Wynn pulls out of Foxwoods deal

April 8, 2010

By Kellie Patrick Gates
and Thomas J. Walsh
For PlanPhilly

Just days after giving the Pennsylvania Gaming Control Board drawings, a timeline and site plans for a proposed South Philadelphia casino, casino mogul Steve Wynn has pulled out of the deal.

His Thursday departure has thrust the beleagured and delayed Foxwoods project back into the uncertainty it faced before he arrived on scene last month and wooed the gaming control board with his reputation, ideas and checkbook.

Wynn seems to have left the door open for involvement in some casino project in Pennsylvania – just not Foxwoods.”We are fascinated by the legalization of full gaming in Pennsylvania and stimulated by the opportunity that it presents for Wynn Resorts, but this particular project did not, in the end, present an opportunity that was appropriate for our company,” Wynn, Chairman and CEO of Wynn Resorts, said in a press statement Thursday afternoon.

It was only Monday when Wynn, at his request, met with Philadelphia Mayor Michael Nutter and Planning Commisison Executive Director Alan Greenberger to talk about the Foxwoods project.

“Mr. Wynn could not have been more excited or enthusiastic about his proposed development,” Nutter said in a phone interview with PlanPhilly Thursday night. “It is a stunning turn of events. I think at moment, no one knows what any of this means.”

Friday, Pennsylvania State Rep. Mike O’Brien, in whose district the Foxwoods site sits, wrote PGCB Chairman Gregory Fajt a letter asking that the board revoke Foxwoods’ license.  “We believe fervantly that they  can’t meet statuatory guildine to have slots up and running by 2012,” O’Brien said in an interview.  If Foxwoods were in their current financial situation when they had applied for the license, it never would have happened,  he said. “We believe the only choice left to the board is to revoke the license.”

Neither Foxwoods’ attorney Fred Jacoby nor the  head of his law firm, Stephen Cozen, returned calls for comment on Thursday or Friday. Lori Potter, a spokeswoman for the Mashantucket Pequot, said Friday the tribe is not commenting. The tribe operates Foxwoods Casino in Connecticut, and part of the reason the state chose the Foxwoods team was for their casino experience. But the tribe has come on hard financial times, and their financial involvement has been shrinking. When Wynn was on board, the plan was that his company would run the casino.

Cozen told The Inquirer Thursday he had also just learned the news and was “in a state of shock.”

The casino is a state project, Nutter said, and as such, it’s really up to the Pennsylvania Gaming Control Board to figure out what happens next.

Can Foxwoods do it without Wynn?

Before the Foxwoods team brought Wynn on, the board had been threatening to yank Foxwoods’ license. At a gaming board meeting last month, Wynn told the panel he planned to have a 51 percent stake in the casino. He said that day that if the board did take the second Philadelphia casino license from Foxwoods, he would be interested in biding for it.

Does Wynn’s departure mean the Foxwoods casino project is doomed to fail?

O’Brien wrote in his letter that past gaming board hearings made it clear that Foxwoods’ only plan was to bring in a new partner, and now that has failed, the project is doomed.

At a Jan. 27 hearing, Foxwoods attorney Jacoby  said that if the agreement with the then-unnamed Wynn fell through, Foxwoods would move forward, but with a slots-only casino in a temporary facility.  But at last month’s hearing, PGCB Chairman Gregory Fajt said it seemed clear that Foxwoods won’t be able to deliver without Wynn.  

Chief Enforcement Council Cyrus Pitre told the board: “It’s pretty obvious that Foxwoods would not have the ability to build the casino we licensed them to build” without Wynn.

Pitre has said that revoking the license, should the board go that route, would not be simple nor quick. There would be a hearing, he said, and the results could be appealed. If Foxwoods loses its license, the board will have to devise a new procedure through which to reissue the license to another entity.

The Pennsylvania Gaming Control Board just found out Wynn was withdrawing Thursday afternoon, too, said spokesman Richard McGarvey.  “We got the press release that everyone else did,” he said.

Foxwoods has been paying a $2,000-per-day fine retroactive to the original, Dec. 1 deadline by when the finance and building plans were due. It was only this week that Foxwoods, thanks to Wynn, met those obligations. But the fine had not yet been lifted. When asked what Wynn’s departure meant for the Foxwoods project, McGarvey said the PGCB was not commenting yet. The board was still not commenting Friday.

Mary Isaacson, O’Brien’s chief of staff, said in an interview that it was clear at Wednesday’s PGCB meeting that Pitre was not satisfied with the finacial documents Wynn had provided.  “Cyrus told the board that an executed agreement was submitted, but there was not enough information that he believed proved any ability to get the project up and running by the 2011 deadline,” she said. <!– @page { margin: 0.79in } P { margin-bottom: 0.08in } –>

Foxwoods now has until May 2011 to make slots available.  Early in 2010, the state legislature passed a law allowing the gaming board to grant another extension, to December 2012. Foxwoods has not applied for the extension. The Wynn team had planned to apply, and then open with both slots and table games.

Foxwoods critics aren’t sure what’s next, but they are celebrating now.

The Foxwoods project has been opposed by many waterfront community groups. So the mood among some Thursday night was celebratory.

Within hours of the announcement, Dianne Mayer of Neighbors Allied for the Best Riverfront sent a mass email invitation for a weekend potluck at her house.  “Regardless of what happens next I feel like celebrating,” Mayer wrote.

“We’re all sort of  stunned, ecstatic, and wondering what happens next,” said Rene Goodwin, Pennsport’s casino representative.  Goodwin said she hopes that if a second Philadelphia casino is built by someone, it goes up at another site. “It’s  never been a good business plan or a good plan of development because of the challenges linked to that site,” she said. Traffic concerns are chief among them, she added.

Many  neighborhood organizations have said any casino should be located at least 1,500 feet from any residential neighborhood to lessen not only traffic concerns, but fears that a casino would depress neighborhood businesses.

But other groups – notably Casino-Free Philadelphia – say they want no casino anywhere. Addiction and other social problems are chief among their concerns.

Casino-Free spokeswoman Lily Cavanagh said Wynn’s decision “demonstrates how much power we really do have. Wynn has been scared out of the Foxwoods deal.”

Cavanagh does not think Foxwoods can recover from this. “If Wynn can’t do it, nobody else will be able to, and it’s time to start thinking about pulling the plug on the second casino altogether,” she said.

SugarHouse Casino is already under construction in Fishtown.

Why did Wynn bail?

As to why, exactly, Wynn is no longer interested in Foxwoods is not known. Wynn spokeswoman Maureen Garrity said the Wynn organization was not commenting beyond the written statement.

Nutter said while he had no idea why Wynn ended his agreement with Foxwoods, he knows for certain that it had nothing to do with the city.

“I had a conversation with Kim Sinatra – general counsel (and senior vice president) of Wynn resorts, and she wanted to directly reassure me that their decision had nothing to do with the City of Philadelphia or their interaction with us,” Nutter said. “They felt warmly received here in the city, and were looking forward to doing this project,” Nutter said.

While the Wynn team isn’t commenting about his departure, O’Brien believes it’s all about the viability of the South Philadelphia site. “This is the first time that a professional gambling operation has looked at this site and found it not to be viable,” he said. “The board should respect his opinon and revoke the license, and find a new site.”

Traffic and neighborhood concerns aren’t the only issues, O’Brien said.  While the Foxwoods team has said it doesn’t need legislative permission to use the state-owned riverfront land known as riparian land, O’Brien and others disagree. The use of the land requires an act of the state legislature. If Foxwoods tried to procede without the riparian lands, they would likely have a legal battle on their hands. A group of local legislators took SugarHouse to court over the riparian issue. After a protracted battle, SugarHouse won, but the legislature has sense eliminated an old law that the court said granted the city’s commerce department the right to give SugarHouse riparian rights – a step the city took during the Street administration.

There was a time when both Foxwoods and SugarHouse felt the city was giving them the opposite of a warm reception. There were many legal battles waged in state supreme court – the casinos won them all – and both casinos now have court-assigned Special Masters who oversee talks.

Talks warmed between the Nutter team and Foxwoods when Foxwoods agreed to move to The Gallery at Market East, and then the former Strawbridge’s building, but the gaming control board sent them back to the waterfront before Foxwoods ever officially asked for a change of venue.

At their meeting Monday, Nutter asked Wynn to consider the Civic Vision for the Central Delaware, which calls for riverfront access and urban-style development, when designing the casino he was then part of. Thursday night, Nutter said, “I will talk about the waterfront with whoever has plans to be at that site. It will be the same conversation about the Civic Vision and the planning process that the community has engaged in.”  Access to the river is a major issue, he said, as well as traffic, parking and congestion.

Speaking of major issues, if the city’s second casino is significantly delayed, it could hit the city’s pocket book.

“It certainly would have some impact on our budget, as we have now started to account for gaming dollars,” Nutter said. But since Foxwoods was already behind schedule, there would be no impact for about two years, Nutter said.

Expert says Wynn has left other casino projects

This isn’t the first time Wynn has become involved – then uninvolved – with a project, said Bill Eadington, director of the University of Nevada Reno’s Institute for the Study of Gambling and Commercial Gaming.

“It’s interesting – he has a long history of backing out of deals, or getting pushed out of deals that were otherwise terribly attractive,”  Eadington said. “He’s eccentric, in his own way, but he’s a real artiste in the developer sense.His heart is not so much in the operations side as it is in the development side, and that’s his history – he’s been very, very good at it.”

Eadington referred to Wynn’s withdrawal from a deal to create a “racino” in Queens, New York, last year at the Aquaduct Racetrack.

“That was a messy one,” he said. “There was a lot of contentious politics between the governor and [New York] state legislature. Wynn came in with a proposal that was quite different from all the others, in Wynn’s style, which is much more high-end.”

Wynn also went to Vancouver in the early ’90s, Eadington said. “He was going to build a very dramatic casino right next to the Pan Pacific [Hotel on the waterfront], a phenomenal sight. But … he came in and really alienated all the local politicians. He came across as very arrogant, very in charge.”

A similar scenario played out in Australia, Eadington said, although there he was out-bid by other companies. “In both Vancouver and Sydney, he just didn’t play the political game. Steve Wynn generally doesn’t kowtow to the politics as readily as other corporations might.”

But at least you could explain the reasons why he failed in those markets, he added. Eadington was genuinely surprised that Wynn pulled out of Philly, and said that from everything he had heard and read about the deal, Wynn had put forth a “very solid and respectable approach.”

“I would find it regrettable that he’s out of the picture,” Eadington said of Wynn. “Philadelphia is a tough case. The Foxwoods situation is a fiasco anyway for all the other reasons. I know the location’s been contentious, but it’s a real missed opportunity.

“I would be very interested to find out the ‘why’ on this, but that will probably be difficult to do. . If it is a screw-up on the part of some Pennsylvania politicians, somebody should get hung to the wall. If it’s because Steve Wynn just had a change of heart, well, that could very well be the case. But I would’ve expected that he would stay, unless there were substantial roadblocks.”

Wynn’s sudden departure could also be purely financial in nature. The economic performance for all of the Las Vegas properties is still a disaster, Eadington said, though Wynn has avoided much of the chaos affecting other casino companies with higher leverage.

Reach the reporter at kelliespatrick@gmail.com.

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