Stockton: Icahn Wanted 1,331 Hotel Rooms to Waive Casino Pact

Showboat Casino on September 1st, 2014, the day after it closed. (Photo: Dan McQuade)

Yesterday, an independent report commissioned by Stockton University about the school’s disastrous purchase of the former Showboat casino was released. The report blamed many, but mostly former Stockton president Herman Saatkamp, who was forced to resign in the wake of the sale.

Stockton bought the former Showboat casino from Caesars last year for use as a branch campus. But Trump Entertainment Resorts, which owns the nearby Trump Taj Mahal, said it would enforce a 1988 pact that said the Showboat could only be used as a casino. (There is also a deed restriction on the property that says it can’t be used as a casino; this will probably be hashed out in court now that the property will reportedly be sold to Bart Blatstein.)

The company said the reason for enforcing the deed restriction was because the college would attract underage gamblers who would attempt to gamble at the Taj. “[W]e believe that having a college located next door to the Taj will hurt our business and create numerous problems for us going forward,” Trump Entertainment Resorts said in a statement in March. “The scenario of young college students residing full time in a dormitory a few steps away from the Taj is entirely different from allowing families to dine in our restaurants.”

The report, however, says Trump Entertainment (which no longer has a connection with the GOP frontrunner other than the name) was willing to waive the deed restrictions — if Stockton would give them all its hotel rooms each summer.

The report cites a conversation between Saatkamp and Carl Icahn, the bondholder for Trump Entertainment who is acquiring the casino out of bankruptcy court:

Saatkamp reported that sometime after his call with [Trump Entertainment Resorts CEO Robert] Griffin, he [Saatkamp] called Icahn, who told him that the 1988 Covenant could possibly be resolved if Stockton gave Trump all 1,331 hotel rooms in the Showboat for the Taj’s use during the summer. Saatkamp told Icahn that this proposal would not work because Stockton needed the rooms to generate income, which was an important aspect of the acquisition. Icahn told Saatkamp that he could not offer any other suggestions because he did not own the Taj yet.

Trump Entertainment Resorts just recently came out of bankruptcy. It’s becoming part of Icahn’s casino empire; he already owns the Tropicana at the other end of the boardwalk.

According to the report, Trump Entertainment said its hands were tied: It could not waive the 1988 covenant “unless it received value in return sufficient to satisfy the Bankruptcy Court and Icahn, Trump’s senior secured creditor.” Though the report says Icahn was wary of having a college campus down the boardwalk from his casino, Trump Entertainment told Saatkamp a similar covenant had previously been waived elsewhere for $5 million and was open to waiving it for use of the hotel rooms each summer.

Unfortunately for Stockton, the report says Saatkamp ignored the deal and only authorized $100,000 for a settlement (despite also saying he had $2 to $5 million available to end the pact). The firm retained by Stockton, Florio Perrucci Steinhardt & Fader LLC, says it thought it could have gotten a waiver of the covenant if it had more money. But Stockton never fully explored the possibilities.

“Had such discussions taken place,” the report says, “then this matter might very well have been resolved long before now, and students might well be populating and getting an education at the Stockton Island Campus as this Report is being completed.”

A full copy of the report is below.

Independent Review on Stockton Purchase of Showboat

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