Sale of Horseshoe Club Is Stalled Once Again

The on-again, off-again plan by two investors to buy the Horseshoe Club in Gardena--which ran into trouble soon after it was proposed--has been stalled again because of issues raised by the state attorney general’s office and city officials.

The City Council voted unanimously Tuesday to table the application of former Commerce Casino President Herbert Stern for the transfer of a city license to operate the club. Stern and Los Angeles attorney Leonard Baum have proposed heading a new partnership that would buy and manage the club.

City’s Oldest Card Club

The current license holders, headed by Horseshoe General Manager Milton Corwin, have run the city’s oldest card club for more than 40 years and are negotiating to sell controlling interest to Stern.

Corwin’s group, however, is caught in a Catch-22 that was to leave them without a license Saturday.1.

The City Council has voted to permit Corwin’s group to maintain rights to the license, pending the outcome of applications to the state attorney general’s office for renewal of its shareholders’ gaming registration certificates. Those certificates are issued by the state after a background investigation into each shareholder’s fitness for involvement in a gambling enterprise.

However, the state gaming registration certificates held by the Horseshoe’s 91 present owners were to expire Saturday and cannot be renewed, said Michael Broderick, manager of the state gaming registration program. Certificates are issued only to shareholders who are associated with an operating club, he said.

The Horseshoe closed for remodeling on May 23 and has not reopened.

The Horseshoe’s shareholders, who live across the country, are caught in “kind of a Catch-22,” Broderick said, because their certificates are expiring, and city law prohibits the group from operating the club without state approval.

Stern and Baum’s $4-million buyout plan, first proposed in March, has run into other problems with the city’s investigation into whether the proposed buyers will be allowed to take over the license.

In a memo recently, Police Chief Richard Propster, who is heading the city’s investigation, said Stern responded falsely to a question on the application which asked whether he had ever sued anyone or had been sued by anyone.

Stern indicated on the application that he had not, but the city’s investigation found that he has been named in at least two lawsuits. One, filed in 1984 by a Commerce Casino shareholder, alleged financial irregularities in the operation of the Commerce Casino by Stern and other club managers.

Never Sued Individually

At Tuesday’s council meeting, Baum--who is Stern’s attorney and worked for Stern when the lawsuit was filed--said the suit was against Telegraph Properties Ltd., the corporation that owned the Commerce Casino, and that although Stern’s name was among other Commerce employees listed in the suit, he was never sued individually.

The suit was later settled out of court, Baum said.

Councilman Mas Fukai, who among the council members has been most critical of the prospective owners’ buyout proposal, questioned how Stern could have omitted mention of the suits on his application.

Baum said Stern’s omission from the application of the 1984 lawsuit and other suits was an oversight.

“They were just things that were not on his mind at the time he filled out the application,” Baum told the council.

Stern, who did not address the council Tuesday, responded to the issue in a letter last week, saying that the Commerce Casino was involved in a number of lawsuits while he was president, including suits filed against customers who wrote bad checks, personal injury suits and suits by disgruntled former employees over hiring practices.

“Although I have served as a witness in a limited number of these cases,” Stern’s letter said, “since my resignation, I have not been named as an individual in most of these matters.”

Resigned in 1986

Stern has said he resigned as president of the Commerce Casino in August, 1986.

The current holders of the Horseshoe Club license want to sell controlling interest in the club to Stern and Baum, including the right to hold the city license. He would still be subject to licensing conditions set by the city and state before he could operate.

Jerry Bleckman, an attorney for the Horseshoe Club, told the council that a June 8 letter to the attorney general’s office advising state officials that the Horseshoe was closed failed inadvertently to mention that the closing is a temporary one for remodeling, and not permanent.

“That will be clarified in writing” in a follow-up letter, Bleckman told the council.

Broderick said he notified club officials in a June 12 letter that individual registrations would be canceled because he thought the club was permanently closed.

Broderick said notification in writing of the club’s intent to reopen under the old management is needed before the gaming certificates of the present owners can be renewed. When all the renewal applications are received, processing will take three to four weeks, he said.

The uncertainty over whether the Horseshoe Club will reopen “is somewhat unique,” Broderick said in an interview. “We don’t usually have this much confusion associated with the renewal process.”

Employees Out of Work

The status of the Horseshoe Club has left former employees out of work and confused about whether to look for jobs elsewhere or wait for the club to reopen.

A skeleton crew of 75 to 100 employees, down from the Horseshoe’s normal 250-member work force, was employed at the club when it closed. Some employees picketed outside the club earlier this month to protest its closing.

“The employees don’t understand the details,” said Barbara Carr, a poker dealer who worked at the Horseshoe for two years. “Should employees look for other jobs? Many of us can’t live on unemployment. We don’t care about the (point) holders. All we know is we don’t have jobs.”

About 10 former Horseshoe employees have been hired by the city’s other two poker clubs, the Eldorado Club and the Normandie Casino, Carr told the council.

Since the buyout plan was proposed, council members have expressed concern over whether the new owners would have the money to operate after the remodeling.

Balked at Conditions

In May, Stern and Baum balked at conditions city officials required of them before permitting transfer of the city gambling license. Those conditions included getting a $6-million letter of credit and setting up a $180,000 escrow account, which would cover four weeks’ pay for club employees if the club failed.

At Tuesday’s meeting, Fukai asked City Manager Kenneth Landau to write to each Horseshoe shareholder requesting their opinion on the proposed sale of the club.

The council also required the current ownership to pay a $15,000 fee to permit them to hold the rights to the gaming license though they are not operating the club. The quarterly fee was due Saturday.

Mayor Donald Dear said the council’s actions would help expedite the present owners’ application for renewal and give a show of support to Horseshoe employees.

The action “shows the employees of the club that we are behind them and not trying to put another stumbling block in front of the operation of the card club,” Dear said.