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Hilton ban dims Atlantic City's future - operators may drop casino plans
'The state Casino Control Commission's refusal to grant a gaming permit to Hilton Hotels Corp. will severely handicap future developments here', said observers.
Prospective new entrants are expected to drop their plans rather than face a licensing process that many said has grown more arduous and political.
Hilton, meanwhile, will likely sell its $308 million casino-hotel here because of the denial. Observers said the buyer could be Resorts International, whose gaming permit was renewed despite payments by three advisers to the prime minister of Bahamas.
Hilton was denied a license largely because of past dealings with attorney Sidney R. Korshak, an alleged adviser to Chicago mob figures. He has never been convicted of a crime and is a member in good standing of the Illinois Bar.
Hilton chairman Barron Hilton maintained that the hotel would eventually be permitted to run the casino-hotel through an appeal to the New Jersey superior court. Few observers of the situation agreed, however, noting it is highly unlikely that a state court could order the independent Casino Control Commission to issue a license.
"Probably what all the courts could do, is throw out the two commission votes against approval", said commission spokesman Tom Flynn. "It [Hilton] would still have only two votes [in favor of a permit], and you need three". And, Flynn added, "If our decision is overruled, we would probably appeal to the New Jersey Supreme Court".
Meanwhile, Hilton has asked the commission to reopen hearings to introduce new evidence on its behalf.
The commission's vote against granting Hilton a gaming permit came a few days after it voted 3 to 1 in favor of renewing Resort's license. In both instances, the agency went against the recommendations of the New Jersey Attorney General's office and the Division of Gaming Enforcement (DGE).
Several observers said that they believe the commission purposely rebuffed the state agencies, heightening a political battle that had a direct bearing on its decision.
As further evidence, they cited the disagreement over a 1976 internal report by then Hilton security director Chester St. Vincent, who is now a private consultant. The report alleged that Hilton executive vice president Henri Lewin, currently the head of Hilton's Nevada gaming operations, had met with organized crime figures and provided free rooms to a union official at the chains San Francisco hotel.
The DGE dismissed the report as "absolutely scurrilous and unsubstantial" and failed to provide the commission with a copy, although the DGE knew of its existence since 1981. The commission introduced the report on its own, against the wishes of the DGE, during the last week of the eight-month-long hearings. Commissioner Carl Zeitz called it "most pertinent evidence" and said Hilton's failure to produce the study was the only ground for the denial of a license.
"I think the commission overreacted on this one, especially in light of the Resorts decision", explained Saul Leonard, national partner of leisure-time and gaming industries for Laventhol & Horwath. "Hilton is amongst the finest gaming operators in the world. No one has ever criticized them on any aspect of their involvement in gaming or other wrong-doings. And it was never proved that Hilton did anything wrong.
The chain's whistle-clean image was a prime reason why the state of New Jersey tried to convince Hilton to build a casino here in the early 1980's. "It would have added a lot of legitimacy to Atlantic City because it would've been the only casino operating under a world-class name not known for its involvement in gaming", said Leonard.
He added that the commission's refusal to grant Hilton a license would have "a very negative impact" on the future development of Atlantic city. "A lot of people looking forward to going there are now going to say, Why bother? It's too much trouble", Leonard explained. "And no one is ever going to build a casino again without getting a permit first".
The 614-room Atlantic City Hilton & Casino, scheduled to open in May, would have added $9.4 million to Hilton's bottom line in 1985 and $21.8 million in 1986, according to a report by Michael G. Mueller of Montgomery Securities. Even if Hilton loses its appeal, it would still be able to operate the hotel portion of the Atlantic City property. Most observers doubted the chain would do so, however.
Leonard said the denial of license to Atlantic City would have no effect on Hilton's operation of its Nevada gaming properties, despite the alleged connection between Henri Lewin, executive vice president of Hilton's Nevada operations, an organized crime.
The Nevada casino-hotels generated $69.7 million in revenues during 1984, according to Hilton.
Separately, New Jersey DGE director Thomas O'Brien was reportedly still "leaning" towards a recommendation that State Attorney General Irwin Kimmelman appeal the Casino Control Commission's renewal of Resorts International's gaming license.
The commission voted to renew the permit after extensive investigations into Resort's role in the funneling of funds to Bahamian Prime Minister Lyndon O. Pindling.
A Bahamian investigation last year found that Pindling had been paid a total of $431,000 by two legal advisers for Resorts, attorneys John A. H. Duffus and Julian Maynard. They had been for a bridge connecting Nassau with Paradise Island, where Resorts operates a casino.
Maynard and Duffus, who also represent Pindling, took $431,000 of the $820,000, they were collectively paid by Resorts and gave it to a third adviser, Everette Bannister. He passed the money on to Pindling, who reportedly used it to build a new home.
Throughout the commission's 12-day hearing, Resorts executives maintained that they did not know the money was being passed on to the prime minister.
Source: BonusGambler.com Editors' Choice
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