W. Virginia to Allow Gambling Machines : Agreement: Action clears way for Excalibur Holding Corp. of Irvine to purchase Mountaineer Park resort, install games.

West Virginia lottery officials agreed Monday to allow an Irvine investment company to operate gambling machines at a horse-racing track and resort in the northern part of the state--an action the company demanded as a condition of its proposed purchase of the facility.

The approval cleared the way for Excalibur Holding Corp. to go ahead with its planned purchase of the 606-acre Mountaineer Park resort, said Excalibur’s treasurer, Thomas K. Russell.

Russell declined to disclose details of the Mountaineer purchase agreement until it is completed. He said he expects escrow to close later this week. The resort, located in Chester, W. Va., includes the racetrack, a 101-room hotel and a nine-hole golf course.

Excalibur officials had hoped to complete purchase of Mountaineer’s stock last month in exchange for cash and stock in Excalibur. But the closing was delayed when West Virginia officials set aside their earlier approval to change the ownership of Mountaineer’s lottery license, Russell said.

The West Virginia Lottery Commission had voted 4 to 3 last month to allow Excalibur to take over the lottery license. But officials later delayed approval of the transfer, saying they had second thoughts about Excalibur’s financial stability and the integrity of company President Michael R. Dunn.

Excalibur emerged from Chapter 11 bankruptcy a year ago, and Dunn had been investigated by the Securities and Exchange Commission for earlier stock deals.

“In light of the company’s past history, we were really uncomfortable with approving the transaction,” said James H. Paige III, West Virginia’s secretary of tax and revenue. Paige initially had recommended that the Lottery Commission deny the license transfer.

Uneasiness over Excalibur prompted Gov. Gaston Caperton to ask the Lottery Commission to reconsider its approval.

During the reconsideration hearing Monday, commission members decided to let their earlier vote stand.

Lottery commissioners believe that Excalibur had provided adequate financial information and assurances that the takeover would not put the state’s gaming income and the 1,000 jobs at Mountaineer Park at risk, Paige said. He said he endorsed the license transfer Monday “with reservations.”

As part of the approval, Excalibur must post a $1-million bond to assure payment of state taxes and to help employees should the operation fail.

Excalibur also must agree to allow the Lottery Commission to review Mountaineer Park’s accounts and to allow a lottery employee to oversee the gaming operations on a full-time basis until the state is comfortable with Excalibur’s operation, Paige said.

The Lottery Commission’s biggest concerns over Excalibur was its Chapter 11 bankruptcy filing in California in 1990, commission member Fred Hadad said.

State officials also were concerned about the SEC’s investigation of Excalibur President Dunn on charges he had sold stock in a separate company and falsely represented to buyers that the company was debt-free.

In settling the case, Dunn did not admit wrongdoing but agreed to a permanent injunction barring him from such acts, according to the Associated Press.

West Virginia licenses Mountaineer Park to operate 165 video lottery machines on an experimental basis, state lottery spokeswoman Nancy Bulla said.

Video lottery allows gamblers to play instant games on terminals linked to a central computer, Bulla said. The 165 machines have earned $70.7 million in sales over the past 2 1/2 years, of which $62.5 million, or 88%, went to players. Mountaineer Park earned $5.5 million from the machines, Bulla said.

Once Excalibur takes over Mountaineer Park, Russell said, it hopes to expand the off-track betting and video lottery facilities, upgrade the hotel and the track’s grandstand and clubhouse areas.

Mountaineer Park’s purchase is Excalibur’s second venture into gambling operations. Excalibur owns land in Cripple Creek, Colo., that includes parcels zoned for gambling. The company is looking into developing a hotel-casino operation on the property, Russell said.

The company’s main business now is oil and gas investments.

Excalibur holds all stock in ExCal Energy Corp., a Michigan corporation that owns about 16,000 acres of drilling leases and 77 natural gas wells in southeast Ohio and about 35 oil and gas wells in Michigan. Excalibur formerly ran security guard operations, which it sold in 1991 while under the bankruptcy court’s jurisdiction.