Card rooms challenge Prop1A before Court of Appeals

Aug 19, 2003 8:19 AM

California’s Proposition 1A that provides Indians with virtual monopolies in operating Las Vegas-like gaming properties is being challenged by three card clubs before judges of the 9th U.S. Circuit Court of Appeals.

Arguments alleging the constitutional change discriminated against the state’s many mini-gambling parlors were heard last week, with both state and federal lawyers appearing in favor of the law.

Prop 1A, supported by some two-thirds of the voters in March 2000, mandates that the governor negotiate gaming compacts with any Indian tribe that seeks to operate a casino on tribal land. It also provides exclusivity in so-called Class III gaming. Since the passage of the law, Gov. Gray Davis has signed compacts with some 53 tribes with at least two dozen more awaiting either federal or state approval.

Lawyers representing the card rooms Artichoke Joe’s, the Grand Casino and the Oaks Club, initially presented their arguments in federal court in Sacramento. However, the pleas were rejected by Judge David Levi who ruled the law did not violate either the Indian Gaming Regulatory Act or the U.S. constitutional guarantee of equal protection.

If the law were reversed it would affect an industry that has grown to at least $5 billion annually and has been seen to reach $10 billion to $12 billion by the end of the decade.

Of particular concern to the card clubs who are questioning the law is the effort by the Lytton Band of Pomo Indians who seek to take over the casino San Pablo card room and turn it into a Las Vegas-like casino. The property is located just 15 minutes from the city of Oakland.

Deja vue again

Encouraged by previous successes, a California lawyer is representing a couple that have lost more than $100,000 in online gaming and is seeking to have their losses forgiven by the credit card companies on whose cards the couple charged their losses.

Atty. Ira Rothken previously represented gamblers who were granted some relief after suing Visa and Discover Card to reduce the amount of money lost during their online gambling excursions.

In the current case, the gambling couple was sued by the Retailers National Bank whose credit card the couple had used to run up losses described as in the thousands of dollars. The couple, through Rothken, countersued arguing the bank had violated California’s unfair business practices act by processing the gambling transactions and violated a state prohibition against providing credit for gambling.

Since the beginning of the year, most major credit card companies have prohibited the use of their cards to process gaming debts.

Row continues

The row between the riverboat operators and their rebellion toward the gaming tax increases promulgated by Illinois Gov. Rod Blagojevich and passed into law by the legislature continued last week.

Four riverboats were granted approval to reduce their operating hours while some operators used others means such as increasing admission charges and laying off employees to reduce their gaming revenues that also would cut back on the amount of taxes paid to the state.

Gov. Blagojevich was outraged. "It appears to be a cynical, concerted effort on behalf of some casino owners who are more interested in their bottom line. Maybe we need to cut those licenses back and let the people own them so we can get more bang for our buck."

Under the law recently passed, riverboats saw their tax bills rise with the largest properties expected to pay the maximum tax rate of 70% during the next operating quarter.

While the tax bill was being debated, some casino operators warned that substantial increases could result in the state receiving less revenue rather than more. During the last reporting month ”” July ”” the state received $6 million more in tax revenue which operators predicted would not be repeated in subsequent reporting periods.

Battle heats up

The effort to get voter approval for a $650 million Indian casino in southern Maine has been heating up as the November referendum nears. Last week, the pro-casino group called Think About It took out full-page ads in several newspapers and began airing spots on about a half-dozen radio stations.

Reportedly Marnell Corrao, the developers who originally operated by Rio Suites Hotel/Casino and who have built several other casino properties in Las Vegas, is on record as promising to spend whatever it takes to get a favorable vote. The company has signed a development and operating contract with a pair of Maine Indian tribes that would own the casino.

State officials have indicated that as of last month, casino proponents had received nearly $1.7 million worth of in-kind donations since the beginning of the campaign last year with Marnell Corrao providing the lion’s share.

The figure swamps the amount reported by casino opponents. Casinos No! reported raising about $625,000 since last year.

The Insider

Despite reporting a net loss of more than $32 million for the first six months of the fiscal year, Aristocrat Leisure said it was "confident about the result for the second half of 2003." They said they had fixed the problems that caused the losses.

Nevada casinos reported winning $9.56 billion during the fiscal year that ended on June 30. This was a 2.8% gain over the previous year.

Iowa voters, who twice have refused to approve expanding gambling in Black Hawk County, will have another chance to address the measure in a countywide referendum on Oct. 7.

WhiteSand Consulting, with offices in both Las Vegas and Atlantic City, has been selected as a consultant to help the New Mexico Racing Commission decide whose application should be approved to conduct horse racing in Hobbs, N. Mex.

Vernon Downs, the upstate New York harness race track owned by Las Vegan Shawn Scott, is looking to become the first New York racetrack to install and operate video lottery machines. They said they hope to be in operation by Nov. 1.

Faced with a $100 million shortfall in its purse account, the Fair Grounds racetrack in New Orleans has filed for bankruptcy protection. The track lost a lawsuit brought by horse owners in 1994 seeking a greater share of slot machine revenues.

Pinnacle Entertainment Inc. (PNK) says it plans to begin construction on a $325 million casino resort within the next 10 days.

The Federated Indians of Graton Rancheria, whose original location for a casino ran afoul of the community, is showing interest in another California location, Rhonert Park. City officials have indicated interest in having the casino, to be built by Station Casinos Inc. (STN), located in their community.


With a new casino ”” the Borgata ”” in operation, Atlantic City casinos reported record gambling revenue for the month of July. State officials said the 13 casinos won $436.1 million during the month, an increase of 4.4% over last year.