 wanted to be involved and agreed to come before the 5 Commission and get authorized and so forth. 6 And Jim Nelson was another party. Jim 7 is a board member of Icahn Enterprises, had previously 8 been on the board of Icahn Gaming, was licensed here 9 in Atlantic City and also in Nevada. 10 At first, some of the other guys on the 11 Steering Committee were a little skeptical because 12 they felt that that would now be three Icahn members. 13 But I think Jim was able to convince -- convince the 14 guys that he would be a valuable addition and was, in 15 fact, an independent. Because he is an independent 16 member of the Icahn Enterprises board. 17 Q. Thank you, Mr. Intrieri. 18 MR. BROOKS: Just for the purposes of 19 the record, that the exhibit we've been 20 referring to P-5, and that's Exhibit J to P-5 21 in terms of the list of directors. And there's 22 an additional submission with respect to Mr. 23 Gary. 24 Q. Mr. Intrieri, let me turn your 25 attention, if I could, to the litigation trust. You 79 Intrieri - direct - Brooks 1 heard a little bit of talk about the litigation trust 2 earlier today. Is there a committee in connection 3 with the litigation trust? 4 A. Yes, there is. 5 Q. And could you tell us a little bit about 6 that committee? 7 A. Yeah. As part of the negotiations, 8 obviously, Ken talked about where this bank debt is 9 trading. So if you figure a-billion-four worth of 10 bank debt, and I'll just round it, trading at a 11 quarter, you got about $950 million worth of discount 12 that the bank debt lenders are taking on their claim 13 if you look at today's current market value. So it 14 was determined early on, even before we showed up, 15 that there was significant litigation against Yung and 16 his team, the damage they did here. Now, I don't know 17 factually if that's true or not. It sure looks that 18 way to me. But, you know, so this -- this committee 19 was formed. The committee is comprised of three 20 people from the Steering Committee. Schultze, George 21 Schultze, was a member of the Steering Committee and 22 two members of my team, Steve Mongillo and Sung Cho. 23 And then we have one nonvoting member. I think it's 24 from the bondholder committee or creditors committee. 25 So I can assure you, I heard talk earlier today about 80 Intrieri - direct - Brooks 1 whether there will be deals made, and I heard talk 2 about levels of funding. I'll make a couple of 3 corrections. I'll make one correction, and I'll give 4 some assurance to the Commission on another question. 5 So, number one, I think the first 6 witness -- 7 Q. Mr. Kieselstein? 8 A. Mr. Kieselstein. Mr. Kieselstein 9 testified that the trust has two-and-a-half million 10 dollars from the company. In fact, I think Mr. 11 Kieselstein was wishful thinking. 12 (Laughter.) 13 A. He was trying to calculate his backlog 14 or something in terms of legal fees going forward. 15 What's actually been agreed to is 16 $300,000 is the initial funding. And the way we look 17 at it is, this could be a tremendous source of 18 recovery for the bank debt holders. And potentially 19 even to the bond holders to the extent that I think 20 they share -- I think it's 90/10, something like that. 21 You know, the bank -- the bank lenders get 90 or 80 22 percent of the recovery. The bondholders get 10 or 20 23 percent of any recoveries. So the way we like to do 24 things is, we think we'll be able to find a hungry 25 counsel who will take the case on a contingency basis. 81 Intrieri - cross - Adams 1 300,000 is -- is being lent to the trust for expenses 2 for experts and other things. And to the extent they 3 start running low on funds there, they'll come back to 4 the committee. And the committee will come back to 5 the company and tell us, listen, we have a really good 6 case here. We've spend a few hundred thousand 7 dollars. We got a really good case, and we need some 8 more funding. We have to have our head examined if we 9 didn't give the additional funding because we're the 10 beneficiaries of that. So that's kind of a correction 11 of the two-and-a-half million dollars that was talked 12 about earlier. 13 The other clarification is that I can 14 assure this Commission that there are going to be no 15 deals from now on. No deals from the perspective -- 16 no deals other than where the company and the 17 bondholder and the bank would get a lot of money. 18 That's the kind of settlement I'm talking about. So 19 I'm not sure if that clarifies the question, Madame 20 Chair, from previous. 21 MR. BROOKS: I have nothing further, 22 Madame Chair. 23 CHAIR KASSEKERT: Mr. Adams? 24 CROSS-EXAMINATION BY MR. ADAMS: 25 Q. I just have a couple of questions. 82 Intrieri - cross - Adams 1 Picking up on what you just said about 2 the litigation trust, is it your testimony that there 3 is a cap on money that would be supplied? Or is 4 there -- just this process you just described/. They 5 can come back, and if they demonstrate to you that it 6 looks like it's worthwhile going forward, then we'll 7 go forward? 8 A. My understanding is the initial 9 contribution, the initial loan is $300,000. I don't 10 believe there's any cap. 11 Q. Okay. 12 A. And when they run through that, they'll 13 come back to the company and, ultimately, they're 14 going to be three -- three members of this 15 subcommittee of the trust committee. 16 Q. Right. 17 A. Two of which are employees of ours. 18 Q. Right. 19 A. Who going to say, hey, it makes a lot of 20 sense. We need to put a little bit more money in here 21 so. 22 Q. But whatever monies are advanced, as you 23 just described in that manner, they, in effect, would 24 be paid back, assuming there's a recovery first? 25 A. That's -- that's correct. However, you 83 Intrieri - cross - Adams 1 got to make sure that the -- 2 Q. Right. 3 A. -- the lawyers are not just off on a 4 wild goose chase, and they really have a real good 5 case and not just wasting money. 6 Q. Correct. 7 You had mentioned -- 8 THE WITNESS: These lawyers hate to hear 9 me talk this way. 10 (Laughter.) 11 MR. ADAMS: I'm a government lawyer. 12 Don't worry about a thing. 13 CHAIR KASSEKERT: Yeah. Right. 14 (Laughter.) 15 MR. ADAMS: I don't get any percentages. 16 Q. But you had mentioned that -- I thought 17 you had mentioned that the -- there was a -- the Icahn 18 companies or group have approximately 40 percent now 19 of the old secured debt; is that correct? 20 A. Little over 40. 21 Q. Little over 40 percent? 22 A. Yes. Yes. 23 Q. Do you know what the next largest 24 percentage is of anybody? 25 A. Probably around five percent or below. 84 Intrieri - cross - Adams 1 Q. Probably below five percent? I know we 2 have the pie chart. 3 A. Yeah. 4 Q. But I'm just asking you. 5 A. I think it's a little -- I had heard 6 that maybe one guy had gone over five, but was told 7 that he had to come before the Commission. 8 CHAIR KASSEKERT: It scared him to 9 death; right? 10 (Laughter.) 11 A. Decided to sell down below five. 12 MR. ADAMS: I have nothing further, 13 Chair. 14 CHAIR KASSEKERT: Thank you. 15 Questions from Commissioners? 16 COMMISSIONER SOMMELING: No questions, 17 Madame Chair. 18 VICE CHAIR EPPS: I just have one 19 question. 20 We were going over the board, and you 21 had on Mr. Deckoff -- Mr. Deckoff works with 22 Black Diamond -- Black -- 23 THE WITNESS: Black Diamond. 24 VICE CHAIR EPPS: Black Diamond. 25 THE WITNESS: Yes. 85 Intrieri 1 VICE CHAIR EPPS: Black Diamond is 2 probably one of those hotels in the area of 3 four percent. 4 THE WITNESS: Yes. 5 VICE CHAIR EPPS: Just for the record, 6 can we clarify that Deckoff's seat on the board 7 has nothing to do with -- -is it fair to say it 8 has nothing to do with Black Diamond's 9 percentage of ownership? Or does it? 10 THE WITNESS: No. It doesn't. In terms 11 of the way I think Mr. Deckoff came on to the 12 board was, there was another party -- I think 13 it was called Silver Point -- who was the 14 second largest. I think they were in the 10, 15 15, 20 -- whatever percentage range they were. 16 They were going to come on board as a very 17 large holder, but they decided not to because 18 they were going to sell down. And it wasn't 19 clear whether or not they wanted to be 20 qualified, and so they suggested Mr. Deckoff. 21 So I don't know if I'm answering your -- 22 VICE CHAIR EPPS: I mean, I guess my 23 question is, is Deckoff there because of his 24 independent status as a person who makes sense 25 to be on the board? Or is he on the board 86 Intrieri 1 because of his affiliation with Black Diamond? 2 THE WITNESS: Probably both. I mean, 3 obviously, we think he's independent. And I 4 think some of the other -- some of the other 5 committee members, you know, wanted to make 6 sure that, you know, as I said, that they were 7 worried that three of the seven members were -- 8 quote -- Icahn designees. So they wanted to 9 make sure -- it was kind of a compromise, you 10 know. The whole thing of getting these guys on 11 the board was a little bit of a compromise 12 amongst the committee members. But, you know, 13 Mr. Deckoff is highly qualified, understands 14 finance, understands the gaming business 15 because he's lent into the gaming business, and 16 so we were very happy -- pleased to have him 17 join our board. 18 VICE CHAIR EPPS: Now Black Diamond's, 19 let's say, sells down and falls lower in the 20 pecking order, does that compromise Deckoff's 21 seat? 22 THE WITNESS: I don't think so, no. 23 Does it compromise his seat as far as -- as far 24 as -- 25 VICE CHAIR EPPS: Based on -- 87 Intrieri 1 THE WITNESS: -- us taking him off the 2 board? 3 VICE CHAIR EPPS: Right. Because his 4 company -- 5 THE WITNESS: I think he's in there the 6 least two years. My understanding, the way the 7 board works, so long as he's qualified, he's in 8 there for at least two years. And I would 9 imagine if he sells down his position to a 10 point where he doesn't really have an economic 11 interest, he probably won't be interested in 12 staying on, anyway. But if he is, we're very 13 happy with Mr. Deckoff as a board member. 14 One other thing, Madame Chair -- 15 CHAIR KASSEKERT: Uh-hum. 16 THE WITNESS: -- that I wanted to 17 clarify, and I'm not sure who asked the 18 question, but the question had something to do 19 with funding. And, you know what? We touched 20 on it a little. I think Ken touched on it a 21 little bit. But I wanted to kind of add to 22 that because this is a very important point. 23 When we got involved with the Steering 24 Committee, when this thing came out of 25 bankruptcy, this thing was going to be an 88 Intrieri 1 extremely levered company. Okay? And Ken, 2 Carl, and I sat down, and we said, this is 3 ridiculous. You're in the middle of a 4 maelstrom of economic turmoil. To have -- and 5 Atlantic City, I have to tell you, is -- I'm 6 sure I don't have to tell you guys that. 7 Atlantic City is in real bad shape because of 8 all the competition that's coming in from 9 Pennsylvania, Connecticut, New York now, and 10 all these other states. And so to have a 11 company levered up like that, we told -- we 12 told our fellow committee members this is 13 ridiculous. We're not going to -- as a 40 14 percent holder -- and I think at the time we 15 were a 25 percent holder -- we're not going to 16 stand by and vote for this because we think 17 it's ridiculous. And so we were -- we were the 18 guys that kind of pressed to completely 19 de-lever this company. I think even the 20 company had -- had agreed to some of the 21 leverage that these guys wanted. And we told 22 them we wanted out. We want no debt at all. 23 They were going to have this exit facility 24 plus, you know, this additional some debt that 25 was going to go to the bank debt holders. And 89 Intrieri 1 so we were able to convince people that that 2 was ridiculous and got that out. 3 In terms of going forward, and in terms 4 of investments going forward, I think Ken hit 5 it right on the button. I mean, you know, 6 looking at, there's two -- two pieces of the 7 pie. One are the maintenance, making sure that 8 you maintain in perfect order, in good order 9 the property to continue to operate as it is 10 operating today versus add-ons, additional 11 things. And to the extent that the management 12 teams come to the board and convince the board 13 that these -- these make sense, these types of 14 expenditures make sense, they'll get funded. 15 But I can assure you they're not going to get 16 funded with over-leveraged debt. I think 17 what -- you know, our idea right now would be 18 especially -- now, if times get a lot better -- 19 and, obviously, "debt" shouldn't be taken as a 20 four-letter word. Debt is not a bad thing all 21 the time. Debt can be a good thing because it 22 helps the company shield itself from tax and 23 other things. You know, federally, et cetera. 24 And some of those things, putting in a capital 25 structure, that makes sense with a portion of 90 Intrieri 1 debt and a portion of equity is a smart, you 2 know, Wall Street thing that you should do when 3 the times allow it. But right now, my view 4 would be you -- if you saw a good project and 5 you wanted to invest in, and cost a few bucks 6 to do it, there's bank debt holders in there 7 that are investors now. You've raised more 8 money through a rights offering to those guys. 9 And if they want to see the property grow, 10 they'll put it in. If they don't, I'm sure 11 there's a core group amongst the bank lenders 12 who will be more than willing to step up, as we 13 did with the exit facility, to backstop those 14 types of rights offerings. So I'm very 15 confident we'll be able to get good financing 16 in place that won't be burdensome for the 17 properties. 18 CHAIR KASSEKERT: Thank you. 19 Well, Mr. Intrieri, I appreciated your 20 comments with respect to the back-of-the-house 21 issues. Because that was one of my biggest 22 concerns when, you know, the Conservator took 23 over, and we saw what the level of operations 24 were and some of the assistance that we needed 25 to step in and help provide over this long 91 Intrieri 1 haul. So I appreciate your comments with 2 respect to that issue in particular. 3 THE WITNESS: Thank you, Madame Chair. 4 CHAIR KASSEKERT: Yes. 5 COMMISSIONER SOMMELING: Yeah. 6 CHAIR KASSEKERT: Commissioner 7 Sommeling? 8 COMMISSIONER SOMMELING: I just want to 9 ask one question with respect to the 10 reorganization as has been proposed. Has the 11 Icahn group satisfied that that's the way 12 they're going to go? 13 THE WITNESS: Help me with the question 14 a little bit in terms of -- 15 COMMISSIONER SOMMELING: In terms of the 16 reorganization of Tropicana -- 17 THE WITNESS: Yeah. 18 COMMISSIONER SOMMELING: -- the way it's 19 now proposed, which would include, of course, 20 Atlantic City -- 21 THE WITNESS: Well, it's not -- I don't 22 think -- right now, my understanding, it 23 doesn't include -- 24 COMMISSIONER SOMMELING: No. I mean, it 25 doesn't -- 92 Intrieri 1 THE WITNESS: Atlantic City. 2 COMMISSIONER SOMMELING: But if it goes 3 that way. 4 THE WITNESS: If it goes that way. 5 COMMISSIONER SOMMELING: Because they 6 had spoken in those terms. It could go that 7 way. 8 THE WITNESS: Yes. Yes. Okay. 9 COMMISSIONER SOMMELING: Either way, is 10 Icahn satisfied that that's the type of 11 reorganization structure that it wants to do, 12 or does it have plans of its own? 13 THE WITNESS: No. I think we're very 14 supportive of the structure that's been 15 proposed. 16 COMMISSIONER SOMMELING: Okay. 17 CHAIR KASSEKERT: Thank you. 18 Anything else? Commissioner Harrington? 19 COMMISSIONER HARRINGTON: No. 20 CHAIR KASSEKERT: Anything on -- 21 MR. BROOKS: Nothing further, Madame 22 Chair. 23 CHAIR KASSEKERT: Thank you. 24 Mr. Adams? 25 MR. ADAMS: Thank you. 93 1 CHAIR KASSEKERT: Thank you. You may 2 step down. 3 THE WITNESS: Thank you, Madame Chair. 4 CHAIR KASSEKERT: Okay. We'll take a 5 brief break before we hear closing arguments. 6 MR. BROOKS: Thank you, Madame Chair 7 (A recess was taken from 3:47 to 4:25 8 p.m.) 9 CHAIR KASSEKERT: Thank you. Everyone 10 may be seated. We'll go back on the record. 11 I'm assuming, Mr. Brooks, you have 12 completed your witness list? 13 MR. BROOKS: I have, Madame Chair. 14 CHAIR KASSEKERT: Okay. Let me move 15 then to closing statements. 16 Mr. Adams? 17 MR. ADAMS: Yes. Thank you, Chair, 18 Commissioners. 19 As I said at the beginning, a lot of 20 additional evidence has come in on the 21 testimony. We now have what I believe is a 22 pretty thorough and complete picture of what's 23 being proposed and what the Steering Committee 24 and the lenders want to do. 25 I think one thing that comes through, at 94 1 least to me, is that all the evidence indicates 2 that we're essentially at a stage now where 3 we're talking about a new Tropicana as opposed 4 to the old Tropicana. And as we said in our 5 reports, which are in evidence, and I reiterate 6 now, I think enough has been presented overall, 7 all the documentation, all the testimony, to 8 indicate that -- and the lenders obviously have 9 voiced their preference as to what they feel is 10 the way to go. And I think it's now ripe for 11 your ultimate decision, but the Division would 12 not oppose that request. And we don't oppose 13 it for the reasons I think we set forth in our 14 reports, and I think that's been reinforced by 15 a lot of the testimony from some key witnesses 16 today. 17 So on that basis, those are basically my 18 closing remarks and our recommendation. If you 19 have any questions, I'd be happy to answer 20 them. 21 CHAIR KASSEKERT: Thank you. 22 Mr. Brooks? 23 MR. BROOKS: Thank you, Madame Chair. 24 First of all, again, I'd like to thank 25 the Commission for having the special hearing 95 1 today. It was a big benefits to us, and we 2 appreciate you taking the time and giving us 3 the opportunity to present our testimony to you 4 and also our exhibits. We realize it was a 5 lengthy record and we, again, appreciate the 6 time. 7 I'd also like to thank the Commission 8 staff, as usual, for the great job they've done 9 in terms of getting ready for today and getting 10 us to this point in time. Invaluable. And I'd 11 also like to thank the Division of Gaming 12 Enforcement. They've done a lot of work in 13 terms of investigation, and to be in a position 14 to submit the reports that were submitted into 15 evidence, and I -- you know, thank you and 16 thank them. 17 A little -- I was talking with Mr. Adams 18 earlier in the week, and I said -- I asked him, 19 did you get the binders? I wanted to make sure 20 he got the binders. And I said, there's a 21 little test in the binders. There was a little 22 subliminal message. Did you see the subliminal 23 message? Sort of like that old Highlights game 24 when you went to the doctor's office, and find 25 the little thing hidden in the diagram. And 96 1 Mr. Adams had it. He had it right away. "See 2 what's new." The little message in the 3 Tropicana -- underneath the Tropicana sign. 4 "See what's new." And what's new is new 5 owners. We know at this point we're going to 6 have new owners. We are now through the 7 bankruptcy process, and there's going to be new 8 owners, and it's an exciting time in connection 9 with this process. 10 And the only question we have today, 11 that we're trying to wrestle with today is how 12 to structure this. Will it be a stand-alone 13 ownership structure, or will it be a structure 14 where there's an integration with Tropicana 15 Atlantic City and reorganized Tropicana 16 Entertainment? 17 You've heard all the testimony. I don't 18 really have to go over much of that. The cost 19 savings, the business synergies, the witnesses 20 did a terrific job of describing the benefits 21 for the integration, and that would also be the 22 preference for the lender. 23 And I also think that the witnesses did 24 a great job today of trying to address 25 concerns, whether they be the back office 97 1 functions and things along those lines, which 2 were definitely problems. And we heard a lot 3 of testimony about that, and I think Mr. 4 Intrieri summed that up very well in terms of 5 the fact that we know those concerns. Those 6 concerns will be dealt with. They won't be 7 issues if there's an integration here. 8 And, of course, the other concern was 9 the problems with the prior disqualified 10 entities and individuals. And I think the 11 record is clear today that there will not be 12 any involvement. We're going to have new 13 owners, new directors, and new qualified 14 management. 15 So on behalf of the Steering Committee, 16 we would request the relief that's in the 17 amended petition, in particular the ability to 18 have reorganized -- or to have Tropicana 19 Atlantic City to be part of the ownership 20 structure for reorganized Tropicana 21 Entertainment. 22 In connection with that, the only -- 23 we've asked for some other relief with regard 24 to qualification. As Mr. Intrieri mentioned, a 25 Wexford Capital is currently over 5 percent or 98 1 over 5.8 percent as we speak, or at least as 2 far as the latest percentages were concerned. 3 I have spoken with their counsel. I have made 4 them aware of the process, and I have made them 5 aware of the timing, because we all are pushing 6 as hard as possible to get these closed now 7 that we are in the position that we are in. 8 They have informed me that they will sell down 9 below the five percent as opposed to 10 qualifying. They really didn't realize that 11 they were there. There were a couple of funds 12 that they manage. It's a common control 13 situation. 14 So that will leave us with the Icahn 15 Corporation over five percent, and they are in 16 the process of -- I think they've made the 17 filings and will continue to work with staff to 18 complete those filings. We are going to file 19 for all the directors. A lot of the officers 20 are already in. 21 Now, we do have Mr. Deckoff. We have 22 talked about him today. Mr. Deckoff will file 23 as an individual. The question is whether or 24 not Black Diamond has to file given they are a 25 4.4 percent owner. I think Mr. Intrieri's 99 1 testimony was candid. They probably -- Mr. 2 Deckoff probably wouldn't be on the board but 3 for the involvement with Black Diamond, but he 4 was on the board because he was one of the 5 people interviewed and selected based upon his 6 qualifications and what he brought to the table 7 in terms of the independent director, somebody 8 who knows finance, somebody who knows business. 9 So the -- we would -- we would submit that 10 based upon the testimony here today, there's no 11 reason, if we're going to be able to waive less 12 than five percent holders, there's no reason 13 for Black Diamond to have to qualify based 14 simply upon the fact that Mr. Deckoff is going 15 to be on the board. 16 If that changes because of something 17 that happens down the road, then we can deal 18 with it. But that would be our position here 19 today. 20 In terms of the five -- less than five 21 percent, of course, one of the things that goes 22 before that, we've mentioned the fact and 23 you've heard testimony here today, that the 24 reorganized Tropicana Entertainment Company 25 will be issued a 114 -- shares under Section 100 1 1145 of the Bankruptcy Code which makes it 2 essentially a public company in terms that -- 3 with regard to the issuance of those shares. 4 And, also, there's going to be a filing, a form 5 10 filing in connection with the company, so it 6 will be a public reporting company, at the very 7 least. Accordingly, because of that, we would 8 ask for it to be treated as a publicly traded 9 company for purposes of the Casino Control Act 10 and potential qualification waivers, in 11 particular, the owners of less than five 12 percent of the equity securities. 13 Some of the other relief that we have 14 sought in connection with this petition, we 15 talked about the warrants. We have one warrant 16 holder that, if they exercised all their 17 warrants -- which as you heard from Mr. 18 Kieselstein, is unlikely. But if they 19 exercised all their warrants, they would go 20 over five percent. I'll call that 21 CIT/Plainfield. CIT holds those warrants for 22 Plainfield. Both of them are probably 23 institutional investors, so that if we do have 24 a -- if we do have a -- if the Commission rules 25 that the reorganized Tropicana is a publicly 101 1 traded company for purposes of the Act, we 2 would be in a position to do something with 3 Section 85f. 4 As to everyone else who are less than 5 five percent, we would ask for waivers in 6 connection with those warrant holders, largely 7 because of the -- for the same reasons that we 8 were asking for the waivers related to the 9 equity holders of less than five percent. 10 And we -- when we submitted the 11 petition, Madame Chair, we did ask for -- or we 12 did mention, talk about Mr. Yee. Mr. Yee is no 13 longer with the company. So it wouldn't be any 14 submissions from Mr. Yee in connection with the 15 submissions being made to complete the 16 application for qualification or interim 17 authorization. 18 And the other changes, as you've heard 19 today, and it was talked about by Mr. Intrieri, 20 is that Hunter Gary is now a board member as 21 opposed to Mr. Shea. And so we'd be -- I think 22 the submission actually has been made already 23 for Mr. Gary in that regard. 24 We also talked about the litigation 25 trust. We're asking for waivers in connection 102 1 with the litigation trust committee. The 2 litigation trust committee is really only a 3 committee only, as Mr. Intrieri described, 4 their one role would be to be involved with the 5 litigation, evaluate the litigation, and 6 evaluate whatever feedback they're getting from 7 the lawyers in terms of the litigation against 8 Mr. Yung and his entities based upon the fact 9 that there's a belief that there are cause -- 10 valid causes of action that will be pursued, 11 potentially pursued as Mr. Intrieri has 12 described. They don't really have any kind of 13 other role from an ownership or control 14 perspective. They're more of an oversight body 15 in connection with the litigation. Therefore, 16 we would ask for waivers in connection with the 17 members of the litigation trust in terms of 18 having to qualify. 19 And we submitted our -- we've mentioned 20 the corporate governance documents. We've 21 submitted the corporate governance documents 22 for the proposed reorganized Tropicana. And 23 we're well aware of the requirements of the 24 Act, and we will -- we are prepared to make 25 sure all the corporate governance documents 103 1 include all the requirements of the Casino 2 Control Act. 3 I think that's all I have, Madame Chair, 4 in terms of the relief that's being sought. 5 CHAIR KASSEKERT: Thank you. 6 MR. BROOKS: Thank you. 7 CHAIR KASSEKERT: Let me ask if any of 8 the Commissioners have any questions at this 9 point? 10 COMMISSIONER SOMMELING: No questions, 11 Madame Chair. 12 CHAIR KASSEKERT: Okay. 13 COMMISSIONER HARRINGTON: No. 14 CHAIR KASSEKERT: Well, obviously, we 15 had a very lengthy process today with a number 16 of exhibits, 43 I think to be exact, introduced 17 on behalf of your clients, Mr. Brooks, and the 18 Division, so there's a lot of information to go 19 through. I don't think it's necessary to have 20 our hearing tomorrow. We've finished the 21 testimony. And I want the Commissioners to 22 have the opportunity to look at the 23 transcripts, review the testimony, and review 24 the exhibits. So we will cancel tomorrow's 25 meeting and take this matter under advisement 104 1 and announce at some point later the date that 2 we'll render a decision. 3 So thank you for -- for your cooperation 4 today. 5 And that being said, I'll entertain a 6 motion to adjourn. 7 COMMISSIONER SOMMELING: Motion to 8 adjourn. 9 CHAIR KASSEKERT: Second? 10 COMMISSIONER HARRINGTON: Second. 11 VICE CHAIR EPPS: Second. 12 CHAIR KASSEKERT: All those in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: Motion carries. 17 Thank you. 18 MR. BROOKS: Thank you, Madame Chair. 19 MR. ADAMS: Thank you. 20 MR. BROOKS: Thank you, Commissioners. 21 (The Special Meeting was adjourned at 22 4:35 p.m.) 23 24 25 105 1 2 C E R T I F I C A T E 3 4 5 I, DARLENE SILLITOE, a Certified Court 6 Reporter and Notary Public of the State of New 7 Jersey, certify that the foregoing is a true 8 and accurate transcript of the proceedings. 9 10 11 I further certify that I am neither 12 attorney, of counsel for, nor related to or 13 employed by any of the parties to the action; 14 further that I am not a relative or employee of 15 any attorney or counsel employed in this case; 16 nor am I financially interested in the action. 17 18 19 DARLENE SILLITOE CCR 20 License No XI01023 21 22 Dated: July 27, 2009 23 24 25