Illinois regulators frown on MGM MIRAGE casino negotiations

Nicole Ziegler Dizon

Friday, July 27, 2001 | 10:38 a.m.

CHICAGO -- Emerald Casino Inc. confirmed Thursday that it is negotiating with Las Vegas gambling giant MGM MIRAGE to sell its top executives' shares in a proposed Rosemont riverboat -- talks the Illinois Gaming Board called "not acceptable."

MGM MIRAGE filed a statement with the federal Securities and Exchange Commission disclosing that the company had signed a 30-day agreement with Emerald to exclusively negotiate a possible acquisition.

The five-member Gaming Board, which voted in January to deny Emerald a license renewal, issued a statement denouncing the negotiations. Emerald has appealed the board's denial.

"The current process involving Emerald's negotiations with MGM is not acceptable to the board," members said. "The only matters pending before the board are the two administrative hearings concerning the denial of renewal and the revocation of Emerald's license."

The board had cited Emerald's failure to disclose earlier shareholder transactions as one reason for denying its request to move its license from a defunct boat in East Dubuque to Rosemont, a Chicago suburb near O'Hare International Airport.

Regulators also alleged that top Emerald officials Donald and Kevin Flynn had misled investigators and that some people associated with the casino had "insidious" ties to organized crime. Emerald denied those allegations and has appealed to an administrative law judge.

Donald Flynn and his son, Kevin Flynn, who own 52 to 53 percent of Emerald's stock, have expressed an interest recently in selling their shares.

An Emerald spokesman said Thursday that any agreement with MGM or any other company would be contingent on the Gaming Board's approval. He declined comment on the board's statement.

"Because Emerald is involved in litigation with the Gaming Board, they feel it's only appropriate to respond to that statement in a public forum like a Gaming Board hearing," he said.

MGM MIRAGE spokesman Alan Feldman said his company is trying to set up a meeting with the Illinois Gaming Board to discuss the negotiations.

"It is obviously an unusual circumstance for everyone involved," Feldman said.

MGM MIRAGE executives announced their interest in Emerald during a Tuesday conference call with investors. Feldman said the company, which owns or operates 18 casino properties in the United States, Australia and South Africa, hopes to move into the lucrative Chicago riverboat market.

MGM MIRAGE and Emerald declined comment on a possible price for the shares. Media reports have put the price at between $250 million and $300 million.

A law signed by Gov. George Ryan in 1999 that brought dockside gambling to Illinois and set up a $12 million state construction program also seemed to grease the skids for the Emerald move. That law said the board "shall" approve the switch.

But Gaming Board members decided the law did not override their authority to investigate casino licensees and eventually rejected Emerald's request.

Since that vote, Ryan has replaced three of five board members. Gambling critics have accused the governor of trying to stack the deck in favor of a deal that would allow the Rosemont casino to go forward after the Flynns and questionable shareholders sold their holdings -- likely at a considerable profit.

Ryan said Thursday that he was insulted by suggestions that he had chosen politically motivated board members.

"The people that I appointed to that board are solid, honest citizens that are going to do what's right on that board," Ryan said. "I have given them no instructions at all."