Advisers’ Role in Bicycle Club Offer Raises Questions : Gambling: Trustee says he had no part in picking winner. Attorney withdraws gaming application.
Two men who have overseen the Bicycle Club Casino for the federal government and handled purchase offers were listed as part of a group recently chosen to buy the U.S. stake in the club for nearly $38 million, records show.
A federal trustee and his attorney, who together are paid more than $300,000 a year to help run the vast Bell Gardens casino for the government, were named on gaming registration applications filed with the California attorney general’s office.
The Santa Monica investment group, which includes business agents for Hollywood celebrities, identified the federal trustee, Harry J. Richard, as its proposed casino manager and his counsel, Las Vegas attorney James F. Lisowski Sr., as both an owner and manager.
This summer, prospective buyers of the club were instructed to contact Richard for information on acquiring the government’s controlling interest in the casino, which was seized four years ago in a drug money laundering case. Richard and Lisowski presented the final purchase offers to federal officials at a meeting last month in their Las Vegas offices.
In an interview, Richard said he had no role in the selection of a buyer. He confirmed that he had discussions not only with the winning bidder but with most bidders about remaining general manager of the casino, but had not struck any agreements to take the job.
“Every group has offered me some sort of position to stay with them in one form or another,” Richard said.
Lisowski acknowledged that he filled out a state gaming registration application but denied that he was one of the investors in Club Acquisition Partners, which was selected late last month to purchase the government’s 36% interest in California’s second-largest card casino.
“I have no role,” he said. “I am not a partner.”
His application form shows that his percentage of ownership and dollar amount invested have yet “to be determined.”
“I have no money in it,” he said. “No, I am not a buyer.”
After inquiries from The Times, Lisowski sent state gaming officials a letter last week withdrawing his application.
The letter had not been received by state officials in Sacramento as of late Friday.
Federal officials said they are examining the $38-million transaction to determine whether the roles of the trustee and his attorney could constitute a conflict, since they may have acted both as agents for the government and as potential business associates of the winning bidder.
“Part of their responsibility was . . . to give us their business judgment about the offers,” a federal source said.
Federal authorities said they conducted background checks on the investment group, but were unaware that Lisowski had applied for a California gaming license and that Richard was listed as proposed manager by the partners.
“What you are telling me is something absolutely, 100% news to me,” said Tim Miller, a supervising deputy for the U.S. Marshals Service.
Richard said he did not try to influence the outcome of the bidding. “I tried to do everything the proper way,” he said.
State Bar officials in Nevada, where Lisowski practices law, declined as a matter of policy to comment on the matter. Bar rules prohibit attorneys from representing both sides in a transaction, or acquiring an ownership interest adverse to their client, without fully disclosing their role.
Lisowski defended his role, saying that he had no input into the sale or the terms of the deal and that he does not have a financial interest in the partnership.
The casino sale will not be final until legal hurdles are cleared, including the approval of a federal judge and the licensing of the new buyers. In addition, two other partnerships that hold an interest in the casino will have an opportunity to match the offer.
The questions about the sale are the latest chapter in the government’s long and embarrassing venture into the casino business.
The U.S. government seized the Bicycle Club in April, 1990, after prosecutors proved it was built in part with $12 million in laundered drug money from Florida.
The government expedited sale of its casino interest this summer after The Times reported that the Asian games manager had been indicted on extortion and loan sharking charges, and the Justice Department had to pay its share of hundreds of thousands of dollars in fines for tax violations.
“Time is of the essence,” the government stressed in sale documents.
Although the government had been involved in the club for more than four years, the winning bid was announced just several weeks after an advertisement soliciting buyers was placed in the Wall Street Journal.
Only the general partner of Club Acquisition Partners, Santa Monica attorney Richard Schneider, was identified. The price was not disclosed. The government and the purchasers had entered into a confidentiality agreement until the deal is finalized.
According to records and interviews, the winning investment group included Hollywood producers Bernard Brillstein and Brad Grey; business managers Nancy Chapman, Terry Bird and Bonnie Grey; several Century City attorneys; investment banker Llewellyn Werner, a former aide to Gov. Edmund G. (Jerry) Brown Jr.; and Bertram M. Lee, a Washington businessman and a former owner of the Denver Nuggets basketball team.
It is unclear who put up the $1-million deposit for the group. But Werner said his merchant banking firm plans to raise the funds necessary to complete the purchase.
Other investors contacted by The Times referred calls to Schneider, who has declined to discuss the partners. But he indicated that some changes in the group may occur before the deal is final.
When the government put its casino interest up for sale, prospective buyers were directed to contact Richard at his Las Vegas office. Sources said there were several finalists in the bidding, including a Native American tribe from Arizona and the Hollywood Park racetrack, which owns but does not operate a glitzy new card casino in Inglewood.
Lisowski, whom Richard hired to provide legal advice for $107,000 a year, said that his office only sent out information regarding the club to prospective bidders and that he answered inquiries from half a dozen.
“I was really not involved in the bid process, and neither was Mr. Richard,” he said. “The government walled us off. . . .”
Richard, who is paid $200,000 in salary and expenses a year to oversee the casino for the U.S. Justice Department, said, “I went out and got the offers and presented them to the government. My job then ceased. I had no involvement in the selection of the (winning) group.”
The choice was made by federal officials from the U.S. attorney’s offices in Los Angeles and Miami, the U.S. Marshals Service and the Justice Department in Washington, according to Miller. Richard and Lisowski were not present.
A bid from Bicycle Club employees seeking to buy the government’s share was rejected because a $1-million deposit check bounced and potential licensing difficulties arose, sources said.
Although Hollywood Park ultimately matched the Santa Monica group’s $38-million offer, sources said, their bid was rejected because California law does not allow a publicly traded corporation to operate a card club. An Assembly bill that would have lifted the restriction died Aug. 31, the final day of the legislative session.
Another bidder who matched the $38-million offer was disqualified for unknown reasons.
The Marshals Service, which is responsible for managing the seized asset, only conducted a criminal background check of the proposed purchasers and did not obtain gaming applications the winning group submitted to the state attorney general.
The group sent a package of 17 registration forms to Sacramento on Aug. 31, including a multi-page application from Lisowski, accompanied by the required $500 check from the attorney for a routine background investigation.
Lisowski checked two boxes indicating that he was applying as a new owner and a manager of the Bicycle Club. His affiliation was to take effect when the investment group’s license was approved.
He listed the previous owner as the United States government.
He and all of the other applicants identified Richard as the proposed manager, according to the attorney general’s office.
Because the applications did not indicate the amount that each owner would invest, the attorney general’s office was unable to determine immediately who actually is buying the government’s share of the Bicycle Club.
All of the applications were “incomplete and will require additional data to be provided by the applicants,” said Whitt Murray, assistant chief of the attorney general’s Bureau of Investigation.
When asked whether he applied for licensing, Lisowski said, “I might have. I probably did. . . . I filled out something. . . . I remember filling out the application.”
Lisowski said he did so because Richard told him to submit it. He said there was concern that pending state legislation to tighten regulation of card clubs and create a state gaming commission would impose a temporary blackout on applications.
In his letter withdrawing the application, Lisowski noted that the bill did not pass the Legislature.
Richard said he may have talked with Lisowski about the desirability of the attorney’s registering himself as a casino manager before any restrictive legislation could be passed. But he said he was unaware that Lisowski put in an ownership application.
“I didn’t ever tell him to do that,” he said.
Richard said he had no idea why the partnership members would list him as their manager. He said Schneider, the general partner, had asked him whether he would be interested in the job. “I said, ‘Yes, I would be.’ We would talk about it after the (final purchase) contract had been signed.”
The Bicycle Club is not the first place that Richard--a 55-year-old former casino executive and retired Air Force officer--and Lisowski, 40, have worked together. In Las Vegas, Richard was brought in as the general manager of the bankrupt Main Street Station Casino in 1992, and Lisowski provided legal advice on gambling and bankruptcy matters.
When Richard was named trustee of the Bicycle Club last year, he soon brought in Lisowski for legal help. “We just got along well,” he said.
With 180 gaming tables, the Bicycle Club grosses nearly $90 million a year and provides the majority of funding for the city of Bell Gardens. The federal government has received at least $25 million in profits from its controlling interest in one of two partnerships that own the casino.
Before the sale can be completed, the other members of these two partnerships will have an opportunity to reject the offer by Club Acquisition Partners and match its winning bid.
Government officials, uncomfortable with being in the casino business, look forward to closing a deal. “This case has been like the tar baby,” said one source. “Every time you touch it, it sticks to you.”
The Casino Deal
After seizing one of California’s biggest card clubs fours years ago, the federal government has entered into an agreement to sell its controlling interest in the Bicycle Club Casino of Bell Gardens to a new Santa Monica investment group. Two men who oversaw the government’s interest and helped handle the sale were listed on gaming applications by the buyers.
* Offers to buy the government’s share in the casino were solicited in a Wall Street Journal ad. Interested parties were instructed to contact the government’s trustee, Harry J. Richard, at his Las Vegas office.
* Richard’s attorney on Bicycle Club issues, James F. Lisowski, Sr., maintained his law office at the same Las Vegas address. Lisowski and Richard presented bids from prospective buyers to the federal officials who selected the winning bid.
* After the government selected Club Acquisition Partners, Lisowski applied to the state attorney general for a gaming registration. He listed himself as one of the proposed new owners and managers of the Bicycle Club. He also listed Richard as manager. Lisowski said Friday that his application is being withdrawn.
