Inherent Stresses of the Casino Operator Licensing Process

16 February 2000

By David Waddell

It's been a long road for Greektown Casino, L.L.C. investors, Ted Gatzaros, Jim Papas and the Sault Ste. Marie Chippewa Indian Tribe. Over 10 years ago, they began their quest for casino gambling in the City of Detroit. At a time when many were abandoning the City, these investors had the vision to foresee a transformed City with entertainment options and nightlife for everyone. For Mr. Gatzaros and Mr. Papas, this vision was not solely dependent on casinos. They invested, developed the Atheneum Hotel and several restaurants and, for many years, made the Greektown area in Detroit the place to go for a night out.

Given the difficult times the City of Detroit has struggled through, there is no doubt in my mind that along the way there have been some bumps in the road. Under the microscopic review of the Michigan Gaming Control Board's investigative team, it is possible that some issues have arisen that statutorily may require a hearing. In the media recently, there has been a lot of speculation about this, and further speculation about the numerous publicly traded casino companies (Park Place, Harrahs, etc.) who would love to get a piece of the action.

At this stage, all of this is speculation. The Michigan Gaming Control Board staff keeps a tight lid on such matters. The only word is that the "Public Investigative Hearing" on the Greektown casino will occur the first week of March 2000.

If there are "qualifier" problems with any of the investors, they have entered into a stressful period where the elaborate system established by our Legislature puts on the pressure for investor to end up pitted against fellow investors in an effort to force out those with even the slightest hint of a problem. At this stage, any individual considered to have "qualifier" problems can sell his or her interest for its fair market value. However, if the matter goes to a hearing and the Board orders "disassociation," the only amount received will be the actual dollars invested. Thus, to go forward, the investors with potential qualifier problems have to take a multi-million dollar gamble.

Even if the investors decide to press the issues, the deck is stacked against them. Under the Michigan Gaming Control and Revenue Act, only the casino operator, the Board and the Attorney General are "parties" entitled to present evidence. Thus, individual investors with possible qualifier problems are not "parties" with their own inherent right to provide evidence on their own behalf. Notably, if the casino license applicant requests, the Board may permit an attorney representing an individual qualifier to present evidence and argument. However, doing so is potentially adverse to the interests of the remaining investors since it could impact the casino's ability to get a license.

In several recent Pete Waldemier columns, Ted Gatzaros has repeatedly said he is going to see it through. "Nothing has changed. I'm not selling out to anybody. I am not going anywhere," he told Pete Waldemier on Friday. Given the system's inherent pressures, many observers are very skeptical of this claim and think it may be negotiation posturing. After all, going forward potentially risks tens of millions of dollars. On the other hand to fight for their vision of Detroit, Ted Gatzaros and Jim Papas have always seemed willing to back long odds. If they hadn't in the past, today we wouldn't have a vibrant Greektown district or the Atheneum Hotel.

We also would not have casinos in the City of Detroit. Hopefully, everyone involved will keep this in mind while doing their jobs in the coming weeks.