Magna Entertainment loses another CEO; he’s No. 6

Jun 26, 2007 7:56 AM

Fortunately for the executive staff, Magna Entertainment Corp. (MECA) maintains a well-oiled revolving door for quick exits.

Michael Newman, who became the company’s sixth CEO since its founding a half-dozen years ago, joined the firm in February.

His resignation was announced last week.

Magna Entertainment was founded by Frank Stronach, the Austrian-born Canadian who became a multi-millionaire by making and selling parts for automobiles. In just a few short years, he drove Magna Entertainment to become North America’s largest operator of horse tracks.

However, the company has had trouble retaining executives primarily because of difficulties dealing with Stronach, according to company critics. They also cite that the company has never made a profit and continues to carry a major debt burden that Stronach is attempting to relieve by selling off some its real estate holdings.

The Newman departure apparently was triggered by a difference of opinion over the rebuilding and maintenance of the stable area at Santa Anita racetrack.

Newman wrote to the city manager of Arcadia, Cal., that Magna would be unwilling to fund a renovation of the stable area.

A few days later, Stronach appeared before the city officials to announced that what Newman had said in the letter was wrong and that the company was prepared to spend $24 million in rebuilding the stables and its facilities. He also said that Newman has been reprimanded.

Court victories

Lawyers for International Game Technology Inc. (IGT) won a pair of victories in U.S. courts last week.

The first dealt with patent infringements alleged by slot machine manufacturer Aristocrat, an Australian company with worldwide connections.

Aristocrat charged that IGT had infringed on patents that covered its Hyperlink products and IGT’s multi-level progressive games — including its Fort Knox, Jackpot Hunter, Party Time and Wheelionaire mystery progressive systems infringed on its patents.

The District Court for the Northern District of California disagreed. In fact, Judge Martin Jenkins ruled in favor of a summary judgment and declared two of Aristocrat’s patents invalid.

The other case dealt with claims made by two former lawyers employed by IGT. In this case as well, IGT was granted a summary judgment. The suit was brought by Shawn and Lena Van Asdale who alleged they were fired as whistle-blowing retaliations.

Florida slots

After eight months of operation, the racinos in Broward County of Florida have failed to generate the gaming revenues lawmakers had been expecting.

So far, only $44 million in tax revenue has been generated by Gulfstream Park, Pompano Park and Mardi Gras Racetrack & Gaming Center, formerly known as Hollywood Greyhound Park.

The operators claim their less than expected performance is due to the half-dozen casinos operated by the Seminole Indians.

"Every time I run a promotion," lamented Mardi Gras chief Danny Adkins, "the Seminoles run three. If I run two television commercials, they run 20 and if I buy a billboard (to advertise) they buy six."

And yet, Mardi Gras is doing far better than the other two racinos.

But the three can’t compete, they say, because the Seminoles pay no state taxes while they pay almost 60% of every dollar wagered.

Despite the poor performances, three pari-mutuel facilities in Miami-Dade County are seeking another vote, even though they lost by a large margin in 2005. Calder racetrack, Dania Jai-alai and Flagler Greyhound track have petitioned for another vote.

Fine dispute

When gaming executive Michael Gaughan ran Coast Casinos, he made a major pitch to get casino approval in Omaha, Neb., the home-town of his dad, the gaming giant Jackie Gaughan.

The effort failed even though Coast Casinos plowed a reported $970,000 into the 2004 campaign.

A problem developed, however, when Coast Casinos failed to file a campaign report within the allotted time frame mandated by Nebraska law. Regulators jumped on the issue and fined the company $97,000, or 10% of the amount spent in the campaign.

Lawyers for Coast Casinos, now owned by Boyd Gaming Corp. (BYD), disagreed saying the fine should have been for $14,200, or $100 for each day the statement was overdue.

The matter is expected to be decided by the Lancaster County District Court.

THE INSIDER: Joseph Bernstein has resigned as a director of Empire Resorts, Inc. (NYNY) saying he feared a conflict of interest since he serves as a trustee of Catskills Litigation Trust. The trust has been awarded $1.787 billion by the St. Regis Mohawk Tribal Court as a class action judgment against the former Park Place Entertainment.

Analysts at Stifel Nicolas have boosted the share price targets of MGM MIRAGE Inc. (MGM) to $100 from $80 and WMS Industries Inc. (WMS) to $35 from $30 per share.

Shareholders for Churchill Downs Inc. (CHDN) will hold their annual meeting on Thursday, June 28, at 10 a.m. at the Louisville, Ky., racetrack.

Las Vegas Sands Corp. (LVS) has begun accepting applications for positions at The Palazzo Resorts-Hotel-Casino in Las Vegas that is expected to open in late 2007.

The New Jersey Senate has voted unanimously to ban smoking at all Atlantic City casinos. The bill now goes to the Assembly for action. Also considering banning smoking at its gaming establishments are the Pennsylvania lawmakers.

Vicki Baumgardner of Louisville, Ky., has joined the National Thoroughbred Racing Association (NTRA) as its chief financial officer.

The Steubenville, Ohio, Herald-Star newspaper has published an editorial urging its West Virginia voters to favor the table game issue for MTR Gaming Group Inc. (MNTG). Voters in Hancock County will cast their ballots on Saturday, June 30.

Todd D. Jordan has resigned as a director of Shuffle Master Inc. (SHFL). He indicated that the time-constraints of a new position will prevent him from fulfilling his director’s duties.