NEW YORK, AUG. 14 -- Drexel Burnham Lambert Inc., one of the largest financiers of New Jersey's gambling industry, has become the first investment-banking firm required to apply for a license to do business with casinos.
The licensing process could mean more public scrutiny of Drexel, which is under investigation in a federal probe of possible Wall Street corruption stemming from the activities of fallen stock speculator Ivan F. Boesky. Drexel has denied wrongdoing and has not been charged.
John R. Hagerty, spokesman for the New Jersey Division of Gaming Enforcement, said today it had recommended that Drexel be required to apply for a nongaming service industry license because of the huge revenue it has received for financing much of the Atlantic City casino business.
Under New Jersey's gambling regulations, any company paid $50,000 a year or more by a casino in a year must have a state license.
"Drexel by far is the firm doing the biggest business in Atlantic City," Hagerty said in a telephone interview. "They are basically the premier financing institution working in Atlantic City today."
Asked whether the investigation of Drexel by the Securities and Exchange Commission and the Manhattan U.S. attorney's office played a role in the division's recommendation, Hagerty said: "It was a factor but not one of the primary reasons that they should be filing for licensure."
Tom Flynn, spokesman for the New Jersey Casino Control Commission, which grants the licenses, said: "We're going to want to know everything that there is to know about Drexel. We're not out to get them, but it's not going to be easy."
Flynn said Drexel must meet three criteria in its application, which must be submitted within 30 days and will be reviewed at public hearings.
"You need good character, you need to demonstrate affirmatively that you have the business acumen to conduct the type of business your license will allow you to do and you have to demonstrate financial stability," he said.
Drexel initially objected to licensing, arguing that as an investment banking firm it already was subjected to considerable regulation. But at a hearing before the Casino Control Commission Wednesday, it agreed to apply for a license