Illinois gaming impasse ends with new board appointments

Mar 22, 2005 4:28 AM

Now that Illinois Gov. Rod Blagojevich has finally appointed enough members to fill out the Illinois Gaming Board, companies like MGM MIRAGE Inc. (MGG), Penn National Gaming Inc. (PENN), and Harrah’s Entertainment Inc. (HET) may be able to put forth their proposed acquisitions for regulatory approval.

Nothing has been happening in Illinois gaming since three of the five members of the board saw their terms expire. Since at least three votes were needed for anything to be approved or denied, the board has been inactive. In addition to the proposed acquisitions, planned expansions by other companies have also been on hold.

And the state’s most controversial item, the 10th riverboat license originally planned for Rosemount, remains unresolved.

Anti gambling elements within the state were heartened by Blagojevich’s appointments since at least two of the three members who take their seat immediately have indicated that they do not favor gambling. They are Aaron Jaffe, a retired Cook County judge who is to become chairman, and the Rev. Eugene Winkler, a retired Methodist minister and social activist. Come July, another new member of the board, Sheila Simon, a southern Illinois University law professor, is also expected to be opposed to gaming.

Shortly after his appointment, Jaffe said he believes the new board will consider both the social and the economic aspects of gambling. This approach to gambling was hailed by Rev. Tom Grey, who was quoted as saying, "If this is truly a new day, then profit won’t be the sole motivation of the regulatory board."

MACHINES CONFISCATED

Colorado permits limited-stakes gaming only in Black Hawk, Cripple Creek and Central City so last week state gaming officials raided several fraternal clubs in Pueblo and Mesa counties and confiscated 48 video poker and slot machines.

The sting operations were the result of complaints, according to officials. They were the first raids conducted in the past decade. In the mid-1990s, gaming officials grabbed about 400 machines and $1.2 million in similar raids.

Although many club operators believed they were operating the machines legally, regulators pointed out that the state law does permit the possession of machines provided no gambling is conducted.

ON THE MOVE

Tony Cabot, internationally known as an expert in gaming law, is leaving his post with Lionel Sawyer & Collins law firm to join a younger firm whose base is in Phoenix, Ariz.

After 23 years with the Las Vegas firm, Cabot joins the firm of Lewis and Roca that plans to grow its involvement in the gaming industry.

The Phoenix firm, which established a Las Vegas arm in 1999, has 17 lawyers practicing locally but 10 times that many involved in Phoenix, Albuquerque, N.M. and Tucson, Ariz.

Cabot left Arizona State University law school in 1981 and immediately joined Bob Faiss and his partners at Lionel Sawyer, Nevada’s leading gaming law firm. He is noted for writing several books on gambling law and especially Internet gambling.

DETROIT WAR

While officials of MGM MIRAGE Inc. (MGG) work feverishly to complete the company’s acquisition of Mandalay Resort Group (MBG) by March 31, a war broke out in Detroit, Mich., where the company is forced by Michigan law to dispose of either MGM Detroit Casino or the MotorCity Casino, 53% owned by Mandalay.

It appeared that the decision would be made easier when Marian Ilitch, whose family owns the Detroit Red Wings, the Detroit Tigers and the Little Caesars pizza chain, offered Mandalay (or soon to be MGM MIRAGE) $525 million for its stake in MotorCity. Ilitch already owns 25% of the casino and her representative indicated she already had bought out the other minority owners in the property.

However, at what seemed to be the last minute, another Detroit businessman, Peter Karmanos, Jr., chairman and CEO of Compuware Corp. and owner of the NHL’s Carolina Hurricanes, jumped in with a bid of $563 million for the Mandalay stake.

Still, the Ilitch offer seemed to be more acceptable since she already has a gaming license while it would take Karmanos from six months to 18 months to receive regulators’ approval.

RACINO MOVEMENT

After some two years of haggling, lawmakers are finally taking steps to resolve the impasse that would place video lottery terminals at two southern New York tracks — Aqueduct and Yonkers Raceway.

The two Senate bills, both favoring a change in the existing law, affects MGM MIRAGE Inc. (MGG) since the gaming company has a contract with the New York Racing Association (NYRA) to build and operate the racino. Addressed in the bills are the amount of money the tracks would receive from the slots action and protection to be provided to the gaming companies building the facilities.

"The legislation we passed," said the head of the Senate Racing Committee, "creates a workable reimbursement fee for the vendors who will be running the VLTs while providing a mechanism to successful garner additional funding for the state."

The two bills sunder consideration will grant the tracks between 32% and 34% of the revenues with the amounts to be split with the participating horsemen and the breeders.