Law Firms Hit the Jackpot in Casino Sale

By The Associated Press
New York Lawyer
July 16, 2009

As many gamblers know, things can get expensive in a hurry in Atlantic City.

The latest proof is the Tropicana Casino and Resort, where the 20-month effort to sell the business has racked up nearly $7.7 million in legal and consulting fees, with still more to come.

On Wednesday, the state Casino Control Commission will consider additional bills totaling nearly $50,000.

Those fees, some billed at $970 an hour, are paid by the casino. They represent more than nine full days' winnings for the Tropicana, which is struggling to regain market share while threatening to lay off employees because of economic pressures.

The Tropicana was sold last month for $200 million to a group of investors led by billionaire Carl Icahn; the deal could close by year's end. When the casino-hotel first went on the market over a year and a half ago, it was expected to fetch about $1 billion.

The mounting fees have prompted casino regulators and state lawmakers to consider limiting the time and cost of similar efforts in the future. And with several distressed casinos struggling to survive, one or more additional gambling houses could find themselves going the way of the Tropicana.

"It is unacceptable but not surprising that this transaction would drag on for almost two years, yielding a cut-rate price for the sale and ballooning legal fees for the law firm of the state-appointed conservator," said state Assemblyman Vince Polistina.

He and another assemblyman, John Amodeo, both Republicans, plan to draft legislation this fall to prevent conservators from hiring their own law firms in similar cases.

And Casino Control Commission Chair Linda Kassekert favors limiting the fees that conservators and their consultants can collect. She says imposing fee caps would put more pressure on conservators to complete a sale as quickly as possible.

The conservator, retired state Supreme Court Justice Gary Stein, said the bills were for legitimate expenses incurred in a process that was unforeseeably delayed by the crashing economy and the bankruptcy filing of the Tropicana's parent company.

"This was not a simple, easy sale process," Stein said. "Nothing in this entire process was routine or predictable."

Stein also said it is accepted practice for trustees or conservators to retain their own law firms to assist them. He cited other examples -- the monitor appointed by former U.S. Attorney Christopher Christie, New Jersey's Republican nominee for governor -- in overseeing the University of Medicine and Dentistry and the trustee in the Bernard Madoff case.

As of Tuesday, legal and consulting fees related to the Tropicana sale stood at $7,695,433. Of that, Stein received $829,468, and his law firm, Pashman Stein, got $1,281,673. The Wall Street mergers and acquisitions firm Debevoise & Plimpton received $3,205,409.

Three management consultants also were paid for assisting: Mickey Brown, a former casino executive and state regulator, got $76,095; Gary Simpson, a financial executive with the Tropicana's former owners, got $132,400; and Pamela Popielarski, a former Tropicana executive who sued for discrimination when she was let go by the previous owners, got $46,125 in fees.

The bankruptcy law firm Cole Schotz got $1,110,541; the accounting firm J.H. Cohn got $873,292, and Kurtzman Carson Co. that coordinated mailing and documents got $140,431.