Bicycle Club employees have taken a small but important step toward buying the federal government's stake in the card casino by narrowly winning the support of the City Redevelopment Agency.
"The employees are ecstatic," said attorney Regina Saborsky of the Beverly Hills-based firm Rosenfeld, Meyer & Susman, which represents the 2,100 workers.
More than 200 card dealers, waitresses and other workers packed City Hall last week to ask council members, who also serve as the redevelopment agency, to support their efforts to form an Employee Stock Ownership Plan. The ESOP would, in essence, buy out the government's 36% interest in the casino and set up a pension plan for workers, officials said.
The federal government became a general partner in the card club after officials uncovered a complex racketeering and money-laundering scheme and seized about a third of the club's assets. In April, 1990, a federal jury found that one Bicycle Club investor had used $12 million in drug smuggling money to build the facility, and the government seized his portion of the business. Profits from the government's 36% share of the operation have been placed in a special U.S. Marshal account now overseen by court-appointed trustee Harry Richard.
Under a court-mandated forfeiture process, the government is preparing to auction or sell its share in the club, Richard said, and the casino's employees are among interested parties that he would not disclose. The city, which receives more than half its tax revenue from the casino, licenses the club and has final approval over any change in ownership.
The council voted, 3 to 1, with Councilwoman Maria Chacon abstaining, to approve the employees' plan. Councilman Rudy Garcia, who voted in opposition, and Chacon both said they wanted more time to review the proposal.
"I'm all for anything that's going to help a working man get a retirement plan," Garcia said. "The only thing I'm against is that they haven't been able to give me any numbers."
Despite initial support from the majority of council members, casino employees face a financial challenge, Saborsky said. They must come up with an estimated $35 million to pay for the deal.
"It's going to take creative financing," Saborsky said. "It's not going to be easy. It may not happen at all."
In addition, under a strict reading of gaming laws, each participating employee would need to register as a casino partner, which would cost about $500 per employee, Saborsky said.
Actual acquisition of the government's stake could take months, Saborsky said. Workers will first place a bid for the federal government's share of the club. If the bid is accepted, a corporation will be formed. The new company would create an employee stock ownership plan and seek loans to help it purchase the government's interest.
Saborsky is seeking third-party financing and the workers may return to the redevelopment agency to request that bonds be issued to help them purchase the casino, which is in a designated redevelopment area.
The agency has the right to issue bonds to help individuals acquire or improve property if the project "helps to implement the redevelopment plan," said City Atty. Michael Estrada. But, he added, the city "would rather not do any financing and we really hope they don't need it."
If the workers can raise the money to buy a share in the casino, their involvement could help erase "that taint" remaining from the racketeering scandal, Saborsky said.
"When an ESOP is done well, you see an increase in morale, stability in the work force and an almost self-policing," Saborsky said. "I think you'd see an increased profitability in the club."
Richard, the trustee, agreed that employee ownership could be a positive influence. "An employee will take more care in making sure everything is done properly," he said.