Investors Face High-Stakes Battle for Casino Profits
When former California Assemblyman David Pierson set out seven years ago to finance construction of the world’s largest card casino, he and two associates put up a total of $10,000 with hopes of someday turning a tidy profit.
Instead, they became sudden multimillionaires. Since 1985, financial records show, the Bicycle Club in Bell Gardens has produced more than $50 million in profits for the three investors and their limited partners.
The casino proceeds have helped Pierson, Beverly Hills bank executive M. Dale Lyon and business consultant Julieann Coyne Wasson acquire luxurious homes, fancy foreign cars and fat bank accounts.
While attaining overnight wealth is not unheard of in some quarters of celebrity-studded Southern California, the Bicycle Club case is striking because the three investors now stand to lose their bonanza just as quickly as they got rich.
When U.S. District Judge Norman C. Roettger Jr. ordered the seizure of the Bicycle Club in March--making it the single largest asset ever forfeited to the federal government--he also froze millions of dollars in monthly casino profits to LCP Associates, the partnership named for Lyon, Coyne and Pierson. Last week, Roettger released profits for a separate, minority group of partners led by the casino’s general manager, George Hardie, but the profits of Lyon, Coyne and Pierson remain frozen.
After growing accustomed to extraordinary wealth, the LCP investors now find themselves in the uncomfortable position of struggling financially to meet exorbitant monthly bills.
To get their profits back, the three must prove in Roettger’s Ft. Lauderdale courtroom that they are innocent investors who were unaware that an international drug money laundering operation funneled proceeds through the Bicycle Club. Federal prosecutors maintain that the government is entitled to LCP’s 65% share of the Bicycle Club because the partnership arranged for the initial financing of $12 million in marijuana profits to build the casino.
“The government’s case is that these guys invested $10,000 and are now making $300,000 a month, so they must be crooks,” said Richard Marmaro, a Century City lawyer who represents Lyon.
Lyon, Coyne and Pierson each refused to be interviewed for this story. Through their attorneys and court documents, all three partners denied knowing that casino construction funds came from drug profits.
Moreover, none of the three LCP investors have been charged with any wrongdoing, nor were they suspects in the recent drug money laundering trial that netted the convictions of one LCP partner and three Miami associates.
A federal civil trial scheduled for the fall in U.S. District Court in Southern Florida is expected to determine if the investors had direct knowledge of the drug profits and whether they get to keep their shares of the Bicycle Club.
During a forfeiture hearing last month, Lyon, 60, and Coyne, 40, were singled out by Assistant U.S. Atty. Robert Bondi as the partners who were “going to have a rather rough road to hoe” in trying to persuade the court that they have “clean hands.”
In addition, interviews and court documents reveal that Lyon and Pierson, 55, often had direct financial dealings with members of the narcotics money laundering network.
Marmaro said flatly in an interview that federal prosecutors do not have a case against the LCP investors.
The Bicycle Club’s phenomenal success can be attributed to “a lot of hard work and risk” taken by the partners, Marmaro said. He likened Lyon to Alexander Graham Bell, Henry Ford and John D. Rockefeller--entrepreneurs who relied on an idea, not a large investment, to launch profitable ventures.
“No one believed that the Bicycle Club would be as enormously successful as it has been,” Marmaro said.
The casino, valued at $150 million, yielded $23.4 million in net profits last year, and is the source of nearly half of the $21-million annual budget of the city of Bell Gardens. Nearly 2,000 people work there, operating 168 gaming tables around the clock.
As the principal organizer of LCP, Pierson has received the largest share of the net profits--$14.5 million since 1985.
It was through the legendary developer and UCLA basketball booster Sam Gilbert that Pierson and his partners acquired their fortunes. Prosecutors said Gilbert funneled millions in marijuana profits through Southern California banks and businesses as part of a scheme to launder drug funds and finance the Bicycle Club. Gilbert died at age 74 of heart failure three days before he was indicted in November, 1987.
Ironically, a large part of the LCP partners’ case to the government will focus on denouncing Gilbert--the very man responsible for their stunning financial success--and denying any involvement in his dealings with drug proceeds.
Pierson, for example, claims that he “had no reason to suspect that a man of Sam Gilbert’s reputation, background and resources would be involved in illegal money laundering,” his Florida attorney, Robert L. Shevin, wrote in court papers.
Marmaro added in an interview: “They were dealing with a man, Sam Gilbert, who had an impeccable reputation, or so everybody thought. They weren’t dealing with Al Capone. . . . No one knew at that time what we know now about Sam Gilbert.”
The LCP profits paid to Gilbert’s three adult children and his grandchildren--who thus far have received approximately $10 million--also have been seized by the government pending the outcome of the forfeiture case. His eldest son, Michael, faces a possible 35 years in prison pending his sentencing on four guilty verdicts in the money- laundering trial.
Last week, Roettger signed an order releasing a portion of the Bicycle Club’s monthly profits to 25 investors who own the 35% of the casino not held by LCP. The group is led by Hardie, the club’s colorful general manager, who has cooperated with federal authorities from the beginning.
Neither Hardie nor his partners “have any illegal interest in the Bicycle Club which should be forfeited to the United States,” according to a letter written last November by the U.S. attorney’s office in Southern Florida.
No such statement from federal authorities has cleared Lyon, Coyne or Pierson.
The Bicycle Club was born from a dream that Pierson held since the 1970s. Having spent two decades as a lawyer, an Inglewood city councilman and a state legislator representing South-Central Los Angeles, he sought to obtain a card club license--first in Inglewood.
But city officials there rejected all bids, including Pierson’s, and it wasn’t until 1983 that he spotted an opportunity to finance a card casino in Bell Gardens.
What follows is a chronology--based on dozens of interviews, thousands of pages of court documents and extensive witness testimony given during the money-laundering trial--of how the Bicycle Club was financed by the LCP investors with the help of Sam Gilbert and his Miami drug associates.
It was Hardie, later to become general manager of the Bicycle Club, who first acquired the rights to 20 acres in Bell Gardens and a city license to operate a club there in 1982. Within a year, however, Hardie was having difficulty raising the millions of dollars he needed in construction funds.
Hardie had met Pierson several years earlier when Hardie was promoting a statewide dog racing initiative. In the spring of 1983, Pierson suggested a plan: Hardie would contribute his club license and the site while Pierson would raise $12 million in financing. Pierson and his associates would get a 65% ownership interest in the Bicycle Club, with the remaining 35% for Hardie and his partners.
All Pierson had to do was come up with the $12 million. For this, he turned to Sam Gilbert, a man he knew to be of significant wealth. Gilbert, after all, had made personal loans to Pierson totaling $850,000.
Pierson was first introduced to Gilbert by Julieann Coyne in 1981. That same year, he recruited Gilbert as a founding director of Olympic National Bank, which Pierson organized and is headquartered in Gilbert’s Trident Center in West Los Angeles.
In mid-1983, Pierson brought a Bicycle Club prospectus to Coyne and asked her to present it to Gilbert. Coyne and Gilbert were “very close personal friends,” Pierson testified during the criminal trial.
Gilbert, after reviewing the Bicycle Club plans, agreed to supply $12 million in financing from an offshore trust account in return for 60% of Pierson’s nearly two-thirds share of the Bicycle Club.
But before the agreement was finalized, Gilbert had a sudden change of heart. He decided to give equal shares of his interest in the casino to Coyne and her former boss at Imperial Bank, Dale Lyon. Coyne had introduced Gilbert to Lyon.
Under Gilbert’s plan, he would furnish the $12 million to the Bicycle Club. In return, his construction firm would receive a $2-million fee to build the casino.
Pierson went along with Gilbert’s wishes and organized LCP Associates, which became the principal owner of the Bicycle Club. The partnership was formed in November, 1983, with an initial investment of $10,000--Pierson paid $4,000 to cover his 40% interest in LCP and Lyon and Coyne put in $3,000 apiece for their 30% shares. The money went toward the cost of establishing the partnership.
At the same time, Lyon was appointed president of CGL Investments Inc., a partnership Gilbert formed along with Coyne to receive the $12 million in laundered money, prosecutors alleged in court. They called CGL “nothing more than a repository for drug money.”
In late 1983, Lyon met with Miami lawyer Melvyn Kessler at the L’Ermitage Hotel in Beverly Hills to discuss the offshore accounts that would finance the Bicycle Club. Kessler was later convicted in the money laundering trial on conspiracy and racketeering charges. Lyon also would travel with Gilbert to Washington, New York and Florida to confer with Kessler and two other Miami drug associates, Jack and Barry Benjamin Kramer. The Kramers were found guilty of the same charges as Kessler; in addition, Ben Kramer is serving a life sentence in a related drug smuggling case.
Within a year and a half of Gilbert forming the partnerships to fund the Bicycle Club, Coyne mysteriously dropped out of any further involvement in the casino. She gave up her work as a personnel consultant at the casino before she could contribute to the club’s astounding success, reduced her role in LCP to limited partner status in 1984, and resigned from CGL Investments in 1985.
Just as Gilbert had arranged for her to own a lucrative share of the Bicycle Club, he had insisted that Coyne be given responsibility for screening and hiring casino employees, Hardie testified.
One of Coyne’s first decisions involved the hiring of her longtime manicurist as a $30,000-a-year personnel director, said sources familiar with the casino’s start-up operation. With Coyne out of the picture several months later, the manicurist was dismissed, the sources said.
Although Coyne had virtually nothing to do with the Bicycle Club by 1985, she has collected $9.7 million in casino profits through last year.
Her departure left Lyon, Pierson and Gilbert to oversee the club’s financing arrangements.
Lyon played a key role as the bookkeeper who handled the paper work and financial transactions from 1984 to 1987 among the Bicycle Club, LCP, the investment firm CGL and the offshore accounts. He would follow Gilbert’s directions in dispersing and depositing millions of dollars in checks, Marmarow said. He was the casino’s first chief financial officer and has received $13.8 million in club profits.
Beginning in 1984, the Bicycle Club received $12 million in Miami drug money that initially was laundered in Los Angeles by Gilbert before being sent to foreign accounts in the tiny European country of Liechtenstein and the Virgin Islands, according to federal authorities. From there, financial documents show, the funds were wired to CGL Investments and passed on to the Bicycle Club. The casino broke ground on April Fool’s Day in 1984.
When the casino’s construction costs incurred by Gilbert’s firm soared to $22 million in 1984, Lyon and Pierson secured an additional $10 million in loans from banks and business associates.
Thus, the Bicycle Club opened on time in November, 1984. Within three months, it began making a profit and grew wildly successful later that year after it was permitted to introduce popular Asian card games.
After the club was built, Lyon loaned $1.6 million in money received from the offshore accounts to Jack Kramer, the Miami associate who was recently convicted. Lyon testified that he issued the loan at the request of Gilbert, but Kramer failed to repay the money. The loan was one of several advances of laundered funds that Lyon made to Kramer at the direction of Gilbert, Lyon said in court.
In what Lyon’s lawyer described as “the most curious transaction” in the Bicycle Club case, Pierson gave $500,000 in LCP profits to Jack Kramer without notifying Lyon or Coyne. The money, which Pierson intended as a loan, was never repaid, Pierson acknowledged in court testimony.
Pierson said he made the loan in April, 1986, when Gilbert asked him to help one of his longtime family and business friends. “I was delighted to be able to do a favor for Sam Gilbert,” he testified.
Two months later, at Gilbert’s request, Pierson loaned an additional $200,000 in Bicycle Club profits to Kramer.
By then, federal authorities were on the trail of the money laundering operation after receiving a tip from Scotland Yard about the suspicious nature of the offshore accounts.
Lyon and Pierson first learned of the criminal investigation in November, 1986, when they were contacted by federal agents for an interview. Several months later, the Miami drug associates demanded the return of the $12 million in Bicycle Club funds to yet another foreign account in Switzerland, prosecutors said.
By this time, Gilbert had become fed up with the financial complications and withdrew from any further involvement in the casino.
Although the Miami associates had no right under the loan agreement to demand a sudden repayment of the loan, Lyon and Pierson helped refinance the Bicycle Club, which by then was generating substantial profits. Both partners said in court that they did so to save $700,000 a month in interest payments. They denied participating in any effort to conceal the funds from authorities.
In November, 1987, a federal grand jury returned indictments against Gilbert and his Miami colleagues. The case attracted little attention in Southern Florida, where drug trials are commonplace and create scant publicity.
Meanwhile, Bicycle Club profits continued to soar. In the past two years alone, the LCP partners have received more than $30 million in profits from the club.
In an effort to preserve their future monthly casino dividends, the LCP investors recently filed court affidavits pleading for the reinstatement of their profits.
Pierson appears to be in the best position to retain his interest in the Bicycle Club, according to Shevin, Pierson’s Miami lawyer. This is because unlike Lyon or Coyne, Pierson had no role in the CGL investment firm that interacted with the Miami drug associates, Shevin said. Pierson also agreed to testify at the criminal trial without demanding immunity from prosecution.
Coyne refused to appear at the criminal trial, citing her constitutional 5th Amendment privilege against self-incrimination. And Lyon testified only under the condition that he receive immunity from prosecution.
As the forfeiture trial nears, even those with the slightest connection to the casino have hired lawyers to scramble for a slice of the jackpot. These include Lyon’s children, Coyne’s husband, Pierson’s ex-wife, Gilbert’s two sons, his disabled daughter and grandchildren and even the former spouse of Ben Kramer, the convicted narcotics smuggler. The relatives and children of the LCP partners were given the ownership shares and had no involvement in financing the casino.
Recently, Roettger noted the high stakes involved in the case as he peered across a courtroom packed with attorneys charging as much as $100,000 a month in legal fees.
“I have never had so many lawyers in one case whose meters have been running so long,” he said. “Clearly this is a matter of considerable interest, especially in the Los Angeles area, or I would not have so many distinguished lawyers here looking out for (their clients’) interests.”
Times staff writer Tina Griego contributed to this article.
PROFITING FROM THE BICYCLE CLUB Since the Bicycle Club card casino opened in Bell Gardens in 1985, the gambling house has become the source of a financial windfall for its initial investors and the partners who own it. Here is a breakdown: David Pierson: $14,475,270
M. Dale Lyon: $13,792,720
Julieann Coyne Wasson: $9,708,300
Michael Gilbert: $3,247,213
Robert Gilbert: $3,237,605
Robert Gilbert Family Trust: $1,578,403
CGL (Coyne, Gilbert, Lyon) Investments: $1,545,000
Michael Gilbert Family Trust: $1,212,249
Lyon Children’s Trust: $442,800
Richard Traweek: $416,850
Margaret Gilbert: $404,116
Source: U.S. District Court, Southern Florida