Winner Take All : Bell May Take Over Poker Parlor to Become First Municipality in Country to Have Its Own Casino

Since the California Bell Club opened in 1980, Bell city officials have watched tax revenues from the 560-seat poker parlor soar to $2 million a year, then plummet to a fourth of that as its owners struggled to free the casino from a tangle of legal and managerial disputes.

Now the club owes $550,000 in back taxes and has failed to produce a cent of revenue for the city since September, prompting Bell officials to consider a unique solution--they want to buy the card club through condemnation and then lease it to a private operator. The Community Redevelopment Agency is expected to choose a concessionaire to run the casino operation on Monday night.

If the city is successful, the first card club in Southeast Los Angeles County could also become the first city-owned casino in the country.

Takeover Idea ‘A New One’

“I grant you, this is a new one,” City Administrator Byron Woosley said. “(But) we may have little choice.”

City officials stressed that they will not be involved in the daily operation of the card club. Instead, the Community Redevelopment Agency--which consists of members of the City Council--will choose a concessionaire to run the business. After the agency selects a manager the next step will be filing condemnation proceedings, officials said.

“I just want out,” said Sam Torosian, general manager of the Bell Club. “I think it was a terrible mistake for me to get into this business in the first place.”

Whether bringing poker to this city of 28,000 was a mistake remains to be seen, city officials said.

Like other cities that suffered losses in tax revenue after the passage of Proposition 13 in 1978, Bell was looking for ways to raise revenue and card clubs seemed to be the answer. So, when a poker referendum came before residents that year, it won by a comfortable margin in spite of strong opposition from a local church group.

In September, 1980, the pioneer Bell Club opened to huge crowds. During its peak between 1981 and 1983, it was generating up to $2 million in annual tax revenue, far exceeding local expectations. But in 1984, club revenues declined and in 1985 profits hit a low of $450,651.

Partners Were Convicted

That year, a former Bell city administrator, a Bell councilman, and several of the club’s general partners were convicted of various illegal activities in connection with the club, leaving it with no one in charge and an $800,000 debt owed to the city. That was when Torosian took over on behalf of the current management group, the California Bell Management Corp.

And for the last year, groups of Bell Club investors, managers and outside groups have been fighting for control of the casino, resulting in several lawsuits.

Councilman George Cole, who proposed the idea of a city-owned casino, says the club will not survive unless the city uses taxpayer money to step in and take control.

“The business is going down the tubes,” Cole said. “The best way to clear up all the legal confusion and chaos is for the city to enter into it. Everybody will be bought off, paid out and we’ll be starting off with a clean slate.”

The council considered pulling the casino’s gaming license, but later decided that process would take months and, more importantly, would do little to speed revenues to the city. Officials then began to consider purchasing the club through condemnation proceedings and selling it to one owner, but decided instead to lease the club.

In September, the city filed a “resolution of necessity” stating the grounds for condemnation.

Howard Manning, an attorney for the casino’s management group, said the general and limited partners support the city’s proposal, but aren’t certain the city has authority to act under condemnation law.

“Usually, condemnation is used for the public good. We think this case stretches a bit far,” he said.

However, Manning said that “the general consensus of the general partners was if the agreed upon price was palatable, then it would make more sense to let condemnation take place.”

Agreed on Price

The city and the club’s general partners have agreed on a price of $7.1 million for the entire operation--including the casino’s lease, equipment, alcohol and beverage license, and the financial interest of the casino’s 40 to 50 partners--Robert Flandrick said. But it will be up to the courts to decide how the purchase money will be divided among the partners, he said.

City officials propose to sell between $7.5 million and $8 million in bonds to finance the purchase, Flandrick said.

According to Mike Rumbolz, chairman of the Nevada State Gaming Control Board, no city has tried to purchase a card club before.

Rumbolz cited a case in 1984 in which a Nevada casino’s license was revoked and state- appointed supervisors temporarily took over operations. But the State of Nevada, he said, “has never owned or run a casino to my knowledge and there has never been anything comparable (to Bell’s proposal) in Atlantic City (New Jersey) either. To my knowledge there is nothing comparable anywhere in the country.”

Flandrick concedes that the city would be taking an unusual step in purchasing the lease-hold interest in the casino, but he compared Bell to cities like Montebello, Downey, Pico Rivera and Lakewood that rely on business operations like golf courses, restaurants and banquet halls for revenue.

Potential Operators

As potential Bell Club operators, the redevelopment agency is considering proposals from the Las Vegas-based Southwest Gaming Inc. and Ronald Sarakbi, the general manager of the nearby California Commerce Club.

Sarakbi, who became general manager of the Commerce Club in 1986, said if he becomes the concessionaire for the Bell Club, he will hire a general manager for both casinos and oversee the two operations.

Donald Speer, president of Southwest Gaming declined comment.

“The city will be the owner of this club, the same way Montebello owns a golf course, “ Flandrick said. “I don’t see any difference between playing golf and playing cards. There are some people who think the card club business is not a good business, but like it or not, it’s a lawful business.”

Card clubs in general have been dogged by controversy over the years.

Last November, a federal grand jury in Miami alleged that an estimated $11.5 million in illegal drug profits had been invested in the nearby Bicycle Club, in Bell Gardens. And in 1985, several former Commerce officials and Orange County fireworks magnate W. Patrick Moriarty pleaded guilty to bribery and racketeering charges in connection with the Commerce Club. Given the stormy past of local casinos, and the Bell Club’s history in particular, could city officials be setting themselves up for more problems than they are solving? Councilman Cole says: “It couldn’t get worse.”

Official Wants Control

“It’s reached the point where if we don’t get firm control we might as well not have a casino and that would be a disaster,” Mayor Pro Tem George Mirabal said.

Council members say they have bent over backwards to help the club become financially solvent, giving it several tax breaks from 1985 to 1987, temporarily waiving part of the city’s monthly tax levy. The levy was based on about 13% of gross revenues but dropped at times to 8% under the waiver. However, Cole said he has seen little improvement.

Torosian argues that city officials never gave him “a fair chance to turn this business around” and blames the city’s tax structure for the club’s demise.

“When I came in here, the club was 10 days from bankruptcy . . . It owed about $800,000,” Torosian said. “Yes, they gave us some tax breaks but the overall tax structure was too high.”

Bell officials agree that stiff competition from surrounding casinos contributed to the club’s downfall.

But Woosley says the major reason for the club’s failure is “the sheer number of partners and their inability to make decisions.”

Since its inception, the Bell Club has had between 40 and 50 limited partners who have become embroiled in disputes over who has controlling interest.

The most recent incident occured in May 1987 when a bloc of limited partners called the Landmark Holding Group Inc. filed a lawsuit that charged the management company with skimming money, accepting illegal kickbacks and stealing more than $1.5 million from the club between 1985 and 1987. That suit is pending, Manning said.

The management company denies any wrongdoing.

“The card club has been in a difficult situation for about three or four years,” Flandrick, the city attorney, said. “There have been ongoing arguments between partners, there are lawsuits pending--it’s the biggest mess I’ve ever seen.”

Cole said Bell officials “got tired” of watching partners fight for control while revenues declined.

“You gamble with how long a business can continue to exist in a situation like this,” the councilman said. “We can’t pretend we don’t have time pressures on us to do something. It has reached the point where something has got to happen.”