By Walter Pavlo
The Massachusetts Supreme Judicial Court issued an Opinion on FBT Everett Realty (FBT) v The Massachusetts Gaming Commission (MGC) which reversed an earlier decision to dismiss the case. The action was originally brought by the land owners of FBT in 2016 after it claimed it was forced to take a $40 million discount on the land, which was originally agreed upon to be sold to Wynn for $75 million. The story behind how that discount came to be and what made FBT sign for the sale of the land for such a loss has remained mostly a mystery. However, FBT’s case may now move forward and answer these questions and more about the inner-workings of how Wynn won the license.
What we all must remind ourselves is that the license for the casino in Everett was a zero sum game for the two bidders for the license, Wynn Resorts and a group of investors behind Suffolk Downs and its gaming partner (Caesar Entertainment and then Mohegan Sun). This was not a battle for a marijuana license or zoning for a building, it was a license to print money. Backed by billions of dollars, the two groups went at each other to win the license and along the way the most interesting of things started to happen, almost as if being orchestrated.
At the beginning, there was almost no doubt that Suffolk Downs would win the license. It had the back of Boston Mayor Thomas Menino, the storied horse track was dying a slow death and a popular, self-made, local entrepreneur Joe O’Donnell was backing the project. Steve Wynn and his team were outsiders, showman, who used the influence of New England Patriot owner and billionaire Robert Kraft to partner on a site in Foxborough. Only, Foxborough wanted nothing to do with Wynn. Suddenly, almost as if it were planned from the start, Wynn touched down on the land in Everett. Within weeks, and fresh from rejection in Foxborough, Everett was a chosen site for Wynn’s casino project.
The owners of the land (Anthony Gattineri, Dustin DeNunzio and Paul Lohnes) were swept away at the prospect of selling an $8 million piece of property for $75 million. There was the curious way in which the land in Everett was divided into a mostly submerged, 6-acre parcel in the polluted Mystic River that lie in Boston and a parcel of 30-acres in Everett, a wasteland that was the epicenter of a Monsanto plant that had poisoned land, sea and air for decades. The division of the land gave Everett an advantage because its mayor Carlo DeMaria was hungry, begging for the casino. It made Everett relevant again and, more importantly to DeMaria, it made DeMaria relevant in Massachusetts.
Within weeks of the option to sell, life got complicated for FBT as accusations that there was a fourth member of FBT, who also had ties to organized crime, was a silent partner in the land. State Police and MGC own investigative arm, Investigations and Enforcement
Bureau, began investigating the claims and found that perhaps there was something to the story, but curiously, that investigation did not conclude. Instead, the findings were turned over to the US Attorneys Office and the Federal Bureau of Investigations who eventually indicted 2 members of FBT and one controversial figure, but not Paul Lohnes. Lohnes, it was later discovered, was friends and past business partner with MGC’s chairman Stephen Crosby. Crosby would resign amid claims of bias by both Wynn and Suffolk Downs. FBT, under pressure from federal investigators, Massachusetts State Police, a powerful law firm and consulting firm whose efforts were led by former Massachusetts Governor Bill Weld, would eventually sign a discounted land deal to resolve the controversy. A few years later, once all three men were cleared of federal charges, FBT went back for the $40 million it lost in the midst of the casino storm.
The Supreme Judicial Court mentioned the investigation and wrote in its decision, “When confronted with the possibility that someone with a criminal background had an undisclosed ownership interest in the parcel of land that a gaming license applicant intended to purchase to develop a casino, the commission did not continue to investigate until it could confidently determine whether there was in fact some undisclosed criminal ownership.” MGC’s decision to not fully investigate FBT but rather work with Wynn on a settlement, will be the most important part of this civil case when it goes to trial.
It will mean deposing Mayor DeMaria, former MGC Chairman Crosby, former Governor Bill Weld, Steve Wynn, Wynn’s former general counsel Kim Sinatra, and the former CEO of Wynn Resorts Matt Maddox. It will involve the powerhouse law firm Mintz Levin who handled the land deal for Wynn and its consulting subsidiary ML Strategies, headed by Stephen Tocco, former executive director and CEO of the Massachusetts Port Authority (Massport) who also served as Massachusetts Secretary of Economic Affairs and as special assistant to both Governor William Weld and Governor Paul Cellucci. It is a trial that would not only determine whether FBT deserves any of the $40 million discount back, but it will show how the casino was won.
The Opinion concluded, “In the instant case, there is the additional complication of whether it was the action of the commission, rather than Wynn, that caused economic loss to FBT. In general, where the government pressures a third party to take action that diminishes the value of the plaintiff’s property, the government is responsible, for regulatory takings purposes, for the economic impact of the third party’s action if the economic harm to the plaintiff was “direct and intended” and “the government’s influence over the third party was coercive rather than merely persuasive.”
Walter Pavlo writes for Forbes Magazine.