That’s after the New Jersey Casino Control Commission (CCC) recently voted to find MGM Resorts “suitable” for casino licensing and gave approval for MGM to remove its 50% ownership share of the Borgata casino from the trust which had held it for sale since 2010.
But why would MGM’s reentry into the New Jersey market with a clean bill of health make Amaya happy?
The Commission’s action brought to a close a saga spanning back to the Commission’s last vote on MGM’s suitability in 2005.
A quick recap:
Fast forward to early 2013.
MGM had not only failed to find a potential purchaser for its share of the Borgata, but in February, MGM actually filed an application with the Commission for a review of its suitability.
The filing contended that changed circumstances (notably evidence of a rift between Stanley and Pansy Ho in their business dealings along with a reduction in Pansy’s share of the Macau operation to 27% following an initial public offering in the Asian stock markets) had alleviated the concerns identified by the Commission back in 2009.
MGM also noted that certain executives whom the Commission had felt were not meeting appropriate regulatory standards had departed the company.
The timing of MGM’s application for review of its suitability happened to coincide with two other major events in the New Jersey gaming market:
The timing of MGM’s application seems to have been calculated to take advantage of PokerStars’ then-pending application for a casino license.
Although MGM’s application preceded the industry-driven opposition to PokerStars (highlighted by the AGA’s amicus brief filed a few weeks after MGM’s application), the MGM application probably did more to kill PokerStars’ New Jersey licensing efforts than did the AGA brief or even the accusations lobbed by the Atlantic Club as it used the courts to weasel out of the PokerStars sale.
Up to the point of the MGM application, PokerStars’ licensing process seemed to be going in a positive direction, at least by all public accounts.
The MGM application threw a wrench into the process by highlighting the Commission’s apparent double standard with respect to owners and executives with dubious respect for the law.
To wit: How could PokerStars get a New Jersey license with key executives who were under indictment for violating U.S. gaming and banking laws while MGM was excluded merely for doing business with the daughter of a reputed gangster?
Now, the MGM application almost certainly was filed on its own merits, and not as part of a coordinated attack on PokerStars.
In other words, MGM was likely trying to piggyback on the PokerStars licensing process in order to get a more lenient review from the Commission.
This process is common in regulatory matters, where companies running into regulatory flak will comb through other agency decisions looking for examples of similar actions taken by other companies which have met with regulatory approval.
Although regulators had room to parse differences between the two companies if challenged (the legal standard for review of most agency action is a highly deferential “arbitrary, capricious, or abuse discretion”), as a practical matter the MGM application was a shot across the Commission’s bow, sending a message that MGM’s license should rise or fall on the same standard applied to PokerStars.
Add in the subsequent attacks on PokerStars by the AGA and Atlantic Club, and the resulting decision to put PokerStars’ licensing process “on hold” was hardly a surprise.
Fortunately for both PokerStars and MGM, New Jersey regulators have a fairly consistent method for resolving situations where licensing is jeopardized by having relationships with questionable individuals—marginalize or terminate the relationship.
As DGE director David Rebuck has stated publicly:
More than likely, if we have the ability to do so, when you look at these companies, you look at the individuals who are running them to see if they have the right character, suitability, and what are the tentacles of the leadership as such that it taints the whole company, or if it’s such you just cut out the person and they get replaced by somebody who is of good character and honesty and integrity.
As a regulator, I don’t like to be in a position of killing a company unless I can show that the leadership, the tentacles of leadership are such that they have unduly influenced the operation of the company so that no matter who you take out, you can’t correct the problems that you’ve identified.
I think history will show that in New Jersey, a lot of times the person will divest their interest. They’ll leave the industry. They’ll separate themselves, or they’ll just take the company out and say, “We’re not dealing with you guys anymore. We can’t live under this oppressive oversight.” Okay, it’s their decision. That’s where we are.
So, for both MGM and PokerStars, the solution was the same.
MGM put more distance between its operations and Stanley and Pansy Ho, as well as terminating other executives who had drawn criticism from regulators. Similarly,
PokerStars found a way to ease out Isai and Mark Scheinberg via the Amaya buyout, along with terminating other key executives who might draw regulatory objections.
This week, MGM was rewarded with a finding of suitability and a return of its ownership stake in Borgata. By all accounts, Amaya and PokerStars should expect a similar happy ending in the coming weeks.
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