The Atlantic Club Casino Hotel says PokerStars is playing the victim after the termination of its deal to buy the Atlantic City gaming joint. The Atlantic Club’s owners, investment group Colony Capital LLC, filed papers on Monday in New Jersey Superior Court rebutting last week’s filing by Stars’ parent outfit Rational Group, which claimed the Atlantic Club had contravened New Jersey gaming regulations re closing dates for such deals.
Stars made its deal to buy the struggling Atlantic Club in November 2012, but the Division of Gaming Enforcement didn’t deem Stars’ interim casino license application complete until April 10, just 16 days before the deal’s expiry date. State regulations require a closing date no earlier than 120 days after regulators officially start processing the application, so Stars says the Atlantic Club has to wait until early August for the deal to expire. Stars sought and received a temporary restraining order (TRO) preventing Colony Capital from shopping the casino to any other buyer.
The full text of Monday’s filing has yet to surface online, but Northjersey.com’s John Brennan ((@BergenBrennan) has been providing updates. Colony Capital say Stars is attempting to mislead the Court by confusing ‘closing date’ with ‘termination date.’ Colony Capital claims the two are quite independent of each other, and it has every right to observe the latter, as allegedly specified in the deal paperwork. Colony Capital says that in addition to doing “a disservice to the Court” by equating closing with termination, Stars are playing the “innocent victims of regulatory red tape,” a portrayal “as wrong as their legal arguments.”
Legal arguments aside, Colony Capital needs to be called out for offering up the howler that they apparently weren’t aware that Stars had prior legal difficulties in the United States. Atlantic Club CFO Eric Matejevich is described as “not fully aware of the extent of the criminal problems” faced by Stars’ founder Isai Scheinberg as a result of the Black Friday indictments. Matejevich apparently was scandalized to learn that Scheinberg and fellow exec Paul Tate “were fugitives from the American courts.”
As part of Stars’ $731m settlement with the US Department of Justice on the Black Friday civil charges, Scheinberg was barred from taking an active role in Stars’ affairs. Matejevich claims Scheinberg called him on the day Stars learned Colony Capital were backing out of the deal. From this, Matejevich concluded that Scheinberg “was fully involved in, and conversant with” details of the sale process. Matejevich also says Scheinberg was getting updates “on a real time basis” regarding Stars’ license bid, which Scheinberg told him stood a “90% chance” of being approved.
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Right around the time the American Gaming Association made its unprecedented petition against Stars’ license bid, Colony Capital claim “significant information emerged publicly” that some of Stars’ management “were associated with serious criminal activities more extensive and unresolved than previously disclosed.”
With Stars’ allegedly soiled undies thus exposed, Colony Capital aren’t optimistic that Stars’ license will be approved, and they want the TRO lifted so they can put the casino up for bids in what they consider a seller’s market. New Jersey’s online gambling market has a launch date of November 2013 and Colony Capital says that if it misses making a deal during “the critical summer season,” there won’t be enough time to do another deal before the online market opens.
Colony Capital argue that lifting the TRO would cause Stars less “relevant hardship” than the Atlantic Club would suffer if the TRO remained in place. They also argue that Stars failed to demonstrate that cancellation of the deal would cause them irreparable harm that “cannot be addressed adequately by monetary damages.” Besides, Colony Capital believes Stars’ legal arguments are ugly and their mama dresses them funny.
Just one more thing: Colony Capital has no intention of returning the $11m the casino already received from Stars since the deal was signed late last year, as “that was the risk [Stars] took for the opportunity of being at the forefront of online gaming.” The warring parties are due to face off in front of a Superior Court judge on Friday, May 17.