As Apollo Management moves to close its acquisition of the Venetian and Palazzo (in tandem with Vici Properties), the Culinary Union hosted an online retrospective of Apollo’s tenure as co-owner of Caesars Entertainment during the 2007-2017 period. Guests of honor were Max Frumes and Sujeet Indap, co-authors of the recently published exposé, The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Power and Greed of Wall Street. Frumes covers debt restructuring for Fitch Solutions and Indap writes the “Lex Column” for the Financial Times.
They were joined by Culinary Union Local 226 President Ted Pappageorge; Paris Las Vegas bell captain (and Culinary vice president) Leain Vashon; Nancy Rapoport, a professor of business law and ethics at the University of Nevada, Las Vegas; UNLV ombuds David G. Schwartz, who frequently writes about the casino industry; and former regulator and retired casino executive Richard Schuetz.
While the discussion was primarily centered on Apollo’s management of Caesars Entertainment, the looming Venetian/Palazzo buyout frequently inserted itself, particularly when Unite-Here President D. Taylor called in to comment about the “enormous amount of deceitful and frankly fraudulent behavior” in Caesars’ eventual bankruptcy filing, leading him to ask, “How could these people possibly get licensed again?”
Indap responded that Apollo would argue that Caesars was in trouble when Apollo arrived, that private equity kept Caesars alive, and “at the end of this story, there’s a lot of value that comes back.” He added that Apollo will probably contend it is composed of smart and large investors.
“Some things that happened aren’t good,” said Schuetz, noting payoffs by Apollo co-founder Leon Black to the late Jeffrey Epstein ($158 million) and to Guzel Ganieva, a woman whom Black allegedly abused physically. Alluding to Caesars Palace Coup (which has been mailed by the Culinary to every member of Nevada Gaming Control Board and Gaming Commission), Schuetz continued, “You’ve put a lot of stuff on the table here that I don’t think anybody knew. The Control Board clearly wants to say ‘Yes’” to the $6.2 billion Venetian/Palazzo deal, expected to close in the fourth quarter of this year.
For his part of the discussion, Frumes began by saying, “What’s frequently missing is the most vulnerable stockholders, who are employees.” In the case of Caesars, it went from a workforce of 87,000 in 2006, when the Apollo/Texas Pacific Group buyout was announced, to 68,000 in 2014 and — when it emerged from Chapter 11 three years later — 65,000 workers, 28,000 of them unionized. (The number of workers represented by collective-bargaining agreements remained relatively constant amid the decade of job cuts.)
Recalling the cutbacks and the need to accomplish more with fewer workers, Vashon said that Apollo and TPG’s disregard for the employees they inherited was “totally amazing” to him. The workforce became minimal and morale fell “totally flat,” he recalled. “You couldn’t keep up [responsibilities] with the staffing they had. The food quality in the hotels for the workers was so bad that we had to file a grievance.”
“There’s a lot of distance,” observed Schwartz. “It’s the hospitality business and you need employees there to make people feel welcome.”
Said Pappageorge, “We have leverage if we organize the workforce in the union properties. We’re not going to quit [talking] about the characters that have taken over the industry” and about their effect on its financial health.
However, no Venetian or Palazzo worker is union-represented.
Added Schuetz, “We’ve lost a lot of great entrepreneurs and they’re supposed to be replaced by these institutions, which are invisible and somewhat unconcerned.”
Rapoport concurred. “Employees have a vote, but it’s a faint and distant voice,” she said.
Frumes, Indap and Schuetz all put much of the onus for the Caesars situation on regulators, who were generally characterized as awed by, and out of their depth with, private equity and hedge funds. As Frumes put it, “Apollo will require additional scrutiny this time around,” both because of the Caesars bankruptcy and Black’s financial affairs.
“The boards need to understand that they’re authorities and can’t be a rubber stamp,” Rapoport interjected.
Concluded Schuetz, once again referring to Caesars Palace Coup, “If we don’t do anything with that learning, it will happen again.”
