Appeals court upholds Tropicana license denial

July 1, 2008 7:57:45 AM PDT
A New Jersey appeals court has upheld the denial of the Tropicana Casino and Resort's license in Atlantic City.Tuesday's ruling affirmed last December's decision by the state Casino Control Commission to strip the former owners of the gambling resort of their license and put the property up for sale.

The Tropicana had appealed the decision, claiming the commission acted wrongly and exceeded its authority in denying the casino a new license.

Last December, regulators cited an affiliate of Kentucky-based Columbia Sussex Corp. for laying off nearly 1,000 casino workers, causing problems with cleanliness and service, as well as for poor compliance with state regulations. The appeals court decision reached many of the same conclusions.

"The findings made by the commission that Tropicana lacked financial integrity and responsibility, as well as business ability, are amply supported by the record," the judges wrote.

The judges cited "the massive staff layoffs," replacement of senior executives with less experienced people, "the cleanliness crisis," and "intransigence" on the part of ownership in complying with important regulations in upholding the commission's decision.

The property, which includes New Jersey's largest hotel at 2,129 rooms, is up for sale, but still open. A first round of bids was rejected because they were too low.

Tropicana president Mark Giannantonio is running the day-to-day operations of the casino under the supervision of a state-appointed trustee, retired state Supreme Court Justice Gary Stein.

Giannantonio said the ruling will have no effect on the casino's operations.

"I work for the judge now; we severed ties (with Columbia Sussex) on Dec. 12," Giannantonio said. "We're just trying to do the best we can in a very difficult market."

Linda Kassekert, chairwoman of the Casino Control Commission, said she was pleased by the decision.

"The judges unanimously agreed that the decision was fully supported by the evidence," she said.

The court ruling allows the thus-far unsuccessful effort to find a new buyer for the Tropicana to continue. Last month, Stein asked the commission to scarp all the bids received so far for the property.

Among bids believed to have been submitted are a $950 million offer from a group headed by New York investor Joseph Palladino; an $850 million bid by Colony Capital LLC, which owns Resorts Atlantic City and the Atlantic City Hilton Casino Resort, and bids from the Baltimore-based Cordish Company, as well as Planet Hollywood, whose amounts were not publicly known.

The commission agreed to reject them all, and Stein is now soliciting new potential buyers.

Stein has said it is likely the casino eventually will be sold through a pre-planned filing under Chapter 363 of the U.S.

bankruptcy code. It would allow the eventual buyer to obtain clear title to the property, free from any liens or lawsuits, and would be quickly completed, Stein said.