Attorney General: The Honorable John G. Rowland, Governor, State of Connecticut, 1995-027 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

September 29, 1995

The Honorable John G. Rowland
Governor
State of Connecticut
State Capitol
Hartford, CT 06106

Dear Governor Rowland:

I am in receipt of your letter dated September 21, 1995, in which you emphasize your concern that the establishment of a third casino in this state not jeopardize the level of revenues currently being received by the State under the Memorandums of Understanding (MOUs) between the State and the Mashantucket Pequot and Mohegan Tribes. In response to this concern, you issued an RFP that required each casino proposal to provide a guarantee that the State will receive, over a three-year period, up to $610 million to make up for any cessation in the Tribes' payments under the MOUs. This guarantee was to take the form of "a clean, irrevocable, unconditional and non-transferable letter of credit" issued from a banking institution approved by the State in the amount of $610 million. RFP 2. The requirements of any financial guarantee that you, and ultimately the General Assembly, place on casino proposals are business policy decisions for you and the General Assembly to resolve.

In this regard, you have asked me the following question:

"If the State is sued on a matter related to the Bridgeport casino issue, for example on an environmental matter such as emissions or clean air, would the State be able to draw down on the Letter of Credit immediately upon commencement of such suit so that there is no loss of revenue to the State."

In a subsequent telephone conversation with me you have clarified that your question applies only to the letter of credit submitted by Mirage Bridgeport, Inc. in its response to the RFP.

According to the Mirage Bridgeport proposal, the State's draw on its letter of credit must be "in compliance with" a future agreement between the State and Mirage Bridgeport which "must contain provisions ... conditioning draws under the Letter of Credit on the prior satisfaction" of four conditions specified in the proposal. Those conditions are:

  1. The State has enacted and promulgated casino gaming legislation and regulations (the "Legislation") that are materially equivalent to those presently in force in New Jersey or Nevada or otherwise satisfactory to the Proposer in its sole discretion.
  2. The Proposer, Mirage Bridgeport, Inc., a Connecticut corporation ("MBI"), Mirage Resorts, Incorporated ("MRI") and all officers and directors of the Proposer, MBI and MRI have obtained all licenses, permits, approvals and agreements, on terms and conditions acceptable to MRI in its sole discretion, necessary to construct, own and operate the temporary and permanent casino/entertainment facilities (the "Facilities").
  3. The Attorney General of the State has issued a favorable legal opinion that the issuance of the RFP, the acceptance of the Proposer's proposal and the Legislation are legal, valid, binding and constitutional.
  4. No injunction or order of any court or governmental agency has been issued which affects the construction, ownership or operation [of] either of the Facilities.

While none of these prospective conditions would limit the State's ability to draw on the letter of credit upon the commencement of a lawsuit as postulated in your question, condition number 4 would limit the State's access to the $610 million should there be any court or administrative order which affects "the construction, ownership or operation" of the proposed gaming facilities. Under the Mirage Bridgeport, Inc. proposal, the State's ability to draw on the letter of credit would cease if an "injunction or order of any court or governmental agency has been issued which affects the construction, ownership or operation" of the proposed gaming facilities. Thus, pursuant to the plain language of the proposal, issuance of a temporary restraining order, a preliminary injunction, or any other order that "affects" the proposed gaming facilities would preclude the State's access to the letter of credit.

Subsequent to your opinion request, Mirage Bridgeport, Inc. informed us by a letter dated September 27, 1995 that Stephen A. Wynn, Chairman and CEO of Mirage Resorts, had sought to clarify this condition on the letter of credit when he appeared before the Gaming Policy Board on September 14, 1995. In his statement, Mr. Wynn indicated that, despite the plain words of the Mirage proposal, "[W]hen we restricted our letter of credit to saying that there would be no lawsuits, or regulatory approvals would have to be obtained first, we meant those from the State of Connecticut only, not the whole universe of lawsuits ...." Transcript, p. 20. According to Mr. Wynn's statements, the State's access to the letter of credit would be precluded upon the issuance of a temporary restraining order, a preliminary injunction, or any other court or administrative order that "affects" the proposed gaming facilities and flows from a lawsuit or administrative action by the State. You should decide whether you will accept this clarification and whether this condition on access to the letter of credit satisfies your objectives.

Although your question was limited to this one aspect of the complex proposals presented for your consideration, the weight to be given any of the elements of the proposals which you have received is a matter for your selection committee to resolve prior to making its recommendation to you and for you to determine in making the decision whether to accept one of the proposals before you. Of course, your selection of a proposal for casino gaming in Bridgeport will be subject to review by the General Assembly.

As you are aware, a federal lawsuit has been filed seeking to halt the current casino RFP process. In large part, the lawsuit is based on the allegation that neither Mirage Bridgeport, Inc., nor the Mashantucket Pequot proposals contain the unconditional $610 million letter of credit set forth in the RFP. As you know, the Mashantucket Pequots have not submitted a letter of credit with their proposal. This office has already discussed with you and your staff the various legal issues raised by the Mashantucket Pequot proposal.

Aside from the present litigation, there have been reports that other persons or entities are also considering challenges to the casino RFP process. In discussions with you and your staff, this office has identified the issues related to the procedure you have followed which may be raised in the current and possible future litigation. Such litigation, as does all litigation, presents some significant risks, including a risk of disruption to the process you have initiated.

Very truly yours,

Richard Blumenthal
Attorney General

RB/jb


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