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Pennsylvania lawmakers can grab
up to 1% of slots action

Jul 13, 2004 4:33 AM

Conflict of interest charges erupted in Pennsylvania last week shortly after the state’s lawmakers passed legislation that authorizes up to 61,000 slot machines at 14 locations. The new law also permits these same lawmakers to own 1% of these gaming parlors.

And there lies the rub.

Critics charge that the language of the law specifically addresses ownership of "securities" of gaming companies, thus allowing the lawmakers to own all or part of a gaming property.

"Not so," answer the bill’s authors. They contend the 1% provision was needed so that lawmakers could own mutual funds or pension funds that invest in publicly traded gaming companies without having to worry about being in violation of the law.

One of the bill’s sponsors, Sen. Bob Tomlinson, said he was assured by his lawyers that the language of the bill prohibits lawmakers from having any gaming stake that exceeds the specified 1%.

An opponent, writing in the "Philadelphia Inquirer," declared, "The same people shoving slots down this state’s throat”¦will be able to personally profit from their oh-so-altruistic legislation."

Gov. Ed Rendell, one of the prime movers in the effort to get slots approved, immediately issued an executive order prohibiting any member of his administration from holding any financial interest in a gaming company.

Tribe ”˜humiliated’

Council leaders of the Nipmuc Tribe of Sutton, Mass., say they felt humiliated by the decision of the Bureau of Indian Affairs to reject their petition for federal recognition. They plan to appeal the decision, they said.

"It’s almost like the British have returned and dismantled us again," said tribal treasurer Ken Hamilton. "They didn’t just deny us. They beat us up. They humiliated us."

The tribe, and another tribe of Nipmucs based in Webster, Mass., has been seeking recognition for the past two decades. At one time, the two tribes combined their recognition efforts but more recently they have submitted separate petitions. Nevertheless, both petitions were recently denied.

The Sutton tribe alleged that the BIA made a sudden rule change that reduced its number from the 527 members claimed to only 11 recognized by the BIA. Yet, they point out, that in the waning days of the Clinton Administration, the BIA issued a proposed finding in favor of the Sutton group but the decision was changed after the Bush administration took over.

The Nipmucs have an agreement with Lakes Entertainment Inc. (LACO) to build a casino once recognition is granted.

An Arnold victory

Efforts by a small casino operator in California to halt the massive deal cut by Gov. Arnold Schwarzenegger with five gaming tribes were dashed last week in a ruling issued by the U.S. District Court.

The judge ruled that the state and the governor did not have a legal duty to worry about other tribes when making agreements concerning gaming compacts. The Rincon Tribe had argued that the deal would increase the competitive advantage of the larger casinos.

The deal between Schwarzenegger involves the Pala, Pauma, Viejas, United Auburn and Rumsey Tribes. It permits them to have an unlimited number of slot machines if they back a $1 billion bond to be issued by the state.

Following the agreement, Schwarzenegger said he would oppose the two referenda questions that would interfere with the existing gaming compacts.

Racino growth

Maine officials were quick to note last week that a recent study has shown that racetrack slots have grown faster than any other form of gambling during the past decade.

The state is awaiting the development of a racino at Bangor Raceway by Penn National Gaming Inc. (PENN). The project is expected to get underway next spring.

According to a study by Analysis Group of California, racino revenue grew 8.3% between 2002 and 2003, almost six times faster than commercial casino revenues.

Despite opposition from a group called Casinos No!, officials have been looking for a way to place a racino in southern Maine, closer to the population center of New England. However, votes earlier this year in Scarborough and its environs have precluded the establishment of slot machines in the area.

Conference calls

Several more gaming companies have announced their scheduled conference calls to discuss the quarter earnings experience for the quarter that ended on June 30.

They include:

MGM MIRAGE Inc. (MGG) to be held on Wednesday, July 21, at 8 a.m. PDT.

Riviera Holdings Inc. (RIV) will be on the same day at 11 a.m. PDT.

International Game Technology (IGT) set for Thursday, July 22, at 6 a.m. PDT.

Ameristar Casinos Inc. (ASCA) scheduled for Wednesday, July 28 at noon PDT.

Scientific Games Corporation (SGMS) set for Wednesday, July 24, at l p.m. PDT.

Boyd Gaming Corp. (BYD) to be held on Wednesday, July 28, at l:30 p.m. PDT

Alliance Gaming Corp. (AGI), set for Tuesday, Aug. 10, at 10 a.m. PDT.

Aussie gaming

Based on statistics released by the state governments, Australians have again shown that they love to gamble.

The figures for the fiscal year ended on June 30 indicated that gaming revenues reached $92 billion. That represented about $6,188 per Australian adult.

Of the total amount gambled, the officials said, some $11 billion was lost by the gamblers, or about $739 per adult.

In the previous year, the Aussies wagered about $90 billion.

THE INSIDER: The U.S. Bankruptcy Court in Louisiana has set Aug. 16 as the date for the auction of Fair Grounds Racetrack. Churchill Downs Inc. (CHDN) has indicated it will make the first bid of $45 million.

Analysts at Buckingham Research have downgraded the shares of MGM MIRAGE Inc. (MGG) from accumulate to neutral.

Equity options in Lakes Entertainment Inc. (LACO) are now being traded on the Chicago Board Options Exchange.

Richard Haddrill, who takes over as CEO of Alliance Gaming Inc. (AGI) on Oct. 1, will be paid a salary of $980,000 annually, according to a filing with the SEC. He also will be granted 500,000 stock options and 377,030 units of restricted stock.

Scientific Games Corporation (SGMS) will supply instant lottery tickets to the Massachusetts Lottery for the next two years. The company was granted the two-year extension to its contract, as well as three one-year options to renew.

Bob Benoit, a former G.M. of Hollywood Park (now owned by Churchill Downs Inc. (CHDN), has been named the first recipient of the Laffit Pincay Jr. Award. Benoit has been affiliated in various capacities with Hollypark for more than a half-century.

Nevada casinos winnings jumped 12.7% to a record $908.2 million during the month of May.

Spectre Gaming Inc. of California will acquire up to 3,000 gaming devices from Bally Gaming and Systems, a subsidiary of Alliance Gaming Corporation (AGI), as part of a multi-year agreement signed last week.

Analysts at Jefferies & Co. have initiated coverage of Penn National Gaming Inc. (PENN) with a buy rating.