Judge Questions $40M Price Drop On Boston Land Sale To Wynn
Encore Boston Harbor is a bastion of luxury and a sought-after gambling destination. Questions concerning the land sale have swirled for years. Now, a judge seeks an investigation into the $40 million price drop Wynn enjoyed on the Encore Boston Harbor property.
Massachusetts Chief Justice of the Appeals Court Scott Kafker released an opinion paper this week. In it, Kafker questions the land sale that led to the casino’s construction. He said circumstances of the sale are suspicious enough to warrant further investigation.
The decision comes nearly eight years after FBT Everett Realty sold the parcel of land to Wynn. It’s a transaction in which the Massachusetts Gaming Commission may have played a dubious role.
FBT and Wynn agreed to $75 million land sale
In 2014, FBT and Wynn closed a $35 million deal for the riverfront property on which Encore Boston Harbor sits. The transaction seemed simple enough. However, one detail seemed amiss: FBT originally sought $75 million for the land.
What happened between that initial ask and the final sale price? The answer may be the stuff of crime movies. Kafker’s opinion lays out the details of the sale, and why the price may have dropped $40 million.
FBT bought the property in 2009 for $8 million. In 2011, Massachusetts passed the Expanded Gaming Act, turning FBT’s riverfront property into a prime location for a casino. Wynn CEO Steve Wynn pounced.
Wynn offered FBT what amounted to a $100,000-a-month retainer to reserve the property. He also agreed to pay $75 million to buy the property if he could obtain a Class 1 gaming license.
A ‘hidden ownership interest’ emerges
As the sale worked through all the red tape, Wynn applied for a gaming license. Per regulations, the state’s Investigations and Enforcement Bureau vetted Wynn Resorts and FBT. During their vetting, they discovered that Charles Lightbody, a man with ties to organized crime, had a “hidden ownership interest” in FBT. They also found some inconsistencies in FBT’s accounting.
FBT alleges that, when the gaming commission found this out, the commission pressured Wynn Resorts to negotiate a lower sale price. FBT alleges the commission wanted Lightbody to get less money from the sale.
In his opinion, Kafker wrote:
“The commission was troubled by what it believed to be a lack of candor by FBT’s principals and their failure to fully cooperate with the IEB’s investigation. It was also anxious that individuals with a criminal background and associations with organized crime should not profit from the award of a casino license to Wynn for the Everett parcel.”
FBT’s hands were tied. If the state gaming commission rejected Wynn’s license, the sale would fall through. So, in 2014, FBT agreed to sell the property for $35 million. The company, of course, was not happy about this and claimed the commission cost them millions of dollars.
Though Kafker stopped short of saying FBT’s claims were legitimate, he did offer this significant observation: “The record, which is based on the limited discovery that has occurred so far, reveals some evidence supporting FBT’s allegation.”
Could the gaming commission be in hot water?
Yes. Kafker said he believes the commission isn’t guilty of contract interference regarding the sale because it is immune in such situations. However, the commission’s role in the $40 million “discount” could violate rules regarding “government-compelled transfers of economic benefits,” Kafker wrote.
“The commission essentially compelled the transfer of the FBT property from FBT to Wynn for $40 million less than the agreed upon price without in any way resolving the criminal ownership issues subject to the exercise of the commission’s investigatory and law enforcement powers. Government-compelled transfers of economic benefits from one private party to another in this context raise significant regulatory concerns.”
While the judge seeks an investigation into the $40 million price drop Wynn enjoyed on the Encore property, Kafker noted the sale needs to undergo further discovery. That is the legal term for both parties in a lawsuit to show each other what evidence they have.
In a statement released Monday, the Massachusetts Gaming Commission said it is happy Kafker sided with it regarding contract interference. The commission said it is ready to move through legal proceedings related to its role in the $40 million price reduction.