Saturday, December 30, 2006

Controversial D.C .Lobbyists/PAC Treasurers Barbara Bonfiglio and Mark Valente III have ties to Team Ilitch; Reps J. Lewis, C. Miller, R. Pomb

PAC-Men Lobbyists
Almost 80 members of Congress used corporate lobbyists
to head their fund-raising committees

By Elizabeth Brown and Shaylyn Cochran

WASHINGTON, October 3, 2005 — When lobbyist William Oldaker sits down to negotiate with a member of Congress, he brings years of experience working for the federal government to the table, as well as the legislative resources of his own firm. He also brings quite a bit of money.

As the treasurer of 23 political committees, groups that raise funds to elect or defeat politicians, Oldaker has signed off on more than $2 million in donations since 1998 to the parties and candidates he is paid to influence, according to a study by the Center for Public Integrity. At the same time that these committees doled out millions to politicians, some 100 companies paid Oldaker's lobbying firms $14 million to influence some of the same lawmakers.

For example, in 2004 four committees that he managed donated a combined $30,000 to Sen. Patty Murray, D-Wash., the ranking member of the transportation appropriations subcommittee. In that same year, Oldaker lobbied Congress on transportation appropriations issues for at least five of his clients. Oldaker did not return repeated calls from the Center.

Oldaker is just one of hundreds of Washington, D.C., lobbyists who play this dual role, influencing members of Congress while also controlling donations that finance their campaigns.

Lobbyists have served as treasurers for at least 800 political action committees and 68 campaign committees in the past six years, according the Center's study. In that time these committees have spent more than $525 million to influence the political process. In other words, these lobbyist-led committees spent more money than President George W. Bush and Sen. John Kerry raised in combined contributions during the 2004 presidential campaign.

"That is truly a lot of money," said Frances Hill, the tax program director at the Campaign Legal Center and a professor of election law at the University of Miami law school. "I think it is all right for people to band together and hire a lobbyist in an expensive suit to represent their interests, but I don't think it is OK to use [campaign] money as the clincher," she said.

Although there are no restrictions on who can be a committee treasurer, Hill said she was "seriously concerned" that so many lobbyists are filling the position. According to federal election law, the treasurer is responsible for all of a committee's expenditures and is also responsible for monitoring contributions.

Meanwhile as these lobbyist-led PACs donate millions, their firms have raked in $3 billion from 10,610 companies and organizations between 1998 and 2004—constituting one quarter of all federal lobbying expenditures for that period. In addition, 557 companies that spent more than $3.5 billion lobbying employed PAC or campaign treasurers as in-house lobbyists.

Most PACs with lobbyist treasurers were actually formed by their clients. New York Stock Exchange lobbyist Cecile Srodes, for example, was the treasurer of two NYSE PACs in 2004. Under her management that year, the committees donated $11,000 to Rep. Michael Oxley, R-Ohio, while Srodes simultaneously lobbied on the "Broker Accountability through Enhanced Transparency Act," which Oxley co-sponsored.

Lobbying expert Bertram Levine said that appointing a lobbyist as the treasurer of a corporate PAC is a "very poor practice." He said that because corporate PACs raise money from the company's employees, they should be the ones designating where the money goes, not lobbyists.

"It buys access," said Levine, a professor of political science at Colgate University in Hamilton, N.Y., and co-author of a book about lobbying. "And that is not something that should be taken lightly; the opportunity to make the argument is the opportunity to win the argument."

'How you buy influence'

Although Levine said that allowing lobbyists to run corporate PACs raises "red flags," he characterized the practice of having them run campaign committees and leadership PACs as the "most obvious conflict of interest." Campaign committees raise money for a candidate's election; leadership PACs are committees formed by politicians to fund other candidates' campaigns.

"Raising money is how you buy influence," Levine said. "There is a loophole here that needs to be closed or at least more closely monitored."

Since 1998, 79 members of Congress have appointed lobbyists as the treasurers of their campaign committees or leadership PACs. There are 39 sitting members of Congress who currently have lobbyists at the helm of such committees. Lobbyists have also been treasurers for major presidential contenders, including Al Gore's 2000 campaign.

For instance, Harold Ickes, a partner at Ickes & Enright Group, is the treasurer of New York Democratic Sen. Hillary Clinton's campaign committee "Hillary Rodham Clinton For U.S. Senate Committee Inc." Ickes clients have included the insurance company Equitas Ltd. and Verizon Services Group. Rep. Rahm Emanuel, D- Ill., co-sponsor of the recently introduced lobbying reform act, the "Emanuel-Meehan bill" also appointed a lobbyist to oversee his campaign committee, "Friends of Rahm Emanuel." Emmanuel's committee raised more than $4 million under the watch of lobbyist William Singer, whose clients include Sara Lee Corp. and United Airlines.

But these lobbyist-led campaign committees are not limited to the Democratic side of the aisle. Lobbyist Timothy McKeever is the treasurer of Alaska Republican Sen. Ted Stevens' campaign committee, "Stevens for Senate." McKeever said that he has worked on the committee since 1980, before he became a lobbyist.

During McKeever's last two election cycles as treasurer, the committee raised nearly $3 million to influence the political process. He insists, however, that his work as a fund-raiser has no impact on his role as a lobbyist.

"I really don't think there is a connection between the two (positions)," McKeever said. "I do relatively little lobbying work for the senator."
Still, in 2003, McKeever reported lobbying on a Senate appropriations bill rider authored by Stevens that would have eliminated funding for certain habitat protection programs in the North Pacific Ocean. The measure was supported by the commercial fishing industry, including Seattle-based Arctic Storm Management Group, one of McKeever's clients. Despite much opposition by environmentalists and other Republicans in Congress, Stevens attached the rider to the bill. In the end, the bill passed, but without the rider.

McKeever did not comment on the specifics of his lobbying, but said that his committee position does not give him any special advantages in attracting clients. "I don't believe they hire me because of it," McKeever said. "Whether (an advantage) is something they perceive, I don't know."

Among the lobbyists overseeing leadership PACs is the Republican political consultant Mark Valente. He serves as the treasurer of 15 PACs, nearly all of which are leadership PACs, including those of House Republicans Joe Wilson, S.C.; Mike Ferguson, N.J.; and Mike Rogers, Mich. [and Candice Miller (CANDICE PAC), Mich.]

Valente, who heads his own lobbying firm Valente & Associates, said he does not believe any conflicts of interest result from heading the leadership PACs of several members of Congress while lobbying. Although at times the job requires fund-raising, Valente said that the majority of his tasks as treasurer involve filling out forms and keeping banking records.

"The members are looking for people they can trust, and we want to help our friends out," Valente said. "And they are already our friends."

Only a few of his clients donate to the PACs he oversees, Valente said, and not many of them have PACs that could make contributions. "Just as we encourage our clients to donate to like-minded members of Congress, we would not exclude the PACs," he said.

By the book

While lobbyists like William Oldaker and Mark Valente are connected to many PACs, neither of them hold the record for the most committees controlled by a registered lobbyist. That distinction belongs to political savant Barbara W. Bonfiglio.

During her tenure as a lobbyist from 1998 to 2001, Bonfiglio mastered the demanding jobs of both overseeing the finances of 31 political committees—more than half of which were campaign committees and leadership PACs—while lobbying for six companies at the D.C. law firm Williams & Jensen. In addition to running FEC-regulated committees, Bonfiglio was also the treasurer of five 527 organizations once connected to members of Congress, which were allowed to raise money without contribution limits.
[Bonfiglio signed Michael J. Malik's MJM Enterprises & Development as a client on Indian and gaming matters while she was concurrenty treasurer of Rep. Richard Pombo's leadership committee RICH PAC. While retaining Bonfiglio's firm, Malik his partners, affiliates and advocates contributed close to $100,000 to Pombo's committees and causes. MJM, a brand few would have on their radar, quietly paid Bonfiglio's firm $220,000]

Though balancing such a vast array of lobbying and campaign finance interests at one time may seem difficult, Bonfiglio could be considered an expert. She wrote the book on it—literally. The attorney is author of How to Cross the Potomac without Falling In, a guide to following the Lobbying Disclosure Act, Federal Election Commission regulations and House and Senate gift rules.

Friday, December 29, 2006

Detroit News predicts 2007 battle between Ilitch MotorCity Casino and MGM Grand Detroit Casino


2007 Industry Outlook:
More tough times ahead
Experts say Michigan's jobless rate will grow in '07

Detroit News Business Staff

This year was a somber one in Michigan, with only a few bright spots for businesses. And 2007 will bring more of the same, experts say.

The domestic auto industry will continue to downsize as it strives to hold its own against global competition. The housing market will remain soft as the state works to replace thousands of auto jobs.

On the plus side, commercial building activity and retail spending should remain healthy, analysts say.

Here's an industry-by-industry breakdown of what's ahead in 2007...

Casino expansion in Detroit in 2007 is the hot topic.

Both the MGM Grand Detroit Casino and the MotorCity Casino will be battling to see who can open it doors first with permanent casino/hotel/convention facilities.

Both are targeting the fourth quarter for completion.

The third Detroit casino -- Greektown Casino -- is lingering far behind with a completion date now set for sometime in September 2008.

Both MGM and MotorCity have now capped their new 17-story, 400-room hotels and are planning to work on the interiors this winter.

"We're moving right along," MotorCity spokeswoman Jacci Woods said. "Our expanded casino will open sometime in the first quarter of 2007 with the hotel completed near the end of the year."

Jacob L. Miklojcik, president of Michigan Consultants in Lansing, a gaming expert, said at this point, it's a 50-50 shot whether they'll get open this year or early next year.

"The land and permits are the killers. Once you have that and the financing, you want to get that sucker open."

Miklojcik said he'd be surprised if there isn't a push in 2007 to expand the number of commercial casinos in Michigan from its current three in Detroit. It would require a change in the state law.

"The move will come in 2007, but whether or not it's successful is another matter," he said.

-- Joel J. Smith

Casinos: Marian Ilitch, owner of MotorCity Casino. Ilitch is one of the few female and sole owners of a major casino in the United States. MotorCity's $275 million expansion of the casino, which includes a 400-room hotel, is expected to open in late 2007.

Thursday, December 28, 2006

GOP Congresswoman received at least $74,000 in bundled funds from Ilitch Family sources after introducing bill for syndicator-backed Indian casino

Detroit casino syndicators Marian Ilitch and Michael J. Malik, and their families, have funneled $74,000 in individual contributions to GOP Congresswoman Candice Miller (MI-10th), since Miller introduced H.R. 831, a bill that would grant approvals for an Indian Casino in Port Huron to be built and managed by an Ilitch/Malik affiliate. The Federal Election Commission has no records to indicate Ilitch/Malik had supported Miller when she first ran for Congress in 2002 or any time before she introduced the bill.

Bay Mills Land Claims Settlement in Congress
In the 108th Congress (2003-04), Rep. Candice Miller (R-MI), a freshman member, introduced H.R. 831 on February 13, 2003 after barely serving one month as a Member of Congress. Rep Don Young (R-AK) agreed to co-author the bill. The bill was the sixth attempt in less than a decade to get congressional approval on land claims settlements for the Bay Mills Indian Community (Brimley, MI). The first three bills were introduced by Rep. Bart Stupak (R-MI). H.R. 831 was finally scheduled to be heard before the House Resources Committee 16 months later (on June 24, 2004).

Rep. Miller represents Michigan’s 10th District, a seat previously held by former Rep. David Bonior (D-MI). Port Huron is in Miller’s districit.

Rep. Stupak represents Michigan’s 1st District. The Bay Mills Indian Reservation is in his district.

Casino Syndicators Behind Bay Mills
Detroit casino syndicators Marian Ilitch and Michael J. Malik, Sr. are backing the Bay Mills tribe‘s casino plans. They have been working with the Bay Mills Indians since 1994 to site a more lucrative urban casino site. Previous proposed locations have included Auburn Hills, Detroit and Pontiac.

Marian Ilitch and her husband Michael Ilitch founded Little Caesars Pizza carry-outs in 1959 and established Ilitch Holdings, Inc in1999. They own the Red Wings Hockey team, Detroit’s Fox Theater and various other dining and entertainment related businesses. He owns the Detroit Tigers baseball team; and she owns MotorCity, one of the three large commercial casinos in Detroit. She continues to partner with Michael Malik on gaming ventures (IH Gaming, Inc. Barwest, Gateway Casino Resorts, etc.). The parent of all these entities is Ilitch Holdings, Inc.

Parallel Political Fundraising Activities
Team Ilitch makes widespread use of "bundling" to federal candidates who have taken significant actions to advance the expansion of Team Ilitch's gaming empire. In addition, Team Ilitch is able to beat the individual contribution limits governing campaign committees by either encouraging establishment or giving to so-called leadership PAC's or contributing to party committees that are designed to directly benefit a specific Member of Congress. Since 2002, the Ilitch Family members and Michael J. Malik, Sr. have contributed $16,000 to Alaskans for Don Young, Inc. (he, and no one elese, co-authored two of the six congressional bills); there are no records of previous or subsequent contributions to Rep. Young. To put it in context with their other giving, Ilitch/Malik also contributed a total of $16,000 individually to Rep. Richard Pombo’s RICH PAC during this same period of time; and when reviewed in combination with their partners, agents and advocates contributed a total of $40,000 to RICH PAC.

On the other end of the giving spectrum, from March 2003 to June 2005 (a little more than two years), Ilitch Family and their casino syndication associate Michael Malik made at least 20 recorded individual (non-PAC) contributions totaling $74,000 to Rep. Candice Miller’s political committees:

1. $14,000 to her campaign committee, Candice Miller for Congress; and
2. $60,000 to her “leadership PAC,” Conservative American Network Delivering Increased Congressional Excellence (CANDICE) PAC.

Nearly all of that was paid on one of three specific dates:

1. $13,000 on March 11, 2003(all to Miller for Congress Campaign)
2. $30,000 on April 2, 2004 (all $5k each to CANDICE PAC)
3. $25,000 on June 30, 2005 (all $5k each to CANDICE PAC)

CANDICE PAC filed a Statement of Organization with the Federal Elections Commission on February 13, 2003 – ironically the same day she introducedH.R. 831.

In the first disclosure report filed by CANDICE PAC July 18, 2003 for the period closing June 30, 2003 there were just three donations recorded totaling $6,500 and received in this order as follows:

1. $5,000 from Michael Malik on March 19, 2003
2. $500 from John Milne on April 25, 2003; and
3. $1,000 from Mark Valente III on June 30, 2003

A review of FEC disclosure documents through June 30, 2004 (three official reporting periods after CANDICE PAC was formed), indicates CANDICE PAC had raised $55,649 from individual (non-PAC) contributors -- 83% of that came from Ilitch Family/Malik and a Florida family (Cherry) that makes gaming devices (ID Interactive) on the same day (April 2, 2004) – any affiliation between the Cherry Family and Ilitch/Malik is unknown at this time.

During the subsequent two year ’06 campaign finance cycle, CANDICE PAC raised $30,594 from individual contributors and $25,000 (82%) came from Ilitch/Malik -- once again avoiding any limits that would apply to donors/funds directed to a campaign committee.

* * *CANDICE PAC may have violated Federal Election laws.* * *

On February 9, 2006, CANDICE PAC made two $5000 contributions to Candice Miller for Congress, Shelby Township, MI; however, contributions from one's leadership PAC to their respective campaign committee are prohibited.

PAC Treasurer Mark Valente III terminated CANDICE PAC on June 28, 2006 after lobbyists’ ties to “leadership PACs” had come under great scrutiny in the wake of the Jack Abramoff scandal. By terminating the leadership committee on June 28, 2006; the committee avoided the spotlight that other active committees endured in the Fall ’06 Elections.

Campaign Finance Summary
From inception to termination, at least 48% of all funds (from individuals and other PACs) received by CANDICE PAC came from the Ilitch Family, Malik. Ilitch/Malik made up a much greater share of the total contributed by individuals (80%+). In various analyses available from PoliticalMoneyLine for Congressional Quarterly ’04 & ’06, it is clear to see that Ilitch Family and Malik were significant forces behind CANDICE PAC and perhaps the reason CANDICE PAC was formed.

In the 28 months that followed February 13, 2003 – the day Rep. Miller introduced H.R. 831 and her treasurer filed paperwork establishing CANDICE PAC -- Ilitch/Malik made individual contributions totalling at least $74,000 to Rep Candice Miller’s controlled committees ($60,000 of that to CANDICE PAC); far out distancing contributions they made to the controlled committees of any other Federal office holder.

During this same period for instance, these casino backers contributed $32,000 to committees controlled directly by Senator Debbie Stabenow (D-MI). Ultimately Stabenow was the beneficiary of more than $113,000 in campaign funds contributed by Ilitch/Malik; however she did not control the majority of those funds as they were directed to Party committees for the Party's use in electing a Democrat to the Senate from Michigan.

Similar to Rep. Miller's circumstances, Stabenow introduced S. 2986, one of the six Bay Mills Indian land claims settlement bills, on Sept. 20, 2002. A hearing before the full Senate Indian Affairs Committee was held two weeks later on October 10, 2002.

The contributions to Stabenow and the Democratic party organizations were delivered after she introduced S. 2986.

As with Rep. Miller, Senator Stabenow (previously a Member of the House of Representatives) does not appear to have received support for her political career from Ilitch/Malik prior to introducing the bill.

You may also want to review these posts:
The Verifiable Truth: Michigan Senator's re-election realizes $113,000 from Detroit syndicators after she introduces plans for their Port Huron Indian Casino
Great Lakes Politics: Bay Mills & Malik get into Plastics; Senator Stabenow announces they'll get $900,000 federal jumpstart
Candy Land:
Calling for More Candy
The Verifiable Truth:
Ilitch Family, Associate increased political contributions 2000%
The Verifiable Truth:
Six bills in Congress, over six years & political gifts in the six figures: That's what Ilitch Family has invested in Port Huron Casino deal

Ilitch/Malik said to have paid $10 million in legal fees advancing Port Huron Indian casino

A surrogate for Detroit casino syndicators Marian Ilitich and Michael J. Malik (Team Ilitch) says the pair have paid more than $10 million in legal fees advancing a proposal for an Indian Casino in Port Huron, Michigan at the site of the current Thomas Edison Inn, and close to the Blue Water Bridge international border crossing.

Richard "Dick" Cummings, president (lobbyist) of the Michigan Machinists Council, is one of the cast of characters recruited by Team Ilitch to support their casino expansion plans. In exchange for his assistance, they've represented they'll allow unions in their casinos. Among other things, they took him to Washington D.C. in 2004 to testify before Congress.

At a November 2006 Port Huron City Council meeting, the Times Herald newspaper quotes Cummings as saying,

"I'm no genius, but I can do the math," Cummings said. "Well, no one builds a casino for $10 million. You don't build the parking garage for that. Malik and the Ilitches have spent more than $10 million just in legal fees." Dick Cummings (Team Ilitch Surrogate)

Michael Malik also spoke at that Council meeting and was present during Cummings' comments. Malik did not refute or make any corrections to Cummings' claims.

The Bay Mills Indian Community (Brimley, MI) has asserted land claims over various property in Michigan including approximatey 110 acres in the Charlotte Beach community. In 2002, the Bay Mills Indians concluded a settlement agreement with then Governor John Engler over these land claims which would allow them to build a casino in Port Huron, 350 miles away from their current reservation lands, in exchange for relinquishing any claims to the 100+ acres in Charlotte Beach. Six months after negotiating that agreement, Team Ilitch has retained the Governor's former negotiator, R. Lance Boldrey, as their attorney.

The agreement needs Congressional approval. More than six bills have been introduced in Congress since 1999 on this matter -- most recenly H.R. 831 by Congresswoman Candice Miller (MI-10th) who has taken in more than $74,000 from Team Ilitch since introducing the bill. Team Ilitch and the Bay Mills Indians have paid D.C. lobbyists close to $1.5 million to push their proposals since 2002. However, little real progress has been made on Capitol Hill.

In 2006, Standard & Poor’s (S&P) downgraded credit ratings of Ilitch Holdings, Inc. subsidiary -- MotorCity's parent company

Slipped by unnoticed in 2006: Standard & Poor’s (S&P) downgraded the credit rating of the Ilitch Holdings, Inc. gaming subsidiary, CCM Merger Inc. (MotorCity Casino); Moody’s put it on the “Watchlist” earlier in the year and gave it a negative outlook rating.

The downgraded ratings based on S&P ratings definitions suggest:

  • CCM Merger, Inc. (MotorCity Casino) as a corporate credit risk (rated B) is “more vulnerable to nonpayment of its obligations” than other companies; and suggest that
  • Nearly $300 million in junk bonds issued by CCM Merger, Inc. (rated CCC+) to fund the Ilitch acquisition of MotorCity Casino are “currently vulnerable to nonpayment;” and also that
  • “In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.”

Troubled Company Reporter, a service of Internet Bankruptcy Library (IBL), has tracked the concerns of these international credit rating companies over the last 18 months. However, one would have to be looking for CCM Merger, Inc. rather than MotorCity Casino, Detroit Entertainment, or any of the other entities that people recognize publicly as affiliated with MotorCity Casino. "CCM Merger, Inc." is MotorCity Casino in disguise.

Both S&P and Moody’s cited MotorCity Casino’s weaker-than-expected operating performance during the first year of Ilitch ownership, a highly competitive operating environment in the Detroit market, and risky leverage of debt to income that’s also higher than what had been anticipated as reasons for their actions.

CCM Merger, Inc. a unit of Ilitch Holdings, Inc./IH Gaming, Inc. is the survivor of Ilitch’s 2005 merger with Mandalay Resort Group’s Circus Circus Michigan, and the entity that raised $950 million in capitol needed to finance Ilitch's $525 million buyout of MGM Mirage/Mandalay Resort Group’s interests.

In 2006,
S&P’s corporate credit rating for CCM Merger, Inc. dropped from B+ to B after one year of Ilitch ownership -- five or six levels below "Investment Grade." CCM Merger Inc. has acquired nearly $1 billion in debt on a venture that Crain’s Detroit has estimated to be worth $1 billion. Troubled Company Reporter estimates it would take the Casino eight years to pay off all the debt before owners could recognize any profits. The highest S&P rating is AAA. Anything below BBB is considered below “investment grade.”

“An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.”

S&P downgraded ratings on the $300 million in junk bonds that were issued to fund CCM Merger’s capital needs to a rating of CCC+ -- seven levels below “investment grade.”

“An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.”

Moody’s has assigned a corporate credit rating of B1 and ratings of B3 for the “junk bond” offerings:
“Obligations rated B are considered speculative and are subject to high credit risk

Moody’s notes:

“CCM Merger is now weakly positioned in its rating category and more vulnerable to a ratings downgrade if future operating results fall short of Moody's expectations.“

The Ilitch organization has a history of risky leverage. Forbes Magazine estimates that the Detroit Tigers have the third worst debt to value ratios in Major League Baseball only two teams leveraged their assets more.

News reports during the 1990s consistently talked about leverage being one of the major factors in the downturn of Little Caesar’s Pizza.

And the amount of unattended or boarded-up real estate in downtown Detroit owned or controlled by the Ilitch Family for more than a decade is another example.

One would have to recognize CCM Merger, Inc. as the parent of MotorCity Casino in order to have caught this earlier in the year. Most people are more familiar with MotorCity Casino, Detroit Entertainment, Ilitch Holdings, etc. and not CCM Merger, Inc. (CCM is a reference to the former Circus Circus Michigan enterprise).

The Standard & Poor's analyst for this matter was:
Michael Scerbo
S&P Analyst
Phone (1) 212-438-7858

Wednesday, December 27, 2006

Notice of $625 million MotorCity offering lead by Deutsche Bank and Merrill Lynch states, Marian Ilitch is co-owner of the Detroit Tigers

A July 11, 2005 announcement of the $625 million offering lead by Deutsche Bank and Merrill Lynch to raise capital for Ilitch Holdings' subsidiary CCM Merger, Inc. (MotorCity Casino) states the purpose of the offering was:

"... to fund the April 2005 acquisition of 75% interest in MotorCity not controlled by CCM's principal shareholder, Marian Ilitch, co-owner of the Detroit Red Wings, the Detroit Tigers and Little Caesars Pizza.

(see complete announcement below)

Duo launch MotorCity funds. (Primary Market)

Source: Loan Market Week
Publication Date: 07/11/2005

Deutsche Bank and Merrill Lynch are leading a $625 million credit facility for Detroit-based MotorCity Casino. The credit, launched at a bank meeting July 6, consists of a five-year, $75 million revolver and a seven-year, $550 million term loan. Pricing on both tranches is LIBOR plus 2 1/2%. Motor City is owned and operated by CCM Merger.

A portion of the funds will be used to fund part of CCM's acquisition of MotorCity, while other portions will be used for expansion plans at the Detroit gaming facility, according to Moody's Investors Service. Moody's assigned a B 1 rating to both tranches and a B3 to $200 million of senior notes due 2013 that the company is also issuing.

Proceeds from the senior notes will be used to refinance CCM's $200 million existing second-lien term loan. The second lien, along with $550 million of first-lien bank debt, were used to fund the April 2005 acquisition of 75% interest in MotorCity not controlled by CCM's principal shareholder, Marian Ilitch, co-owner of the Detroit Red Wings, the Detroit Tigers and Little Caesars Pizza.

The ratings consider CCM's high leverage and single asset profile, Moody's states in its report. Pro forma debt/EBITDA is about 5.2 times, but is expected to increase to almost 7 times over the next 18 months as a result of a $275 million expansion plan that is expected to be funded with $50 million from cash flow and $225 million of additional senior secured revolver borrowings made available under a greenshoe option contained in the credit agreement. Positive ratings consideration is given to the successful operating history of the casino and the size of Detroit's casino market, the report states.

The MotorCity sale has been months in the making after MGM Mirage agreed to buy Mandalay Resort in June 2004 for $4.8 billion and the two companies were required to sell either its MotorCity stake or the MGM Grand Casino in Detroit to comply with Michigan law on casino ownership. Mandalay subsidiary Circus Circus had owned about 53% of MotorCity.

COPYRIGHT 2005 Euromoney Institutional Investor PLC.
Internal use only 10 copy limit. No further use w/o permission.

You may also want to review these posts:

The Verifiable Truth: Detroit Tigers owner doubled his net worth gambling on casinos
The Verifiable Truth: Baseball and Casinos Don’t Mix, or Do They?
The Verifiable Truth: New York Times sports writer recognizes conflicts in Ilitch casino ownership

Gambling Stocks Still Look Like Good Bet

November 21, 2006 2:30 PM ET

Gambling Stocks Still Look Like Good Bet

NEW YORK (AP) - You've gotta know when to hold 'em.

Investors recently doubled down on gambling stocks despite a yearlong winning streak, wagering that expansion will spur growth and bettors will keep spending even as the economy softens.

The Dow Jones U.S. Gambling Index has surged more than 35 percent since the start of the year, easily outpacing the broader market as represented by the Standard & Poor's 500 index, which has added about 12 percent.

The gambling index, comprising 67 stocks weighted primarily toward large hotel-casino operators such as Harrah's Entertainment and MGM Mirage, has generally tracked sentiment about the overall economy.

After rising through April, the index gave back most of the gain amid worries consumers would be cash-strapped as oil prices climbed steadily ahead of the summer months.

"Those concerns didn't come to fruition," said Robert LaFleur, a gaming, lodging and leisure industry analyst with Susquehanna Financial Group. "Expectations were that higher gas prices and a softening housing market would pressure the industry, but visitation has remained strong."

Part of the reason is that casino performance does not necessarily track consumer spending, despite investor reaction.

"The Las Vegas strip market is driven more by overall economic growth," said Morningstar equities analyst Sumit Desai. "The stocks are more cyclical than the underlying business," he said.

And gamblers don't necessarily curb spending in economic slowdowns, anyhow. "The high-roller business is always going to be strong because these guys don't worry about short-term factors," LaFleur said.

Either way, there was more good news Monday when a leading economic indicator edged higher, suggesting the recent housing slump was not enough to offset lower gas prices and a rising stock market.

Another boost for the sector, said Frank Fahrenkopf, head of industry trade group American Gaming Association, is casino operators' expansion into other businesses.

"The industry has moved to the total entertainment package," he said. "People come to destination resorts -- they come to shop, to see shows and to play golf."

That trend in Las Vegas, which attracts more families and couples to what was long considered a bachelor's paradise, has turned off some of the city's more committed gamblers, but it has benefited the operators.

"It used to be that a casino's bottom line was about 65 percent gaming revenue," Fahrenkopf said. That's down to around 40 percent now at some companies, even as gaming revenue surged past $30 billion for the first time last year, according to the AGA.

And casino operators are boosting investment into additional entertainment venues. There are $20 billion worth of projects in Las Vegas alone that will be completed by 2010, said Desai.
"They want to offer a resort experience instead of just gambling," he said.

The danger is that new casinos and hotels could lead to excess supply. "That could be a hiccup for the industry, especially if it coincides with an economic slowdown," he said. "But generally the industry does a great job at managing growth."

Driving that growth -- in Las Vegas and Atlantic City, N.J., and also in the numerous other states that license American Indian casinos -- is increased social acceptance of gambling, Fahrenkopf said. The lobbyist traced the start of public softening toward gambling back to the reintroduction of lotteries in 1963 in New Hampshire. Now 48 states have some form of legalized gambling, from lotteries to horse racing to casinos.

But the surge that benefited casinos most came as poker soared in popularity, first through Internet sites and then, starting in 2002, televised tournaments. The Poker Players Alliance, a player-based lobbying group, estimates there are more than 70 million Americans who play poker. The number of poker tables in Las Vegas has risen to 405 in 2005 from 142 in 2003.

"Poker clearly helps," said LaFleur. "It's a tough game for casinos to make money on, but it attracts gamblers."

Harrah's, the country's largest casino operator, has turned the game's popularity into a major revenue source with its annual World Series of Poker. The company is currently being courted by private-equity groups with a $15 billion buyout offer, excluding debt assumption.

The offer, which would be about a 25 percent premium, helped bolster the sector, LaFleur said, because it sets a mark by which to determine the value of other companies in the sector. "The stocks often trade up in anticipation of other deals," he said.

The news helped Harrah's stock recover after it stumbled earlier this year on investor concerns about its lack of a presence in Asia.

Las Vegas Sands Corp., run by billionaire Sheldon Adelson, and Wynn Resorts Ltd., run by Steve Wynn, have licenses to operate in Macau, China -- the former Portuguese colony on the Chinese mainland that is now considered the next gambling paradise.

The expansion overseas marks the first time U.S. casinos have ventured abroad, lured by a strong gambling culture in Asia and the Chinese government's desire to attract foreign direct investment.

"The market trends are very strong in Asia and there are no indigenous companies with the experience to operate on the scale they want in Macau," LaFleur said, adding that Singapore is also a growing market for U.S. casinos.

The attraction of new markets is clear, but Desai warns that intense capital spending could hamstring some companies. "A lot of times investors think you can't lose with these stocks, but Trump went bankrupt two years ago.

"The problem is they require a lot of investment to keep them fresh and new and they have a ton of debt on the balance sheets. They are inherently risky investments," he said.
You also need to know when to fold 'em.

© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

New York Times sports writer recognizes conflicts in Ilitch casino ownership

December 26, 2006

On Baseball
A Marriage Is a Partnership, Except in Baseball


On the Ilitch Holdings Web site, Marian Ilitch is listed as the company’s vice chairwoman. Among the 15 “companies and venues” listed and described are the Detroit Tigers. A visitor to the site could easily conclude that Marian Ilitch is an officer, if not an owner, of the Tigers and the other 14 ”companies and venues” listed under her name and that of her husband, Michael.

MotorCity Casino is not among those companies and venues. Marian Ilitch owns and operates MotorCity Casino. Under Major League Baseball rules, an owner or officer of a club cannot own or operate a casino. So why does M.L.B. allow Marian Ilitch to own and operate the Detroit casino? Because the Ilitches have assured M.L.B. that Marian Ilitch is not an owner or an officer of the Tigers, the Ilitch Web site notwithstanding.

Michael owns the Tigers; Marian owns the casino. That’s their story, and they’re sticking to it.

The Ilitches don’t talk to reporters. They have not returned telephone calls seeking comment on their baseball and gambling ownership status, nor has the vice president for communications at Ilitch Holdings Inc., Karen Cullen.

Baseball officials, on the other hand, have recently addressed the issue.

“Mike has no ownership interest in the casino, and Marian has no ownership interest in the club,” Bob DuPuy, baseball’s chief operating officer, said Friday. “We don’t have a rule that covers spouses. Since these entities are separate, we don’t deem it a violation.”

DuPuy said that when Marian Ilitch was listed as a director and an officer of the Tigers, “we asked that it be modified and it was.”

What about the Web site listing? “I don’t think she has any direct involvement with the Tigers,” DuPuy said. “My recollection is she divorced herself of any involvement with the Tigers, and we were satisfied with that.”

Tom Ostertag, baseball’s general counsel, echoed DuPuy’s view.

“The annual ownership reports filed by the Tigers clearly indicate that Michael Ilitch owns 100 percent of the club and that Marian Ilitch is not among the club’s officers, directors or employees,” Ostertag said.

The subject of baseball and casinos has arisen because Steve Swindal, a managing general partner of the Yankees, is a partner in a group that may operate three racetracks in New York State and have slot machines at one of them. Bob Nutting, chairman and plurality owner of the Pittsburgh Pirates, had also wanted to install slot machines at a Pennsylvania ski resort he owns.

Nutting abandoned his plan because he did not think he would be able to find a way around baseball’s rules.

Swindal’s and Nutting’s efforts prompted another look at the Ilitch operation. Technically and legally it may be free of any casino smell, but signs remain that a link exists, including the listing of Marian Ilitch as second in command of Ilitch Holdings.

If she is vice chairwoman of the company, and the Tigers are part of the company, how is she not part of the Tigers ownership or at least their executive group?

Michael Ilitch is chairman of Ilitch Holdings, and he is the owner of the Tigers. Christopher Ilitch is president and chief executive of Ilitch Holdings, and his page in the Tigers’ media guide is second only after his father’s. His biography mentions some of the entities included in the company.

Christopher was involved in a casino matter last year when he and Mike Malik, a partner with Marian Ilitch in a casino venture, were the hosts for a $5,000-a-head fund-raiser in the owner’s box at Comerica Park. The event was for Representative Richard Pombo, Republican of California, whose House Resources Committee was scheduled to take up a bill affecting her casino project.

Marian Ilitch is not considered an owner or officer of the Tigers, yet she is an owner or officer of other Ilitch entities like Little Caesars Pizza, the Detroit Red Wings, Olympia Entertainment, Uptown Entertainment and the Fox Theater.

In the first five years of Michael Ilitch’s ownership of the Tigers, the team’s media guides listed his wife as an owner as well. In 1997, Dun & Bradstreet listed her as a team executive, secretary and treasurer. But when she became involved in the casino project that year, she denied having been an owner. Commissioner Bud Selig supported her position.

In April 2005, Westlake Securities of Austin, Tex., announced the $106.4 million sale of Atwater Entertainment Associates’ minority interest in MotorCity Casino to Ilitch Holdings. Westlake said Ilitch Holdings “also bought the remaining equity in the holding company including the controlling interest owned by Mandalay Bay Group prior to its merger with MGM Mirage Resorts.”

Westlake’s release later referred to Ilitch Holdings as “another minority interest shareholder of MotorCity Casino.” The release didn’t say that Marian Ilitch bought the casino or was a minority shareholder in the casino. It said Ilitch Holdings was a shareholder and bought the casino. Where was baseball then?

Yet her biography on the Ilitch Holdings Web site says “Marian purchased the MotorCity Casino in Detroit in April 2005.” Westlake evidently wasn’t in on that deal.

Baseball seems to have ignored the casino transaction the way it has ignored other Tigers transgressions. The Tigers seem to get a pass from Selig. In 1990, he issued guidelines dealing with interviews of minority candidates for decision-making positions. But when the Tigers hired Phil Garner as manager in 1999, they interviewed no minority prospects and Selig did not discipline them.

The Tigers bought their way out of a penalty by establishing a community program involving minorities. The fact that the Tigers repeated the act last year when they hired Jim Leyland, this time conducting sham interviews with two minority candidates knowing they were going to hire Leyland, showed their disregard for Selig’s rules.

Just as the Tigers won the American League pennant under Leyland, Michael Ilitch has also done well — financially — this year. After a year’s absence, he returned to the Forbes list of America’s 400 richest people, his estimated net worth doubling to $1.5 billion from $750 million in 2004.

Matthew Miller, who compiles the Forbes list, declined to provide details of the $1.5 billion estimate but said: “I can tell you the casino holdings are not tremendously significant to the 1.5 number. We have heeded what he has said to a degree that he doesn’t own it.”

Forbes, however, does not have to oversee the enforcement of baseball’s rules. It can accept “to a degree” Ilitch’s story without concern for its absolute veracity. Baseball cannot afford that latitude.

Sunday, December 24, 2006

Ilitch casino partner to assume management of Sinatra's former Lake Tahoe casino

New firm OK'd for Tahoe's Cal-Neva
Ryan Randazzo (RRANDAZZ@RGJ.COM)
December 7, 2006

The Cal-Neva Resort in Crystal Bay will turn its casino over next month to veteran gaming executive Tom Celani and Luna Gaming, pending approval from the Gaming Commission.

The Control Board approved Celani's company Wednesday to lease the casino in the
historic property once owned by Frank Sinatra.

A group of Phoenix and Los Angeles investors called Namwest bought the hotel-casino last year for $30 million, but have been leasing the casino to former owner Chuck Bluth because they are not licensed. Sentry Hospitality of New York is managing the resort for the Namwest investors.

"It needs a lot of investment," said Celani, whose ventures include serving as a partner in Detroit's MotorCity casino and Sodak Gaming, a slot distributor for tribal casinos bought out by Reno-based International Game Technology in 1999.

"It just needs a little love and someone to focus on the casino," Celani said.

He plans to replace the slot machines, but Celani said he'll hold off on other improvements until he's confident Namwest is committed to redeveloping the property.

Namwest plans to spend about $60 million to convert the nine-story hotel's 219 units to 139 one-, two- and three-bedroom condos that investors will buy but occupy only part of the year. Some condos will have separately accessible guest rooms, accounting for the discrepancy in number of units.

The hotel is soliciting buyers for hotel-condominiums, saying the property needs the money from selling hotel-condos for upgrades and the conversion, according to the plans filed in Placer County, Calif.

Cal-Neva straddles the state border, so several government approvals are needed for the construction. Pending those, the units could be ready by 2008, officials have said.

Celani told the Control Board he plans to keep the same employees with the same benefits at the casino.

Pending Gaming Commission approval, Celani will take over Jan. 3.

He said he hopes to fill some of the empty hotel rooms by advertising ski weekends to Reno-Sparks residents, and said the property needs more marketing, especially of its history.

"I don't think they understand it very well," Celani said of the current managers. "I'm a big fan of the history."

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Ilitch has backed loosing sports teams and pizza, but casinos in Detroit? 10.09.06 ● Marian Ilitch #1 on "25 Most Powerful People" to Watch 2006” global gaming business o1.oo.o5 ● My Kingdom for a Casino Forbes 05.08.06 ● Big Lagoon’s casino dream awakens north coast journal 07.28.05 ● Shinnecocks launch legal claim to Hamptons land 06.16.05 ● Ilitch Plans to Expand Casino Empire 07.05.05 ● Ilitch outbids partners 04.14.05 ● Ilitch enmeshed in NY casino dispute 03.20.05 ● Marian Ilitch, high roller 03.20.05 ● MGM Mirage to Decide on Offer for Casino in Detroit 04.16.05 ● Secret deal for MotorCity alleged 02.15.05 ● Los Coyotes get new developer 02.08.05 Detroit casino figure to finance Barstow project 07.07.03 ● Indian Band trying to put casino in Barstow 06.04.03 Pizza matriarch takes on casino roles 10.23.02 ● Vanderbilt gets short straw in negotiations for a casino Lansing Journal 10.06.02 ● Indians aim to drive family from tribe in vicious dispute san diego union tribune 04.09.00 ●Malik owns 2000 Michigan Quarter Horse of the Year 01.01.00 ● Detroit Team to run Michigan’s newest Indian casino 05.23.99 Tiger ties tangle Marian Ilitch 04.29.99 ● Three investors must sell their Detroit casino interests 04.25.99 ● Partners’ cash revived election; They say money was crucial to Prop-E 04.25.99 Investors have troubled histories las vegas review journal 04.27.99 ● Investor served probation for domestic assault on 12 year old boy 04.25.99 Can a pair win a jackpot?: local men hope to... 03.17.97

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