The parent company of Baltimore's casino said Monday that one of its businesses is the subject of a federal investigation into money laundering and that it was pulling out of a $1 billion casino venture in Boston.
But officials at Caesars Entertainment Corp., which is building the $400 million Horseshoe Casino on Russell Street near M&T Bank Stadium, said neither issue would affect the company's Baltimore plans. The city is counting on the casino to provide funds for school construction and a property tax cut.
"Horseshoe Casino Baltimore, which will employ 1,700 people, remains on schedule to open during the third quarter of 2014," said Jan Jones Blackhurst, a Caesars executive. "Construction is progressing as planned. We look forward to adding a world-class casino to the city's portfolio of great tourism attractions."
State officials did not respond to a request for comment on the investigation. City Council Vice President Edward Reisinger, whose district includes the casino site, said he was surprised to hear about it and was seeking answers from Caesars.
But Kevin Harris, a spokesman for Mayor Stephanie Rawlings-Blake, said the administration is still counting on the casino as a boost to the city's economy.
"The casino remains on schedule to open next year, and the mayor looks forward to the added value it will bring to Baltimore, particularly in new jobs and another attraction to drive tourism into the city," Harris said. "All indications are that this will not affect operations for constructing the casino here in Baltimore."
Las Vegas-based Caesars Entertainment teamed up with local investors to form CBAC Gaming, which won the nod to build and operate the city's casino. Caesars made the disclosures about the federal investigation and the Boston project in a report Monday to the U.S. Securities and Exchange Commission.
Plans for the Russell Street casino call for a 122,000-square-foot gaming floor with slot machines, table games and a "World Series of Poker" room. The developers have agreed to pay the city at least $11 million in the first year of operation, enough to help fund the mayor's proposed property tax cut for homeowners for a year. Rawlings-Blake plans to cut property taxes by a total of 22 percent — a reduction of 50 cents per $100 of assessed value — over 10 years.
The mayor is also counting on revenue from the casino's table games to contribute to the city's $20 million annual share of a $1.1 billion plan to renovate and rebuild dilapidated schools.
James Karmel, a gaming analyst and Harford County Community College history professor, said the investigation was "going to raise eyebrows" in Maryland, even if there's no reason to be concerned about the Baltimore project's status.
"I wouldn't be surprised if the lottery commission launched an inquiry," he said. "The commission would be well-served to monitor this."
News of the investigation caused immediate market trouble for Caesars.
Shares of the company, which operates the Caesars Palace and Flamingo casinos on the Las Vegas Strip, fell as much as 9 percent on Monday.
In the filing, Caesars said it would withdraw its application for a casino venture with the operator of Boston's Suffolk Downs racetrack after investigators for the Massachusetts Gaming Commission raised concerns about its suitability for a state gaming license and the "financial condition" of the company.
A report by the Massachusetts commission, issued on Oct. 18 and not yet public, raised a number of issues, Caesars said. These included the company's financial condition and its business relationship — since terminated — with a partner in a hotel project. The company said "all but one" of the commission's concerns stem from "circumstances that are at least several years old."
The company said it "strongly disagrees" with the commission's assessment, which was filed in a report last week, but decided to withdraw from the Boston project in light of the commission's concerns. Caesars said that "neither it nor its affiliates have been found unsuitable by any licensing authority."
The company also said its Desert Palace subsidiary, which operates Caesars Palace, had received a letter from the financial crimes unit of the U.S. Department of the Treasury about "alleged violations of the Bank Secrecy Act," an anti-money-laundering law. Caesars said a federal grand jury is conducting an investigation into the matter.
The company is "unable to determine the probability of the outcome of these matters or the range of reasonably possible loss," the filing states.
Caesars is saddled with more than $20 billion in debt incurred when it was acquired in 2008 by private equity firms Apollo Global Management and TPG Capital, both of which remain major shareholders.
The company's withdrawal from the Suffolk Downs project is considered a major blow to Caesars. CEO Gary Loveman said in September that the proposed casino would draw elite international gamblers, making it one of the best cash-making opportunities in the U.S. gambling industry.
Shares of the company closed down nearly 5 percent at $17.81 in trading Monday on the Nasdaq.
Reuters contributed to this article.
twitter.com/lukebroadwaterCopyright © 2014, The Baltimore Sun