Friday, December 21, 2007

Tribe Predicts Construction at both the Sun and Poconos Will Be 25% Over Budget

By Ken Davison
Feather News

The cost of the Tribe’s two expansions, one at the Mohegan Sun and the other at the Tribe’s Pocono Downs in Pennsylvania, will run 25% over the the budgeted amounts announced just one year ago.

The Tribe made the announcement last week during a conference call with financial analysts in which the Tribe’s gaming authority also reported upon their fiscal year’s fourth quarter gaming results.

The New Price

The cost of the current expansion project at the Mohegan Sun casino on the reservation, called Project Horizon, is projected to increase by $185 million to $925 million. The Tribe announced last November that the expansion would cost $740 million and include a 1,000-room hotel and 900 slot machines, among other amenities. Although the new cost will be significantly higher, the hotel will now have only 922 rooms and the gaming space will include 826 slot machines.

The Tribe began the three-year Project Horizon six months ago in a groundbreaking that took place on June 7th.

The expansion in Pennsylvania, called Project Sunrise, will also exceed its earlier budget estimate by 25% before it is completed. Earlier estimates of the Phase II construction were between $140 and $150 million but that will increase to $208 million, according to Bob Soper, CEO of Pocono Downs.

The Pocono's Project Sunrise began last May 4th, according to officials.

Rising prices of raw materials and a faulty estimate were cited for last year’s incorrect Mohegan Sun budget figures.

Former chairman of the tribal council Roland Harris stepped down from the tribal council last year to assume the post of MTGA's senior vice president in charge of construction and special projects. Harris abruptly stepped down from his post two weeks ago - a job that paid him a salary of around a half-million dollars annualy (Harris was paid $306,286 from March 2007 through September 2007). The Tribe has said they will seek someone with qualifications this time.

Deja Vu - The Last Expansion

The budget overruns are reminiscent of the last expansion on the reservation. The expansion at Mohegan Sun that first opened in 2001, called Project Sunburst, exceeded its original estimate by about 50%. The final cost was about $1.2 billion compared to the $800 million originally projected for the expansion. In that expansion, the number of hotel rooms was also reduced, from 1,500 to 1,200 rooms.

Expansion at any price? The $1.2 billion cost of Project Sunburst does not include the approximately $1 billion the Tribe is paying its former casino management company, Trading Cove Associates, which ended the management contract early and paved the way for an expansion controlled entirely by the tribal council under then-chairman Roland Harris.

I’ll hide the cheese where the rats will never find it

According to Tom Acevedo, the Mohegan government’s former chief-of-staff and former NIGC official, in an internal investigatory witness statement taken in 2001, “(I) had a conversation with Len Wolman, (a partner in) Trading Cove Associates, regarding the hotel tower (construction) contract. He said contractors believed that the Mohegan Tribe was just cutting deals with their favorite contractors and it was a waste of time to bid for work. Wolman said the lack of bidding companies was costing the Tribe a great deal of money.” Acevedo himself said the selection process was an orchestrated set-up while another witness said, "… it is obvious through the actions of the Tribe they planned on giving the ($29 million) contract to Manafort from the beginning …”

Former head of the Mohegan Tribal Gaming Commission, Bud Mullen, was documented as saying there was suspected abuse in connection with some of the contracts related to the construction but that was not his area of responsibility.

Mullen, also a former assistant director for the FBI and head of the DEA, said he told then-chairman Roland Harris to be very careful of the the Tribe's construction representative Bill Katz (whom Harris hired at $30,000 per month and later increased to $50,000 per month), because Katz told them at lunch one day that “I can bury the cheese where the rats will never find it.”

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