Quacking like a Duck

The backers of the tax break for Morgan Stanley’s casino in AC have a brand new strategy to gain public support for their bailout: pretend that Morgan Stanley isn’t involved.  Kevin DeSanctis, the CEO of Morgan Stanley’s casino investment vehicle (called Revel Entertainment), told the Press of Atlantic City that “Revel made the application, not Morgan Stanley.  There’s just too much confusion out there. The point is being lost.”  And according to the Associated Press, “Revel officials said they, not Morgan Stanley, are in line for the state tax incentives.”

Hearing this, we thought of the famous saying by the poet James Whitcomb Riley: “When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.”  And boy does Morgan Stanley sure quack like a duck.  Consider the following:

• Morgan Stanley disclosed that it had an ownership stake in the casino in a 2007 public filing required under the NJ Municipal Land Use Law (see chart).  The document clearly shows Morgan Stanley as owning a significant stake in Revel Entertainment through a chain of limited liability companies and corporations.  Morgan Stanley even lists their Revel investment (called Ventura Holdings) in their list of subsidiaries filed with the Securities and Exchange Commission in 2009.

• The application for the $300 million tax break was filed by Revel Atlantic City LLC (a wholly owned subsidiary of Revel Entertainment).   According to this LLC’s last filing with the State of New Jersey, the President of Revel Atlantic City LLC is Edgar Sabounghi.  If you use this nifty little thing called Google, you find that Mr. Sabounghi is apparently employed by Morgan Stanley (according to numerous SEC filings, the last one dated 8/17/2009).  Mr. Sabounghi also shows up on other Revel related entities, with his address listed as 1585 Broadway, New York, NY.  Guess which global financial firm is located at 1585 Broadway?

• Morgan Stanley not only appears to own a major stake in Revel, property records disclose they have been financing the project.  According to these records, Morgan Stanley Senior Funding, Inc has the first, second, and third mortgage on the casino.

According to the Associated Press, Revel “won’t disclose the size of [Morgan Stanley’s] stake” in the casino project.  Why are Revel officials so reticent to publicly disclose the owners of the casino?  And more importantly, why aren’t NJ officials and politicians demanding this information before they dole out $300 million in tax rebates?