Boyd Gaming Fined $150K For Not Disclosing Sex Scandal Surrounding License Surrender

Written By Katie Kohler on June 18, 2021

The Pennsylvania Gaming Control Board fined Boyd Gaming $150,000 due to its failure to disclose information about allegations against one of its now-former executives. The unnamed executive was one of the company-licensed principals. Upon resignation and subsequent surrender of the executive’s PA gaming license, Boyd Gaming, owner of Valley Forge Casino, violated its consent agreement obligation.

Before the executive retired in Dec. 2019, Boyd Gaming’s Board of Directors conducted an investigation regarding allegations of an inappropriate sexual relationship between the principal and one of Boyd’s female executives. No names or locations of the incidents were provided.

In addition to the fine, Boyd must immediately implement policies and offer training support to “minimize the opportunity for a similar opportunity in the future.”

Boyd did not provide PA regulators with required quarterly update

During the PGCB monthly meeting on June 16, Dustin Miller, PGCB deputy chief enforcement council, presented the consent agreement and a statement of facts surrounding the events which resulted in the fine.

On Dec. 13, 2019, the PGCB Bureau of Investigations and Enforcement’s Special Section Unit (SSU) requested meeting minutes from Boyd for the fourth quarter of 2018 and 2019. It was discovered that since Boyd acquired Valley Forge Casino in Sept. 2018, the required quarterly update for Boyd’s Board of Directors had not been provided to the PGCB. Boyd then provided the regulators with the required documents.

Boyd formed a special committee

In April 2020, upon reviewing the Dec. 5 meeting of Boyd’s Board of Directors (BOD), the minutes stated that the BOD’s earlier-formed special committee concluded an internal investigation and proposed recommendation. However, no reference was provided as to the reason for the committee or what they found.

In early May, the SSU requested the report which the BOD provided. It included a copy of the July 1, 2019 BOD minutes which stated the BOD authorized an independent investigation in a response to a letter to each of the members of Boyd’s BOD.

Former Boyd exec says she was forced into inappropriate sexual activity

A law firm representing a then-current female Boyd executive seeking a separation agreement sent the letter.

In the letter, the female exec says she was forced to engage in inappropriate sexual activity with an unspecified male executive. In addition, the letter included complaints about her compensation relative to male peers and treatment in an earlier investigation that caused her to be stripped of some responsibilities.

The female exec refused to reveal the identity of the male executive unless she received a separation agreement and a letter of reference.

Boyd’s BOD approved the terms of the agreement on July 1, 2019, on the condition she identify the male executive. She agreed and the person who she identified was, at the time, a Pennsylvania licensed principal.

Boyd exec denied affair, fessed up, then retired

The BOD then formed a special committee consisting of independent directors of the BOD to investigate. The accused exec denied having any sexual history with the female. 

In late Sept. 2019, he discussed the possibility of retirement with Boyd’s President and CEO. Although not named specifically by Miller during the report, Keith Smith has been CEO of Boyd since 2008. Later that month, in a conversation with the President Chief Executive (Smith), the accused executive admitted he had a sexual relationship with the female. He said it happened ten years before the investigation. He denied he pressured her into sexual activity. Immediately after the conversation, Smith disclosed the conversation to the special committee.

At the next meeting on Dec. 5, 2019, the BOD was informed of the special committee’s findings. The committee did not resolve whether the sex between the executive and the female subordinate was consensual or pressured. However, it violated Boyd’s non-fraternization company policy which prohibits team members from engaging in intimate relationships with other team members.

On. Dec 9, the accused male executive announced his retirement effective Dec. 15. He remained in his positions as Board Secretary, General Counsel and Vice President until his retirement. He did not receive his 2019 annual cash bonus ($545,178) or his career restricted stock units (valued at $88,500). 

License surrender

When Valley Forge petitioned to surrender the accused exec’s license, the PGCB was not aware of the surrounding circumstances. Boyd Gaming explained it did not think to disclose the accused principal’s sexual relationship with the female executive because of the female executive’s allegations related to workplace harassment and employee discrimination. Boyd eventually acknowledged that the nature of the allegation and initial denial should have warranted disclosure.

Miller said:

“Boyd should have disclosed the allegation and the accused principal’s false denial of the allegation. They denied the Board the ability to make a determination if the accused principal’s license should be surrendered with or without prejudice.”

Why does full disclosure matter during a license surrender?

Knowing all the facts in regards to a surrender can help gaming regulators in the future when/if a person reapplies under another licensed entity.

A Boyd exec left in 2019

The name of the accused principal or the female executive was not provided by the PGCB or legal counsel representing Boyd.

Research by PlayPennsylvania shows on Dec. 9, 2019, Boyd disclosed in a securities filing that Brian Larson, longtime general counsel who joined Boyd in 1993, would retire on Dec. 15.

Meeting minutes for the PGCB Feb. 12, 2020 meeting shows the surrender of three principal licenses. Larson was of those people and the only one from Boyd. No reason was given for Larson’s surrender.

As noted in the PGCB’s stipulation of facts, the principal stayed in his positions as Board Secretary, General Counsel and Vice President until his retirement.

Larson is listed as a former exec/VP, secretary for Boyd Gaming.

Scandal led to changes from Boyd

In May 2021, Boyd named Uri Clinton as new general counsel. Bloomberg Law confirmed the hire and reported that Boyd was without a legal chief for over a year following Larson’s retirement.

Clinton served as council for Boyd during Wednesday’s PGCB meeting. He said that Boyd adopted various recommendations of the special committee such as:

  • A clawback policy which allows for Boyd to “clawback” unvested equity awards from executives who engage in inappropriate conduct.
  • All senior executive candidates asked about prior claims of workplace harassment.
  • Creation of a centralized database for inappropriate conduct in the workplace.

Commented Clinton:

“We stand by the structure, integrity and framework of the investigation. We clearly now recognize we should have done better in informing regulators about the scope and reason of the investigation.”

Photo of Boyd Gaming-owned Valley Forge Casino by Katie Kohler.

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Katie Kohler

Katie Kohler is a Philadelphia-area based award-winning journalist. She is the Managing Editor at PlayPennsylvania and covers the Pennsylvania gambling industry with an emphasis on sports betting, online casino/poker and the lottery.

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