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Casino Series Part 2: Kraft and Vegas - a new NFL?

Thursday, February 16, 2012

 

Robert Kraft’s unlikely alliance with a Las Vegas tycoon is fueling charges of hypocrisy, with the dominant owner of the traditionally gambling-averse NFL pushing a $1 billion casino while simultaneously claiming to have no stake in it.

Kraft’s stance that he will simply be leasing land to casino mogul Steve Wynn appears designed to avoid the league’s anti-gambling restrictions that prevent owners from being investors in casino projects.

But the stance, at best, is narrowly legal, with Kraft bound to share in the casino’s profits, even if he remains on paper simply the project’s landlord, leasing prime land just across Route 1 from Gillette Stadium, critics say.

Delaware Is Paying Attention

Kraft’s moves have not gone unnoticed in Delaware, where an NFL legal onslaught in 2009 gutted a promising sports gambling game that casinos in the state had hoped to offer. 

Ed Sutor, president and chief executive of Dover Downs, is still bitter over the NFL’s intervention and incredulous that one of the league’s top owners is now teaming up with arguably the world’s best known casino builder.

The amount of money that Wynn will fork over to lease Kraft’s Foxborough land is bound to be much higher than what other commercial developers would be able to offer, Sutor notes.

And that’s because of the money Wynn will be making on slot machines and table games, which Kraft, even if indirectly, will profit from.

Robert Kraft

He contends the league’s opposition to gambling is based mainly on who is raking in the profits.

“It’s kind of hypocritical, if you ask me,” Sutor said, “They fight tooth and nail because they are not getting a piece of the action, and when they get a piece of the action, they are more than happy (to go with it).”

Given Kraft’s role as one of the league’s most revered owners, the move by the Patriots owner to unveil a deal with Wynn for a mega casino across from Gillette Stadium came as a surprise to those familiar with the league’s long-standing aversion to gambling.

The NFL and Vegas

The National Football League is so squeamish about gambling that until recently it would not allow even a mention of Las Vegas in ads running the Super Bowl.

And when tiny Delaware, scrambling to boost lottery revenues, proposed adding sports betting to its three casinos, the league launched a full out legal assault.

The NFL’s legal team hauled Delaware officials into federal court, winning a decision that restricted the state to a watered down version of sports betting that proved only minimally profitable.

The league has also lobbied hard in Washington against proposals by Congressman Barney Frank to legalize and regulate internet gambling as a way of raising badly needed tax dollars.

Still, the last two years since the Delaware case have seen a modest warming in relations between the league and the legalized gambling industry, with the Patriots, among other teams, teaming up to put their logos on lottery tickets.

Kraft's Response

But the league’s prohibition on team owners becoming investors in casinos has remained unchanged.

Kraft’s proposal is just as it has been laid out, a land lease with no involvement in the ownership, said Stacey James, a spokesman for the Patriots owner.

“I can put the basic question to rest,” James wrote in an email. “No, they can’t have any ownership or stake in a gaming operation. This would be a land lease only.”

Still, some question whether Kraft can act like an owner when it suits his purposes - and campaign for a casino across from his stadium – while also insisting he is not invested in the project.

Kraft’s campaign has included watching a Patriots game, in full public view with Wynn and his wife, and a joint press

New England Patriots Photo: Wikipedia/ Pats1

conference with the casino magnate.

Secret talks with some Foxborough officials reportedly began months earlier as the team began sending out feelers on the possibility of a casino project on a sprawling parking lot near the stadium, previously marketed as a corporate headquarters or biotech location.

A lawyer for the Kraft Group drafted last summer reportedly drafted proposed changes in the Foxborough’s zoning regulations that would have paved the way for a casino.

In fact, simply leasing land to Wynn is not enough to provide a buffer between Kraft and the casino proposed for his property, at least when it comes to determining ownership, casino and real estate experts say.

Instead, it comes down to how the lease is structured.

Most leases, especially if they include retail and not just straight office space, give the landlord a cut of the profits. That, in turn, would be enough for most gambling regulators in states across the country to view Kraft as a stakeholder and require him to undergo a background review along with Wynn, said Mark Hichar, a partner at Edwards Angell Palmer & Dodge and an expert on the New England gaming market.

Instead, the lease would have to be based on a flat payment, rather than a percentage of profits. But even if that passes legal muster – some property owners in Las Vegas have structured leases with casinos in this way to avoid having to win approval as investors – Kraft will inevitably be benefiting from a share of the casino’s profits, Dover Downs’ Sutor contends.

Steve Wynn Photo: Wikipedia/ Bobak

“If they do get a license, the rent (Mr.Wynn) would be paying the owner of the football team will be far greater than market value. It will be financed by gaming. This guy will reap the benefits of being associated with a casino. He can call it rent if he wants.”

And to be truly considered just the land guy, with no stake in the casino project, Kraft will also have to act the part, swearing off any involvement in decisions related to the management of the casino.

While it’s not likely that Kraft has any interest in setting odds, it could bar him from having a say in other substantive decisions that might have a greater impact on the community, such as construction and design.

“If he has the potential to override Steve Wynn on anything, he is involved in management,” contends I. Nelson Rose, a professor at Whittier Law School in California and an expert on gaming law.

The ultimate test of whether Kraft’s attempt to profit from a mega casino development without having to formally become an owner is still ahead.

That will come if and when Wynn is able to convince Foxborough officials and voters to cut a deal, freeing him to apply to the newly launched Massachusetts Gaming Commission for a license.

At that point, Steve Crosby, the commission’s chairman, and other board members will have to decide whether Kraft should undergo a background review as Wynn and other investors of the project will.

If so, Kraft will be considered to have a stake in the project beyond just being a neutral landowner with no more say in Wynn’s new casino than the phone company or any other service provider.

“Why make such a big deal about this partnership business unless you are really going to be a player in it?” Hichar asks. “If you are just leasing it, it’s not a very sexy role and not worthy of all this publicity.”

 

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