Thoughts About The Tropicana Situation
It's been a couple of days since the New Jersey Casino Control Commission (NJCCC) declined Columbia-Sussex/Tropicana Casino Resorts (TCR) request for licensing. This historic decision - that forces TCR to sell the Tropicana less than a year after taking control - has sent shockwaves throughout the gaming industry with analysts falling on both sides of the decision. It has become apparent to me, after reading through the NJCCC's 63-page "Opinion and Order for Tropicana Casinos and Resorts" report that the decision to revoke TCR's Atlantic City license was undeniably correct.
Much has been said about the 20+% cuts of staff at the Tropicana and how this has adversely affected housekeeping efforts. During a three to five month stretch in the summer of 2007, the Tropicana suffered a near crisis of hygiene due to the synergy of staff cuts, employee absence due to sickness and incidents of restroom toilet sabotage. The NJCCC also noted complaints lodged by representative of large convention that was held at the Tropicana during this time in their report, but said that the previously reported 'flood' off complaints of unkempt rooms didn't seem to be any more that what might be expected from a resort the size of the Tropicana. Regardless of their origin or accuracy, allegations of unsanitary facilities has caused a public relations nightmare for the Tropicana and caused the NJCCC to investigate further. The NJCC report stated that the complaints about unclean facilities were only part of the reason why TCR's license was revoked.
What worried the NJCCC more was William Yung's seemingly dishonest bait and switch of actual payroll reductions he outlined at a NJCCC hearing in 2006. Yung told the NJCCC that planned cuts in payroll would be handled mostly by attrition and would be relatively minimal, no big deal. Shortly thereafter, while on a 'roadshow' to visit prospective investors, Yung outlined a massive plan to cut $40 million in salary costs to increase TCR's bottom line in Atlantic City. Either Yung presented false information to New Jersey regulators to avoid inquiry, or Yung presented falsely inflated information to potential investors, coaxing them to buy a chunk of TCR's debt load (which they didn't.) The NJCCC believes that Yung wasn't forthright about his planned employee cuts and had planned this - as he had done at TCR's other properties in Nevada and elsewhere - beforehand. Yung, however blames the expansion of TCR's payroll savings plan on the unexpected impact of Pennsylvania slot parlors on the Tropicana profits.
Simply put, Yung exhibited a lack of cooperation on a grand scale that did nothing to earn regulatory trust in his ability to operate in this marketplace. Moreover, his decision-making process was seriously flawed.
While close-to-the-bone employee cuts are an extremely component of the delicensing verdict, it is but a drop in a bucket of reasons why the NJCCC has rightly terminated TCR's Atlantic City Gaming license. The complete story as told in the NJCCC's report is truly fascinating reading, not only for its outcome and examples of corporate tom foolery, but for its take no prisoners tone and bluntly eloquent language.
This is one of the more compelling passages of the report:
Calculus is a marvelous discipline: you start with the answer, and work backwards. In certain respects, that was Yung's approach in dealing with the Tropicana. He needed to get a certain answer, and it mattered little whether there was a cogent analysis to justify the outcome.
The report lays out a full timeline of how TCRs aggressive payroll reduction initiatives and back up coverage plans broke numerous gaming statutes, how executives who lied during testimony to cover for Yung were rewarded with promotions or not being fired, and how those who offered dissenting opinions to Yung were shown the door. Additionally, TCR purposefully stumbled, bumbled and backpedaled when forming an independent audit oversight committee that is required by state gaming laws. It is apparent when reading the report that TCR and boss William Yung have demonstrated a blatant disregard of the laws, rules and responsibilities that companies who are given the privilege of operating a casino in Atlantic City are required to uphold and abide by.
The NJCCC's mission is to regulate gaming in Atlantic City and maintain - and enhance - its status and reputation as an honest, fun place to visit. While TCR and Yung may not be 'gangsters' in the 'Corleone' sense of the word, they are to a degree dis-organized criminals - breaking laws, rules and trust for financial gain.
In this age when Atlantic City is being financially squeezed by casinos in Pennsylvania, Connecticut and Delaware, Atlantic City simply cannot afford any bad press, mediocre resorts or slash and cash out operators. With new resorts in various states of planning and/or completion (ie Water Club at Borgata, MGM Grand Atlantic City, Pinnacle Atlantic City and the AC Gateway project) and existing properties investing billions of dollars to add new towers, refurbish old ones and upgrading dining and entertainment offerings, there really is no place in Atlantic City for Tropicana Casino Resorts.
Significantly, what must not be lost sight of is why there is a need for a first class facility, and the Legislature has made that plain: to help restore Atlantic City as a resort, tourist and convention destination, which directly ties to the unique role that the casino industry serves in the redevelopment of Atlantic City. Plainly, the adverse publicity that Tropicana has drawn highlights the need for every casino hotel to be ever vigilant in maintaining a facility that meets the statutory standard.
As a tourist with a fascination of the gaming industry, I truly believe that the NJCCC made the right move in giving Tropicana Casino Resorts the boot from Atlantic City. Operating a casino is not a right, it is an honor that should be bestowed only upon people who have demonstrated an understanding of how their business serves its patrons, its employees and the communities they are located in. Some might argue that regulators should stay out of how casinos operate and let the free market system decide on its own which properties survive, thrive or die. In this instance however, the issues at the Tropicana went far beyond what the casual bus tour junket visitor would see, so barring sewage explosions all over the casinos and restaurants, there would be only partial (but probably steadily growing) impact on the common tourist. TCR's boardroom monkey business is exactly who New Jersey's thirty year old gaming statutes were instituted. Denying license for operation of the Tropicana Atlantic City, forcing sale of the property and levying a $750,000 fine on Tropicana Casino Resorts is in the best interests of Atlantic City and in turn, those of us who stay and play there.
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