I am writing as pro bono counsel for No Eastie Casino, a group of concerned citizens organized to oppose casino development in the Greater Boston region formerly registered as a municipal ballot question committee. This letter and all attached supporting documentation are filed in support of a formal request that the Inspector General’s office investigate apparent collusion between the Massachusetts Gaming Commission (“MGC”), Suffolk Downs holding company Sterling Suffolk, LLC (“SSL,”) and their Category 1 gaming license application partner Mohegan Sun Massachusetts (“MSM”). We are concurrently requesting that the Secretary of the Commonwealth investigate possible resulting disenfranchisement of Boston voters as well as fraud which may have followed in the Revere special election held February 25, 2014.

For reasons detailed below and in the attached documentary evidence, we have reason to believe that:

(1)   The MGC intentionally agreed to hold confidential in perpetuity a binding agreement as to the terms of a lease between MSM and SSL from the public, the city of Boston, and the residents and city government of Revere at MSM’s request. It did so in the knowledge that full awareness of these terms would have strongly supported Boston’s claim to “host community” status for the most recent iteration of a casino at Suffolk Downs-which would in turn have required a special election to be held in connection with this proposal in the city of Boston.[1]

(2)   Despite this knowledge, the MGC maintained that it had no reason to believe that the city of Boston should be classified a statutory “host community” and expressed open impatience with the city’s repeated requests that the Commission provide proper due process in consideration of its claim.

(3)   In addition to possibly disenfranchising Boston voters by withholding information which would have given them the right to vote on the MSM proposal, the MGC’s failure to disclose may have also materially affected the outcome of the Revere special election on the city of Revere’s host community agreement with MSM held February 25, 2014. In the months preceding the election, voters were explicitly promised by SSL management that a vote in favor of the proposed MSM casino development would guarantee the successful future of the race track at Suffolk Downs and the Massachusetts racing industry generally. However, the MGC, SSL, and MSM clearly knew that SSL would have no obligation whatsoever to maintain its track and that it would have the option of either closing the track immediately or requiring MSM to run it upon execution of the lease. This critical information was never made available to Revere voters.

(4)   On April 28, 2014, the MGC engaged in ex parte communication with SSL to inform its management that a critical provision of SSL’s proposed lease agreement with MSM would likely result in a finding that Boston would be found a statutory “host community” for any gaming establishment at Suffolk Downs. This communication was made two days before a hearing scheduled to decide this question, and after all supporting briefs and evidence had been filed on the record. We have reason to believe that this communication was made with the specific intent of precluding the city of Boston’s claim to host community status for the gaming establishment currently proposed at Suffolk Downs.

In recognition of the gravity of these allegations, we provide the following detailed summary of the applicable facts and law, and have attached all necessary supporting documentary evidence.

LEGAL BACKGROUND

1. a.     Standard of law: “host” vs. “surrounding” communities as defined by G.L.C. 23K

Determination of “host community” status is an essential step in the Massachusetts casino licensing process. The Expanded Gaming Act of 2011 provides casino host communities with the power to negotiate lucrative host community agreements with developers (or refuse to negotiate at all), as well as the right to present these agreements to host community residents for an up-or-down vote.[2] “Surrounding communities” enjoy none of these rights, and may be forced into arbitration to reach mitigation agreements even if local governments and residents strongly object to casino development within inches of their municipal boundaries.[3]

Host communities are defined as those in which the premises of a “gaming establishment” are to be located. A “gaming establishment” is defined for all purposes under the Act as:

[T]he premises approved under a gaming license which includes a gaming area and any other nongaming structure related to the gaming area and may include, but shall not be limited to, hotels, restaurants or other amenities.[4]

The Act does not provide a definition for the word “amenities,” but the city of Revere was able to claim host community status in connection with the prior casino proposal at Suffolk Downs due to the small portion of the race track which lies within Revere’s municipal boundaries.[5]

FACTUAL HISTORY

The Massachusetts Gaming Commission is an administrative tribunal tasked with, inter alia, “ensuring public confidence in the integrity of the gaming licensing process and in the strict oversight of all gaming establishments through a rigorous regulatory scheme.” G.L.C. 23K §1(1). As of the date of this letter, it is presently reviewing two competing proposals for a gaming license in the greater Boston area (“Region A”): an application from Mohegan Sun Massachusetts (“MSM”) to be sited at Suffolk Downs, and an application from Wynn, LLC (“Wynn”) intended for construction in Everett. The city of Boston has repeatedly asserted its right to host community status regarding both projects.

Boston’s claim to host community status for the MSM application primarily rests upon the location of the significant majority of Sterling Suffolk LLC’s (“SSL”) race track within the city of Boston. SSL was previously an applicant for a gaming license in a proposal in which the grounds of the proposed gaming establishment would have been entirely located on the East Boston side of the Suffolk Downs site. Because the racetrack was unquestionably a statutory “amenity” to the gaming establishment at that time, the city of Revere was also deemed a host community and negotiated its own host community agreement with SSL.[6]

In an election held November 5, 2013, East Boston voters rejected a proposed casino at Suffolk Downs while Revere voted to approve the same project. Pursuant to the plain terms of the Gaming Act requiring unanimous approval from all host communities within which a proposed gaming establishment is to be located, our position remains that this vote negated any future development of a casino at Suffolk Downs. Regardless, SSL and the city of Revere announced tentative plans as early as November 6, 2013 to explore casino development on the smaller portion of the Suffolk Downs parcel located within Revere city limits.[7]

On November 27, 2013, SSL and Mohegan Sun Massachussetts (“MSM”) signed a Binding Agreement for Definitive Ground Lease (“The Binding Agreement”) in which both parties agreed to the terms of a future lease to be executed upon issuance of a gaming license to MSM in which SSL agreed to lease the Revere portion of the Suffolk Downs property to MSM.[8]

The Binding Agreement included, inter alia, the following provision:

Landlord [SSL] shall not be obligated to continue, maintain or operate the Race Track. If Landlord elects to continue the Race Track use, it may (but shall not be obligated to) elect to require Tenant [MSM] to operate the Race Track (to the extent not prohibited by the License or applicable law and subject to Tenant being reasonably satisfied with the form and substance of the existing horsemen’s agreement then in effect, to the extent it has not been previously approved by Tenant), pursuant to a commercially reasonable management agreement negotiated by the parties in good faith, which shall provide that Tenant be responsible for all costs and expenses and any operating losses, and shall retain all revenues, attributable to operating the Race Track, and that Landlord shall not be obligated to pay any management fees or other amounts to Tenant for managing the Race Track.

Binding Agreement, at 9.[9]

As will be detailed further below, SSL’s Binding Agreement with MSM that it had no obligation whatsoever to operate or maintain its own race track was directly inconsistent with its public written (although non-binding) promise to maintain racing on the premises as well as its cross-marketing with MSM in advance of the Revere vote.

On December 2, 2013, MSM provided a copy of the Binding Agreement to the MGC’s Investigation and Enforcement Bureau (“IEB”).[10] It subsequently attached a copy of the Binding Agreement to its complete package in support of its application for a Massachusetts Category 1 gaming license filed with the Commission on December 31, 2013 as Attachments 2-04-02, 2-07-04, and 4-79-02.

Concurrent with the December 31, 2014 filing of its RFA-2 application, Mohegan Sun filed a letter through counsel requesting that the Binding Agreement be deemed confidential by the MGC pursuant to its regulatory authority under 205 CMR 103.02.[11] In support of this request, MSM alleged that the Binding Agreement contained “competitively sensitive information,” “including trade secrets that if disclosed would put MSM at a competitive disadvantage to other applicants in Region A.”[12]

On January 9, 2014, Suffolk Downs Chief Operating Officer Paul “Chip” Tuttle filed a letter with the Massachusetts Gaming Commission dated January 6[13] in which SSL promised that it would maintain horse racing on its property for the duration of the fifteen-year gaming license if it were granted to Mohegan Sun. This letter made no mention of the provision cited above in which Suffolk Downs “shall not be obligated to continue, maintain or operate the Race Track,” or of the terms of the Binding Agreement which would permit Suffolk Downs to require MSM to assume all control of and responsibility for the track at any time.

In a Gaming Commission open meeting held January 29, 2014, Commissioner James McHugh acknowledged that he had, with the “help and assistance” of outside consultants who were also reviewing the building and site design components of the RFA-2 applications, reviewed “the application and the plans and the diagrams and the lease agreements that are part of the Mohegan Sun application to see if there were any connections to Boston.” [14]

And the lease agreement that we also took a preliminary look at has the normal things that one would expect to find in a commercial lease. No operational control over how the facility operates, although there is a profit-sharing arrangement and some other things that are typical of a commercial lease. So, my view and my recommendation is that we proceed on that brief review that this is in fact a Revere facility… [15]

Commissioner McHugh did not mention the provision excerpted above which would have permitted SSL to require that full operational control of the race track be assumed by MSM at any time.[16]

In the two months leading up to the Revere special election on the question of MSM’s host community agreement with Revere, “Friends of Suffolk Downs” (a promotional effort sponsored and funded entirely by SSL) sent out a number of email messages to supporters signed by SSL Chief Operating Officer Chip Tuttle.[17] These messages made repeated reference to the MSM casino development as a guarantee for the future of jobs and continued racing at Suffolk Downs. No mention was ever publicly made of the Binding Agreement’s provision allowing management of the race track to be transferred to MSM, or of SSL’s right to close the track at any time after the formal signing of the lease.

On February 25, 2014, a referendum was held in Revere in which voters approved construction of a gaming establishment on the Revere side of the Suffolk Downs parcel.

On March 20, 2014, Boston Mayor Martin J. Walsh and counsel for the city of Boston appeared before the MGC to formally petition for host community status.[18] The Commission strongly indicated its preference at that time that Boston be designated a surrounding community to both Region A proposals, and openly expressed frustration that the mayor was unwilling to accede to this designation.[19]

On March 24, 2014, No Eastie Casino filed a public records request requesting a complete copy of the Binding Agreement and all related correspondence. This request was denied as to the Binding Agreement and granted as to related correspondence in a response dated April 3, 2014.[20] This response alleged that the Binding Agreement was exempt from release pursuant to G.L.c. 4 §7 clause 26(a)[21] with no further grounds or explanation provided.

On April 3, 2014, the MGC announced an ad hoc briefing schedule regarding questions as to the exact location of the “gaming establishment” for casino proposals to be located on the Boston city line in Everett and Revere. A hearing was scheduled for May 1^st in order to reaching a conclusive determination on Boston’s status as a host or surrounding community based upon the Commission’s findings in regard to these questions.

The stated purpose of this process, as explained by MGC counsel, was to:

[A]fford interested individuals an opportunity to submit a memorandum or some kind of brief by April 17, that’s the two weeks, by five o’clock. The intent being to include whatever necessary to help the Commission in its discussion in resolving these questions. They may include things like legal, citation to legal authorities. They should include things like the reasons of course why the individual or group has taken the position they have. It should either attach or reference certain documents that they believe support their position, and include any other relevant information they believe to support their position. Again, all of this would be designed to aid the Commission in reaching its ultimate decision as to what the premises of these respective gaming establishments are.[22]

During the course of the discussion leading up to this announcement at the April 3^rd hearing, several Commissioners made prejudicial statements questioning the city of Boston’s claim to host community status and openly indicating a strong preference that Boston be designated a surrounding community. Chairman Crosby shared his opinion at the outset of the scheduled discussion on this topic that “the city [of Boston] is looking to nickel and dime issues.”[23]

Later in the same discussion, Chairman Crosby reviewed the consequences of Boston’s possible designation as a host or surrounding community with MGC Ombudsman John Ziemba. As seen below, the conversation appeared to be based strongly upon a presumption that Boston would be designated a surrounding community.

CHAIRMAN CROSBY: So, we’re talking August [for issuance of a license if Boston is determined to be a surrounding community].

MR. ZIEMBA: That is correct. In the alternative if Boston is determined to be a host community, all of that goes by the wayside. And then the earliest, you have a host community agreement if that’s executed in expeditious form, the earliest a referendum could occur would be 60 to 90 days after that. And then the submissions thereafter. Substantially longer, obviously.

COMMISSIONER CAMERON: Without arbitration that’s 36 or seven days sooner?

MR. ZIEMBA: Without arbitration 36 or seven days sooner, correct.

COMMISSIONER MCHUGH: We have to think about the timeline today. I’m very concerned, I must say, based on the comments that we heard at the surrounding community meetings[24] we held last week, two weeks ago about the 30 days and then arbitration begins period. I heard in those meeting two things. I heard substantive concerns and they were articulately expressed. But I also heard concerns about not having been heard. And I think that the process the city has used since October has not engaged the community in a way that allows community input into the negotiations and exchange with the applicants that is needed in order to come up with constructive solutions to manifest issues that are real and significant that they discussed. And I don’t see any evidence that there’s been any actual negotiations as opposed to jockeying about information. And I have substantial concerns about whether it’s fair to give the 30 days only before arbitration begins if it turns out that the city is a surrounding community. Fair not to the city as an entity, they made this bed. I recognize that an election took place. I recognize we have a new administration. I recognize that the changes have to be made and adjustments have to be made for differing outlooks. But still I look at the people most affected by this in the two communities and wonder — not wonder, believe they haven’t had a sufficient opportunity to be heard by their own representatives and participate with their own representatives in trying to craft something if it can be crafted that will satisfy their concerns.[25]

The Commissioners then discussed the significant inconvenience to the applicants which the delay caused by Boston’s host community status might create:

COMMISSIONER ZUNIGA: What we’re really talking about here in terms of schedule is that at a minimum it slipped already until around August. It could be longer. We may decide that. We may have a role in deciding how much longer or we may not. Our current schedule or our recent schedule relative to meeting this fiscal year in terms of award of a license is effectively now slipped. And we’re looking at an early date of August or thereabouts for award of a license in that region.

CHAIRMAN CROSBY: We would have been making this decision next month if it weren’t for this process. I think we are bending over backwards to give the city a fair opportunity, a very fair opportunity to make its case and compromising a lot of other parties to do it, particularly ones who are invested in the time. But I think it’s the right thing to do. I hope everybody will be mindful that a big price is being paid by a lot of people to try to accommodate the city’s concerns.[26]

No Eastie Casino, MSM, and Wynn, LLC all filed briefs with the Commission on April 17^th, while the city of Boston filed a letter in which it called the entire ad hoc adjudicatory process into question. MSM’s brief dedicated only a short paragraph to the issue of whether or not the race track was a statutory “amenity” to the proposed gaming establishment.[27]

On April 28, 2014, MGC counsel placed a telephone call to SSL Secretary Charles A. Baker III (and other unnamed members of SSL’s management team) to discuss the provision of the Binding Agreement which would have permitted SSL to transfer operations of Suffolk Downs to MSM.[28] Although the specific details of this conversation are obviously unknown to us, Baker characterized them in a letter dated April 30, 2014 as possible “questions or concerns” regarding this provision, and immediately addressed the inquiry by requesting that the Commission “consider this provision to be stricken and of no further force or effect.”[29]

Baker also proffered the following unexpected concession:

We thought it would be appropriate to note the necessary corollary to our pledge to continue racing-if, by continuing to race, Suffolk Downs would invalidate or jeopardize Mohegan Sun’s application or gaming license, we would not do it. We would not let racing or any other activity on the remainder of Suffolk Downs’ land get in the way of a successful gaming establishment in Revere. While we believe that there is no colorable legal theory that would sustain such a view, and while we remain committed to continuing racing as outlined in our January letter, we want to make clear that we would discontinue racing operations in the event that racing at Suffolk Downs would be considered a legal impediment to Mohegan Sun’s Revere-only gaming license application.”[30]

At its public meeting held May 1, 2014, the MGC granted the city of Boston’s written request for an additional week to negotiate with Wynn and MSM regarding possible host or surrounding community agreements. Limited testimony was offered from No Eastie Casino regarding the status of the race track as an amenity to any casino at Suffolk Downs, and the hearing was continued to May 8, 2014. SSL Secretary Baker’s April 30, 2014 letter did not appear within the “Commissioner’s Packet” issued that morning which included all documents to be considered by the Commission in its review of Boston’s host community status.

On May 8, 2014, MGC Chairman Stephen Crosby opened the scheduled MGC meeting with an announcement that he would be recusing himself from all further business in Region A.[31] Commissioner James McHugh assumed responsibility as acting chair for Region A matters, and proceeded to chair the meeting.

In his opening remarks, Acting Chairman McHugh reiterated the opinion of the Commission, as expressed on previous occasions, that it had ultimate jurisdiction to declare which municipalities should be deemed host communities under the Gaming Act. Presentations regarding the questions raised as to the locations of the two Region A gaming establishments were then heard from the city of Boston, MSM, Wynn, LLC, and No Eastie Casino.

In its portion of the hearing, the city of Boston emphasized the lease provision quoted above which allowed MSM to manage the race track as evidence of Boston’s host community status-only to be informed by the Commission that this provision had just been stricken from the Binding Agreement.

The meeting of May 8th closed with a discussion on the record between the Commissioners regarding the two questions before them on the record. Although the transcript of this meeting is not yet available as of the time of filing this letter, notes and independent recollection of undersigned counsel reflect that the lease provision which would have permitted MSM to assume operational control of the race track was raised by a number of the Commissioners in the discussion of the location of the proposed gaming establishment at Suffolk Downs. Acting Chairman McHugh was especially careful to explain his opinion that the track could not be considered an amenity or in any other way part of the gaming establishment because MSM could not acquire and clearly had no intent to acquire it. Commissioner McHugh specifically mentioned the removal of the lease provision in question as dispositive of the issue, in that he could now definitively find that there was “independence between the properties.” All of the Commissioners appeared to agree that this operational separation was legally significant.

On May 9, 2014 (the day after its “decision in principle” to deny Boston host community status), the Commission released a redacted version of the Binding Agreement.[32]

As of the date of this letter, May 15, 2014, the Commission is scheduled to ratify and issue a formal written decision to confirm its decision in principle. We reserve the right to supplement this letter upon release of this decision.

GROUNDS FOR INVESTIGATION

In light of the facts outlined above, we are seeking independent investigation of the following issues:

• I.              THE GAMING COMMISSION’S INTENTIONAL WITHHOLDING OF THE BINDING AGREEMENT FROM THE CITY OF BOSTON AND THE PUBLIC

We believe that further investigation of the Commission’s conduct surrounding the decision to maintain the confidentiality of the Binding Agreement is now warranted.

It is now apparent that the Massachusetts Gaming Commission was aware that the Binding Agreement as signed on November 27, 2013 would have provided the city of Boston with a credible claim to host community status. Despite this knowledge, the Gaming Commission not only agreed to withhold this document from the public in perpetuity at MSM’s request on grounds which now appear highly questionable, but also made no exception for the city of Boston and did not require MSM to release this critical document to Boston’s attorneys in a timely manner even after the city had formally requested it. The Commission further agreed with MSM that the entire document should remain confidential on the grounds proposed by the applicant, despite what we now know to have been the clearly available option of releasing a redacted version.

• II.            THE GAMING COMMISSION’S CONTINUED DENIAL OF BOSTON’S CLAIM TO HOST COMMUNITY STATUS WHILE IN POSSESSION OF THE BINDING AGREEMENT

We are deeply concerned by the MGC’s stated opposition toward the city of Boston’s bid for host community status while in possession of the Binding Agreement and apparent willingness to disenfranchise city residents despite knowledge of its contents.

The city of Boston reserved the right to claim host community status in connection with the MSM proposal from the very first opportunity well before the December 31, 2013 filing of MSM’s RFA-2 application. In a letter dated December 9, 2013,[33] the city through counsel advised the Commission that it would be unable to definitively determine whether it should be classified as a host or surrounding community. The letter concluded as follows: “In the absence of direct knowledge or facts to the contrary, the City of Boston maintains that the City of Boston is a host community to the Suffolk Downs site.”[34] The city raised and preserved similar claims on the record in written filings and live appearances before the Commission made, inter alia, January 9, 2014, February 10, 2014, and March 20, 2014.

Despite these repeated requests, the issue of host community status for the revised plan at Suffolk Downs was never fully discussed on the record at an MGC meeting until well nearly one month after the February 25, 2014 vote in Revere.[35] Given that the MGC had been in possession of the Binding Agreement since at least December 3, 2013, we have no choice but to conclude that the Commission’s repeated attempts to dissuade and deny Boston from seeking host community status even while in possession of a document which would have allowed the city a strong claim to this status were not made in good faith. Denial of host community status amounted to a disenfranchisement of the entire city of Boston from any opportunity to exercise its collective right to vote upon one of the single most development projects proposed for the greater Boston area in recent memory, and we believe that these circumstances merit further investigation in and of themselves. Without conceding the Commission’s claimed ultimate authority to determine host community status, we now aver that this conduct constituted an abuse of this alleged authority.

• III.           QUESTIONS AS TO THE FEBRUARY 25, 2014 SPECIAL ELECTION IN REVERE

Knowledge of the contents of the Binding Agreement not only would have given the city of Boston a claim to host community status, but would have influenced many Revere voters concerned for the future of Suffolk Downs. We request that the Secretary of the Commonwealth investigate this apparent election-related impropriety.

As outlined above, the public promises as to the future of Suffolk Downs and the racing industry made by SSL, MSM, and the city of Revere simply cannot be squared with the terms of the Binding Agreement at issue here. Given the undeniable importance of the continued future of the race track at Suffolk Downs to the average Revere voter, we believe that the MGC’s apparent collusion in keeping this information from the public may raise issues as to the validity of this election. We believe that further investigation is also necessary in order to determine if Revere Mayor Dan Rizzo was made aware of this provision and, if so, when it was brought to his attention.

• IV.           THE GAMING COMMISSION’S EX PARTE COMMUNICATION WITH SSL MANAGEMENT AND APPARENT COLLUSION TO DENY THE CITY OF BOSTON’S CLAIM TO HOST COMMUNITY STATUS.

A comprehensive independent investigation of the Commission’s apparent ex parte attempts to influence the outcome of its own proceedings is now necessary.

We have serious concerns regarding the April 28, 2013 telephone call between MGC counsel and Suffolk Downs management, as we believe it is unlikely that counsel would have placed this call without the knowledge of the Commission. While this ex parte discussion of a critical issue regarding the Binding Agreement two days before a scheduled hearing certainly deserves further scrutiny in and of itself,[36] we are further troubled by the clear implication which arises from the April 30^th SSL letter that counsel’s “questions and concerns” were not only enough to convince SSL to strike the provision in question immediately but to further offer to “discontinue” racing at Suffolk Downs entirely.

Thank you for your consideration of our request. We remain available to further discuss anything raised within this letter at (617)-567-0508 or noeastiecasino@gmail.com.

Very truly yours,

NO EASTIE CASINO

Matt Cameron (BBO #664359), General Counsel

Celeste Myers, Co-Chair

cc:                    Massachusetts Gaming Commission     

Massachusetts Governor Deval Patrick

Kevin Conroy, Foley Hoag LLP (counsel for Mohegan Sun Massachusetts)

Charles Baker, Secretary, Sterling Suffolk, LL

[1] We suggest that this communication under the circumstances was inappropriate on its face under the commonly-understood standards applicable to any impartial tribunal’s dealings with parties before it. However, pursuant to the Commission’s own Enhanced Code of Ethics: “Except during a hearing or meeting conducted in accordance with the Open Meeting Law, G.L. c. 30A, and/or 205 CMR, Commissioners may not engage in communications that a reasonable person would view as likely to affect the Commissioner’s judgment regarding an application or other matter pending before it in an adjudicatory proceeding or reasonably likely to come before it in such a proceeding, except for consulting with another Commissioner, Commission employees, or consultants whose function it is to aid the Commission in carrying out its responsibilities, and shall take all reasonable actions necessary to avoid receiving such communications…” MGC Enhanced Code of Ethics §22, at 9, available at http://massgaming.com/wp-content/uploads/Enhanced-code-of-ethics-final-approved-by-MGC-2-21-13.pdf.

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