The Saga of the Silver Saddle Casino : Gambling: After nearly nine troubled years, Cudahy is still waiting for the grandiose poker club to open and start generating revenue for city coffers.
Nine years ago, a young South Gate real estate broker with an amiable grin and the gift of gab came to this town and promised its leaders that he would build a card club that would put all others to shame.
But for a good part of nine years, Charles R. King, as owner of Tanlo Inc., has had little success in his attempt to build the world’s largest card casino on three acres in Cudahy’s tiny industrial sector. He has searched for, found and lost financing and spent hundreds of thousands of dollars on a scaled-back version of the club. Except for a few months in 1986, King has never opened the Silver Saddle Casino for business.
Now, with the casino as close to completion as it has ever been, he and his partner, Beverly Hills businessman Shyr Jin (Jim) Tsay, are embroiled in a complicated financial dispute and work has ground to a halt.
This time, city leaders have more to lose than time if King and Tsay fail to end their disagreement amicably.
The Cudahy City Council is counting on $650,000 in gaming revenue from the casino to help it get through this fiscal year. The city budget was balanced on the assumption that the club would open as scheduled this fall and begin pouring anywhere from 8% to 13% of its gross revenue into city coffers.
The casino’s closure has forced the city to slowly draw upon its $750,000 in cash reserves, money that city leaders say could have been put to good use elsewhere in this crowded town that was recently ranked one of the poorest in the state.
Thus far, a majority of the council has remained calm about the possibility that the casino will not open this year. City Manager Jack Joseph said that the city would be in trouble if the casino did not open by next July, but he said the city plans to float a bond later this year that will replenish its reserves. Also, Joseph said, this is not the first time in the last nine years that the city has counted on casino revenue to balance its budget.
Last year, the council penciled in $400,000 in gaming revenue. When the casino did not open, Joseph said the city recovered most of its budget shortfall with greater than expected sales tax revenue.
Councilman John Robertson, a harsh critic of King and the Silver Saddle, has been the only councilman critical of the decision to use casino revenue to balance the city budget.
“King has never fulfilled one promise to this city,” Robertson said. “If he doesn’t come through we are not going to have any money in the bank. This city can’t afford it.”
The probability that the casino will open this year is slim, City Manager Joseph said.
In addition to the financial dispute between Tsay and King, Tsay’s company, Naxos Inc., which arranged the financing for development of the casino, has filed a request for involuntary bankruptcy on behalf of the Silver Saddle with the U.S. Bankruptcy Court in Los Angeles. The request was filed without King’s knowledge, his attorneys said.
If the court allows the Silver Saddle to go into bankruptcy, the project could be delayed for an unknown length of time.
But the problems do not end there. City leaders said last week that King and Tsay are in violation of their license agreement with the city, which stipulated that construction of the casino was to have been completed in January.
City Manager Joseph said that, in all likelihood, the City Council will have to hold a hearing to decide whether the casino license held by King and Tsay should be revoked.
To more than one frustrated council member, revocation is not out of the question.
“I’m getting to the point where I say, ‘This is enough,’ ” Councilman Joseph Fregeau said. “They were doing darn good up to now, but now construction has stopped and Chuck and Jim Tsay are fighting and it’s getting to the point where they have to put up or get out. If they don’t want to do it, I’m sure we could find someone else who does.”
As the situation stands now, the Silver Saddle project is a “mess,” Joseph said.
“We know that construction has stopped. That King and Tsay have sought arbitration. That according to the license agreement construction should have been completed in January. What else could happen?” Joseph said.
Neither King nor Tsay would comment on the current dispute.
Ira G. Rivin, King’s attorney, said that according to the joint venture agreement signed by King and Tsay in September, 1987, Naxos Inc. was to provide and procure all “necessary” financing for the project. Now, he said, Naxos Inc. is saying the project will cost too much to complete and is balking at arranging more financing. The building is complete except for work on the interior that is expected to take 90 days, King said.
“Naxos is saying that it is going to take a substantial amount to complete the project, and basically they want Tanlo to reduce its interest in the Silver Saddle,” Rivin said. “That is something we are not willing to do.”
Rivin said that King wants an arbitrator to either force Naxos Inc. to comply with the terms of the joint venture, or to allow King to find another partner so that the casino can be opened without further delay.
Kay E. Kochenderfer, Tsay’s attorney, said only that her client “vigorously” denies all of King’s charges. She also said that, according to the joint venture agreement, it is not Naxos’ responsibility to provide “unlimited” funding for the Silver Saddle project.
“This is a dispute about the completion of the project which hopefully will be resolved in arbitration,” she said.
Kochenderfer declined to discuss why Naxos Inc. has petitioned the court for involuntary bankruptcy on behalf of the Silver Saddle. She said only that: “We have requested that the Silver Saddle be put into bankruptcy with the hope that through the process it would come back much stronger. We are exploring various avenues to resolve this dispute and this is one of them. Our whole goal here is to get the casino up and running as soon as possible.”
She and Rivin said an arbitrator has been selected, and he may hear the partners’ complaints sometime next month.
King, 42, is no stranger to financial complications in the Silver Saddle project.
When he first began promoting the project in the early 1980s, he attempted to get a loan from a Virginia-based company only to find that the company had once filed for bankruptcy and had been under investigation by the FBI. King then tried to line up limited partners who would buy shares of his corporation, only to find himself challenged by some City Council members who demanded to know who the investors were. From 1986 until last April’s election, he faced a hostile council, which once tried to revoke his license, and which used every opportunity to delay his plans and stymie the project, King said.
In September, 1987, he formed a general partnership with Naxos Inc., which was purchased by Tsay, 51, a Taiwanese-born engineer who has made millions in real estate and owns several hotels and bars in Los Angeles County, according to property records.
It has been, King said, “a long nine years.” But he said, “It is too late to turn back now.”
“I like to finish what I start,” King said. “This is a business, one that is potentially a very lucrative business once it gets open and operating properly.”
But after nine years of watching what could be an important source of revenue become bogged down in political and financial problems, city leaders are being asked by residents and one council member why they have not yanked the casino license and given it to someone else?
“King should have been gone a long time ago,” Robertson said.
Robertson said he believes the reason his fellow council members have not revoked the casino license is because King has been their political supporter.
Robertson charged that the council gave King what he wanted, including protection from competition by preventing another card club from opening until the population increases by 20,000.
“The council sold out the residents. He (King) bought in by supporting them in the election and now they are paying him back.”
King said he did not support Alex Rodriguez, Jack Cluck and Mayor Joseph Graffio, winners in last April’s election.
“Robertson is just blowing off steam,” King said. “He’ll seize any opportunity to make another person look bad, especially the council when they don’t buckle under and do what he wants,”
Robertson, said Graffio, is a “big liar.”
Fregeau said: “The present council is not in King’s pocket. We have been working for the betterment of the city, and if it helps King, it is coincidence. It is for the city that we make changes, not for King. If the club fails, it fails. If I had my druthers, we would operate this city without the parlor, and I think the rest of the council feels the same. We were getting along fine before King came here and I’m sure we can get along fine without him.”
BACKGROUND In 1963, Cudahy voters outlawed gambling in the city. The issue surfaced again in 1981, when Charles King, a South Gate real estate agent, proposed an ordinance that would have given him the right to apply for a card parlor license. The proposal was submitted to voters twice because of a dispute over whether it required the approval of two-thirds of the voters or a simple majority. In December, 1982, a majority of voters approved of card casinos, making Cudahy the sixth city in Los Angeles County to legalize poker.
KEY DATES IN SILVER SADDLE SAGA
July, 1983--Charles King announces that construction is scheduled to begin in the fall on the Silver Saddle Casino, a $12-million card club that will accommodate 1,200 people and pump $1.9 million annually into city coffers.
January, 1984--King asks the Cudahy City Council to extend its deadline for breaking ground from December, 1983, to July 1, 1984. The council votes no, but two months later votes to extend the deadline to June 1, 1984.
April, 1984--King asks for another deadline extension to complete the land purchase. The council sets a new deadline of September, 1985, to have the club built and operating.
December, 1984--The City Council gives King permission to scale back his operation from 100 to 40 tables.
March, 1985--Purchase of the two-acre club site on Patata Street is completed. The council waives a September construction deadline.
February, 1986--The club opens, but with only four gaming tables in one corner of a cramped, box-shaped building that once housed an automobile smog-check station. King said construction crews would continue to work on expansion.
July, 1986--The club closes, and two months later the council’s attempt to revoke King’s license is stymied when King files for bankruptcy and a court holds that the city cannot revoke the license.
May, 1987--King says the gaming hall has fresh financial backing and new plans to reopen its doors by September.
September, 1987--A new partner buys in and the project is scaled up from a 40-table parlor to a casino that could house 100 tables.
November, 1988--Building permits are approved. King and his partners agreed to complete construction by January, 1990.
July, 1990--The council adopts its 1990-91 budget, penciling in $650,000 in gaming revenue from the club to balance the budget. The Silver Saddle grand opening is pushed back to September, nine months late.
September, 1990--King and his partners have a financial dispute. The case is scheduled to go before an arbitrator in October. Work on the club is halted.
