Fate of Bicycle Club Rides on Court Action

A federal judge in Florida is scheduled to start the first of a series of hearings Friday to determine how many of the investors in the Bicycle Club knew that profits from a marijuana smuggling ring were invested in the club.

The judge is expected to decide eventually whether any of the club’s 31 investors will be required to forfeit their interests, and who ultimately will control the club.

The club was seized April 2 by the federal government and placed under the control of the city of Bell Gardens after a federal jury found four men guilty of a complex racketeering scheme that involved investing drug-smuggling profits in several ventures, including construction of the club.

One of those men was a partner of a group that owns a controlling interest in the Bicycle Club.

For the last three weeks, revenues from the club, which sometimes reach $200,000 a day, have been deposited directly into a special account controlled by the U.S. Marshal Service. The club’s 31 investors will not receive their share until the judge determines who will be allowed to retain ownership in the club and who must forfeit it to the federal government for auction.

At stake is control of a card casino that brings in $100 million a year, creates 1,900 jobs and provides about half of the city’s tax revenues.

Ralph Lockridge, a spokesman for the Drug Enforcement Agency, said that in most federal seizure cases, neither innocence nor ignorance of the owner or investor is considered a defense.

“It is hard to understand, but the case is not against the people,” he said. “The case is against the property.

“For example, if a vehicle is used to transport drugs, it has nothing to do with whether the driver or the owner knew. Under the law, the question is, ‘Did the car transport narcotics or didn’t it?’ If in fact it did, it can be seized and can ultimately be forfeited by the courts.

“The question is (whether) the Bicycle Club was built with the proceeds of illegal activity. If it was, then that’s the end of the story.”

But Lockridge added that the federal judge ultimately decides what will happen to the seized property. There are provisions for innocent owners, but it is up to the owners to prove their innocence, he said.

The Bicycle Club is owned by two general partnerships--LCP Associates and Park Place Associates. Michael Gilbert, one of the men convicted of racketeering, is a limited partner in LCP Associates, which has a 65% interest in the club. Club General Manager George Hardie holds a controlling interest in the other general partnership, Park Place Associates, which owns the remaining 35%.

Federal law recognizes five different degrees of innocence, ranging from an investor or owner who was not convicted but was found to be involved in illegal activity, to an owner or investor who was found to have done everything possible to prevent his property from being used for illegal purposes, Lockridge said.

Hardie said the case is further complicated because the club is unique among properties seized by the federal government in drug cases.

“It is not like a car or a boat,” he said. “It is a living and breathing asset. It has a value that fluctuates. I don’t think anybody in the country knows how it is going to turn out. It could go on for two or three years.”

There are several possible outcomes.

The judge could decide that the entire club should be forfeited and put on the auction block. The federal government has no interest in running a card casino, Lockridge said.

But that outcome is the least likely one, Bell Gardens City Manager Claude Booker said. He noted that the U.S. attorney in Miami has already stated that Park Place Associates, the general partnership controlled by Hardie, is an innocent third party. Hardie, who testified as a government witness during the three-month trial, has said he did not know drug money was used to help build the club.

Federal prosecutors said $12.5 million of the club’s $22 million construction costs were traced to the drug-smuggling scheme.

Officials from the U.S. attorney’s office in Miami declined to comment about the upcoming hearings.

Booker also cited a partial forfeiture as another possibility. In that case, anywhere from 5% to 65% of the club could be forfeited and auctioned.

Hardie, who was allowed to remain general manager, said in a recent interview that he expects to be allowed to retain his interest.

He said he was referred to Los Angeles developer Samuel Gilbert while attempting to obtain financing to build the club. Hardie said that after several meetings a deal was negotiated in which a partnership formed by Gilbert would receive 65% of the club in return for financing the construction.

Gilbert was not a partner of LCP Associates, which owns 65% of the club, but most of the money LCP used to finance a construction loan for the club came from Gilbert’s elaborate laundering network, federal prosecutors said.

Michael Gilbert, Samuel Gilbert’s son, was the only partner in LCP Associates convicted of racketeering in relation to the money laundering case. He owned 5% of the Bicycle Club.

Samuel Gilbert was indicted in the case, but died before authorities announced that he had been charged.

The hearings that are scheduled to begin Friday are expected to shed more light on the scheme.

“It’s not over,” Hardie said. “It’s an ongoing thing. It’s not pleasant. Sam probably took a lot of secrets with him to the grave.”