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Questions trail state gambling commissioner

Critics raise doubts about Stephen Crosby’s judgment after revelations he waited months to disclose potential conflict

Stephen Crosby, the gambling panel chairman.

David L. Ryan/Globe Staff

Stephen Crosby, the gambling panel chairman.

After Las Vegas casino mogul Steve Wynn toured the former industrial site in Everett where he was thinking of building a casino in November 2012, state gambling commission chairman Stephen Crosby didn’t mention that one of the land owners was his former business partner.

A month later, when Wynn negotiated an option to pay an estimated $70 million for the land if Crosby’s commission approved a casino on the site, Crosby again said nothing about his four-decade relationship with Paul Lohnes, co-owner of the land.

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Even when Everett voters overwhelmingly approved Wynn’s proposal in June, leaving the fate of the $1.3 billion project up to Crosby’s commission, Crosby said nothing.

Only after state and federal investigators began looking into whether Lohnes’ more recent business partners include people with extensive criminal records did Crosby tell Governor Deval Patrick about his connection to Lohnes. And only when the Globe began asking questions about the connection did Crosby announce he was withdrawing from the commission vote on the Everett land deal, scheduled for Dec. 13.

Now, some are wondering why Crosby waited so long to make public his seven-year business partnership with Lohnes and whether disclosing it is enough to allow him to continue taking part in the decision over who should receive the license for Greater Boston’s only casino.

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“I think he owes it to the public to recuse himself in any decision involving the Greater Boston region,” said Gregory Sullivan, a former state inspector general and now research director at the Pioneer Institute, a public policy think tank. “A secret disclosure made to [Patrick] does not in my view begin to address the conflict in question.”

Officials toured a proposed casino site. The land is owned in part by Paul Lohnes, a former business partner of state gambling commission chairman Stephen Crosby.

David L. Ryan/Globe Staff/File

Officials toured a proposed casino site. The land is owned in part by Paul Lohnes, a former business partner of state gambling commission chairman Stephen Crosby.

The state Ethics Commission has informed Crosby that he could continue to vote on matters related to Everett, after he filed a detailed disclosure in late October about his relationship with Lohnes, a friend since they served in the National Guard together in the 1970s.

Patrick, who appointed Crosby in December 2011, agrees. “We are confident that the commission is acting in a fair and impartial manner,” said Patrick’s communications director, Jesse Mermell.

But Sullivan says Massachusetts’ fledgling casino industry is a special case with significant public concern about its integrity, creating a mandate for regulators to do more than simply meet the letter of the law. Crosby himself, the former dean of the McCormack School of Policy and Global Studies at UMass Boston, said on the day Patrick selected him that he should be a symbol of good government.

“It will be up to me and the commission to assure both the public and the participants in the gaming industry that the process for developing expanded gaming in Massachusetts is honest, transparent, and fair,” Crosby said.

Crosby said he learned about Lohnes’s potential involvement in the Everett casino project in the fall of 2012 — around the time Wynn visited the land — but he didn’t immediately disclose that he and Lohnes had made large amounts of money together as publishers of cable TV guides from 1983 to 1990. A third business partner has said Lohnes provided crucial investment money in the early years when the company was struggling.

Crosby now says he waited to reveal the connection in part because “nobody knew if Wynn was for real or not,” and because he had not had any contact with Lohnes for years.

“I never see the guy. He wasn’t a public figure,” Crosby said. Under state ethics rules, he wasn’t automatically required to disclose personal connections to people selling land for a casino, he noted, but he did when it became relevant.

“You disclose when there is an action to be taken that could be influenced by your relationship,” Crosby explained on Friday. “As soon as there was an issue on the table,” he said, he not only disclosed, but recused himself from voting.

So far, the commission has voted only twice on the rival Greater Boston casino proposals — approving the developers of both Suffolk Downs and a Milford proposal later rejected by voters — but its actions have shaped the fates of the rival projects over the past year.

In October, concerns raised by commission investigators prompted Caesars Entertainment to withdraw from plans to operate the Suffolk Downs casino. Investigators had raised questions about the company’s character: Caesars had made a licensing deal with a company linked to Russian mobsters, they said.

Caesars’s abrupt withdrawal is believed to have played a significant role in the proposal’s rejection by East Boston voters a few weeks later, leaving Suffolk Downs to carry on with a casino plan located on the part of their property in Revere where voters supported the idea. Crosby, who has also disclosed that he played football at Harvard with one of the Suffolk Downs principals, has indicated he supports allowing the project to continue despite opposition in East Boston.

Another key vote on the Everett proposal is scheduled for Dec. 16, after results of the commission’s background check on Wynn Resorts are expected to be released. But the commission has long been guiding the Everett project through the complex process.

Crosby presided over at least two commission meetings this summer about Boston Mayor Thomas M. Menino’s request to recognize his city as a cohost for the Wynn casino on the grounds that a sliver of the site was actually in Boston. Wynn officials saw Menino’s move as a threat because Menino was strongly backing the rival casino plan at Suffolk Downs.

The panel never voted because Menino eventually withdrew his request to become a host, but Crosby made public remarks that seemed to favor Wynn Resorts, urging the two sides to resolve the issue using materials provided by Wynn.

Crosby disclosed his Lohnes connection to the governor’s office on Aug. 22 in the middle of Wynn’s tiff with Menino, but he didn’t mention the connection at public meetings. By contrast, another commission member, former judge James McHugh, disclosed to the audience when his former law partner, Jon Albano, came before the panel on behalf of a casino developer. Albano also represents the Globe.

Crosby said he felt compelled to reveal his relationship with Lohnes when his investigators raised concerns that Lohnes may have secret partners in the land deal “and/or other difficult issues which could threaten the public trust in this process,” according to Crosby’s statement to the Globe on Wednesday.

By the time of his disclosure, a federal grand jury was investigating whether Charles A. Lightbody, a Revere businessman who served jail time for assault and pleaded guilty for his role in a massive identity theft ring in New York, was an undisclosed partner of Lohnes. Lightbody had boasted to friends that he would make $18 million from the land sale if the Everett casino was approved.

Just before the Globe reported on Nov. 21 that the grand jury was hearing testimony, Wynn officials announced plans to renegotiate the deal with Lohnes’s company, FBT Everett Realty, lowering the sale price to leave less for any undisclosed partners. Wynn has not revealed the reduced price, but, considering that FBT bought the land for $8 million in 2009, Lohnes and the other owners still stand to make millions if the resort is approved.

But Crosby minimized the land controversy’s impact on Wynn, suggesting to reporters that the possible involvement of Lightbody would not hurt Wynn’s chances of winning a license. “It didn’t have anything to do with Wynn,” Crosby said. “This is nothing Wynn knew anything about.”

Crosby withdrew from the debate and voting over the land deal on Dec. 4, after the Globe began asking questions about his connection to Lohnes.

“At that point we knew more about the funny business . . . I was trying to figure out how to handle the situation,” Crosby said on Friday. “The land issue is a unique circumstance: There is a person I know who was in the position to make an incredible windfall profit out of the casino property” and he felt he shouldn’t vote on a deal that could directly benefit Lohnes.

Except for the Everett land vote, Crosby has said he intends to participate fully in the selection of a Greater Boston casino, despite calls for him to step aside from Sullivan as well as from Clyde Barrow, a gambling expert at the University of Massachusetts Dartmouth. Critics note that the gaming commission’s rules require a commissioner to “abstain from participating or voting in any proceeding in which their impartiality may reasonably be questioned,” something both Sullivan and Barrow have done.

And Crosby himself has set a high bar for ethical behavior in the way he has grilled applicants who’ve appeared before the commission, warning them that even the appearance of impropriety may be too much.

“You are in the gaming industry, where issues of appearance matter more than in other industries,” Crosby admonished one witness who had been the subject of a misconduct probe by the Securities and Exchange Commission in the 1990s.

Now, Crosby concedes that his tough questions for applicants could be turned toward him.

“I’m taking this one step at a time. It’s a complicated area. I know people involved in both [Everett and Revere] and I’m on the record as being hard-nosed about all the proposals,” he said, adding, “This deserves a very hard look . . . I agree.”

Mark Arsenault of the Globe staff contributed to this report. Andrea Estes can be reached atandrea.estes@globe.com. Scott Allen can be reached atallen@globe.com.
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