30, 1988, the debtors were discharged from bankruptcy under an
approved plan of reorganization.
The casino's financial condition continued to deteriorate in
1988. Although revenues increased, ESA reported a net loss of
$26,672,111. In April, 1988, the Commission renewed ESA's
license, but only for one year although it was eligible for a
two-year license. The Commission continued the conditions
imposed the previous year, in addition to imposing new
requirements. For example, the Commission ordered that the
license hearing would automatically be reopened should ESA's
cash position fall below $6 million for five working days.
Additionally, it required Elsinore to make additional funding
available to ESA if working capital fell below $7 million.
Beginning January 17, 1989, the DGE began monitoring ESA's
cash position on a daily basis. On several occasions, ESA's
accounts fell below the required levels.
ESA filed an application for its 1989 license renewal on
December 15, 1988. On March 13, 1989, the Commission's
Division of Financial Evaluation and Control issued a report
which concluded that ESA had not demonstrated adequate
financial stability. The Commission conducted various hearings
between March 27, 1989 and May 16, 1989 to determine whether
to renew ESA's casino license and to determine whether a
conservator should be appointed. At the April 3, 1989 hearing,
counsel for the Atlantis testified that ESA intended to sell
the casino, preferably within sixty days. See, P.Ex. 25, at
390-91. ESA therefore opposed the appointment of a conservator
since, in their view, this would make it difficult to sell the
casino as a going concern. Alternatively, counsel testified, if
no buyer could be found within the sixty day period, the
company intended to dispose of the casino by auction in order
to satisfy creditors. Id., at 301. Jeanne Hood, the President
and Chief Executive Officer of Elsinore, testified that a sale
was imminent, and noted that it was well known that Elsinore
did not have the resources to make the Atlantis "a very
profitable, viable property." P.Ex. 26, at 610-11.
On April 7, 1989 the Commission voted not to renew ESA's
license and appointed Joseph M. Nolan as conservator. The
Commission thereafter conducted hearings to determine what
powers, duties and responsibilities were appropriate for the
conservator. Chairman Read stated that the conservator need
not undertake many of the activities authorized under the Act,
and that the conservator "should, in the spirit of limiting
the problems of transition, exercise restraints." P.Ex. 30, at
990. The Commission's Order, dated April 19, 1989, provides
that "the regular and normal operations of the casino hotel
shall be conducted by ESA under the general guidance and
oversight, but without specific review or approval of the
conservator, pending the sale of the casino hotel. . . ."
D.Ex. B, at 2. The conservator was authorized to assess and
monitor ESA's financial situation and to report to the
Commission if ESA could no longer remain financially viable.
ESA was required to make all books and records available to
the conservator, and was prohibited from taking any
significant actions, including sale of the property, without
first notifying the conservator. The conservator, in turn, was
authorized to sell the property subject to prior approval of
the Commission. Id., at 3. As this court previously observed,
[i]t appears that the Commission implemented a
system of checks and balances, pending the sale
of the Atlantis, in order to assure that
defendants met minimum regulatory standards,
without unduly disrupting day to day operations.
The checks and balances served to curb any major
action on the part of the defendants and the
Conservator, but the daily operation was handled
Finkler v. Elsinore Shore Associates, 725 F. Supp. at 832.