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Mohegan Sun announces more than 300 layoffs, replacement of CEO

By Brian Hallenbeck

Publication: theday.com

Published September 27. 2012 6:00PM   Updated September 28. 2012 4:50PM

Mohegan — Wracked by a revenue decline that shows no sign of abating, Mohegan Sun is laying off more than 300 employees and replacing its chief executive officer.

Jeffrey Hartmann, a Mohegan Sun executive since 1996 and the casino's president and CEO since 2011, left his job Wednesday, Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority, said Thursday night.

"Jeff's no longer with the company," Etess said, declining to elaborate.

Bobby Soper, CEO of Mohegan Sun at Pocono Downs, the authority's racetrack casino in Wilkes-Barre, Pa., will replace Hartmann, Etess said. Soper is a member of the Mohegan Tribe, as is Mohegan Sun's No. 2 man, Ray Pineault, the chief operating officer.

Attempts to reach Hartmann were unsuccessful.

Etess said 282 employees were being laid off immediately and that another 46 would be let go at the end of October when the casino closes Birches, a tribe-owned restaurant that will reopen under new ownership.

The casino also will shut down its keno operation, Etess said.

The layoffs — the casino's second round in two years — will impact virtually every department and include workers at all levels, from vice president on down, he said. Managers began informing employees around 6 p.m. Thursday and hope to conclude the process within the next two days, Etess said.

"You have to put this in the context of the amazing decline in business we've experienced," Etess said. "The last thing we ever want to do is lay people off, but we had to do this to make the size of our workforce appropriate to our business volumes."

After the layoffs, Mohegan Sun's workforce, also reduced in recent years by attrition, will number about 6,400, Etess said. Prior to the recession, the casino employed more than 10,000.

Slots revenue, generally considered a reliable indicator of a casino's overall financial health, has been declining for the last five years at Mohegan Sun and Foxwoods Resort Casino, its nearby competitor.

Foxwoods has no plan to lay off employees, Scott Butera, Foxwoods' president and CEO, said Thursday night in the wake of the Mohegan Sun news.

In recent months, casino executives have attributed shrinking revenues to the economy's weak recovery and to increasing competition from Resorts World Casino at the Aqueduct racetrack in New York City, which debuted last October, and to a lesser extent Revel, a $2.4 billion casino that opened in April in Atlantic City, N.J.

Last month, Resorts World, which operates slots-like video display terminals and electronic table games, generated a $58.6 million slots "win" — the amount of wagers the casino keeps after paying out prizes. Mohegan Sun's take for the month was $56.3 million. Resorts World's "handle" — the total amount of wagers — totaled more than $1.1 billion, far outstripping Mohegan Sun's $687.2 million.

"Clearly, the competition from Resorts World has taken business away from us, but it's also had an impact on the whole region," Etess said. "It's prompted Atlantic City and Yonkers (N.Y.) to get more aggressive. It's had a tremendous effect on the dynamic in the marketplace."

For the first eight months of 2012, Mohegan Sun's slots win was down 6.7 percent over the same period in 2011. Comparing August 2012 to August 2007, the decline is a staggering 32.6 percent.

Earlier, the Mohegan Tribal Gaming Authority, the entity that operates the casino, reported that its net income, or profit, for the third quarter of its 2012 fiscal year — April, May and June — was down 4.7 percent over the same quarter the previous year.

But Etess said the economy, both nationally and in Connecticut, may be an ever bigger factor than competition from other gaming facilities.

"The unemployment rate, the price of gas, the overall economic conditions …" he said. "Connecticut is a huge part of our market. We're seeing declines among our customers in certain counties. It's not that they're going to other casinos — someone could be still be coming to Mohegan Sun and spending less."

About 53 percent of Mohegan Sun's customers are Connecticut residents, Etess said.

In the earlier round of mass layoffs, in September 2010, Mohegan Sun announced it was eliminating 475 positions, the majority of them in the casino's food and beverage department. At the time, the casino said about 120 workers whose positions were eliminated would be able to transition into other jobs at Mohegan Sun.

At the same time, the casino announced it would close one of its two buffet restaurants, the snack bar in its race book and two casino-owned outlets in its food court that later reopened under third-party operators.

Later that year, Etess, who was then CEO of both the authority and Mohegan Sun, announced that he would relinquish responsibility for Mohegan Sun's day-to-day operation to focus on authority business. Hartmann, then Mohegan Sun's executive vice president and chief operating officer, was elevated to CEO of Mohegan Sun, effective January 2011.

The Mohegan Tribal Gaming Authority refinanced $1.6 billion in long-term debt in March of this year, pushing back maturity dates to 2015 and later. Around the same time, Etess and Hartmann agreed to three-year contract extensions with the Mohegan Tribe. Under the deals, Etess and Hartmann were to be paid $1.4 million and $1.3 million in the first year. The contracts were to extend to June 30, 2015.

b.hallenbeck@theday.com

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