Minority investors debate Emerald deal

Nicole Ziegler Dizon

Wednesday, April 17, 2002 | 9:33 a.m.

CHICAGO -- Emerald Casino Inc. and most of the minority investors in its ill-fated Rosemont casino project urged the Illinois Gaming Board on Tuesday to accept a settlement that would let MGM MIRAGE buy their shares and send $300 million to the state.

But one minority investor, former Chicago Bears safety Shaun Gayle, said the settlement offer is unfair and alleged that women and minorities who invested $32 million in the project were being pressured to accept the deal.

"I'm aware that some of my fellow shareholders, the minorities, have been led to believe that this is the best possible deal," Gayle said. "It is my belief that they've been convinced that this is the only deal."

Emerald offered last week to pay $300 million to the state in return for permission to sell its riverboat gambling license to Las Vegas casino giant MGM MIRAGE for $615 million. Emerald previously had proposed giving the state $160 million, but the board rejected that offer.

The proposed casino has been in legal limbo since January 2001, when the Gaming Board rejected Emerald's request to move its casino license to Rosemont, a Chicago suburb near O'Hare International Airport. At the time, the board alleged that Emerald executives Donald and Kevin Flynn had lied to Gaming Board investigators and that some shareholders had ties to the mafia.

Emerald is fighting the decision both in an administrative proceeding and in court.

Under the proposed settlement, Emerald's shareholders would pay $250 million to the state. Donald and Kevin Flynn would pay an additional $50 million. Anyone identified as having connections to organized crime would be barred from receiving more than their initial investment.

"This settlement proposal is unquestionably beneficial to the people of the state of Illinois, which is the express purpose of the Riverboat Gambling Act," said Emerald attorney C. Barry Montgomery.

Aside from the immediate infusion of cash, the riverboat also would create 1,500 jobs and provide $150 million in annual tax revenues, Montgomery said.

Connie Payton, widow of former Chicago Bears star Walter Payton, spoke for most of the minority investors Tuesday, reading a letter asking the Gaming Board to quickly resolve the issue so they can recoup their $32 million investment.

"Through no fault of our own, that investment is now in jeopardy because of the ongoing dispute between the Gaming Board and the Flynn family," Payton said.

Although the letter did not specifically endorse the latest proposal, Payton said afterward that shareholders would like to see some profit from their investment. Earlier this year, the minority shareholders had proposed surrendering any profit to the state in return for their original investment.

Payton also disputed Gayle's allegation that minority shareholders were too scared to push for a better deal.

"Honestly, it's not true," Payton said. "We're all smart people."

Under state law, 20 percent of the investors in the new casino must be women and minorities.

Gayle said he couldn't support the proposed settlement because minority investors would be forced to sell their shares only to buy back in at a higher price. He also said there is no guarantee that all the minority shareholders would be allowed to reinvest in the new boat, and he argued that they should not have to pay the state because they did nothing wrong.

Gayle also claimed he "got more than one warning" that he should not say anything at the meeting that would hurt the proposed MGM buyout or he would not be allowed to reinvest in the casino.

After the meeting, Gayle would not say who gave him the warning, but added that it was not Emerald.

MGM attorney Cezar Froelich said only he and MGM's chief executive had met with Gayle, and neither of them ever threatened him. Froelich said MGM has told minority investors that they will be allowed to reinvest once they are vetted by the company and the Gaming Board.