Casino Investors Sue U.S., Allege Mismanagement

Opening a new legal front in the fight over the Bicycle Club casino, a group of investors filed a $150-million lawsuit Thursday against their partners--the U.S. Justice Department and its federal Marshals Service.

The suit was announced outside the Bell Gardens casino, where employees and investors waved signs saying, “Feds get out.”

The U.S. government has operated the casino since 1990, when it seized a controlling interest after a drug and money-laundering investigation.

The dissident investors, who own 35% of the club and were not implicated in the criminal case that led to the casino’s takeover, contend that the government has used the casino as a “cash cow,” taking in $38 million in profits while not investing enough to keep up with competitors.

“They’ve milked the golden goose so much it’s become a scrawny duck,” said George Hardie, former operator of the club and the biggest shareholder in the minority partnership, Park Place Associates.

Hardie and the others contend in their lawsuit that the government’s mismanagement is ruining their investment. They point to such things as the reduction in jobs, from a high of more than 2,000 when the government seized control to 1,635 today, and a sharp decline in the casino’s profits, from $23.4 million the year before the government took over to $8.5 million last year.

In responding to the new round of criticism, Frederick S. Wyle, the trustee managing the casino for the government, acknowledged a huge drop in revenues, but said the downturn reflected problems faced by all card clubs in California.

Wyle, a San Francisco lawyer who is paid more than $700,000 annually to run the casino, noted a gaming consultant’s analysis blaming the Bicycle Club’s problems on implementation of the no-smoking law in California, the El Nino weather conditions and increased competition.

The trustee and federal officials are negotiating to sell their roughly 30% share of the casino to a British gaming company, Ladbroke Racing Corp.

The suit is the latest in a string of problems for the government. In January, the state Fair Political Practices Commission filed a 922-count complaint against the Bicycle Club for using gambling profits to illegally try to influence local elections. The scheme was designed to defeat gambling initiatives in other communities while hiding the Bicycle Club’s involvement, the FPPC said.