The planned merger between Eldorado Resorts Inc. (ERI) and Caesars Entertainment just hit a potential snag. According to documents linked to the merger, it appears that several key individuals at Eldorado, including CEO Tom Reeg, are being investigated by the Securities 
and Exchange Commission (SEC) over their involvement in questionable trading activity linked to IRadimed Corp., a medical device manufacturer. If the SEC were to decide to halt the large casino merger, Eldorado could be on the hook for up to $836.8 million in penalties owed to Caesars.
As part of the process to see the two companies meld into one, Eldorado presented virtually its entire history to the SEC a few days ago in the form of the SEC’s required S-4 filing. That history includes the acknowledgement that it had informed Caesars that Eldorado’s Reeg, chairman Gary Carano, chief operating officer Anthony Carano and board member James Hawkins had been subpoenaed by the SEC over their involvement in the trading activity. Hawkins is on Eldorado’s compensation and audit committees, and is also listed as holding a spot on IRadimed’s board.
The Eldorado filing from September 3 reads, in part, “In the course of Caesars’ reverse due diligence of ERI, representatives of ERI informed representatives of Caesars that Mr. Reeg, Gary Carano, Anthony Carano, the president and chief operating officer of ERI, and James Hawkins, a member of the ERI Board, each had received a subpoena from the SEC in May 2019 relating to its ongoing investigation of trading in the securities of another publicly-traded company.” While it doesn’t specifically mention IRadimed by name, the company is described as “the stock of which the ERI executives had traded and for which Mr. Hawkins had served as a member of the board of directors.”
This revelation may put the $17.3-billion deal at risk, but the SEC doesn’t necessarily have to take a heavy-handed approach. Eldorado said in the filing that it hopes the commission doesn’t call it off because it would have to give $155 million to Caesars if it is forced to step away from the deal. The S-4 filing shows a different figure, though, indicating that Eldorado is on the hook for $836.8 million “in the event that the merger agreement was terminated for failure to obtain one or more required regulatory approvals, or if ERI was in material and willful breach of its regulatory efforts obligations with respect to antitrust laws.”
The exact nature of the SEC investigation into the executives isn’t known. There is a suspected link between the individuals and IRadimed shares, but no mention is ever specifically made of possible insider trading. Now that the subject has come to the front lines, investigative minds will certainly unravel the mystery.
