Caesars Entertainment’s court-appointed examiner has told company officials and creditors’ lawyers he believes the company acted improperly when it transferred assets away from the hobbled casino prior to putting it into Chapter 11, The Post has learned.
A report by the examiner, expected to be released next month, is likely to conclude there was a degree of civil fraud connected to the transfer, three sources with direct knowledge of the talks said.
The examiner, Richard Davis, held the telephone briefings in recent weeks as he neared the completion of his report.
Some creditors accused Caesars, controlled by Leon Black’s Apollo Global Management, of moving the gaming company’s best assets beyond their reach without paying adequate compensation.
The transfers occurred shortly before January 2015 when Apollo put Caesars’ biggest unit into bankruptcy.
“The examiner said he believes there were deficiencies in the transfer process,” a source close to the situation said.
If Caesars does not reach a settlement before Davis’s report is issued, its board, including TPG Capital founder David Bonderman and Apollo founder Marc Rowan (both billionaires), as well as NFL star Lynn Swann, could be held personally liable for some claims, sources said.
Additionally, a finding of fraud could prompt state gaming regulators to investigate Caesars, a third party close to the situation said.
The transfer of assets came during a hectic period in Caesars’ nearly 80-year history.
In 2013, with many gaming companies across the country hurting due to increased competition from new brick-and-mortar casinos and from online gaming operations, Apollo, in a bid to salvage its investment in Caesars, split the 49-casino chain into three companies.
One new part included Caesars’ online assets and its Las Vegas’ Planet Hollywood.
A second new piece contained Caesars most promising casinos, including the Horseshoe in Baltimore.
The third remaining unit contained 28 of the company’s most troubled brick-and-mortar casinos, including Bally’s and Caesars in Atlantic City. That unit was placed in Chapter 11 reorganization.
Creditors in the bankrupt unit have $18 billion in claims and some of them believe they received far too little for the assets that were transferred to the two new entities.
“The examiner has said there are valid claims,” a second source who has direct knowledge of the calls said.
“The real issue is whether ultimately liability goes beyond the companies to individuals.”
“That’s absolutely a possibility,” one source said.
Davis did not tell parties how much the parent company, Caesars Entertainment Corp., owed creditors.
Caesars has already offered creditors an additional $1.8 billion in cash and stock. Two creditors, David Tepper’s Appaloosa Management and Oaktree Capital Management, feel they are owed billions more.
Cash-strapped Caesars cannot afford to pay additional billions and needs to get one of them to agree to a settlement, sources said.
No settlement talks are currently planned, sources said.
Appaloosa and Oaktree have asked for a nearly 60 percent stake in all of Caesars.
Caesars, Apollo and TPG declined comment.