Don’t bet against me (Full Transcript)
Steve Wynn puts his cards on the table
What follows is a transcript of an unedited interview with Steve Wynn of Wynn Enterprises on March 5 at his villa in Las Vegas. For the edited version, click here.
WYNN: What’s on your mind? What’s of interest to the magazine about this show they’re running in Massachusetts about having a casino in Boston? Do the folks in Massachusetts, do they want to have a casino in Boston? I heard some folks signed a paper there that they’d like to not have the legislation, and that sort of thing.
COMMONWEALTH: There’s an effort to get a measure on the ballot to try to repeal the gaming law. The attorney general has ruled that the question is illegal, but her decision is being appealed to the Supreme Judicial Court.
WYNN: It’s unsettling to see it. Every time they try to legalize gaming, we’ve always stayed out. Years and years ago I got involved in Florida and Connecticut. The governor invited us because he wanted to have a casino in Connecticut, in Bridgeport. And it was before they had an Indian casino with the Mashantucket and Pequot Indians. So it was an established fact. But when states have ballot measures, my take on this, after having had this job for 40-odd years, is that it’s inappropriate for us to work it. There ought to be a consensus of the people that live there that it’s a good idea because without that consensus it’s never going to be a good business. You have a lot of employees, which make up a constituency that’s important. In Nevada we are the industry. In Mississippi, we’re the industry. In Macau, we’re the employer. And so politicians and government have an entirely different attitude when something is relevant to the success of the community. A vote by citizens to have a casino in a state is a statement by the folks that live there, OK. When a Legislature does it unilaterally and someone says let’s have a referendum to cancel out those assholes in the capital, I’m saying to myself, whoa, anything that’s worth doing is worth doing right. To the extent we’ve made suggestions about things that should be done, it’s in order that the legislation be successful. We’re a company that doesn’t like to do things unless we do them right. It’s not enough for the attorney general to say it’s not legal. I hope there isn’t a serious issue about the acceptability of it in Massachusetts. That would be disappointing and confusing to me. We polled our own town in Everett and also in Boston to see how it looked for the other guys. Overall in Boston, you’d win if you put that question up. In the rest of the state? I don’t know.
WYNN: Whoa, this is going to be expensive to make it pretty. We’re going to have to hide the pump house that’s over there with berms and trees. The most beautiful view is the view of the skyline of Boston over the little inlet they cut in for the water. I looked down at the distance from the low tide to the water level and I was thinking, how do you make this look pretty? And then there’s the structure of the property, which is in effect a peninsula between the tracks and that water cutout where I guess they used to bring in barges for the chemical company because it looks very rectilinear. That forms a peninsula of sorts. That was good news and bad news. We’re going to have to completely hide the tracks, and take them out visually and experientially – double-paned windows and that sort of thing, New York windows like they have on Fifth Avenue. Easy to do. We’re going to buffer both sides of the property and we’re going to pitch the place and the views and the presentation to the river, the waterfront, and the skyline of Boston, which looks quite lovely from that angle. I don’t have my north-south orientation right, but I think the tracks are west. I think the river is south and I think north is toward the bus property. Whatever that direction is (gestures over the Mystic River), that view, I like the skyline of Boston. I know we’re going to come in on Alford and make an avenue into the property that would be a presentation where we would block the approach road and that pump house on the left and make the side of our building and the entrances really pretty. And get around to the front where we would reveal the waterfront. So the waterfront played a big part in my thinking the day that I was there. I looked away from the tracks and at the skyline of Boston. When I sat down with my design partner De [DeRuyter Butler] – because we do everything in house,architecture and interiors, the two of us for the last 31 years – De and I sat down and right away we were framing the entire arrival experience and the presentation of the hotel toward Boston’s skyline. And that’s what I thought the day I was there. I look at property a little different from some people. I say, ok, what are its deficits, what are its advantages? Where’s the good news here?
CW: What about that giant power plant across the street? That can’t be good.
WYNN: The stair towers will face that way. [He points at me.} You’re Boston. There’s the power plant. We’re going to hide that. You go past it and the hotel sits and faces this way. The rooms don’t look at the power plant unless you go like this [cranes his neck] out of your room. But you’ll be up higher. Remember the building is on a podium. By the time you get through with the lower levels and lift it above the water line, the ground floor is usually two to three feet above grade. And then we’re going to have berms along the side that will go up 20 feet. But our ground floor, to have an atrium and other high grand-feeling arrivals for the emotional management of the place, the first elevated floor above ground is probably 28 feet above. So you’ve got the second level, which is plus 28 to plus 31, and then you’ve got another 35 to 40 feet before you get to rooms because there’s convention meeting space on that floor. So now when you hit the first floor rooms, you’re up five stories. The first two floors, you’re interior environment and we’re in control of that. When you get into a room with floor to ceiling glass, you’re up 50 feet. You’re looking over everything and that softens what you experienced the other day. If what you saw is what it felt like it would be terrible. But that’s not what’s going to happen. When I look at it, I automatically know that I’m starting in my bedrooms five stories up and the first and second are managed by us with atria and all of that sort of thing, which is very distracting visually.
CW: Is Everett, visually, one of your biggest challenges in terms of what you’ve done?
WYNN: Well, first of all, you asked what I thought when I saw the site. And my thought process was pretty much what I described to you. But there isn’t anything in Revere, East Boston, until you’re out in the country. You’re either in a locked-in urban environment in center city Boston, where there’s no extra land and you’re looking at the side of high rises, which all look the same in every damn city of America. There’s about eight different curtain walls with these buildings. You can’t tell whether you’re in Boston or Philadelphia if you’re in the center city. Or, for that matter, Hong Kong or Shanghai. It’s all the same. So there’s no pretty piece of property unless they give you Boston Common, which is, of course, absurd. Same thing in New York. When you go away from the center district, you’re going to bump into compromises physically, so other than the site itself and what the emotion is when you turn into it, you have to take the view that the place itself is the attraction. Its internal excitement and environment trumps any other real estate disadvantages. People come to such places for one reason only: It’s an experiential exploration. They come for the fun of it. It’s an entertainment facility. Call it what you want. People are playing the slot machines. People are coming to see a show. People are coming to the nightclub. People are eating at the fancy restaurants. They’re shopping at the fancy shops. And if the place does that, then it justifies itself and what’s across the street is irrelevant.
CW: Still, aren’t you going to see the power plant and the scrap years in Everett driving in?
WYNN: We are in the metropolitan area and what’s important is what’s in that area: museums, the convention center, other hotels, and universities, an outrageous amount of higher education. Boston’s a destination, so I’m saying if I build something nice I’ll be OK. If I’m not right on Boylston or the exact corner where I’m supposed to be, it doesn’t matter because we’re spending $1.5 billion. There’s nothing like that. They are, to a certain extent, destinations themselves. It’s going to have the biggest hotel room in the eastern United States. There’s no other hotel that starts with rooms of 600-odd feet. That’s the smallest room in the place. Those are the things you have to take into consideration when you say what about where you are. It’s who you are which is more important. I imagine there are pieces of property with hurdles you can’t overcome. I didn’t find the site to be disqualified. I found it to be challenging.
WYNN: I knew what their plan was because it was part of the public record. No matter what they said, I was going to say the same thing, whether I’d gone first or second. No one who was making a major, serious effort would have ever, ever proposed a three-star hotel in the United States of America in my business today. Either they don’t care or they’d be foolish. Everything in Boston is four stars already. A three-star hotel is a 50-square-foot bathroom. You walk in and there’s a toilet, a single sink, and a tub-shower combination. Those are 350-square-foot rooms. It’s not done. It’s outrageous. You’d say it’s either a total amateur, someone who has not done their homework, or it’s someone who is saying, our major effort is to control this process because we have something going on somewhere else. Clearly, having a hedge fund buy 60 percent of the place, having one guy do the shops, another guy doing the hotel, where’s your heart in this project? It sounds like you’re trying to finance it out like a shopping center developer. I don’t know why [Suffolk Downs investor Joe] O’Donnell did that. You want to make it easy for me? Hire the people from down the street to compete with us and have them make a presentation like that because it’s very transparent. We’re going to pay 25 percent on table games. We’re not going to have anything to do with Connecticut. They have no tax on table games, zero. Now, you’d have to be critically handicapped not to see that from a Massachusetts point of view it’s a disqualifier.
CW: So you feel like you came out of that day in very good shape.
WYNN: We had submitted 235 pounds worth of paper. I even had some fun. I said I love it [the paper submission] so much I take it wherever I go. I couldn’t resist. There it is. I’m sure you all read every page, I said to the commissioners. We had submitted as required all the stuff about employment, personnel, and diversity. There was a huge backup requirement by the state of Massachusetts. We’ve won every HR reward in America. We’ve been on the cover of HR magazine two or three times. We won the Human Resources Institute award as the best employer of over 1,500 employees in America against Disney and Microsoft in 1998. We were the second-most-admired company at Mirage on the cover behind Coca-Cola in 1997. The year before we were seventh. In each of those stories, they said the reason Wynn gets the votes from the juries they use for those selections is because of the human resources program. All of that stuff and the developer-speak that [Mohegan Sun chief Mitchell] Ettess did, all of that was submitted in overwhelming detail in the presentation that had already been given to the commissioners. The hearing, as we understood it, was to summarize our position and our priorities, not to run through the whole program again unless you wanted to do a press event for the peanut gallery in the audience, who don’t get to vote so who gives a damn. No offense to the magazine and press, but that wasn’t what that hearing was about. The hearing was about what have you done Massachusetts and why did you do it? Let’s get down to it. Stop the crap and the development baloney. The state of Massachusetts, through its elected representatives, passed a law that said they wanted to create tourism, tax revenue, and jobs. Two of those three things are effects, one of them is a cause. They’re not equal. They may be the stated objectives, but employment and tax revenue are the result of tourism, to increase tourism in Boston. To simplify, that’s bringing people from over there [speaks with Boston accent] to over heah. If you want them to come from over there to over here, what’s here has to be better than what’s over there. Period. Let’s get down to it. What you build here has got to be better than what’s there, and when it is it costs more money, it has more stuff, it hires more people to execute it, and that’s really what brings cash in from outside the region and you get a positive cash flow. That’s tourism. Of course, that means you can grow it year after year, whereas if all you do is build a box of slots or the kind of thing you see in riverboats across America (the face of gaming is ugly in America, which is why we don’t participate in it). If you do that, you have one first year in which all the tax revenue comes, and the place takes its place in terms of revenue, and it stays there, a locals joint. Unless you have a place that brings people from outside the region in, you don’t have the growth and the stability that offsets the rising cost of business. You need to have a growth path in these businesses. When all you do is cater to Everett, Boston, and the immediate area, you have a good first year, and then you stay there. That’s what happens with the riverboats. There’s an economic downturn in the town, down it goes. I’m not in that business. We’re a destination resort kind of place. I backed out of Philadelphia but I stayed in Boston because Boston is a destination city. It has museums. It has all those international students with all those international parents and I know a lot of them and I’m going to get them to come to our place and bring their money from China, Mexico, and Brazil and every place else.
CW: Did you do a low-tech presentation to offer a contrast with Mohegan Sun?
WYNN: The cast of characters was determined by what we thought the process was that day. We thought the process was to summarize how we related to the legislation and the moment. I had to assume that massive [paper] presentation was on the record and decided not to run over it again, that was just developer-speak. That was palaver, telling how many awards they’ve won. The week that we were there we got more five stars than anyone in the world, according to Forbes magazine. In this past week, Fortune magazine made us the most admired company in gaming for the fifth straight year, third in all of hospitality in America. It was Marriott because of Ritz Carlton, Starwood because of St. Regis, and then me. I didn’t talk about that. I didn’t think it was appropriate. I could have had all those people there. I could have had diversity people. I could have had Asians. I could have had Latins, African Americans. That was a dog and pony show. Our view of what the hearing was about was much different than that. All it needed was two of us, one to cover some of the financials and the other to deal with the big picture.
CW: Mohegan Sun officials tried to position themselves as the local company. Did you purposely work in all those references to your family growing up in Revere as a counterpoint?
WYNN: We’re all from Revere, 100 percent. 11 Dana Street was where my Aunt Bessie and Uncle Hymie lived.
CW: I assume that was on purpose.
WYNN: No, I did it because I like talking about it. Every summer I was at Revere Beach until I went away to prep school. Revere Beach. I always do it when I’m in Boston. I talk about Dana Street and my Aunt Bessie’s yarn shop on Shirley Avenue. Currently, my cousin Jerry’s beach sales place is right there before you go over the bridge over the railroad tracks. That’s an old habit of mine. I would have been born in Revere, too, but my father was born in 1916 and had rheumatic fever. His mother died eight months after he was born. He was brought up in a foster home, the Shansky family in Revere. My grandfather, Jake, who was a vaudevillian, paid the Shanskys to take care of my father. It was a very nice foster home. But my father, as a result of rheumatic fever, it left him with a damaged aorta valve. By the time he was 45, 47 years old, his left ventricle was hugely enlarged and he was having heart failure. When I was in my last year at Penn, he spent from January to March in the hospital and then he was flown to the University of Minnesota because he was dying at age 47. They tried to save him by doing aortic valve replacement. It was just before graduation, but I was there when they came into the room and said we’re sorry. It was just like in the movies. My mother was hysterical. Anyway, because my father had rheumatic fever, during World War II he was 4F. Big heart murmur disqualified him. During World War II, if you were disqualified for being 4F, you still had to get a defense job. So my father in 1941 or 1942, the year before I was born (I was born six weeks after Pearl Harbor. Imagine being eight months pregnant. That explains all my kookiness. My mother must have been emotionally disturbed by Pearl Harbor. I came on Jan. 27. Pearl Harbor was on Dec. 7.) The closest defense job he could find was at Marlin Firearms in New Haven. So my dad moved from Revere in the war years. So I was born in New Haven because of my father’s requirement to have a defense job. We lived in a tenement house. My mother said she walked me in a walker. Just before Glenn Miller was recruited – you know he died in a plane accident in England and disappeared over the English Channel? – he and his orchestra they practiced at the Yale Commons and my mother took me as a baby to hear them. They’d play and march up and down. I’ve always been a Glenn Miller fan ever since. “String of Pearls.” I hear those songs and something comes from deep inside me. I’m not from Revere. The rest of the clan is, low-end Revere.
CW: Do you ever gamble?
WYNN: I played poker until I was about 50. I shoot craps about once every five years. I’m a big success, of course, like everybody else. My friend Mark and I we both shoot crap every once in awhile. We put $15,000 or $20,000 together and blow it. Am I a gambler? No. My father was a problem gambler, and so was the father of my first wife, Elaine. His name was Sonny. So we lived with the results of problem gaming, the self-destructive behavior that attends such things. And it’s the reason why, when the subject came up in New Jersey years ago and they formed the Pathological Gambling Foundation headed by Dr. Robert Custer, who was the foundation researcher on this subject, he asked me to go on the board and I did and I funded it. I was fascinated about the subject because of my dad. Dr. Custer and I got in a long conversation and he told me all about it. He said,look Steve, there’s a percentage of the population, 2 or 3 percent in that range, that has a predilection for addictive behavior. He said it is a genetic predilection that includes drugs and alcohol and gambling. Dr. Custer was the first one to point out that the existence of a casino does not create more problem gamers. People who love gambling are betting with their bookmaker or engaging in gambling with their friends, betting sports, and doing those things. They satisfy it, so what to do about it? If that’s a description of it, he said it happens to be the same as drugs and alcohol. The victim of such unfortunate structure has to decide that they will be a victim no more. Interventions help but the only success ever in drug and alcohol addiction is when the addict says enough and goes into AA or Betty Ford or to counseling for problem gaming. So he said, Steve, being against gambling is like being against drinking. You can close a bar at midnight, you won’t stop one alcoholic. You can close the bars at five o’clock and you won’t stop the alcoholics. They will get the booze. Same with drug people, they’ll find a way to satisfy the craving. What is important is that you have a place to treat them. There is AA and that has done more to save alcoholics from the bitter end than anything in the world. All the studies, all the lip service, all the speeches are to nothing without AA. Same with the drug addiction centers. But they are voluntarily attended. And that’s the secret. That’s what I learned.
CW: You’ve been frustrated with the regulatory process in Massachusetts, right?
WYNN: We’ve seen this before. Someone decides to do something, like legalizing an activity that heretofore was banned, and everybody says, well, you know what we’re going to do? We’re going to regulate it. The assumption in that statement is that without proper regulation, everyone will run amok. Terrible things will happen. That primary assumption — that without regulation, everything will collapse — that’s false. Because so much capital is involved, the only people that can do it are responsible. You can’t run a business in a manner that would allow it to run amok. We’re not talking about a floating craps game in the back of a bar somewhere. You can’t run this business as a public company without self-regulation. You have to have accountability. What we see when something is first legalized is the creation of an agency and then a very self-conscious, worried approach to are we doing this right, are we going far enough, because without every last measure of anticipatory regulation the thing will explode. That assumption is totally false, but nevertheless well intended. There isn’t anything malicious about it. It’s just the way it is. We’ve seen it before. In the case of Massachusetts, the requirement and the extent of the regulatory submission was extraordinary, 235 pounds. We didn’t do creative writing there. That was required. Now, is anyone going to read all of that? Thousands of pages, what was that all about? It was about politicians and staffers writing regulations. It’s the same with health care and the Affordable Care Act. I’ve been providing health care for 40 years. It’s [the Affordeable Care Act] an error. It’s a mistake. We all make mistakes, right? In every single opportunity to deal with the problem, it missed and on top of that did it wrong. It created new problems. Very often, in gaming we’ve seen the zealousness of the writers of the legislation, again well intended, but without input. These things are usually done in a vacuum. There were no hearings. There was no attempt to take expert testimony. They did hire regulators and people who have done it before. One of the people that did us was a very, very competent guy named Guy Michaels. He had been the director of the gaming division in New Jersey. The same thing happened there. You know, in the early days of New Jersey, they had a couple women in the department that reviewed whether they liked our selection of wallpaper in the bathrooms. Under the guise of protecting the welfare of the state of New Jersey, they were esthetically reviewing our interior decorating. The people they hired to review the interior decorating had no prior experience in such matters. But, again, the agency was launched with the confidence of a farmer without a mortgage. Time and experience tempered that sort of thing and today regulation in New Jersey is far more mature, sophisticated, and, I may say, focused. Nevada is the final measure because of the years of experience. They license anybody who’s got the authority to control the enterprise.
CW: Were you prepared at one point to walk away from Everett when questions were raised about your casino in Macau in China?
WYNN: Once we decided that Massachusetts was a very good place for us, that it was a place where we could build a destination resort, the question came up: What was the attitude toward Macau. There’s been more misinformation published about Macau than I have hair on my head. It’s not our job to correct it. Nevada understands it completely and has come to grips with the vagaries of a growing market, and there’s always some, and there will be in Massachusetts as well. But they got their comfort from the way we were running our business, which for all intents and purposes suspended the possibility that there could be a scandal or a terrible criminal activity. So Nevada has come to grips with understanding where are the controls, where are the moments of intersection, where are the choke holds you can control and know a business is being run properly. And it takes years to figure that out. When we saw the young agency’s first request for information – and the nature and extent of it was daunting – we had our own opinion that much of the information that we would supply would never be seen by any living human being, that it was going to go into a box or a hall or a warehouse somewhere or committed to a computer file and that would be the end of it. So we had to do this 235 pounds of documents, it’s extraordinary. How much of that is relevant to the regulatory process?
CW: You made a call to Gaming Commission chairman Stephen Crosby about Macau. What happened during that call?
WYNN: I made a phone call after my investigative interviews. I wanted to find out whether our persistence in Macau per se was a disqualifier. If so, why spend money here? Why bother them, even if they were going to bill us for it? If being in Macau was in itself a disqualifier, then we choose to leave. So I placed a call to the chairman, one of two phone calls I made to the chairman in my time. He wasn’t there. He was in a meeting. He returned my call with Judge [James] McHugh. I guess he wanted two people on the call when the police interview him. I said Mr. Chairman, I don’t have any desire to waste your time or my own. I want to ask if our involvement in China is itself as disqualifier. Because if it is, I can’t satisfy you. I’m certainly not going to surrender my operation in Macau and I’ll save you the trouble of dealing with us. I’ll go away. He said Mr. Wynn, what we’re interested in here is the standard you employ to run your business in Nevada or anywhere else for that matter. Our job is not to license Macau or regulate Macau. Our job is to understand how you deal with each place in which you are engaged. Does that answer your question? I said, if that’s the answer, you have answered my question, thank you very much. That was it.
CW: Caesar’s Entertainment suggested Crosby …
WYNN: I’ll never forgive [Caesar’s CEO] Gary Loveman for getting creative and using that to try to make a witness out of me in his lawsuit. I was misquoted. I told Gary what I said just like I just told you. Next thing you know he torqued it around and got creative. Made me angry.
CW: But Caesar’s said Crosby begged you to stay in the running.
WYNN: Yeah, bullshit. That’s not what happened and Gary Loveman knows that’s not what happened. Do you know anything about this fella Crosby? Do you think he’d beg anybody to stay? McHugh? You’ve got any background on these guys? They were very happy to answer my question. And they did it with those exact words. I’m repeating verbatim what he said to me.
CW: In your submission, you’ve raised concerns about elements of the state gaming law. You’ve threatened to walk if they aren’t corrected. Is that true?
WYNN: There were eight or 10 of them. We discussed them with staff before our final presentation. Again, how do you see the process? What is it we’re doing? They’re trying to pick someone. They decided to have a casino in metropolitan Boston. Their job is to find a suitable, qualified, legitimate person who will do the best job. Shaping the regulatory end and managing the process up to the moment of selection and thereafter, our input is helpful or it is not. We either begin to play the role of good partner or we don’t. When something was really awry, I had to speak. I told you I called Crosby twice. They had a meeting that I heard about where they decided you can’t have your host community vote until after we finish suitability. At the time, there was no date certain on the completion of suitability, sort of the end of the year, we think, subject to change. If that were true, we needed by law host community approval. We also needed in order to get host community approval to comply with other neighborhood geographic restrictions which included the harbor authority. We as a waterfront property are subject to the Boston harbor authority and its promulgated regulations and guidelines that had to do with setbacks, building height, and a host of other things, landscaping, beautification, functionality of the adjacent real estate to the waterfront. The usual stuff, planning board stuff. Our building, which we needed to show the locals, had to be approved by them, too, and they consult with the local community. It was a joint thing. It wasn’t just Everett, it was the harbor community. I had to design a building and meet deadline for the submission that the commission required by the end of December. The two facts were mutually exclusive. The chairman didn’t know that, nor did Judge McHugh when they voted that there would be no host votes until suitability was finished. The two dates clashed and canceled each other. I called them up. I said Mr. Chairman, with respect, my job is to help you. Do you understand the position we’re in with respect to your law. He said, what’s your point, Mr. Wynn? I can’t finish designing the building and get to you with a building that I know is OK unless I get the approval of the community and the harbor authority. I have to finish the building first in order to finish your application. If you tell me I can’t get the host agreement, I can’t get either date. He said: I didn’t know about the harbor authority. Tell me about that. So I told him. And that’s tied up with the local community. Yes, the local community and the harbor authority jointly decide that we want this building on the shoreline. So harbor authority, please grant the planning board the ability to approve this building. They interact. Crosby thanked me for enlightening him on this point. He did not know about the harbor authority. He was glad that the water was going to be part of the project, but he didn’t know about the harbor authority or understand the relationship between Everett and our building. They reversed their position, not to do me a favor but because they found out that there was a conflict. There are a number of conflicts.
CW: What conflicts are you talking about?
WYNN: Now who tells them this and why would you not tell them this? The major partner in this is the state of Massachusetts taking 25 percent off the top. It would be a miracle if I have a 25 percent operating margin after taxes and other expenses in Boston. That would be good number for us. I’d be happy with 23. They get 25 off the top plus money we’ve got to pay the cities, and money we got to pay the commission, and money we got to pay these guys and those guys. You add it all up and it’s 30-odd percent off the top. The major partner in the enterprise in terms of money is the state of Massachusetts and the local governments. Not us. We just supply the money and the management. They are in effect hiring a technician who is a finance source. If you go and pick somebody, you’re damn well not going to pick somebody to trust if they don’t know what they’re talking about. I’m the managing partner. I got something to tell you. You did things that are contradictory and counterintuitive to the purposes of your law. Now you want people to come there or don’t you? Do you want them to go to Connecticut or do you want them to come to Boston? Customer experience is the only damn thing that matters. No one gives a damn about the commission. They don’t give a damn about the legislation. Customers care about their experience or they go where they get what they want. The ones from over there come here if here’s OK. If here’s not OK, they stay there.
CW: How critical are those issues you’ve raised? You’ve threatened to walk away because of them. Is that a real threat.
WYNN: Each of those things is critical or we wouldn’t have made an issue of them. Is there room for compromise? There’s absolutely a way to deal with all of those. Some of those may not be as stark as we said. This was, after all, something of a negotiation. You want to give yourself the right not to be trapped into a stupid business deal. Take a look over here [Points to himself.] Do you see a dummy? No one will a billion-five is a fool. I am not going to lead this company over a cliff. I am not a Judas goat. I’m the CEO of a public company. I’m dying to build a hotel for a billion and a half dollars in Boston and I’ll bring my capital and experience full tilt to the job personally. But I want the state of Massachusetts to have the same commitment to us as we do to them. How else would you say it?
CW: I’m not sure if threatening to walk away is the right way.
WYNN: I don’t know how else to start this conversation to get the state to negotiate with us in order to do this well. So we put in there that if we don’t get these types of changes, we have the right to leave. That’s always true.
CW: Several lawmakers have told me that your point about withholding taxes is valid and the provision should be changed. But regarding many of your other suggestions – tax parity with the Wampanoags, for example – they are wary of reopening the debate about gambling.
WYNN: That’s very interesting.
CW: Well, it makes sense in a way.
WYNN: Is the leadership of the Legislature in Massachusetts dedicated to the pursuit of excellence or is this a political ping pong game? If it’s a political ping pong game, it’s not the right place for us. If I make a legitimate point, and someone says I can’t do it for political reasons, then I say fine, you’ve made a good decision for me. What would you do? What would any sane person say?
CW: What if the Legislature doesn’t move on this before the license is awarded, which seems very possible?
WYNN: The question is does the Legislature have to act in each and every case or are there other avenues of resolution of these issues. The point of our application is that these issues are important and need to be resolved. Surely the Legislature can do it, but there are other ways to do it as well. And there are compromise positions and there’s a discussion that can take place.
CW: Another of your concerns is the requirement to provide space for compulsive gambling services inside your hotel. What’s your problem with that?
WYNN: The idea of putting a compulsive or pathological gambling facility in the joint and running it ourselves, that’s an outrageous, ridiculous idea and the speaker of the House and other people in the Legislature let it be known that that didn’t happen until after the bill left there. Somewhere after that, antigaming people stuck in these things that we object to. It did not come out of Ways and Means or the House that way. We’re not qualified to run a compulsive gambling facility. I’m not even qualified to pick somebody to run it. The state of Massachusetts is qualified and will have the revenue – from us – to do it. To put a pathological gambling facility in a casino is to put AA in a bar. Anybody that wants me to do that is someone that I need to think about.
CW: Have you gotten any feedback from lawmakers?
WYNN: Sure. We say, is anything we’re saying outrageous or improper or look like it’s too ecocentric to the company? This has to do with the survival of the enterprise, the security of the workforce, the stability of the tax revenue. If you don’t believe that I’m qualified to tell you this, pick someone else. But I’m your partner. You can’t do that.
CW: What’s your problem with the requirement that the casino collect withholding from anyone who wins more than $600?
WYNN: You can’t treat everybody like they’re a deadbeat dad when they cash out $600. That’s like everybody is presumed to be a bum. My customers won’t put up with that and I won’t be part of it. That $600 thing? No. No. I get relief. It’s an outrageous mistake. They’re going to go to the federal rule. A table gaming person comes in three days in a row. He loses on Friday. He loses on Saturday. He loses $10,000 but wins $600 on Sunday. He’s lost $9,400 and they take taxes out.
CW: So you sound like you want to work with the commission and are not just threatening to leave unless they act.
WYNN: Of course they’ve got time to do this. There isn’t anything we’ve asked them to do that isn’t solvable one way or another. But to not mention it would be an act of gross irresponsibility both to my stockholders, my company, and to the state of Massachusetts. Nothing that we’ve suggested has anything to do with anything except informing the state that certain things they’ve done are counterproductive to the goals of the legislation and will sabotage the very thing they want to build. If that is the case, I’m not their guy and they get the Indians.
CW: Mohegan Sun isn’t complaining about the gaming law.
WYNN: The only interest of the Indians is to smother this threat to their main business, where they have billions invested. So they say, we love the legislation. We don’t want to make any changes. We’re going to lay this off to a bunch of other guys and have nothing invested and squash it. Anybody that doesn’t understand that didn’t go to school. If this isn’t the most transparent thing in the history of the world, I don’t know what is. So if it’s politically inconvenient to correct mistakes, then we’ll live our life somewhere else.
CW: In your recent talk with financial analysts, you outlined the company’s finances. What about the Everett casino? How would that do financially?
WYNN: I believe the cash flow, the EBITDA, on the hotel will be around $300 million. The business plan says before corporate expense, $300 million. This place did $480 million last year. Macau did $1.325 billion. I think that place is a $300 million business, as we’ve drawn it, or better. If I spend $1.5 billion and I get $300 million, that’s a 20 percent return on capital. But I am going to put in as equity $500 million or $600 million and borrow $900 million. So the return on the $500 million or $600 million, that’s pretty healthy. Now the question is, if we have cash sitting in the bank – and we have $2 billion or more right now – what am I getting on that money? I have it in US Treasuries so I’m getting half a point. That’s nothing. So if I can take $500 million or $600 million of our capital and put it in Boston, Massachusetts, and have a growing business that will support this place by having a strong eastern presence.
CW: How has your Las Vegas business done as more and more casinos have been built around the country?
WYNN: The Las Vegas business has suffered. The local business in slot machines and blackjack and craps is the same or less than it was in 2004 because of all the regional gaming and the Indians in California. Local casinos around the country in the last decade have sucked up a lot. Las Vegas is still the destination of choice, but instead of coming three times a year they come once and go closer to home. Las Vegas is surviving and growing only because of international business. They come from over there to here, from Latin America, from Europe, from China. Fifty-two percent of my table business is Chinese, 24 percent is Latin. My American business is 25 percent of the $600m in table revenue I had. Of the slot machines, of the $200 million or so we took in, $40 million to $50 million was international. If you just took American business, we’d be $400 million here in this competitive environment. So having a casino in Boston will give us a local presence. All of the gamblers in New England come here. There isn’t any gambler at the Indian casino, Mashantucket or Pequot or at Mohegan Sun, doesn’t know about Wynn. Every gambler on the East Coast knows about us. We don’t need any commercials. You build a better mousetrap, you build a prettier place. The question is, can we build a prettier place than Mohegan Sun? Go walk into Mohegan Sun and walk here. Forget me, the owners, and the executives, they’re all full of crap. Go look.
CW: You’ve said your Mohegan Sun’s worst nightmare?
WYNN: Absolutely their worst nightmare. I’ll take all their top-end table business.[Slaps his hands together] Just like that.
CW: So you believe that’s why they aren’t pushing for any changes in the Massachusetts gaming law?
WYNN: They just want me to go away. So they’ll run PR. [Puts on a phony voice.] Steve Wynn is trying to tell Massachusetts what to do. Steve Wynn is this or that. We love Massachusetts. We’re compliant. We’re grateful. We wouldn’t put any politician in an uncomfortable position. Aw shucks, putting politicians in uncomfortable positions, breaks my heart. They don’t care about putting me in an uncomfortable position. Well, hello? I’m not apologizing for anything. I’m just trying to be helpful and tell the truth whether you like it or you don’t.
CW: The Gaming Commission recently awarded a slots license, and three of the five commissions who voted for a slots parlor in Plainville said the intention of the operator to keep harness racing going at the local track was crucial in their support. Does that make you worried competing against Suffolk Downs?
WYNN: Am I worried? No. If someone picks Mohegan Sun because it’s next to Suffolk Downs, the biggest break in the world would be that they didn’t pick me. That is so preposterous. The race track business is dead. Hello? What do you need, a building to fall on your head? Thoroughbred racing is dying. Every slot machine joint put in every track hasn’t made one speck of difference. Do we assume that everyone is ignorant of the facts, that no one does any research on gaming, that no one in government is capable of knowing what’s going on outside the room? I have no patience for that kind of foolishness. To pick Mohegan Sun, if you represent the state of Massachusetts, is an act of gross irresponsibility if you know the setup here. MGM, Caesars, that would have been a different story because they wouldn’t have had a casino down the street with no tax.
CW: What do you think the odds are that the Gaming Commission will pick you?
WYNN: I don’t have any idea. I don’t second guess these people. What I do is keep my feet on the ground and ask myself, at this stage, what matters. I visit everybody and say in order to compete with Connecticut and Rhode Island and New York here’s what we’ve got to do. I’ve got some input for you. A couple of them are so critical that they would really undermine the enterprise and on those issues if you aren’t going to fix it I’m not playing.
CW: Again, how fast do they need to act before you walk?
WYNN: They need to address these issues in a colloquy that has a rational reasonable disposition that gets everyone comfortable that the issues are being accepted and dealt with. There are more ways than one to skin the cat. I didn’t get into the specifics, but I highlighted the issues. And I said if you don’t do these, I can’t keep to the plan I’ve given you, I can’t keep my promise, the document is a fraud. It’s a fictitious piece of paper designed for political [sounds like]cosmesis. Screw it. I’m not that kind of person. We’re not that type of company. We didn’t get this reputation by acting like a bunch of jerks. And the process has gotten a little jerky now and then. If you can’t call it for what it is, then you shouldn’t be there. We’re adults here. This is a serious business spending $1.5 billion in Boston. No one has spent that kind of money. We’re going to slide in like farmers, like a donkey, or are we going to discuss business? Get a focus, Massachusetts. Pay attention. If you don’t want to do this, then don’t do it, but don’t do it lousy, don’t do it stupid. That’s the attitude of the guy you’re talking to today.
CW: So it sounds like, bottom line, you still want to open in Everett.
WYNN: I like being there. I’m putting up with a lot of stuff to get through the process because I like the opportunity. I think we’d be a big hit there if we’re allowed to run the business properly. I think everybody would like us once we’re there because it will be tasteful, it will be elegant, it’ll be fun to go there. And the casino will be over there. You won’t ever have to see it when you’re in my hotel and my restaurants. It’s a place where children don’t go, with separate access from the garage. You have to walk down the hall, go through a separate foyer, into an isolated casino. All that stuff that the other guys never talk about. I want a hotel first in Boston that everybody who doesn’t give a damn about a casino wants to stay at because you can charge in Boston. Boston’s got as good average room rate. And there’s rich people there, and a casino is not for poor people. I’m not interested in poor people in a casino at a resort hotel. I’m interested in people who can afford this and have the intelligence and the wherewithal and the sophistication to know the difference between good and bad, clean and dirty, pretty and ugly. I’m the pretty building guy. It’s not for everybody. So all that populist crap is not for me. I build places that are destinations. You want me and my company, that’s it. If you don’t, my feelings won’t be hurt. We’ll retire gracefully and thank everybody for their time. But if we’re going to do this, this company doesn’t do half-ass jobs. The other guys have a completely different agenda. They will spend the least amount of money. The guys who are supposedly being picked will have bupkus invested when this is over. They will not have a horse in the race. They’ll be up the street where they come from. They will have laid off the hotel to some operator. They will have laid off the retail. And they’ll have laid the capital off to a hedge fund that will own 60 percent of it. What the hell a hedge fund is doing there I don’t know. But you can see Mohegan Sun is laying it off because they don’t have the financial responsibility or any rational stake in this. You couldn’t have picked someone who was more comparatively disqualifiable unless you picked the other Indian tribe. It’s unbelievable that O’Donnell did that. He either had his head in the ground like an ostrich or there’s some agenda here that I don’t understand. How could you explain this to the voters? You can’t vilify me enough to overcome the obvious disqualifier of Mohegan Sun. You can think Steve Wynn is a perfect fool, but how do you pick Mohegan Sun for 25 percent of table revenue when its zero at the other place. And when they make a presentation as naïve as the one they did. They told on themselves in that dog and pony show. I watched it from my hotel room. I thought that they would have changed it before the hearing to say our hotel rooms will not be three stars, they’re four. They couldn’t say five because they’ve never had one. There are only 53 hotels in America that are five star and Mohegan Sun is not one of them. Nor is the Mashantucket Pequot joint [Foxwoods] at Ledyard one of them.
CW: So you’re feeling confident?
WYNN: The state of Massachusetts demands financial responsibility by law. Those commissioners are bound by law to use certain criteria in making their selection: reputation, experience, financial responsibility. All those things are by law. How can you pick the Indians? Why did O’Donnell do that? Why didn’t he pick Penn National, Hard Rock? What about all those other guys that got disqualified? Why the Indians? And then for Mitchell Etess [the CEO of Mohegan Sun] to stick to his guns, I had to talk about it. If you tell me we’re going to lose because they’ll say the other place is close to the horses [shakes his head], so we blew close to $6 million. Cost of poker.
CW: Cost of poker, huh?
WYNN: I hope the impression you get is that there’s common sense afoot here. If we get picked, that’ll be the story. We keep our promises. We understand our business. We love doing it. But we really are a one-trick pony. We build destinations and we take real good care of people and we get paid for it. Anybody who doesn’t like it, tough shit. You are who you are.
CW: So what happens if the casino market gets overbuilt?
WYNN: The minute that the market doesn’t grow, the operators, in order to maintain a profit, start cutting costs and they change the product that they’re delivering and the customer experience begins to deteriorate. It’s going on on the Strip now. That’s why we pick up market share in hard times because we don’t borrow too much money and we don’t get ourselves into a margin squeeze. We accept less money but we don’t change the standards. Our market share will increase. We have to maintain our service levels. We have to make our employees feel safe even if the shit hits the fan because it’s not Steve Wynn that makes the place. Only people make people happy. The issue here of guest experience is about the line employees. You can’t bounce with the market. You’ve got to be strong enough to power through the downturns. And that has to do with your capital structure. The Mohegan Sun doesn’t have enough money to do this, so they go looking for someone who’s a trader, a hedge fund. By design, by their own self-defining language, they raise money from other people, manage it for seven years, and then give back the money at a profit. They take a 2 percent fee each year for managing the money and get 20 percent of the upside. They have a limited life span in every investment. They are here to sell and leave, precisely the type of company that shouldn’t be in the hospitality business because every year you’re building for the future or you’re going backwards. It’s got to be someone who’s going to stay in Boston. These Wall Street types or the Indians down the stree, there’s no common sense to the discussion.
CW: It seems like Suffolk Downs has been the inside favorite to win the eastern Massachusetts casino license since the start of this process. Did you see that?
WYNN: Joe O’Donnell let everyone know from day one that Boston was his. [Talks with Boston accent.] I’m the guy from Harvard. Suffolk Downs? Don’t worry about it. When I was in Foxborough, I bumped into Joe one day. He said, I wish it had been you with me, Steve. Total confidence. Very successful man. A man of respect. He let everybody know, perhaps it was a strategy to discourage competition, that Boston was his. And there isn’t anyone in America in my industry who wasn’t told that one way or another by him and [Suffolk investor Richard] Fields. They laughed at me. And one of their partners was Steve Ross from Vornado. He came on my boat and he said to me: We’re going to kick your ass. He actually said that to me. Now when I found out, through polling, that there was not community support in Foxborough, I left. I told Bob Kraft, you told me there was total community support, I came, but I don’t see us getting above 52 percent. It’s not where I want to be, so I’m leaving. He said I’m sorry Steve, you wasted $1 million. I said, it’s OK. It’s OK. But he miscalculated in what he told me, but that’s alright. That’s a great family, and dear friends.
CW: So how…
WYNN: Did you know that Bob Kraft and I dated the same girl at the same time when we were in high school? Sheila from Brookline. When we found out, we both almost dropped dead. So we called her. Neither of us knew about the other. Her father was my dad’s buddy.
CW: How did you decide on Everett after Foxborough?
WYNN: [Wynn CEO] Matt Maddox came across Everett. It was Matt that did it. He was reading about the Hard Rock looking at Everett and how encouraging the Everett mayor had been. And then Hard Rock went away. And Matt went to see it. He met Mayor DeLamaria. I didn’t know about Everett. In my youth in Revere, I never knew about Everett.
CW: Did you have any more contact with O’Donnell?
WYNN: When we came to Everett, I saw O’Donnell and he gave me the same speech. Steve, you’re going to lose, you’ve got the wrong sight. I wish you had been with me, but you’ve got no chance. I’ve got no chance? When Caesar’s took a hike, or got tossed, I called him because I wanted to know what he was going to do. He said: What took you so long? I thought you’d have been here already. This is your chance. Look, I’m calling because I wanted to figure out what your deal is. He said have your guy talk to my guy, we’ll tell you everything. He said it’s a good thing you’re calling me because you have no chance where you are. The next day I called him back and he asked me when are you going to withdraw? I said, based on our conversation yesterday I am calling to withdraw my inquiry to you. I am not withdrawing from Everett. Sorry. Oh well, you’ve got a problem. Maybe so, maybe so, but Suffolk Downs is not the problem.
CW: Still, the casino in Revere will prop up the Suffolk Downs horse track. That could play big locally.
WYNN: It was a tossup [between the two major competitors for the slots license], but there were more jobs with the track included. That was a big thing to that town. You can’t say that here. It’s not a tossup. It’s not a tossup in finance. It’s not a tossup in reputation. It’s not a tossup in experience and the ability to do it. It’s not a tossup because of the competitive nature down the street. It’s not a tossup because of the competitive investment. My investment is bigger than theirs. I did know what they said [in their presentation], Kim Sinatra told me, but I didn’t take much account of it because of the reasons I’ve cited here. They make a decision. It’s my problem if they pick us. That’s when I’m really, really involved. If they don’t pick us, you win some you lose some. You can’t be a brat about it. So I’m more concerned about what is the landscape if we are selected and we have to finish this job and run this business responsibly.
WYNN: We got picked in 2002 from 29 other companies for the license concession in Macau. They were going to give three, but two new ones. Stanley Ho, the existing operator, was going to get one of them. We got the first one and the reason we got it was that Edmund Ho, the chief executive who was forming the new government after the Portuguese lease was up, he had been to Mirage, played Shadow Creek, and been to Bellagio. He had never met me. I didn’t know him. He wasn’t a big gambler, but he had been there with friends. And when the decision was taken to change Macau and make it an international destination city like Las Vegas, he decided that one of the people who they wanted to participate is the guy who had done it in Las Vegas. I was contacted by a mutual friend who said, are you going to participate? I asked, what are the terms? Is there corruption? Right away I was disbelieving. Everything was exactly the opposite. We got picked because of the work we had done at Mirage and Bellagio. We did it the old fashioned way, based on our track record. That’s all we’ve got. So if I don’t have a casino in Boston I’m not hurt. But if I have a casino in Boston that’s no good, I’m destroyed. We do it right or we don’t do it. That’s a black and white statement. It’s sharp edged. Those issues that we’ve highlighted, there is room to deal with them reasonably and you can give someone comfort that if you’re not doing it today they can do it tomorrow. I want the discussion. Otherwise, I’m a dope.