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Caesars lawsuit against gaming commission chief dismissed

Massachusetts Gaming Commission Chairman Stephen Crosby.

Yoon S. Byun/Globe staff/file 2013

Massachusetts Gaming Commission Chairman Stephen Crosby.

A federal judge dismissed a high-profile lawsuit Friday against Massachusetts Gaming Commission chairman Stephen Crosby, in which Las Vegas gambling giant Caesars Entertainment contended that Crosby exercised bias against the company to favor a rival casino project.

Crosby, reached by phone Friday night, said the court had backed up what the commission had said all along, that Caesars’ legal claims were “specious.”

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But the gambling company is not giving up and will appeal the ruling to the US Court of Appeals for the First Circuit, Caesars said in a statement.

The lawsuit was filed in December, two months after Suffolk Downs dropped Caesars as a partner in a $1 billion casino venture at the East Boston racetrack, over concern that the company would fail its mandatory state background check. Commission investigators had raised red flags about the company, including that Caesars had signed a licensing deal with a hotel chain owned in part by a businessman allegedly tied to Russian mobsters.

Caesars said in its suit that Crosby was predisposed to favor a rival casino application by Wynn Resorts because of his past business relationship with Paul Lohnes, one owner of a plot of land in Everett where Wynn has proposed a casino.

The suit cited a controversy on Crosby’s failure to immediately file a formal disclosure of his association with Lohnes. Crosby disclosed the relationship one year after he became aware of the potential conflict, according to court documents.

In December, Crosby recused himself from a commission discussion of the Everett land, and in May he removed himself from the debate about awarding the Greater Boston resort casino license.

In a highly technical, 38-page ruling, US District Judge Nathaniel M. Gorton acknowledged that it would be unconstitutional for a state official to conspire to deprive an applicant of the opportunity to compete for a state license for the purpose of favoring a former business partner.

“Such actions would shock the conscience as truly outrageous and thus constitute a violation of substantive due process,” Gorton said. “Caesars can only reach that negative conclusion, however, by assuming a series of improbable inferences, themselves resting on the shaky foundation of a number of naked assertions.

“Stripped of its sensational accusations of Crosby’s nefarious motive, assertions the court does not assume to be true at this juncture, plaintiff has simply alleged a violation of procedural due process that the court considers a close call. Courts must accept well-pled facts as true but need not indulge in improbable conspiracy theories.”

Caesars strongly disagreed with the ruling.

“Caesars and the citizens of the Commonwealth deserve to know the truth about the conduct of the leader of the Massachusetts Gaming Commission, whose subsequent recusal from the [Greater Boston region] selection process has further impeded implementation of the 2011 Expanded Gaming Act,” Gary Loveman, chairman and chief executive of Caesars Entertainment said in a statement issued late Friday night.

The Expanded Gaming Act, signed by the governor in 2011, allows the establishment of three resort casinos and one slot machine parlor in Massachusetts.

“Throughout his ruling, Judge Gorton acknowledges the merits of the claims made by Caesars in its lawsuit,” Caesars stated. “The opinion states that the court is ‘disturbed by Crosby’s failure to avoid the appearance of impropriety and convinced that public trust in the casino licensing process has suffered as a result.’

“The ruling further acknowledges Crosby’s ‘ethical lapses.’ The company emphatically disagrees with the court’s assertion that it is not empowered to rule on these ‘lapses.’ ”

Mark Arsenault can be reached at mark.arsenault@globe.com.

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