Even as construction and renovation work proceeds in earnest on site, we’re picking up bits and pieces of discouraging information about the administrative aspects of the Orange County casino project.
Specifically, we’re hearing that there may be some serious issues that will need to be hammered out between the two major partners in the venture, the Cook Group and the Lauth Group (we’re using the shorthand titles by which the partners are best known, and not the names that they are using for assorted participants in the joint venture).
Watch to see what – if anything – unfurls before theIndiana Gaming Commission this week about whether this will remain a 50-50 partnership, and while we don’t think that we’re into the kind of “can this marriage be saved” situation we’ve seen before on some other projects, word in the Springs Valley is that things aren’t quite as amicable as they have been as the partners bicker over whether certain respective commitments have been fulfilled.
You may also hear soon about concerns and issues related to the adequacy of financing for the OC project.
When the Indiana Gaming Commission met a couple of days after Feigenbaum's report, Gaming Commission Executive Director glossed over any problems he may have been aware of. Feigenbaum reported on June 22 in IGI:
With respect to the financing matter, Indiana Gaming Commission members were told at their June 7 meeting that while the Blue Sky Casino partnership secured $270 million in financing via the bond route in a timely manner, the partnership did not meet the May 1 Commission-imposed deadline for securing an additional $30 million line of credit via a revolving loan required by the state. Blue Sky has apparently since closed on the $30 million revolver end of the transaction, but commissioners may decide to fine the entity at the September Commission meeting for failing to adhere to the original deadline.
The Indiana Gaming Commission was informed publicly at the same meeting earlier this month that the dispute between Blue Sky partners Lauth Property Group, Inc. and Cook Group, Inc. and their respective subsidiaries will be resolved via arbitration. Commission Secretary Don Vowels, the panel’s former chair, revealed that an agreement between the two partners required Lauth to transfer 25% of its interest in Blue Sky to Cook if financing for the project was not finalized by April 15.
At this point in time there has been no determination as to whether there has been any change in ownership,” Commission Executive Director Ernie Yelton informed commissioners. “That’s still under debate.” “All I know is there are some allegations that the agreement between the two entities – not an agreement with the state of Indiana or the Gaming Commission – there’s a dispute as to how that would apply to control of the project, and I know that has not been resolved,” Yelton tells Mike Smith of the Associated Press. “One reason it was not put on the agenda is there has been no impact whatsoever on this project. None at all, so if that would ever occur, then obviously everyone would be informed and people would appear to answer questions.” The Cook Group’s Steve Ferguson declines to elaborate on the details, telling Lesley Stedman Weidenbener of the Louisville Courier-Journal “that the parties had decided not to discuss the matter in public,” as she writes.
If Vowels' account of the agreement between Cook and Lauth is correct, then clearly what is at issue in the Orange Co. lawsuit is control of the project. According to Vowels, the failure to nail down the financing by April 15 meant that Lauth had to transfer 25% to Cook, giving it 75-25 control over the project. A transfer of that big of a stake in the casino could easily cost Lauth hundreds of millions of dollars in lost profits if the casino is successful. Feigenbaum also reports that Vowels expressed concern that Yelton and his staff were not scrutinizing Blue Sky in the same manner as it had scrutinized Trump's failed attempt to build a casino. Feigenbaum writes:
Commission member Vowels, who chaired the panel during much of the earlier proceedings involving the original Orange County operating agent award to Trump Springs Valley, questioned why the Commission and its staff were not scrutinizing Blue Sky in the same manner it did Trump, citing the missed financing deadlines and the untidy quarrel between the respective partners. Executive Director Yelton explained that the Trump and Blue Sky circumstances were different: Trump had filed for bankruptcy protection, he observed, and was unwilling or unable to provide the State of Indiana with a firm commitment to complete the Orange County project, while “We have seen nothing that has impacted this project at all,” even with the financing delay and dispute between the partners.
As news of Cook's lawsuit against Lauth has spread, there is growing concern that Yelton misled the Commission, which isn't scheduled to meet again until September. Rumors began circulating around Orange Co. last week that a lawsuit had been filed, but noone could obtain confirmation of it. Several reporters were reportedly digging for information through the end of last week, but they all kept coming up with dry holes.
The Louisville Courier-Journal's Grace Schneider finally broke this story today, revealing that Judge Larry Blanton had sealed the records to the suit without holding a hearing at the request of Cook's attorneys. If the subject matter of the suit is what it appears, it is inconceivable that Indiana law would sustain the judge's order sealing the records.
Under Indiana's Access to Public Records law, most civil court records are general accessible to the public. There are some mandatory items which the court must seal, even without a public hearing. Only two mandatory provisions of state law could possibly allow the records to be sealed without a hearing. One covers trade secrets, and the other covers confidential financial information; however, the financial information mandate does not include information that is filed with or received by a state agency. Those court records not covered by the mandatory provisions of the Access to Public Records law may only be sealed after the court holds a public hearing and makes findings of fact and conclusion of law upon a showing of the proponderance of the evidence that:
Based upon the statutory criteria for sealing the record, it is hard to argue that any public interest is served. The real purpose in sealing the record it seems is to withhold the information from the Gaming Commission, which might reconsider whether the partnership is suited for holding a gaming license upon learning the contents of the suit.
(1) a public interest will be secured by sealing the record;
(2) dissemination of the information contained in the record will create a serious and imminent danger to that public interest;
(3) any prejudicial effect created by dissemination of the information cannot be avoided by any reasonable method other than sealing the record;
(4) there is a substantial probability that sealing the record will be effective in protecting the public interest against the perceived danger; and
(5) it is reasonably necessary for the record to remain sealed for a period of time.
The judge's order in the case is reported to be a mere page in length, and news reports don't reveal the specific grounds he gave for sealing the record. Presumably the ruling did not involve an item which the law mandates be sealed because the Louisville Courier-Journal reports that Judge Blanton has scheduled a hearing for July 31. It is conceivable that the parties will resolve their differences by that point and the lawsuit will be withdrawn, thereby making it unnecessary for the court to conduct the hearing.