As financial giant Merrill Lynch, whose deep financial troubles led to a federal bailout with tax dollars, prepares to become the new owner of Greektown Casino, African-American investors have been put on notice that local ownership would no longer be a requirement under the new agreement.
Under the new Settlement Agreement the casino, which is preparing to emerge from Chapter 11 bankruptcy, can operate without abiding by the 10 percent local partnership agreement it was bound by in the past that allowed minority investors to be shareholders in the gaming business in Detroit.
All previous 11 Development Agreements under three mayors had a provision that required 10 percent to be offered to Detroit residents.
The current Settlement Agreement pushed by Merrill Lynch, now owned by Bank of America, only requires that 2 percent be offered as local partnership which is contingent upon Merrill Lynch deciding to sell the casino.
At issue also is the governing board of the casino, which in previous agreements clearly stated that African-Americans must make up 25 percent of the board.
Now the new agreement Merrill Lynch favors only requires the Detroit City Council to appoint an ombudsman to the gaming board. However, that individual will have no voting power.
If the city consents to the agreement, it would receive $15 million. But one investor quickly retorted that such an amount means nothing if almost half of that amount goes toward legal fees for the law firm of Cid Froelich, the Chicago lawyer who has long represented the city in such negotiations with the casino.
Froelich told members of the Detroit City Council Tuesday afternoon that the Settlement Agreement is the best deal and it has to be ratified for Greektown to move ahead in the current bankruptcy proceedings scheduled for Nov. 3 and Nov. 6.
Failure to do so, according to Froelich, would mean no casino in Greektown, an appeal that did not seem to move the majority of the council members.
Saul Green, representing Detroit Mayor Dave Bing’s administration, said the city has no option but to follow bankruptcy law and move ahead with the new agreement because it is in line with the casino’s march out of bankruptcy court.
Like Froelich, Green reiterated that the city was following the law in ensuring that everything was in place for a post-bankruptcy era for Greektown Casino, even if that means there are no set-asides available any longer for minority investors.
“Kindly consider that capitalism is best served when everyone is included. Merrill Lynch, who is scheduled to receive control of Greektown Casino, was itself the beneficiary of stimulus dollars from the federal government,” said Dr. J.C. Douglas, an African- American investor urging council to reject the agreement.
Another investor, Suane Lommis, said Greektown makes an annual profit of $80 million and could not understand how it can go bankrupt.
Lommis, narrating her financial ordeal with the casino before council, said it began in 1997 and in 2006, she was asked to sign a buyout contract.
“They had us sign a contract to buy us out and we had to wait until 2009 before we got paid,” Lommis said. “In 2007 they declared bankruptcy and I am really beginning to wonder if this is not investment fraud. This is just unfair and there is no equity in this agreement.”
Two other investors, Art Blackwell and Chris Jackson, warned council not to approve the deal because it was bad for the city.
“This is a quasi public partnership deal,” Blackwell said. “I want council in its infinite wisdom to investigate this.”
Jackson said it would be a mistake if Detroit allows Greektown to get out of a historical obligation that ensures equity in the marketplace and strong consideration for local partnership given the area in which it is operating.
He said if the new agreement goes into effect, Greektown under Merrill Lynch would no longer feel obligated to abide by the rule that requires 51 percent of its workforce to come from Detroit, and one-third of all vendor suppliers to be minorities.
After listening intently to both parties, council members overwhelmingly voted to reject the deal and send it back to the drawing board, despite the Oct. 25 deadline for approval.
Voting to squash the agreement were council members Brenda Jones, Alberta Tinsley-Talabi, JoAnn Watson, Kwame Kenyatta, Martha Reeves and Barbara-Rose Collins. Council President Ken Cockrel Jr. and member Sheila Cockrel were the only two who supported the new agreement.
In 1993, Ted Gatzaros, Jim Pappas, the Sault Saint Marie Tribe of Chippewa Indians, Blackwell, Jackson, former council president Gill Hill, Rev. Wendell Anthony, Marvin Beatty, Rev. Robert Smith and many community groups sponsored an advisory ballot initiative called Proposal C to establish an off-reservation Indian casino in Greektown. The ballot committee called Casino Gambling for Detroit Now pushed Proposal C, passed by Detroit voters.
In 1997, following the passage of a statewide referendum that approved the establishment of three casinos for Detroit, the Greektown partnership was developed. The Sault Saint Marie Tribe had 50 percent ownership and the other half went to Monroe Partners which included Gatzaros, Pappas, Blackwell, Jackson, Beatty, Smith, Dr. Hills Howard and Dr. Anthony Harris. Fifty percent of the ownership at the time consisted of Detroit residents or businesses at the time.
In 2006, Greektown’s local partners in numerous proposals made offers to purchase portions or all of the Tribe’s ownership interest in the casino but were turned down.
In 2007, the majority owners of Greektown Casino, the Sault Saint Marie Tribe of Chippewa Indians, filed for bankruptcy on behalf of the casino.
Some investors are already asking the council to hold the casino’s feet to the fire in relation to the tax rollback.
Under the Development Agreement, Greektown Casino must be in compliance in order to benefit from the tax rollback from 22 to 18 percent, an incentive that was written to encourage all three casinos including, MGM Grand and Motor City, to expedite the building of hotels along with a conference center and theatre.
Critics are saying Greektown has not fully complied and that 10 percent local ownership is far from realization.
Contacted on his New York cell phone, Michael O’Brien of Bank of America did not return a request for an interview at press time. It remains unclear what the casino would now do given that the council halted the deal after investors convinced its members that Detroit should not settle for it.
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