License To Be Ill
License To Be Ill
Columbia Sussex stripped of AC license, company appeals decision
For only the second time in the state’s 29-year history of legalized gaming, the New Jersey Casino Control Commission denied a license renewal to an existing operator. Spurred by what the commission called poor operating decisions and a lack of understanding of the Atlantic City market, Columbia Sussex was denied a license, meaning the company will have to find a buyer for its Tropicana Casino & Resort.
The property will be operated by a trustee picked by state regulators in the meantime. Columbia Sussex was also fined $750,000—the highest ever fine imposed on a gambling property in the state.
“In a word, Tropicana’s regulatory performance over the past year has been abysmal,” commission chairwoman Linda Kassekert said in announcing the 4-1 decision.
After hearing days of testimony, Kassekert and other commission members said their decision was influenced by a bevy of issues, including: less than stellar financial results; conflicts with employees and labor unions; significant layoffs as a cost-cutting measure; cleanliness and health issues at the property; and the failure of the property to create an independent audit committee—a critical regulatory requirement for Atlantic City casino operators.
“I do not believe this applicant has the business ability to operate a facility of this size and magnitude given the decisions that were made,” Kassekert said.
Columbia Sussex CEO William Yung admitted there were mistakes made and that the company had misjudged certain business dynamics of the Atlantic City market. But he also cast blame on unions and some employees for deliberately causing trouble and vandalizing the property. He also said reports of unsanitary conditions in hotel guestrooms were dramatically overblown and that the property was taking appropriate steps to correct ongoing problems.
The only commission member to oppose the revocation, Michael Fedorko, said he felt the move was too severe a punishment. He said the commission should have followed the New Jersey Division of Gaming Enforcement’s recommendation of a one-year license rather than a typical five-year license.
Others, however, said the decision gives a clear indication that regulation of casino properties in New Jersey is not a matter that will be taken lightly.
“[The commission is saying] Work within the regulations that are set forth. You have the freedom to make business decisions on how to run your business. Disobey the regulations, and the consequences can be significant,” Deutsche Bank gaming analyst Andrew Zarnett told the Philadelphia Inquirer.
The decision also got rave reviews from UNITE HERE Local 54, the union that has been at the center of employee and job cut battles with the Tropicana over the past year. Union president Robert McDevitt told the Associated Press that his members are calling the decision “a victory for the industry.”
Columbia Sussex executives were not on hand when the Casino Control Commission’s decision was read, having left the room after learning their fate from their attorneys. The company did file an appeal of the decision, but also said it will work closely with former New Jersey State Supreme Court Justice Gary Stein—the trustee appointed to run the facility until a buyer can be found.
The company has indicated that if it cannot reverse the commission’s decision, it could lead to bankruptcy. The decision, and a denial of an emergency appeal process by a judge, could cause the Tropicana to default on a complex lending agreement, the company said in a statement.
In the meantime, the property remains open and operating.