The investors behind Suffolk Downs gambled and lost big when East Boston voters said no to a casino on Tuesday.
But the gamble taken before the vote is what likely sealed their fate.
On Oct. 18 — 18 days before election day and the casino referendum — Suffolk Downs dropped Caesars Entertainment as its partner and casino operator. The decision came after state Gaming Commission investigators raised concerns about a business relationship.
Caesars Entertainment wanted to go public and argue its case. “We were fully prepared to go before the commission and defend the finding,” said a Caesars executive who was involved in the effort. “But our partners were concerned if we were having all this conversation prior to the referendum, people could forget whether they wanted a casino and get lost in the rhetoric around the hearing. They asked us to step down.”
Caesars obliged. The day after its withdrawal, CEO Gary Loveman blasted state regulators for establishing “unprecedented” licensing standards.
But Loveman didn’t say who did him in first — his Suffolk Downs partners.
They blinked, and when they did, they handed their opponents a valuable weapon: uncertainty. Without a big-name partner like Caesars, the promises of jobs and economic development seemed gauzier — and riskier — than ever.
“Goliath lost its edge,” said Scott Harshbarger, the former Massachusetts attorney general who opposes the state’s expanded gambling law and is trying to get a repeal question on the ballot.
It was a stunning stroke of fortune for casino opponents, who from the start were cast as David in this classic showdown of conviction and community activism against Goliath’s money and political power.
Suffolk Downs spent $1.9 million on a sophisticated get-out-the-vote effort that was built on glittering promises of jobs and economic development. The polished sales pitch talked about creating a “good urban environment,” not a casino development. The architect’s renderings almost made you forget the gas tanks edging the development site.
Casino opponents spent $22,000 over the past year and had a whopping $12,000 left for the final push. Their early rallies looked sparse and rag-tag. Still, as it took longer than expected for Suffolk Downs to reach a host agreement with Boston Mayor Menino, doubt grew stronger. One poll in late October showed the “no” vote winning. Another showed the “yes” vote slightly ahead.
Into that volatile mix came a real October surprise, the issue of Caesars’ “suitability.”
The Gaming Commission report raised questions about a licensing agreement Caesars had signed with a boutique hotel company, Gansevoort Hotel Group. The licensing agreement gave Caesars the right to use the Gansevoort name at a Las Vegas hotel the company is refurbishing. Gaming Commission investigators were concerned about a Gansevoort investor who allegedly had ties through relatives to Russian mobsters. Caesars ended the licensing agreement, but that didn’t satisfy investigators.
Caesars wanted to fight what it considered “rumors, innuendos, and allegations,” a Caesars executive said. “We have a powerful case about why this is wrong,” Caesars told their Suffolk Downs partners. But their partners didn’t want to take that risk. Caesars withdrew, so commission members never actually voted on its suitability. Since then, it has been reported that a Caesars subsidiary is under federal investigation for possible money laundering.
On Tuesday, East Boston rejected the $1 billion casino proposal by a margin of 56 percent to 44 percent. That should be the end of the Suffolk Downs story. But as the “no” votes piled up in Eastie, Suffolk Downs backers started talking about moving the casino to the 52 acres they own in Revere, where voters approved their proposal.
It would give East Boston the worst of all possible worlds — a casino on its doorstep, but none of the benefits outlined in Boston’s host agreement with Suffolk Downs. Eastie casino opponents blasted track owners for “mobilizing to find a way around the voice of the people and Massachusetts gambling law.”
It’s funny what the gambling business does to people. Fearful of losing its right to bid for a casino license, Suffolk Downs did not want to take a risk with Caesars. That contributed to losing the East Boston vote. Now, Suffolk Downs backers are desperately trying to salvage a business built on leveraging other people’s risk.