ATLANTIC CITY — The casino workers union is concerned the increasing influence hedge funds are exerting over gaming companies could have a disastrous impact on the local market and wants state regulators to step in before it is too late.
Unite Here Local 54, which represents more than one-third of all Atlantic City casino employees, addressed the Casino Control Commission during Wednesday’s public meeting about protecting workers against potentially hostile actions taken by gaming company investors, specifically at Caesars Entertainment Corp. and MGM Resorts International.
MGM declined to comment. Caesars did not respond to a request for comment.
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The union’s concern is that Wall Street firms have recently purchased a significant percentage of shares in both companies, which could result in those investors looking to make a quick profit at the expense of the industry, the Atlantic City market and, by default, the workers.
“If (their) only interest is to squeeze money out of the company and it’s going to hurt the industry here, then I think the commission is uniquely positioned to have a say in it,” Local 54 President Bob McDevitt said after the meeting.
Chairman James Plousis said the commission and the state Division of Gaming Enforcement would “do our due diligence on all these applications as they come forward,” in respect to licensure and qualifications.
McDevitt told the three-member commission that “private equity was a disaster” for Caesars after the 2008 buyout from two Wall Street firms, Apollo Global Management and TPG Capital.
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He noted that employees of the gaming company “witnessed years of cuts to jobs and maintenance” and casinos were closed, namely Showboat, which the company closed in 2014 to protect its other three Atlantic City properties — Caesars Atlantic City, Bally’s Atlantic City and Harrah’s Resort.
Cindy Pemberton, of Hammonton, worked as a restaurant server at Showboat for 27 years until the property was closed. While she now works at Gordon Ramsay Pub & Grill at Caesars, her position was downgraded to food runner and her take-home pay has suffered as a result.
“No one could have thought that a profitable casino (Showboat) would close down in Atlantic City,” she told the commission. “We do not want to repeat the TPG and Apollo years at Caesars. My coworkers and I will not stand by while New York billionaires and millionaires strip our company for their own gain.”
Carl Icahn, the hedge-fund billionaire who once owned several Atlantic City casino properties but now owns only the shell of the former Trump Plaza, purchased 28.5% of Caesars and is the company’s largest shareholder. He appointed three people to the executive board and will have a say in naming the company’s new CEO.
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Icahn and Local 54 clashed in 2016 over contract negotiations for workers at the former Trump Taj Mahal Casino Resort. It resulted in a 102-day strike and the eventual closure of the Boardwalk casino property.
McDevitt was asked whether his concerns were related to the union’s history with Icahn, but he rebuffed the suggestion, saying the focus was not the Wall Street tycoon.
Several hedge funds have also recently bought up shares of MGM, which operates Borgata Hotel Casino & Spa, including Russell Investments Group Ltd. and Commonwealth Equity Services LLC. The gaming company has recently explored using robots in place of service bartenders at MGM Springfield in Massachusetts and announced plans to use them at their Las Vegas properties amid calls to cut $100 million in payroll over the next two years.
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“We don’t want to go through another five to 10 years of degrading the industry just so a few guys can make some money,” said McDevitt. “No one should have a license to just pull money out of people’s pockets in Atlantic City just because they are in a minority position of owning a casino. They have a responsibility to the city and the state and, by default, the workers.”
McDevitt said in addition to the potential harm hedge fund firms might do by “squeezing” money out of capital improvements and property investments, he was concerned it may “undermine the revival” of Atlantic City.
“So called ‘active investors,’ whether they are hedge funds or private equity, are generally interested in benefiting themselves and other shareholders in the short-term, often without regard to the long-term consequences for the company,” he said. “Consequently, they are a serious threat to the stability and longevity of our industry.”