N.J. agency refuses Tropicana Casino request

ATLANTIC CITY - The New Jersey Casino Control Commission today refused to transfer assets of the Tropicana Resort & Casino back to its disqualified owner as a way to prevent the company's being pushed into bankruptcy.

The Tropicana's state-appointed trustee, former New Jersey Supreme Court Justice Gary Stein, had asked for the transfer, saying a bankruptcy, that could be triggered by a pending lawsuit, will hurt his effort to sell the property. Stein is evaluating several bids for the casino.

But after a day-long hearing here, the commission voted 4-0 to deny Stein's request.

"For sound statutory and policy reasons, Justice Stein's rush to return title to Adamar [the Tropicana's former parent company] is misplaced and, in my view, must fail," commission chair Linda Kassekert said in a 17-page ruling issued at the conclusion of the hearing.

"Whatever attendant delay it may cause in the sale process, cannot justify granting Justice Stein's petition," Kassekert wrote.

Stein declined to comment after the decision.

The Tropicana has been on the block and under Stein's control since the commission ruled against renewing the license of Columbia-Sussex Corp. on Dec. 12, over regulatory violations and unsanitary conditions at the casino.

When Columbia-Sussex bought the former Aztar Corp., Aztar's shares of Adamar of New Jersey Inc., the company that owned the Tropicana, were placed into a trust so that the deal could close. When the commission found Columbia-Sussex unsuitable, the trust was activated and Stein took control of the trust.

It is that transfer which Stein sought today to undo.

His move was prompted by a lawsuit filed in late January in Wilmington, Del., by Wilmington Trust Co. on behalf of bondholders, who blamed Columbia-Sussex for gross mismanagement that led to it losing its casino license. The suit claims that the firm also defaulted on a $960 million debt note.

The Delaware judge had set an April 20 deadline to "cure" the default, and prevent an involuntary bankruptcy.

During today's hearing, Stein spoke for almost and hour and a half asking the commission to approve his petition. He said an involuntary bankruptcy would cast a pall over the casino while he is trying to sell it. "An involuntary bankruptcy of Adamar has to hurt this business . . . and it will affect my ability to sell the asset," he said.

"It's so obvious that the best thing for this commission to do is to approve this petition," Stein said. If it does not, "it will cast doubt on the regulatory environment over the casino industry here," he said.

After Stein's vigorous appeal, Kassekert said the commission wouldn't be holding today's hearing if not for the bondholders' lawsuit in Delaware.

In her ruling, Kasskert said the petition "could be perceived to be for the benefit of Adamar's disqualified parent companies."

The ruling continued: "Unfortunately, Justice Stein's petition not only squarely interjects the commission in the Delware litigation, but also purports to do so without providing a sound basis under the Casino Control Act for the commission to act. . . . It is not at all clear that the requested reconveyance would cure Tropicana Entertainment's Delaware dilemma."

The commission, which was minus member William T. Sommeling today, also voted to extend the sale process to June 9, giving Stein an extra 60 days to close a sale.

Meanwhile, Edward Weisfelner, counsel for Wilmington Trust Co., said the Delaware lawsuit will go forward. "The commission made absolutely the right ruling, and I think Justice Stein should be appropriately chastised for taking on Adamar's position in a battle that doesn't affect him."

Mary Jo Flaherty, deputy attorney general for the state Division of Gaming Enforcement, early in the day had urged the commission to deny Stein's request.

The gaming commission's denial of the Columbia-Sussex relicensing was only the second time it had taken such an action in the 29-year history of gambling in Atlantic City. The Atlantis Hotel & Casino was shut down in 1989 after the commission concluded that it was financially unstable.

Besides having its license revoked, Columbia-Sussex was fined $750,000 - the largest amount ever imposed by the commission - for its failure to form an in-house audit committee as required by the New Jersey Casino Control Act.

More than 70 customer complaints, including assertions of bedbugs in hotel rooms and filthy bathrooms, were part of the evidence before the commission.