Federal subpoena may delay Chicago casino

January 29, 2002 7:30 AM
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A federal probe into the proposed Emerald Casino in Rosemont, Ill., may eventually impact the reported deal brokered by a state official that would put MGM MIRAGE Inc. (MGG) in a position to develop the project.

According to a report in the Chicago Tribune, members of the Illinois Gaming Board were served a subpoena last week demanding all records pertaining to the rejected Emerald Casino. The move by federal officials came at a time when the board’s new chief administrator, Philip Parenti, reportedly brokered a deal whereby MGM MIRAGE would buy out the Emerald’s ownership for $615 million. This would then make it easier for the regulators to jump-start the licensing procedure.

The Emerald Casino’s original principals were deemed unfit for a license and their proposal was rejected by the Illinois Gaming Board a year ago.They since have sued the board while the state’s 10th and final gaming license has remained in limbo.

Aside from the federal probe, an Emerald lawyer told state officials they really had only two choices concerning the proposed Rosemont project, They could enhance the state’s coffers with the $160 million fine they would extract from the MGM MIRAGE payment as well as about $125 million a year in future tax revenue. Or, he said, they could face several years of expensive litigation.

No explanation was given by federal officials for the expansion of the investigation although it was strongly felt that they were looking at the investment of an individual that they believe has ties to organized crime. The individual reportedly has purchased a piece of the disputed license for $1.5 million and would stand to receive an estimated $4.5 million if the deal were consummated.

Takeout target?

Is Argosy Gaming Inc. (AGY) going to be the industry’s next buyout? Such a move wouldn’t surprise Robin Farley, chief gaming analyst for UBS Warburg. In her weekly report, Farley said Argosy’s stock price had tumbled unnecessarily since Chicago reports indicated MGM MIRAGE was the apparent designee for a Rosemont gaming license.

The price decline was unnecessary, she said, because the Rosemont license would have little impact on Argosy’s current operations. Also, she said, by having Illinois award the final license would make Argosy’s takeover “more compelling” since large gaming companies would have to make a takeover move to get into the Illinois marketplace.

Farley placed a price target of $39 on Argosy. On Monday, AGY fell $1.35 to $32.70.

Count ’em: three

Now the court has to decide whether there are three members, or just one member, that can lay claim to being descendants of the Ione Band of Me-Wuk Indians.

And the decision could determine just what will happen to a $100 million casino under construction in the Sacramento, Cal., area.

It all started when the Bureau of Indian Affairs recognized Donnamarie Potts and her two adult children as the survivors of Louie and Annie Oliver, last known members of the Ione Band. This was disputed by Rhonda L. Morningtar Pope, a 31-year-old medical bookkeeper and mother of three children who claimed she was the only surviving granddaughter of the Olivers.

The BIA agreed and overturned its recognition of the Potts family.

If the court rules as expected, that Pope’s claim is valid, it’s possible that the whole $100 million casino project will go down the drain.

The Insider

Three gaming companies will be announcing their quarterly results this week. Argosy Gaming Company (AGY) will report on Tuesday at 8:30 a.m. (PT) while Station Casinos Inc. (STN) will report a short time later beginning at 10 a.m. (PT). Then on Thursday, WMS will release its figures for the second fiscal quarter at l:30 p.m. (PT).

Action Online Entertainment, a British casino operator, has been granted an online gaming license by the Isle of Man. The company joins four previous licensees: MGM MIRAGE, Sun International (SIH), Littlewoods and Rank.

Cash-short Missouri Gov. Bob Holden has proposed changes in that state’s gaming laws that would generate an estimated $156 million. These include raising the admission fee for riverboats to $3 from $2; removing the $500 loss limit regulation, and increasing the gaming tax from 20% to 22%.

International Game Technology (IGT) says it is comfortable with gaming analysts’ forecasts for the company’s performance in the remainder of its fiscal 2002. The consensus estimate is for earnings of $3.23 per share.

Stratosphere Corp. has been found in violation of a marketing patent held by Harrah’s Entertainment Inc. (HET).

Taiwan’s legislature has killed a bill that would have legalized casino gambling.

Youbet.com says it expects to apply for a license to participate in California’s new advance deposit wagering system at the February meeting of the California Horse Racing Board.

Coinless Systems Inc. (CLSY) announced a licensing agreement with Konami Gaming Inc. for the use of its patented technology, Scan After Print, in slot machines manufactured by Konami.

The City of Laughlin, Nev., reported a total of 334,000 visitors during the month of November, a 1.5% increase over November 2000.

Innovative Gaming Corporation of America says it has cancelled its acquisition of Scotch Twist Inc.

Indiana riverboats reported December gaming revenues of $154.6 million, an increase of 25.8% over last year.

The Northern Kentucky Chamber of Commerce board of directors has overwhelmingly voted to support allowing slot machines at the state’s racetracks.

Harry Curtis, gaming analyst for Robertson Stephens has reiterated his “strong buy” rating for MGM MIRAGE Inc. (MGG).

Moody’s Investors Service has downgraded the credit rating for the debt of Station Casinos Inc. (STN) and has placed the credit of Boyd Gaming Inc. (BYD) on a negative watch.

Former Fitzgerald’s Casino operator Jerry Turk has announced that the Pala Indians plan to build a 500-room hotel next to its casino in Fallbrook, Cal. Turk manages the casino.