As financial giant Merrill Lynch, whose deep financial troubles led to a federal bailout with tax dollars, prepares to become the new owner of Greektown Casino, African-American investors have been put on notice that local ownership would no longer be a requirement under the new agreement.
Under the new Settlement Agreement the casino, which is preparing to emerge from Chapter 11 bankruptcy, can operate without abiding by the 10 percent local partnership agreement it was bound by in the past that allowed minority investors to be shareholders in the gaming business in Detroit.
All previous 11 Development Agreements under three mayors had a provision that required 10 percent to be offered to Detroit residents.
The current Settlement Agreement pushed by Merrill Lynch, now owned by Bank of America, only requires that 2 percent be offered as local partnership which is contingent upon Merrill Lynch deciding to sell the casino.
At issue also is the governing board of the casino, which in previous agreements clearly stated that African-Americans must make up 25 percent of the board.
Now the new agreement Merrill Lynch favors only requires the Detroit City Council to appoint an ombudsman to the gaming board. However, that individual will have no voting power.
If the city consents to the agreement, it would receive $15 million. But one investor quickly retorted that such an amount means nothing if almost half of that amount goes toward legal fees for the law firm of Cid Froelich, the Chicago lawyer who has long represented the city in such negotiations with the casino.
Froelich told members of the Detroit City Council Tuesday afternoon that the Settlement Agreement is the best deal and it has to be ratified for Greektown to move ahead in the current bankruptcy proceedings scheduled for Nov. 3 and Nov. 6.
Failure to do so, according to Froelich, would mean no casino in Greektown, an appeal that did not seem to move the majority of the council members.
Saul Green, representing Detroit Mayor Dave Bing’s administration, said the city has no option but to follow bankruptcy law and move ahead with the new agreement because it is in line with the casino’s march out of bankruptcy court.
Like Froelich, Green reiterated that the city was following the law in ensuring that everything was in place for a post-bankruptcy era for Greektown Casino, even if that means there are no set-asides available any longer for minority investors.
“Kindly consider that capitalism is best served when everyone is included. Merrill Lynch, who is scheduled to receive control of Greektown Casino, was itself the beneficiary of stimulus dollars from the federal government,” said Dr. J.C. Douglas, an African- American investor urging council to reject the agreement.
Another investor, Suane Lommis, said Greektown makes an annual profit of $80 million and could not understand how it can go bankrupt.