HARRISBURG, Pa. — For a second time in 15 months, Pennsylvania’s high court ordered state gambling regulators to re-examine the legality of the ownership structure of a group that won a lucrative Philadelphia-area casino license in late 2014.
The seven state Supreme Court justices ruled unanimously Tuesday that the Pennsylvania Gaming Control Board has not sufficiently calculated whether the ownership group of the proposed Live! Hotel & Casino would meet limitations in state law on casino ownership.
The case revolves around the extent of the involvement of London-based businessman Watche Manoukian, who owns the controlling stake in Parx Casino in nearby Bensalem. Under state law, a majority casino owner is limited to a one-third share in another casino.
In her 43-page opinion, Justice Debra Todd told the gaming board that it must use a broader definition of “financial interest” in examining the extent of Manoukian’s involvement in the ownership and financing of the Live! casino.
The definition must include loans from one casino owner to another since the lender “acquires a monetary right or claim to repayment of the loan proceeds” from the recipient casino, Todd wrote. Todd suggested that the gaming board should hold a public hearing as part of its review.
At issue is a combination of financial elements in the project’s structure.
One share gives 33 percent of the project’s profits to Greenwood Racing Inc., which owns Parx Casino and is controlled by Manoukian. A trust benefiting Manoukian’s three sons would hold a separate 17 percent stake. Manoukian and his family members would hold all the ownership shares in the trustee, while Manoukian pledged to contribute $34 million to the trust, to be used as capital for the casino project.
Those combined elements “raised the question of whether the trust was being used by Manoukian to evade the requirements” of state law that limits one person’s casino ownership, Todd wrote.
The gaming board had declined to count the trust, its ownership structure or Manoukian’s $34 million toward his ownership stake. In a statement, the gaming board said it “appreciates” the court’s work and was reviewing the decision to determine its next steps.
The decision comes as Pennsylvania’s cash-strapped government eyes various ways of expanding casino-style gambling in hopes of avoiding a broader tax increase. Pennsylvania, the nation’s No. 2 commercial casino state, already reaps hundreds of millions of dollars in taxes on gambling profits.
Legislation passed earlier this month by the state House of Representatives would expand gambling to casino websites, airports, bars and off-track betting parlors while repealing the law that limits casino ownership.
Live! won a four-way competition for the last casino license in eastern Pennsylvania, and the fifth in the Philadelphia region. It will be owned and operated by the Cordish Cos. of Baltimore and Greenwood.
The project is on ice, awaiting the outcome of the court challenge brought by one of the unsuccessful applicants. Lawyers in the case declined comment Tuesday.