GALLOWAY TOWNSHIP — A report commissioned by Stockton University trustees in May to investigate the ill-fated $18 million purchase of the former Showboat Casino in Atlantic City found there’s plenty of blame to go around.
The report, released Tuesday, shows:
— An ambitious college president, Herman Saatkamp, who got support from state officials to buy a closed Atlantic City casino and turn it into an Island Campus as part of the Atlantic City revitalization.
— A casino company, Caesars Entertainment, on the verge of bankruptcy, that may have been less than forthcoming about potential problems with a use covenant at the site.
— Legal counsel, Stevan Sandberg, who did not adequately recognize or respond to the level of risk in the purchase, and was not properly registered to work in New Jersey.
— A university board of trustees with questions, who were never fully informed of the risks, but relied on the president’s judgement, something they now regret.
All those factors led to a “confluence of facts, risks, and personalities” that culminated in a transaction that was “certainly unwise,” according to a report released Tuesday by the Gibbons firm.
The 45-page report analyzes the role of former Stockton President Saatkamp, Stockton’s legal counsel, board of trustees, Caesars, and state officials.
It also provides insight into efforts made after the sale to resolve the covenant.
Saatkamp said Carl Icahn reportedly offered to resolve the issue if Stockton provided 1,331 hotel rooms at the Showboat for Taj Mahal’s use during the summer. Saatkamp refused because the college needed the rooms to generate income for the college.
The report notes Saatkamp and Stockton’s legal counsel made several missteps in completing the sale.
Saatkamp issued a statement Tuesday saying he is disappointed that the report does not place more emphasis on the role of the outside attorneys hired to handle the sale. Sandberg did not respond to a request for comment.
The law form of Florio, Perrucci, Steinhardt and Fader, which employed Sandberg, issued a statement saying their ongoing representation of Stockton precludes them from commenting extensively, but they disagree withsome of the conclusions as they relate to the firm and its services.
The report cites Saatkamp as a “visionary leader during a period of extraordinary growth” who had a deep commitment to the Showboat sale, both as a way to expand Stockton in Atlantic City, and because he believed it was financially a good deal. It also says Saatkamp also wished to “cement his legacy of accomplishment at Stockton.”
It says the trustees relied on Saatkamp and counsel for all information and that Saatkamp was ”not candid with investigators” during the investigation, claiming he had not been told of the covenant before settlement when he clearly was aware of it, but just thought it would not be a problem.
The trustees authorized $350,000 for the investigation, and to date have paid $380,000. The firm has asked for an increase in part because of additional investigation made necessary by Saatkamp’s denial that he was aware of the 1988 covenant before closing.
The report notes that while Caesars refused to participate in the investigation, the company “appears to have misled Stockton into believing that a release of the 1988 covenant would be forthcoming, when, according to Trump (Taj Mahal officials), there was no reason to believe that this was so.”
A spokesman for Caesars issued a statement saying that all parties to the Stockton-Showboat transaction and their counsel were operating with full knowledge of the status of title to the Showboat property, including the deed restrictions.
“Any suggestion that CEOC or its operating subsidiaries were less than forthright in the course of the Stockton-Showboat transactions is simply false,” the email says.
A footnote in the report says Taj Mahal generally cooperated with the investigation, but did decline to provide some pertinent documents, citing its own ongoing lawsuit against Stockton regarding its request for Stockton records of the sale.
Trump Entertainment CEO Robert Griffin said Tuesday that he wants to read the full report before commenting, but that it was “disheartening” for him personally to have been attacked by Saatkamp over the covenant issue. Saatkamp had blamed the Taj for not releasing its covenant. The report shows Taj Mahal counsel had told Caesars it would not release the covenant and Taj Mahal officials were surprised when the sale went through in December.
The report also concludes that while there was support for a Stockton campus in Atlantic City by state officials and legislators, no one pushed the university to buy Showboat. However, it notes that the purchase was suggested to Saatkamp by Jon Hanson, chairman of the Governor’s Advisory Commission on New Jersey Gaming, Sports and Entertainment at a meeting with Stockton trustee Curtis Bashaw.
According to the report, Hanson said he would assist with negotiations and $17 million in funding from the Casino Reinvestment Development Authority. On the drive back, Bashaw said he did not think the Showboat made sense for Stockton, but that Saatkamp believed he had received “marching orders” from Hanson. Saatkamp denied feeling any political pressure to buy Showboat and Hanson denied applying such pressure.
The report says Hanson was active in assisting Stockton with the purchase, including acting as intermediary in getting the price lowered from $20 million to $18 million. Hanson did not respond to a request for comment.
The report also addresses the attempted sale of Showboat to developer Glenn Straub’s KK Ventures, noting again that an error by Stockton’s attorney, who failed to note changes Straub’s attorney had made to the contract, led to further litigation. That sales contract has been terminated.
Stockton board of trustees Chairwoman Madeleine Deininger issued a statement with the report saying at the time of the sale there was great enthusiasm for future growth in Atlantic City. She said the the college owes the public answers to what happened and promised transparency in future decisions.
The Associated Press on Tuesday reported that New York private equity investor Jeffrey Keating said that he has contacted Stockton about buying the Showboat for "significantly more" than the $18 million the university paid. He said he would initially operate it as a nongambling property while maintaining the option to restore gaming there in the future.
Philadelphia developer Bart Blatstein has also been named as a potential buyer for Showboat. Stockton officials have said there is interest in the site from several parties, but no deals have been announced.