The Supreme Judicial Court concluded today that a man has no right to the money he says he's owed through a secret oral deal with Wynn Resorts to get paid more than his partners for selling it the land where its Encore casino now sits.
The opinion by the state's highest court does not immediately end Anthony Gattineri's bid for the $19 million he says he's owed, but it won't help his pending case before the federal appeals court in Boston, now considering his request that it overturn a federal judge's ruling to toss his suit over the supposed promise. The appeals court asked the SJC for its opinion on whether the deal is legal because resolving the question hinges on Massachusetts gambling laws.
Gattineri was a minority owner of FBT Everett Realty, LLC, which sold the industrial wasteland to Wynn for conversion into the Boston area's one casino.
The casino concern originally agreed to pay $75 million for the land off the Mystic River in 2012, but after the state Gaming Commission raised questions about whether there might be a hidden FBT owner who was a convicted felon with organized-crime connections, the company and FBT agreed to lower the price to $35 million - its value as land not used for a casino. To win state approval, Gattineri and the other two owners had to certify they would not funnel any of the proceeds to any possible organized-crime figures, such as Charles Lightbody, from whom Gattineri bought his stake in FBT - and to whom he still owed money for the purchase.
Gattineri, although he eventually signed on to the proposal, objected to the deal. According to the court's summary:
Gattineri alleges that at a meeting with Wynn vice-president Robert DeSalvio in San Diego, California, the two men agreed that in exchange for Gattineri signing the certificate, Wynn would "make Anthony Gattineri whole" by paying him an additional nearly $19 million, calculated as Gattineri's proportional share of the $40 million price reduction on the FBT parcel. This agreement was neither committed to writing nor communicated to the commission. Gattineri was also a person of particular interest to the commission, as he not only was one of the three principals of FBT but had also bought out the convicted felon's ownership interest in FBT and still owed him money at the time of the investigation.
Wynn never paid him the extra money, though and Gattineri sued Wynn in 2018 in federal court in Boston - where he lost.
The US Court of Appeals for the First Circuit in Boston, now considering his appeal, asked the SJC to answer the question of whether the agreement Gattineri had with Wynn is unenforceable either because it violates the state gaming law or if it doesn't violates the state's avowed public policy of "ensuring public confidence in the integrity of the gaming licensing process and in the strict oversight of all gaming establishments through a rigorous regulatory scheme?"
The SJC said ensuring public confidence in state oversight of gambling is paramount and weaved throughout the law, so the $19-million deal is unenforceable:
We conclude that the San Diego agreement is unenforceable for reasons of public policy. By its express terms, the paramount public policy of the Expanded Gaming Act (gaming act), G. L. c. 23K, is to protect the integrity and public confidence in the casino gambling licensure process. This public policy, reflecting both the risks presented by large-scale gambling operations and the recognized need for their strict regulation, has been consistently emphasized in our gambling statutes and our case law. Consequently, an agreement, concealed from the commission empowered to review and approve casino licenses and inconsistent with the terms presented to, and approved by, the commission to address its concerns about the possibility of involvement of organized crime, is therefore unenforceable as a violation of public policy.
The court then detailed its reasoning for why public policy in this case overrides the sanctity of contracts:
In the instant case, the commission was confronted with very troubling evidence indicating that Lightbody, a convicted felon with possible connections to organized crime, might have an undisclosed ownership interest in the parcel of land that would be a part of a casino license application. That interest had also been purchased by Gattineri pursuant to a promissory note and memorandum of understanding. The details of that purchase were also suspicious, as documents had been backdated. All of this made the details of the FBT parcel sale to Wynn, including Gattineri's interest in it, a matter of significant regulatory concern, requiring full investigation and disclosure.
Gattineri's interest in the property and the price he would receive for it were therefore well within the regulatory powers of the commission. The commission's follow-up investigation also made its lingering concerns regarding Lightbody and Gattineri clear to all of those involved. As a result, any additional contract involving Gattineri's compensation should have been presented to the commission by Wynn or Gattineri himself. Wynn and Gattineri's statutory obligations to fully disclose pertinent information and to not mislead the commission required such presentation particularly because of the concerns that Lightbody might still be involved, and because Gattineri was the one who transacted with him. See G. L. c. 23K, § 13 (b), (c). Consequently, the enforcement of any contracts concealed from the commission and compensating Gattineri for his interest in the property would be a violation of public policy. ... Not only was the alleged San Diego agreement concealed from the commission, but it was also inconsistent with the publicly disclosed terms and conditions upon which the sale of the FBT property had been approved. This provides an additional reason for rendering the San Diego agreement unenforceable.
The commission had approved the sale of the FBT parcel to Wynn with two specific conditions designed to address its concerns about undisclosed interests with connections to organized crime. First, it sought certificates from FBT members that confirmed their ownership stake in FBT and that they would be the only recipients of the FBT parcel sale proceeds. Second, it required that "the sale price" of the FBT parcel be "no more [than] $35 million" to ensure that the purchase of the parcel would not reflect a casino premium. The commission considered the price reduction necessary to promote public confidence in the integrity of the deal, as the combination of the IEB's investigation, the certificates, the capped price, and the turning over of files to the United States Attorney, the Attorney General of Massachusetts, and the district attorney for the Suffolk district for further investigation demonstrated the commission's commitment to preventing any persons with connections to organized crime from profiting from the awarding of the license.
In response, Gattineri refused to sign the certificate. Instead, he would only do so if he received extra compensation. That compensation, he claims, was to be provided in the San Diego agreement, a contract for an additional $19 million that was concealed from the commission.
Secret deals in violation of the public terms and conditions required for gaming licensure are unenforceable violations of public policy. They place in grave doubt the integrity of the public process for awarding the license, and thereby defeat the public's confidence in that process.
As alleged by Gattineri, he and Wynn's representative negotiated a secret oral agreement for additional compensation beyond the $35 million cap required as a condition for approval of the license. It was also to be paid to Gattineri, the person who had purchased an additional interest in FBT from Lightbody, the convicted felon with ties to organized crime who was recorded claiming to still have an interest in the FBT parcel, thereby raising concerns that such additional undisclosed compensation might end up in his hands. It is hard to imagine contractual conditions more likely to undermine the public's confidence in the licensing process. According to Gattineri, the deal was negotiated in private, done orally and not in writing, and deliberately concealed from the commission. Enforcement of such a secret agreement, contradicting the public terms of approval, constitutes a clear violation of public policy.