After weeks of speculation that Wynn Resorts Ltd. might delay the opening of the Encore Boston Harbor to appeal a $35 million fine against it by the Massachusetts Gaming Commission and a personal $500,000 fine against its CEO, Wynn threw in the towel, and announced it would open the 3-million-square-foot $2.6 billion casino resort on June 23—”100 percent on schedule.”
With less than a month to go, the great majority of the 3,100 slot machines, 143 table games, and 88 poker tables are operational. The 671 hotel rooms are almost ready for occupancy. About 5,500 people have been hired and a third of them are on the job. The company is committed to hiring a large portion of them from the immediate area.
The Wynn board said they would abide by the decision while indicating they felt that it went too far: “The board of directors of Wynn Resorts appreciates the findings by the Massachusetts Gaming Commission that it, and its qualifiers, remain suitable by clear and convincing evidence. The company will not file an appeal. However, we do not agree with the finding that Matt Maddox violated company policy, and are pleased that neither the Commission’s Investigation and Enforcement Bureau, nor the Special Committee of the Board, found that he, or any other current company executives, violated any company policies in managing the allegations against the company’s founder.”
It continued, “The Nevada Gaming Control Board, under whose jurisdiction the alleged activities of our founder occurred, conducted its own year-long investigation and recently reaffirmed Matt Maddox’s good standing in Nevada, and praised him for creating a ‘paradigm shift’ and for taking ‘corrective actions that have been impressive.’ We believe Matt’s leadership has been, and will continue to be, essential in our transformation from a founder-led company to an innovative global corporation. Matt has created a more diverse, inclusive and respectful workplace culture—all while maintaining focus on executing the company’s business plan.”
The commission, in its April 54-page report on the company had said that its fine of Maddox, reflected his “clear failure to require an investigation about a specific spa employee complaint brought to his attention.”
The board said disagreed with the MGC’s comments regarding Maddox, “and believes they are not supported by the evidence. Therefore, we would support his decision to exercise his rights and appeal the fine imposed upon him, and believe he would rightly prevail in his appeal. However, that appeal would delay the final conclusion of this matter, and therefore we appreciate Matt’s decision to forego an appeal in order to allow closure for the Company. The Company will pay the fine imposed on him and has today delivered payment of that, and the Company’s fine, to the Commission.”
The board concluded that it looked “forward to working with the Massachusetts Gaming Commission staff on an implementation plan of the imposed conditions that meets the commission’s and company’s mutual goals. Wynn Resorts looks forward to opening Encore Boston Harbor on June 23, which will be the first five-star gaming resort in New England.”
But a report in the Las Vegas Review Journal about a domestic dispute between Maddox and his wife Katherine at the Red Rock Casino Resort in Summerlin in late April was revealed last week. According to the report, the couple was walking through the casino and Maddox tried to take a phone away from Katherine, which resulted in her hitting him multiple times, and documented on casino surveillance.
The incident was resolved with Katherine Maddox agreeing to take six months of domestic violence counseling and perform at least 48 hours of community service. Regulators were notified of the incident in both Nevada and Massachusetts, a spokesman for the company reported.
In a statement, Maddox said, “My wife and I were in an argument on our 17th wedding anniversary. No one was hurt and no one was in any danger. It was a misunderstanding. We are deeply in love and incredibly supportive of each other for over 20 years. This has already been resolved in court. It is a private matter and will be my last comment.”
The company also responded. “The board of directors and the company are supportive of Matt and Kay and their family. Because this is a personal matter unrelated to company business we will have no further comment.”
Last week’s announcement about the June 23 opening comes after a three-year building schedule was shaken to the foundations last year when former CEO and founder Steve Wynn’s long history of sexual allegations by employees—dating back to 2005—was ousted in a January 2018 expose in the Wall Street Journal.
The allegations forced the legendary casino mogul to resign and sell all his holdings. A new corporate administration swept the company nearly clean of any executives or board members who might have had anything to do with keeping the allegations against Wynn secret when the MGC was deciding whether to grant Wynn a license for the Boston metro market.
Those allegations, which Wynn has always denied, triggered a yearlong probe by the investigations arm of the MGC into the company. The MGC allowed Wynn to keep its license but slammed it with a record $35 million fine. It also fined MGC CEO Matt Maddox with a personal $500,000 fine for not being informed enough to know about Wynn’s cover-up when Maddox was his protégé and a high-level executive. It required Maddox to take “leadership training.” It set an independent monitor to keep an eagle eye on the corporation’s operations in Everett for at least three years and as long as five years to ensure that it maintains its new high standards of respect for employees. The monitor will issue progress reports every six months. These were, industry analysts noted, humiliating requirements and the company took umbrage, although not publicly. A company spokesman noted that company officials were working with the commission “to understand the intent of the monitor condition in their recent decision.”
MGM and Wynn Flirt
For a few weeks the company apparently weighed its options of leaving the Bay State. During a first quarter earnings conference call CEO Matt Maddox said the opening date for the Encore might be delayed a week or two. At the same he and his team openly negotiated with nearby MGM, which operates a casino in Springfield about possibly selling the Encore property. However from when the two companies announced they were talking until they withdrew from talks, was only four days.
That public flirting was greeted by nearly universal hostility by state and local officials, including Everett Mayor Carlo DeMaria, and Springfield Mayor Domenic Sarno. They not so subtly reminded the company that they had the legal means to jam a wrench into any attempt to switch operators for the Boston property. Such as the fact that state law prevents one company from operating two casinos in the state. And that the MGC must approve of any gaming operator. And that the host cities of Springfield and Everett had negotiated airtight host agreements that gave them considerable say if an operator wanted to sell and move.
Governor Charlie Baker and House Speaker Bob DeLeo also expressed their public displeasure and the commission didn’t need to add that its blessing was required for the MGM to sell the Springfield and for Wynn to sell the Encore in Everett. MGM’s buyer would have to be willing the undergo the state’s colonoscopy level suitability review—and agree to the requirements MGM had imposed on it by Springfield and the surrounding towns.
The public coverage of the talks between MGM and Wynn were largely unsympathetic toward Wynn. “I think what you’re seeing here a little bit of a temper tantrum by the CEO of Wynn,” Richard McGowan, a Boston College professor who studies the gambling industry, was quoted by one paper.
Alan R. Woinski, CEO of Gaming USA, told the Republican that news of the meetings between Wynn and MGM was an affront to the state. “Did they really think they were going to get off scot-free?” he asked.
And so, with an almost audible corporate sigh, last week Wynn announced it would pay the fine by the May 31 deadline and open the casino on Sunday, June 23, 10 a.m.
During those intervening weeks between the MGC’s levying of the fine on Wynn, and the company’s announcement that it would proceed with the opening, the commission had continued to grant the approvals the company needed to open. It verified that inspectors had put check marks by all safety and security systems.
Extending Alcohol Service
It gave the go-ahead for a waiver for the casino to serve alcohol until 4 a.m. to active players near the casino floor for all 23 food and beverage outlets; which compares to a 2 a.m. booze shut-off for most of the rest of the state’s bars and taverns.
In requesting the change, Encore Boston Harbor Vice President Jacqui Krum noted that Nevada casinos serve alcohol 24/7 and that services between 2-4 a.m. was “something our customers expect and anticipate.” She added that staff is trained not to “over-serve” customers and ensure they get home safely. “This building has eyes on it like no place else,” she said.
Warren Richards, executive director of food and beverage, told the panel that his employees are trained to know when someone is intoxicated and not to serve those who are just after a free drink as opposed to someone who is actively playing.
The city of Everett sent a letter of support. The city of Boston requested a denial. Local residents who testified were about evenly split.
The commission voted 4 to 1 for the request. Dissenting commissioner Eileen O’Brien said she would have preferred to find out how well the casino was operating without the extended times before granting the waiver.
A state police officer reported that the same extension has worked well at the MGM Springfield—without any incidents deriving from it.
An officer of the commission’s Investigations and Enforcement Bureau said partiers looking for late night alcohol haven’t made Springfield their destination. “We have not seen that at MGM,” the officer said. “I just don’t think people make the trip at 2 a.m. to go somewhere else and park and then engage in gaming.”
In July 2017 the legislature gave the commission the authority to grant such extensions in the interest of making Massachusetts casinos competitive with casinos in the area.
While MGM and Wynn were engaged in sales talks, the commission calmly continued its work, and MGC Chairman Cathy Judd-Stein noted that the commission had been kept informed about the conversations. She commented at the beginning of last week’s meeting, “To be clear, at no time was there a proposed transaction pending before the commission; however, like many, we were, of course, closely monitoring developments.” She added, “And, our focus appropriately remains on the regulatory preparations needed to open Encore Boston Harbor by June 23.”
Judd-Stein had added that although the casino project had passed through the fire in the three year process of opening along the waterfront of the Mystic River overlooking the Boston skyline, “the fact remains that Massachusetts and the City of Everett is home to a nearly complete, world-class $2.6 billion development that has dramatically transformed the waterfront; a land that was previously dormant, desolate and contaminated, which upon issuance of a certificate of operation, will soon be a place of employment for more than 5,000 people.”
She concluded that the commission “is fully committed to dedicating all the resources and attention necessary to ensure that the property can open in a timely and orderly fashion and in accordance with what is required by law, just as the MGC has successfully done twice previously.”
Last week a Boston Globe columnist Shirley Leung in a piece entitled “The high-stakes poker game that Wynn Resorts and MGM just lost” speculated that the two gaming giants realized that they were playing with very poor hands and decided to cut their losses. The piece noted: “Why? Because it became ever clearer that the gaming commission and the two mayors had the winning hand. The gaming statute and host agreement give the commission and local communities unusual power over the industry. Nothing happens—no sales, no trades—without them.”
The gaming companies had counted on government officials not to want to engage in a long, drawn out fight, and to acquiesce when they did a trade. They miscalculated.
At one point Judd-Stein made clear that the commission wouldn’t make transferring ownership easy. “Under the statute, any transfer of interest will always require commission approval, preceded by an extended period of evaluation and review.”
When they announced they were negotiating a possible deal, the commission’s spokesman Elaine Driscoll, countered, “I think the licensee is aware that there is an expectation that conditions are met. That said, they have a right to appeal. The commission would have to assess that.” She added, The MGC continues to focus its efforts on the significant amount of regulatory preparations required before Encore’s opening.”
The Globe piece added that the two gaming giants apparently hadn’t realized that doing business in Massachusetts was a whole lot different from doing it in Nevada. “They may not like it, but hey, they were the ones who chose to do business here,” wrote Leung.
Wynn issued a statement with just a hint of humility: “We have noted the anxiety raised by various stakeholders regarding a transaction and this troubles us at MGM,” and adding, “We only wish to have a positive impact on communities in which we operate.”
But Leung observed that the Bay State also has a stake in keeping the two companies right where they are, and that Wynn is a global empire of which Boston is quite a small piece. That Massachusetts has a huge interest in the Everett casino doing well and contributing millions of dollars in taxes to the state government.
Wynn Focuses on Opening
With board of directors statement Wynn put its troubles with the state behind it, and focused on opening June 23. When the MGC asked Encore Boston Harbor CEO Robert DeSalvio about Maddox’s recent comments about delaying the opening, the spokesman replied, “That is no longer the case. We will be ready to go June 23 at 10 a.m.”
One of its most important tasks is to try to convince thousands of motorists not to drive to the Encore Boston Harbor on its opening day.
The casino’s executive director of transportation, James Folk, said the worst-case scenario was up to 3,000 cars an hour. But the casino and the city of Everett and Boston itself are prepared, with about 400 officers assigned to traffic details. They have erected highway signs directing traffic and notifying patrons of cheap or even free mass transit to get them to the shores of the Mystic river.
Folk told Everett city council members last week: “We feel that this plan is a very good plan. Will we have to react to certain things during that day? Of course, and that’s why we will have that command certain so that we’re all on the same page.”
Wynn spent many months formulating a transportation plan for the opening. It sent hundreds of employees riding MBTA shuttle buses to acquaint themselves with the mass transit options available. The company encourages its employees to avail themselves of these opportunities also by subsidizing the MBTA.
The “Encore Neighborhood Runner,” a 26-passenger motor coach, will freely transport employees and residents from the Chelsea Silver Line stop to the casino. Free shuttle services will run every few minute 24/7.
The casino does not reserve any of the 2,900 parking spaces for employees. But it also wants the public to use as few parking spaces as possible. It will have ride-sharing pick-up areas across from the casino, where Uber and Lyft will be required to pick up passengers.
John Tocco, executive director of government affairs and community relations for Wynn, told the Everett council that first days of casino openings are unique.
“Don’t think that this first opening period is going to be the rest of your life. It’s happened everywhere,” he said. “We’re the new shiny toy in town. A lot of people are going to be interested in probably seeing what we have to offer, then it will normalize. I promise.”
He concluded, “The MBTA is critical. It’s critical for our success.”
So is the Encore Premium Harbor Shuttle, which crosses the river 24/7 for $7.
Wynn does realize that despite its best efforts, people will drive there. Those people will be given updates on parking and traffic along the highways. They will be directed to parking lots that have open spaces. They will also be able to find out ahead of time when the lot is full.
Obviously a little apprehensive, one city council member observed last week, “This is something that this community’s never witnessed before. It’s a pretty big event.”
Folk did his best to put such fears to rest. “If we see traffic really bad in a certain area, we might change where we’re sending cars,” he said.
Tocco noted that they deliberately picked a Sunday for the first day so that fewer people would be driving back and forth to work. “So while there may be a spike, school’s out, it’s the weekend, it’s the week before Fourth of July,” he said. “We picked a day that hopefully should have a lot of extra capacity on the roadways.”
During a progress report on the construction to the Massachusetts Gaming Commission, Peter Campot, head of the company’s design and construction arm said the opening would happen on time. “I wouldn’t lie to you, there are quite a few things I’m worried about. But I think we have them all under control,” he said. “There’s nothing that’s a game changer right now. We have a lot of work to do over the next 10 days, but everything’s on track.”
The commission’s project oversight manager Joe Delaney echoed that assessment. He said employees will be running “test days” leading up to the grand opening.
Hiring those employees has been a major factor as the opening approaches. Wynn’s host agreement requires that it hold multiple job fairs in Everett and nearby communities. It is committed to providing training in some cases so that Everett residents quality for some skilled positions.
DeSalvio told the commission last week: “We’ve had tremendous response to the jobs event that we’ve had at the Hynes and in other places, and I think we’ve assembled quite a team to really pull this off.”
Search for an Independent Monitor
Meanwhile, now that it is assured that Wynn will be staying in the Bay State, the MGC has begun to search for the independent monitor that Wynn will pay to look over its shoulder with very critical spectacles resting on his or her nose for at least the next three years. It posted a request for response for a contractor.
The job requirements include reviewing the policies and organizational changes Wynn has adopted to make sure it is sticking to its promises to completely change the corporate culture. The commission will accept quotes until June 28.
Of course, the company’s executives tell the commission they have already made all of the required changes—and more. And that they intend to follow up on them. However, the MGC has chosen a “trust but verify” approach with Wynn, with emphasis on verify.
Some of the things Wynn did after the departure of their founding chief: They fired any executives who knew about Wynn’s problems but said nothing to the board of directors. They separated the position of CEO and chairman of the board so that near absolute power within the company would never again be concentrated in one person. They also created separate avenues for reporting allegations and incidents to a separate human resources executive.
The commission has said it wants to emphasize four areas the monitor will enforce:
- The extent to which the company implements and human resources policies that reflect best practices.
- Whether Wynn uses gag orders or confidentiality clause or other ways of keeping employees from talking about potential abuse.
- How well Wynn communicates internally and with regulators.
- Whether Wynn uses outside attorneys and avoids conflicts of interest.
The commission has said it may use the monitor’s recommendations and make them requirements for the company retaining its license.
The commission wrote: “The commission does not expect the monitor to substitute its judgment for that of the company in these matters. Instead, the commission is attempting to gain an understanding as to whether the approaches put in place by the company are consistent with recognized best practices and are in fact effective.”
MGM Springfield
The MGC last week fined MGM Springfield $100,000 in connection with 22 documented incidents of minors being found on the casino floor during the Springfield’s first two months of operation.
MGM did not appeal the fine. MGM Springfield President Michael Mathis emphasized the casino’s “zero tolerance” for minors on the gaming floor.
Officials of MGM told the panel they are taking aggressive measures to prevent those under 21 from being on the floor, including adding more warning signs and eliminating routes that take non-gamblers through the floor in front of slot machines and tables. It is also beefing up security during peak times. The casino has also introduced “hand stamps” for young appearing adults so they are not frequently hassled by security.
The casino’s design of multiple entrances and exits may have added to the problem, MGC Chairman Cathy Judd-Stein speculated. The design also encourages patrons to go outside of the casino to experience the mid-town’s attractions.
MGM noted that since it introduced the measures that apprehensions of minors has increased each month.
In a related development the MGC was given a report last week that found that crime in downtown Springfield has declined in the months since the casino opened last August.
The report, “Assessing the Impact of Gambling on Public Safety in Massachusetts,” which the MGC commissioned, was densely packed with statistics. It noted, “An extra 10,000-15,000 people a day has caused crime to barely budge.”
Since the data is early Judd-Stein advised against drawing any conclusions about trends. She told fellow panel members, “I think overall, the initial findings, as early as they are, are positive. So we are happy to see those early results. The police departments are providing the data that will help us for the future so we can start to think about trends. But right now, it would be premature.”
Crime in the Metro Center did not increase with more people, although the casino was the top location for crime and police calls in the area. Although an overall increase of about 2 p.m. in total crime was reported, 90 percent of those at the casino were closed by an arrest.
Neighboring communities were unable to link their decreases or increases in crime to the casino.
The surrounding mixed community of residences and commercial saw the lowest crime rate in nine years. The report noted, “Robberies, burglaries, auto thefts, and miscellaneous thefts are way down, although some domestic crimes have increased.” It added, “Thefts from vehicles have increased elsewhere, but not here. Thefts from buildings are high, including seven at a homeless shelter.”
