Resorts, ex-CEO file suit against Morgan Stanley in A.C. land deal

By J. STAAS HAUGHT Staff Writer, (609) 272-7253
Published: Saturday, January 13, 2007

ATLANTIC CITY — Angry that a rival casino developer didn't offer her a job after she secretly helped it reel in a lucrative land deal, former Resorts chief Audrey Oswell is suing Morgan Stanley.
Angry that their former chief executive officer worked behind the scenes to help a rival casino developer buy a valuable chunk of Boardwalk property, Resorts International is suing ... Morgan Stanley.

The Wall Street investment firm, which last year bought a 20-acre parcel of land for $70 million, is now facing two multiple-count suits accusing it of swindling Oswell out of a job and both she and Resorts out of a prime piece of real estate.

Nobody's talking — except to say they're not talking — but the two lawsuits, filed late last year and Jan. 4, shed an interesting light on how development deals are shaped in this city.

Oswell fired the first legal shot last fall — the suit was originally filed in Atlantic County Superior Court, but moved to U.S. District Court in Camden a few weeks later — after hearing that Morgan Stanley tapped Revel Entertainment, an upstart gaming company headed by Atlantic City casino veteran Kevin DeSanctis, to turn the long-vacant lot into a billion-dollar megaresort.

Morgan Stanley had promised the job to Oswell, she claims in her suit, as a reward for her help in securing the land deal.
“In exchange for Ms. Oswell's information, contacts and services in brokering the deal, Morgan Stanley agreed to pursue a business venture to develop the property as a casino, and to make her a member/partner on the deal and to employ her as president and CEO,” the suit reads.

Oswell was still under contract as president and CEO of Resorts Atlantic City when she helped broker the transaction.

She stepped down from the $800,000-per-year job May 1, 2006, apparently believing a job offer was imminent. She now works for a Las Vegas casino.

Calls to Oswell went unreturned Friday. Her lawyer, Lynn Collins, did not respond to calls or an e-mail requesting comment. No suits have been filed against Oswell.

Aside from a few differences — including whether Oswell ever inquired about Resort's interest in buying the property (she says they had no designs on it; they say they were never asked) — the two suits mirror one another in explaining how the land deal came about.

According to the legal filings Oswell met in June 2004 with Sam Sobel, a principal owner of the 20-acre plot, who told her the property was available for sale.

“Based on her familiarity with the Atlantic City gaming market and the availability (or lack thereof) of substantial tracts of land along the Atlantic City shore, Oswell believed that there was a potentially lucrative opportunity to develop the property as a casino,” both lawsuits read.

Roger Wagner, chief operating officer for Resorts International, said in an e-mail Friday afternoon that company policy bars commenting on pending litigation. The company's lawyer, Herbert J. Stern, did not respond to an interview request.

In late 2005, Oswell met with Michael Garrity, a Morgan Stanley representative, to discuss buying the property, according to the suits.

Oswell's suit claims Morgan Stanley had originally considered Hard Rock International the front-runner for developing the property into a casino (a rumor that was reported in the media) but favored Oswell because she seemingly had “an inside track.”

Resorts' suit alleges that throughout the discussions Morgan Stanley was fully aware of Oswell's employment with the casino and of a noncompete clause in her contract “continuing well beyond Morgan Stanley's/Oswell's contemplated purchase of the property.

“Throughout these initial discussions, Morgan Stanley also knew that Oswell had not disclosed the opportunity to Resorts,” the casino company's suit continues.

Morgan Stanley originally had agreed to provide Oswell the necessary funds to buy the land, her suit alleges, but the deal was changed so that the powerful New York finance house would bankroll the buy and hire Oswell to run the project.

The Resorts lawsuit claims Oswell also was promised a “significant ownership stake in the property.”

Mark Lake, a spokesman for Morgan Stanley, declined comment beyond saying, “We believe both suits are wholly without merit.”

Oswell's suit claims Garrity, working for Morgan Stanley, pressed her to get Resorts to release her from the noncompete clause in her contract. Oswell told Garrity she was certain she could get her employer to excuse the noncompete clause, but could not resign from her position until after the deal was consumated “due to her personal obligations.”

When she finally did leave Resorts, the company paid her a combined severance package of more than $550,000, according to Securities and Exchange Commission filings. She still had 17 months left on her contract with Resorts.

Oswell's suit charges that Morgan Stanley decided not to make good on the bargain because it had “concern over a possible lawsuit from Resorts.”

Oswell is seeking compensatory and punitive damages and legal fees.

Resorts is seeking damages, legal fees, any gains Morgan Stanley realized from the deal and is asking the court to hold the property in trust for Resorts.

No trial date has been set in either case.