Bell Hopes for New Casino Manager, More Profits

Control of the California Bell Club will be up for grabs Monday when the partners meet to decide whether to oust the current managers.

For the Bell City Council, the partners’ meeting represents the possibility of an end to the internecine wrangling that has plagued the club for months, and that a strong, central management will emerge to restore the club’s former profitability.

“We need some changes at the club,” City Administrator Byron Woosley said. “The City Council believes it’s reasonable to count on $1.5 million in tax revenue each year. We want to see a situation where they present to us a plan to achieve that. This has not occurred (with the present managers).”

Councilman George Mirabal agreed. “Our first preference would be to find a management team that is also the owner of the club. It’s hard for us to deal with someone who is not really responsible.”

Income Vital to City

The casino currently accounts for nearly 15% of the city’s $9 million tax revenue. In its heyday, it contributed almost 25% of the municipal budget, and the drop in income has hurt the city, Mirabal said. “It looks like we are going to have to cut back this year because of the loss of income.”

Bell has received $565,000 in tax revenue from the club so far in 1987. In 1986, the club paid the city $1.3 million, but in 1985, the club’s lowest revenue year, the city got only $738,000. In the club’s early years, revenues to the city were around $2 million a year.

The club’s operation has been under a cloud since December, 1983, when a former city councilman, a former city administrator and five club investors were indicted on federal charges that ranged from mail fraud for the city officials to either fraud or racketeering charges against the others.

Even before the indictments and later convictions, however, the club’s revenue had begun to slip as competing casinos opened nearby, starting with the Commerce Club in mid-1983, and followed by the Huntington Park Casino and the Bicycle Club in 1984.

Revenues Surge, Dip

Casino revenue, which reached a high of $1.5 million a month in July, 1983, the month before the Commerce Club opened, dropped to about $500,000 a month in January, 1985, in the midst of the racketeering trials.

In September, 1985, the present management team, Bell Club Management Corp., was chosen by the limited partners and it looked as if the club might be on the road to recovery. With the new managers in place, and with the introduction of the popular Chinese game pai gow, revenue climbed again to more than $1 million a month for much of 1986. However, this year has seen revenue dwindle to about $800,000 a month.

To help the club get back on its feet and to help it better compete with other clubs, the City Council has granted a series of tax breaks since July, 1985.

The club’s latest request for tax relief, which is scheduled to be heard by the council Monday, would grant the casino a one-year tax reduction, the longest yet. The proposed tax reduction would charge the club 9% on its first $1 million income monthly and 13% on all revenue above that amount. The normal tax bracket for a business the size of the casino would be a flat 13%.

Tied to Conditions

The city, though, is tying the tax break to a number of conditions. For instance, the club must guarantee the city $1.25 million a year in revenue and spend a certain percentage of its income to promote the casino.

While shoring up the club with tax breaks, the city has tried to clean up its reputation in relation to the club.

The indictments of city officials and the resulting scandal helped lead to the election of four new members to the council: only Mayor Jay Price, an adamant opponent of the casino when it was first proposed, remains from the early days of the club’s existence. George Cole and Ray Johnson were elected in April, 1984, and Mirabal and Rolf Janssen in April, 1986.

The council has required a number of new controls to prevent abuses at the club. It hired a new accounting firm to monitor the club’s operation; ordered lock boxes for cash transactions; began monitoring the club with rotating teams of city employees; instituted spot checks of transactions via video cameras and divided oversight of the club among the city administrator, police chief and finance director.

Cole said that the council’s goal was to prevent the possibility of corruption from occurring again. “These rules aren’t perfect,” he said, “but they increase the accountability.”

Lawsuit Filed

Despite these efforts by the city to restore public confidence, disputes between the limited and general partners erupted in March into a civil lawsuit under the federal racketeering statute, with one group of limited partners charging misconduct on the part of the managers. However, there have been no criminal charges made against anyone involved in the casino, and the issue remains a civil matter.

In the resulting distrust and contention, many partners became receptive to outside investors who were bidding for points and jockeying for control of the club. This has led to the two meetings scheduled Monday, at which each of two rival investment groups will make a pitch to the partners for support.

The city will be doing more than just cheering on the sidelines; it will be directly participating as a voting point holder.

Bell is the trustee for 12.625 points (a point is a 1% ownership share), which the federal court confiscated from those convicted on racketeering charges.

One of the investment groups that will make a presentation to the partners Monday is Southwest Gaming Inc., a Las Vegas-based corporation which manages the Desert Oasis in Indio and is currently bidding for a San Francisco area casino as well as the Bell Club, according to SGI President Donald Speer.

The second group is LCI Corp., represented by Los Angeles attorney Arnold Malter.

City to Back LCI

Southwest Gaming is scheduled to address the partners at the first meeting, and if the group gets control, Malter’s appeal may not be heard, according to club manager Samuel Torosian.

The city will cast its votes for LCI, as it agreed to do when it signed a contract in June to sell its shares to LCI for $70,000 a point. As a condition of the sale, LCI must obtain a controlling interest in the club. Woosley, who will represent the city at the meetings, said the city will sit out the first meeting, and reserve its vote for Malter at the second session.

Southwest Gaming Inc. will go into the first meeting with the votes of the general partners, according to Torosian. Torosian said he is “99 and nine-tenths certain” that SGI will get control of the casino.

However, the election will depend on the votes of the limited partners. Malter did not return telephone calls for comment, and SGI’s Speer refused to speculate on the outcome. However, Speer said that SGI is interested in getting 100% ownership of the casino, not merely in obtaining a controlling interest.

Although the current general partners may be voted out Monday, this apparently will not resolve the lawsuits that are pending.

Restraining Order

The general partners asked for an injunction in March against a limited partner, Landmark Holding, to prevent Landmark from taking over the club following a March partners’ meeting. The general partners obtained a temporary restraining order against Landmark at that time, which is still in effect.

Edward V. Washington Jr., the attorney for Landmark, said that although the partners’ meetings Monday may affect the issue of the injunction against Landmark, cross-complaints by Landmark asking for monetary damages from the general partners will not be affected. Even if the management group is ousted, he said, the case will be pursued.

Also pursued, he added, will be the lawsuit Landmark brought against the managers in federal court on racketeering charges.

One of the four general partners named in the suit, Wing Lou, also known as Sammy B., who recently sold his interest to the other general partners, denied the allegations of wrongdoing that Landmark’s lawsuit makes against the general partners. The other general partners also have denied any wrongdoing through their lawyer, Howard Manning.

Lou said that the general partners’ success in paying off back taxes and reducing the casino’s debts lured outside investors just as the general partners were about to realize a profit.

Revenue to Go to U.S.

“The club was $3 million in the red when the general partners took over,” he said in an interview before selling his interest in the club. “Now that the club’s making money, they want us out.”

Bell will not make a profit from the sale of the points it holds in trust; proceeds of the sale, minus a payment to Bell to cover its costs, will go to the federal government. Nevertheless, council members have reiterated their desire to get the best deal possible for the government, and they accepted Malter’s bid of $70,000 a point as the best offer available and the best chance to end the squabbling that has plagued the casino’s management.

Despite repeated requests by the council, Malter has not yet given the city a full disclosure of his financial backing. Malter represents an investors’ group which includes South Korean nationals, according to his spokesman, Frank Nemecek.

Such disclosure, and an investigation by the city and the state of his background, are necessary before he could take possession of the government’s shares.

“I’m not sure whether Malter is any better or worse than anyone else,” Woosley said. “But the main goal (of the city) is to get a positive change, and get a stable, predictable tax base for the city, and it was our understanding that Malter would attempt to gain this.”

Speer, who heads SGI, has a background in casino management. He was a manager at the Sands Hotel in Las Vegas from 1975 to 1982, except for a brief stint at the Tropicana in 1976.

Should his group’s bid to buy the casino succeed, club management probably would be under the direction of Louis Cavaricci, the firm’s vice president of casino operations, he said.