Refusal by a holding company's directors to meet requests may slow Hollywood Casino Toledo's opening.
EDITOR'S NOTE: This version clarifies a statement by Penn spokesman Bob Tenenbaum on a Japanese investment firm.
COLUMBUS -- State regulators are warning Penn National Gaming Inc. that its tentative plan to open Hollywood Casino Toledo on April 1 is endangered by the refusal of a financial backer's board of directors to submit to background investigations.
The Ohio Casino Control Commission is preparing a letter to Fortress Investment Group, a New York-based limited liability company that serves as Penn's holding company. The letter repeats its demand that individual board members, not just the entity as a whole, must participate in the license application process for casino operators.
"Already the delay of this filing and the delay of other filings have imperiled the scheduled opening of the casino facility in Toledo," reads a preliminary version of the letter. "Any further delay will only serve to further threaten this tenuous timeline."
Penn is investing $300 million in its Toledo project on the banks of the Maumee River adjacent to Rossford. The casino has already begun moving its back-office operations into the building, is engaging in jobs fairs in its search for employees, and is tentatively gearing up for an April 1 opening.
Matt Schuler, the commission's executive director, said Fortress, as an entity, has submitted its required application as a holding company in addition to applications already submitted by Penn and its key personnel. But the Fortress board has so far refused to do the same for its 10 members.
"The commission has had a number of meetings where it has expressed its desire and set deadlines for filings to the legal representatives of Penn National and Fortress," Mr. Schuler said Thursday. "They have indicated that members of the board of Fortress are holding back their applications to see if legislative changes in the definition of 'holding company' go through the [Ohio] General Assembly."
The commission did not experience a similar problem with Rock Ohio Caesars, which is developing casinos in Cleveland and Cincinnati.
Current law, passed last year under then-Gov. Ted Strickland, requires a holding or management company, director, executive officer, board member, manager, and shareholder with any ownership stake or voting rights in a casino operator to submit the same background information as required of the applicant itself.
But subsequent deals negotiated with Penn and Rock by Gov. John Kasich, deals that led to the promise of an additional $220 million over 10 years to the state, would redefine "holding company" as one that has an ownership stake and voting rights of at least 5 percent of a company.
A recently introduced bill in the House includes that language, but it's unclear whether House Bill 386 will swiftly pass before lawmakers recess for the holidays next week.
In the meantime, the casino commission is enforcing the law as now written as it continues to write the rules for the licensing, operation, and security of the casinos before they open.
Penn believes that Fortress would fall below the proposed new 5 percent threshold.
"We argued before the commission that Fortress should not be in that category anyway because it doesn't exercise any direct control," said Penn spokesman Bob Tenenbaum. "In our case, there's a [Japanese investment firm] involved that owns a piece of Fortress, so this information is also being required of them. They don't have any control over the operations of the company, and we have no way of making them submit the application. The commission disagreed."
He stressed that, while Fortress owns a piece of Penn, it doesn't have a direct role in either of Penn's casinos.
In 2007, Fortress and another investor had announced a $6.1 billion deal to take over the Pennsylvania-based racetrack and casino operator, but the deal fell apart the following year as the economy sank. That was before Penn and Rock won voter approval in 2009 to build four Las Vegas-style casinos on four specific parcels of land.
In addition to its Toledo casino, Penn is working toward an opening of its Hollywood Casino Columbus for late next year. Rock plans to open its Horseshoe Casino Cleveland shortly before Penn's Toledo casino.
Contact Jim Provance at: email@example.com, or 614-221-0496.
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