Why Suffolk Downs Dropped Caesars Entertainment From Its Casino Bid

'Hipster real-estate developer' with reported ties to Russian mob seems to be the problem.

Suffolk Downs shook up the Massachusetts casino race on Friday night, announcing that, as a result of a Massachusetts Gaming Commission background investigation into its partner, Caesars Entertainment, it was dropping the gaming giant from its bid to win the single casino license the state will issue for the Boston area. But why? Indications were that there were a variety of issues, but the biggie seemed to be unsavory ties to a mystery unsavory character. This morning, the Globe reported the problem was “a business relationship with a person alleged to have family members involved in organized crime outside the United States.”

As it turns out, investigators flagged a recent deal Caesars made with the Gansevoort Hotel Group, a boutique hotel outfit out of New York, to open a new hotel in Las Vegas. Caesars CEO Gary Loveman confirmed as much to Bloomberg Businessweek earlier today, telling BW that Massachusetts raised concerns about an investor in the company. As a result, Loveman said, Caesars would be cutting ties with Gansevoort.

A source familiar with the situation tells me that the trouble stems from Gansevoort part-owner Arik Kislin, who has been reported in the past to have ties to the Russian mob. From a March 2012 New York Post story:

Long before he became an owner of Manhattan’s trendy Hotel Gansevoort, a hipster real-estate developer played a leading role in a shadowy firm that served as the treasury for one of Russia’s most powerful mobs, stunning court records show.

Hamptons-hopping businessman Arik Kislin was one of three people “authorized to give [financial] instructions” to a company in Liechtenstein now identified as a front for the Ismailovskaya organized-crime group, according to law-enforcement officials and court documents from three countries obtained by The Post.

Yes, sports fans, you read that right: A man identified by the New York Post as a “hipster real-estate developer” has totally upended the Massachusetts casino bidding. Concerns have been raised that, by knocking out a company as big as Caesars, which operates 54 casinos in 13 states and six countries, the gaming commission could, as the Globe put it, “cement the state’s reputation as the toughest US jurisdiction in which to qualify for a gambling license.” On the one hand, Caesars could argue that it’s unfair to be eliminated for a single, unrelated deal with a company that has a part owner with unsavory ties. Here is part of the statement a Caesars spokesman gave me on Friday:

Caesars Entertainment, which is licensed in more jurisdictions than any other gaming company, has decided to withdraw its application to develop a casino in Massachusetts. We believe the commission is attempting to set standards of suitability that are arbitrary, unreasonable, and inconsistent with those that exist in every other gaming jurisdiction.

Then again, today, Caesars dropped Gansevoort. It’s never dull with casinos.