California card clubs challenge Indian casino legality

November 20, 2001 7:46 AM
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There are 40 casinos being operated on Indian reservations in California but their future may be limited.

A federal judge in Sacramento heard arguments last week from lawyers representing four area card clubs who charged that state gaming compacts “give them (Indians) preferential treatment.” Such treatment was described as racist as well as unconstitutional.

Lawyers predicted that regardless of the federal judge’s ruling, the matter will be appealed to the U.S. Supreme Court.

The challenge to the state law that followed two referenda supporting Indian casinos was filed last February but was just heard last week.

“The state cannot permit gaming only on Indian lands,” said a Washington, D.C., constitutional attorney hired by the card clubs. “The Congress did not intend to give Indian tribes monopoly rights.”

Ironically, the suit was initially filed to prevent the Lytton Band of Pomo Indians from converting an existing card club into a Las Vegas-style casino. And, on this particular issue, the state government agrees with the protesters.

Gov. Gray Davis and his staff are attempting to take legal measures to prevent the conversion, saying that the urban casino was an improper expansion of gambling.

Citing the will of the people, based on the large majority of voters who approved reservation gambling, Richard Milanovich, chairman of the Agua Caliente Tribe in Palm Springs, said he was confident that “in the end, we will be vindicated.”

LCI value jumps
While a bankruptcy judge in Las Vegas was approving a $50 million financing plan to keep the Aladdin Hotel/Casino open for another year, shareholders in London Clubs International Plc watched as the value of their company rose rapidly.

LCI had announced that it had reached agreement with the banks involved in the Aladdin to secure a release from the financial obligations it had agreed to in previous loan agreements. In return for the release, LCI granted the banks warrants to subscribe for 5% of the company’s current stock. This can only take place if LCI’s share price equals or exceeds 50 pence. At the time of the agreement, the price had risen to 25¾ pence.

In court, Aladdin indicated it had incurred a net loss of $86.2 million on gross revenue of $65.4 million for the quarter ended on Sept. 30.

But, receiving the infusion of cash was seen as a way of both staying alive and improving the property’s cash flow.

“This is a key step in our effort to make the Aladdin generate positive cash flow, said Bill Timmins, president and COO of the Aladdin.

Aladdin said it owes its banks slightly less than $435 million with the banks holding the deed of trust as collateral for the loans.

Employees must pay
A lawsuit involving a casino employee that had a shortage in her cash drawer and was forced to repay the money reached the Nevada Supreme Court last week with the court deciding in favor of the action taken by her employer, Coast Resorts Inc.

The court ruled that as long as the company had a reasonable basis for attributing the loss to that employee, “the employer may require the employee to reimburse the employer or face disciplinary action.”

This wasn’t the way a hearings officer had ruled earlier. He had determined that management of The Orleans Hotel/Casino should reimburse the employee the $520 they had withheld from her pay. A District Court judge had agreed with the hearings officer ordering that the repayment be made to the employee.

All about money
A battle royal is going on in Canada over the split of casino revenue from the Casino Rama. The property is owned by the Chippewa Band of Indians and is operated now by Penn National Gaming (PENN), the company that inherited the contract with a recent merger.

The casino, authorized by the Ontario Casino Control Commission, has been operating since 1966 and has shown total profits of about $500 million. Under the initial agreement, the operators, now known as the Mnjikaning Tribe, keep 35% and share the remainder with the other 133 First Nations Tribes of Canada.

After five years, however, the Chiefs of Ontario voted to end the Mnjikaning’s 35% and put all the money in a hat to be distributed among all First Nation Tribes.

Despite the millions banked during the past five years, the Mnjikaning have been saying “We’re poor little Indians.”

The other tribes are ready to dispute that contention.

The Insider
Isle of Capri Black Hawk, a gaming property owned 57% by Isle of Capri Inc. (ISLE) and 47% owned by Nevada Gold & Casinos Inc. (UWN), has obtained a $90 million credit facility from CIBC World Markets.

International Game Technology (IGT) has sued Millennium Gaming Inc. of Idaho Springs, Colo., to prevent the company from retrofitting and selling IGT machines to casinos.

A recent poll of New York voters found that 54% support Indian-run casinos provided they are operated “on Native American reservations.” Only 34% were opposed. But when asked about locating a casino in their town, 66% were opposed.

Harrah’s New Orleans reported a net profit of $621,000 from operations but had a net loss of $1.9 million because of payments on its long-term debt. Last year, the company had a net operating loss of $19.6 million and a total net loss of $31.4 million.

Because of a slowdown in business, Hollywood Casinos (HWD) has reduced its staff of 1,800 employees by 30%.

Ameristar Casinos Inc. (ASCA) announced it would sell four million common shares and that founder and principal stockholder, Craig Neilsen, would sell two million shares in an offering being handled by Bear Stearns, Merrill Lynch and CIBC World Markets. Following the sale, Neilsen will still own 15.7 million shares or 63.1% of the company.

Mikohn Gaming Corp. (MIKN) reports that the State of Illinois has approved its new slot machine Ripley’s Believe It or Not.

The Missouri gaming market will expand next month with the opening of a new riverboat in Boonville, Mo. Isle of Capri Inc. (ISLE) said it will open the gaming facility on Dec. 6 and it will become the state’s 11th casino property.

Merrill Lynch has begun coverage of Penn National Gaming Inc. (PENN) with a buy rating.

Atlantic City’s two convention centers have projected that they will have a combined operating loss of $9.8 million this year.

Deutsche Banc Alex. Brown gaming analysts have downgraded WMS Industries (WMS) from a buy to market perform.