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September 19, 2014

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Union pushed; Trop fell

Behind the scenes, the Culinary and its parent helped bring about the loss of Tropicana’s New Jersey license and its filing for bankruptcy protection

The owners of the Tropicana might have filed for bankruptcy protection regardless of labor union tactics.

But the Culinary Union and its parent certainly saw where the Tropicana, a long-standing nemesis, was vulnerable. And the union then set itself on a course of action that it knew would lead to the company’s financial unraveling.

The gaming company has filed for bankruptcy reorganization after the union’s parent, Unite Here, led a successful charge for the revocation of its New Jersey gaming license.

The union’s maneuvers reveal its strategy in nasty contract disputes: Take the fight beyond the negotiating table and to members of corporate boards or, as in the case of the Tropicana, try to hasten bankruptcy.

Unite Here did it with the help of its Las Vegas and Atlantic City affiliates.

Union leaders say they didn’t set out to force the bankruptcy of Tropicana Entertainment, the gaming subsidiary of Columbia Sussex Corp. But they concede that when they fought to have the company’s New Jersey gaming license revoked last year, they knew the company was so highly leveraged that bankruptcy was all but inevitable.

“We knew they were a house of cards,” said Robert McDevitt, head of Unite Here Local 54, the Culinary’s Atlantic City counterpart. “If you pulled out the main driver for income, it wouldn’t take long for the rest of it to come tumbling down.”

Indeed the company, still smarting from its battle with Unite Here, seemed to imply in its Chapter 11 bankruptcy filing this week that the union’s “very public, political and vociferous” campaign in Atlantic City had played a key role in the Casino Control Commission’s decision. The company said the commission’s ruling was based on “misinterpretation of one of its own regulations, as well as ... consideration of matters outside its regulatory authority.”

License revocation, the company noted, was “advocated only by the union.”

Tropicana declined to elaborate beyond the court record. “We’re trying to reorganize the company and create a future for it,” spokesman Hud Englehart said. “There’s nothing for us to say about (the union). There’s no sense in dredging up the past.”

Columbia Sussex Corp. Chief Executive William Yung initially expressed reservations about entering the New Jersey casino market because of the state’s “strong, militant unions,” according to a former Tropicana executive who testified in the licensing hearings.

He was right to be concerned.

Richard Hurd, a labor relations expert at Cornell University, said the Tropicana campaign is representative of the kinds of corporate pressure tactics Unite Here has employed in the past, to great effect.

For instance, when the Culinary wanted to organize workers at the vehemently anti-union MGM Grand in the 1990s, it conducted opposition research on members of the parent company’s board of directors. The union created bad publicity for the directors, who often sat on other corporate boards. The union attacked those other companies as well. Soon enough, sitting on the MGM board became more trouble than it was worth, and MGM was forced to deal. It gave the union a year to organize workers, free from retaliation.

“They want firms they can deal with, firms that will negotiate and accept industry standards,” Hurd said. “Any time they are dealing with a company that fights the union at every stop, their goal is to inflict as much pain as possible.”

The message to employers, Hurd said, is clear: Change your tune or leave.

In the case of the Tropicana, the Atlantic City local didn’t like what it was hearing. After a second round of layoffs last spring, McDevitt, the union boss, told Tropicana executives, as well as other Atlantic City operators, “We’re going to war with this company.”

He expected some pushback. None came. The reactions from the city’s other casino operators ranged from indifference to downright encouragement, McDevitt said.

And so Local 54 began a coordinated attack. Among those involved in the strategy sessions were international Co-President John Wilhelm and Las Vegas Culinary leader D. Taylor, who also runs Unite Here’s gaming division.

Researchers in Las Vegas and New England began collecting information on staffing levels and health standards at the property. Members conducted customer surveys of Tropicana patrons on the Atlantic City boardwalk. The information served as the basis of a damning report the union issued to hundreds of investors and analysts that fall.

Customers and workers alike complained of bedbugs, roaches and filthy rooms.

Meanwhile the union was conducting a public campaign, announcing in the news media that it would oppose Tropicana’s relicensing. It also worked its political connections in the New Jersey Legislature, making its case against the company and lobbying to be a party in the licensing hearings.

At the same time, the Culinary Union was battling with Tropicana management at the bargaining table in Las Vegas. The company had already cut hundreds of workers’ jobs and was proposing to take away the union’s prized health care and pension plans, hallmarks of its contracts citywide.

Negotiations were at a standstill, and much was riding on the New Jersey licensing hearings in December. “We knew that if we were successful in New Jersey there was going to be a cascading effect,” McDevitt said. In other words, union officials hoped a revocation in Atlantic City would prompt scrutiny from regulators elsewhere, including Nevada.

The New Jersey Casino Control Commission ultimately denied Tropicana’s license renewal, saying the company lacked the good character, business ability and financial responsibility required under state law.

In their report and public comments, commissioners downplayed the union’s influence, saying their decision was based purely on regulatory violations such as the company’s failure to set up an independent audit committee. But industry observers said Unite Here created such bad publicity for Tropicana that regulators would have been hard-pressed to act otherwise.

“They stoked the public fire,” said Joseph Weinert, senior vice president of Spectrum Gaming Group, an Atlantic City-based consulting company. “I would find it difficult to believe that the casino control commissioners were not in some way influenced by the drumbeat of Local 54.”

The property has since been placed under state control and is now on the auction block.

In Las Vegas, within days of the decision, the Culinary Union stepped up the pressure, submitting a report to the Nevada Gaming Control Board detailing what it said was evidence that deteriorating security conditions posed a safety threat to workers and the public and bring disrepute on the gaming industry.

After hiring a private investigator, the union alleged that prostitutes and pimps have a regular presence at the casino. Culinary head Taylor also blasted the company for what he called widespread payroll problems, saying workers were being routinely shorted.

Then, last month, the union highlighted an incentive program Tropicana maintained for housekeepers: The company offers a $25 reward to maids who catch live bedbugs.

The campaign, however, did not have the desired effect. Nevada regulators said they were monitoring the situation but have found no violation of gaming laws.

The union’s goal, nevertheless, remains the same.

“We think that Bill Yung should be gone,” Taylor said.

The Culinary may yet get its wish. The company filed for bankruptcy court protection this week and shortly thereafter Tropicana bondholders petitioned the U.S. Bankruptcy Court in Delaware for Tropicana Entertainment to be placed under a court-appointed trustee’s control.

More reserved than his Atlantic City counterpart, Taylor downplayed the union’s role, saying the company’s own business practices led to its downfall. He did, however, offer a parting shot: “Tropicana did not view workers as a valuable commodity, and I think they regret it now.”

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