A day after the stunning withdrawal of gambling giant Caesars Entertainment from a Suffolk Downs casino bid, the city is exploring options to delay a November referendum on the project, and Caesars’ top executive blasted state regulators for establishing “unprecedented” licensing standards.
“It’s going to be very difficult for sophisticated, multi-jurisdictional operators to tolerate the environment this commission has created,” said Caesars chief executive Gary Loveman, speaking of the five-member state gambling commission.
Caesars, one of the biggest names in the casino industry, dropped out of the East Boston casino venture Friday, after the partnership learned that state investigators had recommended Caesars be disqualified from participating in the competition for the Greater Boston casino resort license. Suffolk Downs formally asked Caesars to withdraw, and their two-year partnership will be legally severed in the coming days.
Suffolk Downs will seek a new casino operator and push ahead with its application.
Meanwhile, Mayor Thomas M. Menino will consult with the gambling commission and Secretary of State William Galvin about the city’s legal options for postponing the Nov. 5 East Boston referendum on the project, if Suffolk Downs cannot find a new partner quickly, said spokeswoman Dot Joyce.
Menino wants Suffolk Downs to have a new casino operator on board before residents vote on the fate of the project, she said.
The revelation that one of the biggest names in the business may have been unsuitable to bid in Massachusetts quickly grabbed the attention of the industry in Las Vegas, said Roger Gros, a casino expert and publisher.
“It has raised some eyebrows,” he said.
Caesars’ exit could also pose a danger that prominent casino operators may decide doing business in Massachusetts is too difficult, Gros said. “People could walk away and [Massachusetts] could end up with second-rate casino companies.”
Companies still awaiting background checks in Massachusetts include: Wynn Resorts, which has proposed a casino in Everett; Foxwoods, which is part of a Milford casino proposal; and MGM, which wants to build a casino in downtown Springfield.
Caesars’ struggle with enormous debt has been well-publicized, and the company’s financial position is among the concerns state investigators raised in their report.
But Loveman said investigators spent most of their efforts probing a licensing agreement Caesars had signed with a boutique hotel company, Gansevoort Hotel Group.
Caesars had intended to use the Gansevoort brand at the former Bill’s Gamblin’ Hall in Las Vegas, which the company is refurbishing. Essentially, the licensing agreement gave Caesars the right to use the Gansevoort name, Loveman said.
But investigators raised red flags about an owner of Gansevoort, who was alleged to have ties to Russian mobsters in a 2012 New York Post article.
Loveman, who lives in the Boston suburbs, said Caesars ended the licensing agreement when Massachusetts flagged the relationship as a problem, but investigators “found that unacceptable.”
“In other jurisdictions if you do something that raises a regulator’s concerns . . . in almost every instance as long as you discontinue or disassociate, it is considered a reasonable action,” Loveman said, in a Globe interview.
Loveman said the recommendation against Caesars “was almost entirely based” on the hotel licensing agreement. “To apply this kind of standard to what was a trademark license — a passive business venture unrelated to gaming — is just extraordinary.”
Investigators have compiled their findings in a lengthy report, which Suffolk Downs received late Friday, triggering Caesars’ exit from the Boston project several hours later.
The report has not been made public. The commission intends to release a redacted version this week, probably on Wednesday.
The commission has also scheduled an Oct. 29 public hearing to review the findings. At some point soon after the hearing, the commission will decide if Suffolk Downs will be deemed suitable to bid for a casino license in Massachusetts.
The commission, through its spokesperson, declined to respond Saturday to Loveman’s comments.
In addition to the Gansevoort connection, investigators raised issue with Caesars’ dealings with Terrance Watanabe, a wealthy high-roller
In East Boston, casino opponents quickly jumped on Caesars’ sudden exit as evidence voters cannot trust Suffolk Downs.
“Clearly, they did not do due diligence in vetting Caesars — a company with which they have had a relationship since 2011 — and only ended the relationship when forced to do so,” said the anti-casino group No Eastie Casino, in a statement.
Mayoral candidate Martin J. Walsh said Saturday that he retains his faith in the project. “Insofar as Caesars is a minority partner and Suffolk has a strong team, I see no reason why Suffolk will not be deemed suitable for a gaming license and I continue to support their application,” he said in a statement.
Walsh’s opponent, John Connolly, said the casino vote should go forward as scheduled, on the day of the city final election.
“The people will decide based upon all of the facts and information, including this recent development,” he said in a statement. “The vote should still occur on Nov. 5 when there is a higher turnout so that the most people possible will have a say about this important issue.”
Suffolk Downs is competing for the Greater Boston casino license with Wynn Resorts and Foxwoods. The commission intends to award the license in early 2014.