Casino Political Misdeeds Alleged

By JEFF LEEDS

Nov. 29, 1997 12 AM PT

TIMES STAFF WRITER

In elections two years ago, voters from Ontario to Pico Rivera went to the polls to decide whether to allow card clubs in their cities.

Casino backers--promising jobs and additional tax revenues--were scrambling to get them approved before Jan. 1, 1996, when a state moratorium on new card clubs went into effect.

Opponents warned that casinos would attract loan sharks, prostitutes and gangsters while destroying families--as breadwinners became addicted to gambling.

Of the eight cities with casino measures on their ballots that year, only one--Hawaiian Gardens--approved a new card club. Seven other cities have defeated similar measures since 1993. All the cities are in the Southland, except for Stockton--whose election after the deadline was allowed because it involved broadening of an existing card club ordinance--and South San Francisco.

What voters didn’t know in any of those cases, investigators for the state political watchdog say, was that opposition to new card clubs was financed by more than $1 million from the Bicycle Club in Bell Gardens--a casino controlled by the U.S. government.

Campaign committees opposing the new clubs had names such as Concerned Taxpayers of California and Californians Against Gaming Expansion, but they were all bankrolled by the Bicycle Club, according to a report by the state Fair Political Practices Commission.

“When voting on gaming initiatives, the public by and large did not know that the opposition was orchestrated by a casino controlled by the United States government,” commission investigator Richard McSherry said in court documents.

The campaigns against new clubs were run so that the Bicycle Club, “and ultimately the United States government, could eliminate competition and maintain a near monopoly on casinos in the Los Angeles area,” McSherry said.

The report also alleges that casino campaign committees failed to properly account for donations and that some of that money was illegally diverted for personal use by the casino’s top political consultant. The Los Angeles County district attorney’s office, working with investigators from the state commission, is also examining payments made to the consultant.

No charges have been filed in connection with either investigation, but prosecutors have called several witnesses who are scheduled to testify before the county grand jury next week.

The federal government became part owner of the Bicycle Club in 1990, when the Justice Department seized a share of it in a money-laundering case. Since then, a federally appointed trustee has overseen the casino for the U.S. Marshals Service, which maintains seized properties for the department.

The business has generated more than $30 million in profits for the Marshals Service, making it the most valuable asset ever seized by federal law enforcement.

But it has also generated considerable embarrassment for the Justice Department. Critics in the U.S. Senate have accused department officials of turning a blind eye to crime in the casino, and the department’s inspector general is now examining its handling of the club.

Federal officials who oversaw the casino knew its history of contributing to campaigns opposing new card clubs, but they decided not to interfere in the business’ political activity, a Marshals Service official said.

“This was outside the scope of the government’s responsibilities,” said Kenneth C. Holecko, the agency’s assistant director for business services.

While federal officials defended in court the club’s right to contribute to a campaign against a Cypress card club in 1993, Holecko said no one at the Marshals Service reviewed how the money was spent. Nor was anyone at the agency aware that the club failed to disclose its involvement in political activities, he said.

Political practices commission investigators questioned Harry J. Richard, the former federal trustee who authorized the contributions, but the state report does not accuse him of wrongdoing.

Instead, the document places much of the blame for the alleged campaign violations on George G. Hardie, the founder of the Bicycle Club, who served as its general manager until he was ousted in 1994.

After Hardie’s removal, Richard continued to approve checks to various political committees, the Marshals Service said. In August 1995--after most of the elections on new card clubs were over--the agency instructed Richard to stop making contributions.

But Hardie, who remains a minority owner of the club, protested that the casino wasn’t doing enough to fight the remaining ballot measures in late 1995. In a statement to a Senate subcommittee last year, the Marshals Service said it told Richard at the time that “the U.S. government should not be involved in local elections or referenda.” Richard ignored their instructions, according to the agency.

When the Marshals Service confronted him in November 1995, Richard admitted that he had continued to fund campaign committees to oppose ballot measures, agency officials said.

“The trustee stated that he had not informed the Marshals Service or the Justice Department about his actions because he knew that its officials would have opposed such contributions,” the agency said.

Richard, who later resigned under pressure, said in a brief interview that he did not monitor the club’s political consultants closely enough to know whether they were breaking the law.

“I expected the people we were working with to handle everything properly,” he said. “I’ve never seen one [campaign] mailer. Ever.”

Hardie insists he is being made a patsy for actions committed by Richard and his overseers in the Marshals Service. Hardie said he sent Richard and the agency copies of political mail pieces--many of which investigators for the state commission allege violated campaign laws.

“The government’s repeated assertion that it knows nothing about these activities is flatly false, is shameful and further erodes confidence in the integrity of the U.S. Marshals Service,” Hardie wrote in a letter to Frederick S. Wyle, the Bicycle Club’s current trustee. “Now the FPPC, in a quandary because they don’t know how to sue the federal government, wants to go after the messenger.”

Commission investigators have also focused on the club’s Long Beach-based political consultant, Jerry Westlund. Investigators allege that he paid at least $70,022 of the campaign committees’ money to two companies he owned--Cal Coast Printing and Conceptual Designs. Investigators said he was not entitled to those funds.

Westlund was able to make those expenditures, investigators allege, in part because David L. Gould, the treasurer for most of the campaign committees, “failed to maintain . . . invoices for the vast majority of the expenses, but instead chose to make expenditures based on invoices prepared by or on behalf of Mr. Westlund.”

Gould declined to comment.

One hotly contest election cited in the report was in November 1995 in Pomona. Investigators found that three Bicycle Club committees deposited $40,000 during the Pomona campaign into a bulk mail account--established in the name of Cal Coast Printing--that was usually used to pay postage.

In January 1996, Westlund sent a letter to the U.S. postmaster and asked that a check for $40,000 be issued to him from the account. The post office issued Westlund the check, but the club committees failed to properly account for the money, commission investigators said in their report.

Another section of the document deals with independent contractors who received payments from the club’s campaign committees. One contractor, Dave Gutierrez, was paid more than $34,000 for “general operations and overhead.”

When interviewed by authorities, however, “Mr. Gutierrez stated he did not perform any such work for the committee, but was provided [checks] as payment for construction services rendered on Mr. Westlund’s personal property,” the report said.

Another contractor, Tilo Steurer, was paid more than $30,000 by a campaign committee for unspecified services, investigators said. Steurer, owner of a Los Alamitos car dealership, told commission investigators that he never worked for a campaign committee. He said he received checks “as payment on a loan he made to Mr. Westlund which had been secured by a 1989 Mercedes.”

Westlund declined to comment, referring calls to his attorney, Wayne Ordos, former executive director of the state commission.

“Everything that Mr. Westlund did was designed to advance the political cause of the Bicycle Club and was endorsed by upper management,” Ordos said.

While the commission investigation continues, the Justice Department is eager to sell its share of the casino. But those efforts remain bogged down. Officials announced in July that they hoped the Ladbroke Group, a British gaming company, would buy the government’s 36% share for $25 million. But under California law, a publicly traded firm such as Ladbroke can only own casino property. It cannot operate a casino.

Brokers of the Ladbroke deal devised a new approach. The Justice Department would still sell to Ladbroke, but the club’s partners would lease the day-to-day operation to a start-up firm, TBC Operating Co. The company comprises several attorneys from Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, a politically well-connected Century City law firm.

The federal judge overseeing the case that led to the casino’s seizure has approved the deal, and the Century City attorneys have applied for licenses from the state Office of Gaming Registration.

“The Department of Justice is very eager to sell this asset,” said Associate Deputy Atty. Gen. Paul J. Fishman, who is overseeing the sale from Washington. “The sooner that happens, the better.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Behind the Scenes

Fair Political Practice Commission investigators believe political committees backed by the Bicycle Club casino broke campaign laws in the process of influencing elections in 15 cities. Voters were considering ballot measures that would have allowed new card clubs to open in those communities. In nearly every case, the Bicycle Club-backed opposition succeeded.

1993

* Bellflower: Ballot measure defeated

* Compton: Casino approved by City Council; effort to petition for a citywide vote failed

* Cypress: Ballot measure defeated

* Lynwood: Ballot measure defeated

* West Hollywood: Ballot measure defeated

1994

* South El Monte: Ballot measure defeated

1995

* Azusa: Ballot measure defeated

* Colton: Ballot measure defeated

* Hawaiian Gardens: Ballot measure passed