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Caesars’ troubles stunned Suffolk Downs

Suffolk Downs was “blindsided” this month by disclosures that its casino partner for two years, Caesars Entertainment, faced serious questions from state investigators that jeopardized Caesars’ suitability to bid for a Massachusetts casino license, Suffolk Downs officials said Tuesday.

The partnership that owns the track “relied on Caesars contractual obligation to keep us informed,” track lawyer Bruce E. Falby told the state gambling commission. “These obligations were not met.”

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Suffolk Downs asked Caesars to withdraw from the track’s $1 billion resort casino proposal on Oct. 18, after learning that investigators performing mandatory background checks on each applicant had recommended to the commission that Caesars be deemed unsuitable to bid.

Investigators raised several red flags, including a licensing deal with the Gansevoort Hotel Group, a New York boutique hotel company whose name Caesars wanted to use on a refurbished Las Vegas hotel. A principal in Gansevoort, Arik Kislin, has been linked to Russian mobsters, according to a report from the commission’s enforcement arm.

With Caesars out of the project, Suffolk Downs officials appeared Tuesday before the commission to discuss the background checks on the remaining partners. Most of the hearing dealt with how Suffolk Downs vetted Caesars as a potential partner in 2011, and how track officials responded after learning early this month that investigators had raised grave concerns about Caesars.

Commissioners had relatively few questions for the Suffolk Downs officials, and the remaining partners seem likely to be deemed suitable. Commission chairman Stephen Crosby said the panel will issue a decision before Tuesday’s critical referendums on the casino in East Boston and Revere.

Suffolk Downs intends to replace Caesars with a new casino operator and continue its pursuit of the sole Greater Boston resort casino license. It may not have enough time to replace Caesars before the votes, according to Suffolk Downs.

Suffolk Downs officials said they first learned in an Oct. 2 meeting with the commission’s enforcement arm that Caesars faced questions about the Gansevoort deal. Suffolk Downs hired former Massachusetts attorney general Thomas F. Reilly to investigate the matter.

Reilly told the commission he reviewed documents from Caesars on the Gansevoort deal. “It was obvious [there] were red flags,” Reilly said.

A Caesars spokesman said the company “shared all pertinent information about its suitability with [Suffolk Downs],” and that the company was “equally surprised” at the Oct. 2 meeting by investigators’ concerns over the hotel deal.

“As is customary in a suitability investigation, the investigators questioned Caesars officials about a wide range of topics,” and the questions alone, dating back months, did not suggest that investigators would recommend the company be disqualified, according to the Caesars spokesman.

Casino opponent Celeste Myers, a leader of the No Eastie Casino citizens group, told commissioners in a separate hearing Tuesday that the group “has serious concerns about [Suffolk Downs’] ability to select a suitable partner,” after track officials chose one partner, Caesars, and another, Vornado Realty Trust, that refused to participate in the background investigation. The commission has allowed Vornado’s shares in the venture to be held in a blind trust.

Mark Arsenault can be reached at mark.arsenault@globe.com. Follow him on Twitter @bostonglobemark

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