A new report lays blame largely on Stockton University’s former president in the school’s ill-fated purchase of Showboat Casino Hotel in Atlantic City last year, citing his “haste to obtain approval of the deal” and failure to tell the board of trustees about legal hurdles that ultimately derailed plans to convert the gaming hall to a…(Editor’s note: This report was updated at 3:15 p.m. with additional information and quotes from the report.)
A new report lays blame largely on Stockton University’s former president in the school’s ill-fated purchase of Showboat Casino Hotel in Atlantic City last year, citing his “haste to obtain approval of the deal” and failure to tell the board of trustees about legal hurdles that ultimately derailed plans to convert the gaming hall to a satellite campus.
The independent investigation, commissioned by Stockton’s board, also places responsibility on the outside counsel hired by the school to negotiate the deal and on Caesars Entertainment, Showboat’s former owner, for overpromising on whether it could resolve restrictions on the property’s use with a neighboring casino owner.
It is the most damning criticism of a deal that has dogged Stockton in recent months, one that was falling apart before former President Herman Saatkamp resigned in April. Released Tuesday, the report by the Newark-based law firm Gibbons PC highlights “a confluence of facts, risks and personalities that culminated in a transaction that, with the benefit of 20-20 hindsight, was certainly unwise.”
The findings also come as Stockton works to get out from under the shuttered casino, which closed last summer after years of declining revenue. On Monday, NJBIZ reported that developer Bart Blatstein has signed a purchase agreement to acquire the property, though other details remained unclear as both parties remained tight-lipped.
The saga began when Stockton purchased the casino from Caesars last December for $18 million, with designs of converting it to a so-called island campus. Those plans fell apart amid restrictions on the building’s use as a nongaming facility, which stemmed from a 1988 agreement between Caesars and the ownership of nearby Trump Taj Mahal that said the property can only be used as a casino-hotel.
That led Stockton to sell Showboat to Florida-based developer Glenn Straub in April, a deal that later stalled and resulted in litigation that allowed the school to seek another buyer. Meanwhile, Stockton spends an estimated $500,000 to $600,000 monthly to maintain the shuttered property, including costs for utilities and security and maintenance personnel.
In the 45-page report, which was commissioned in May, investigators noted Saatkamp’s enthusiasm for the plan and positive impact on the school, but said he failed to tell university trustees that Trump Entertainment had no plans to waive the 1988 agreement, among other important pieces of information. The report also said Saatkamp “did not enter into meaningful negotiations with Trump” to negotiate a resolution, nor did he engage the board in that process after the board had already approved the purchase.
“(Saatkamp), a visionary leader during a period of extraordinary growth and progress at the University, was deeply committed to the purchase of the Showboat, for good and legitimate reasons,” Gibbons investigators wrote. “Thus, while the wisdom of the transaction could have been and was debated, Saatkamp’s advocacy for it was not based upon any illicit motive or self-dealing.
“That said, Saatkamp’s leadership style, and haste to obtain approval of the deal, hampered debate and, in this case, resulted in the Board of Trustees, which had already approved the transaction, not learning of critical facts.”
The report also points to a misstep that came as Stockton was negotiating a sale to Straub, a Florida-based developer who had recently acquired the defunct Revel casino. It notes that Saatkamp and Stockton’s lead counsel “failed to recognize” a change to the purchase agreement by Straub’s attorney, which seriously hindered Stockton’s ability to walk away from the deal and ultimately led to litigation between the parties.
In a prepared statement issued through his attorney, Saatkamp on Tuesday said, “Nothing in the Gibbons Report released today changes my fundamental, deeply rooted belief that as president of the university, I acted in the best interest of the university and the citizens of New Jersey.”
He said he welcomed the opportunity to speak to investigators and was gratified that the accomplishments at Stockton during his tenure were recognized in the report,” but said more blame should be placed on Stockton’s outside counsel.
Gibbons investigators, who conducted more than two dozen interviews over the summer, also laid blame on casino giant Caesars, which still owns three casinos in Atlantic City and has been in financial disarray for years. The report said Caesars executives “repeatedly misrepresented, prior to closing, that a waiver of the 1998 Covenant would be forthcoming from Trump when there was no reason to believe that it would be, at least without substantial additional negotiations and the approval of a bankruptcy court.”
“(Although) we were not able to fully explore this issue because Caesars refused to participate in this investigation, Caesars appears to have misled Stockton into believing that a release of the 1988 Covenant would be forthcoming when, according to Trump, there was no reason to believe that this was so. Indeed, the record reveals that Caesars and its counsel repeatedly assured Saatkamp and (Stockton’s attorney), both before and after the December 9 Board meeting, that it could and would resolve this ‘title issue.’ ”
An Atlantic City-based spokeswoman for Caesars did not immediately respond to a voicemail requesting comment early Tuesday afternoon.
The report also details a series of meetings and exchanges involving Saatkamp, Atlantic City casino executives and Jon F. Hanson, the real estate magnate and Gov. Chris Christie’s top adviser on sports and gaming issues. They include a meeting in Morristown last September, in which Hanson suggested Showboat to Saatkamp as a means of expanding in Atlantic City.
Investigators also reference a March 4 email exchange in which Saatkamp informs Hanson of his concerns about the restrictions on Showboat. Hanson responds, “I am on it; if necessary, I will call Icahn,” referring to billionaire investor Carl Icahn, who is the senior secured creditor for Trump Taj Mahal.
The report, meantime, addresses whether Hanson or other state officials pressured Stockton into the deal and whether they knew about the 1988 agreement between Caesars and Trump Entertainment ahead of time.
“Although there is no question but that the State supported the notion of Stockton opening a campus in Atlantic City as a matter of urban revitalization, neither Saatkamp nor Hanson viewed Hanson’s suggestion of the Showboat as a directive from the State,” investigators wrote. “Nor was that the general sense of the Board members whom we interviewed. And there is absolutely no evidence that Hanson, or anyone else from the State, knew about the 1988 Covenant prior to the closing, let alone in any way pressured Stockton to close notwithstanding that Covenant.”