Card Clubs’ Weak Hand Vs. Indian Casinos

Haig Kelegian did the federal government a big favor some years back by taking an embarrassment off its hands: the Bicycle Club casino in Bell Gardens, a card club the feds had acquired, somewhat absent-mindedly, through an asset seizure in a 1990 money-laundering case.

After buying out the government’s interest in 1999, Kelegian and his partners spent a few million restoring the Bike so it could reassume its status as one of the leading poker clubs in the state. But after they finished, instead of enjoying the fruits of their investment in comfort and peace, they found themselves surrounded by the enemy.

That would be the Indian gaming tribes, which in a few short years had achieved something the card clubs had failed at over the previous century: They had turned gaming into California’s principal growth industry.

California now ranks behind only Nevada and New Jersey in statewide gambling revenue. Unfortunately for the card clubs, a good portion of the growth of tribal gaming has come at their expense.

Poker clubs located within a few miles of newly opened tribal casinos have seen their business decimated. Even healthy clubs such as the Bicycle and Commerce casinos, which at first considered themselves well-protected by their prime urban locations and long distances from the nearest Indian properties, gripe that the tribes have begun targeting players of their most lucrative games -- blackjack and Pai Gow among them -- and siphoning off weekend trade. All the while, the tribes are using their newfound clout in Sacramento to prevent the card clubs from expanding and modernizing.

“If this doesn’t change, I’m ready to surrender my license to the state, and I will become a banker,” Kelegian growled one day recently from behind his desk upstairs at the Bike. “You can quote me on that. That’s what I fully intend to do. I don’t need this headache.”

These days, while the tribes are negotiating with Gov. Gray Davis over liberalizing the existing limits on the size of Indian casinos (the issue seems to be not whether, but by how much), the prospects for poker-room owners look bleaker than ever.

Want an idea of what the atmosphere must have been like in Saddam’s bunker as U.S. troops closed in? Try attending a conference of these guys.

“The question is whether we should expect to benefit from the tribal negotiations or perish because of them,” Andrew Schneiderman, president of the California Gaming Assn., the non-tribal casino trade group, said at a recent meeting of the organization.

The decline of the poker clubs during the tribal era hasn’t been leisurely. A decade ago, the state licensed about 400 poker clubs. Today there are 110, of which more than half are the sort of two-table social clubs that occupy the backrooms of billiard parlors or the basements of Masonic lodges.

Kelegian points out that the sizable commercial card clubs in the state -- those holding licenses for more than 100 tables -- number scarcely more than a dozen. But the larger clubs tend to be among the biggest taxpayers in their local communities. The more than $8 million in taxes Bell Gardens receives annually from the Bicycle Casino, for example, represents more than 30% of that cash-strapped city’s budget.

One might expect that the legislators representing some of these localities in the statehouse would speak out on the clubs’ behalf. In Kelegian’s view, however, they’re not nearly pushing hard enough.

“To date not one legislator has stood up for us,” he complains. “Privately they say, ‘We know you’ve got a problem and we’ll try to help you,’ but not one has stood up in session. This is like the Boston Tea Party all over again. We’re paying taxes and nobody is representing us.”

Meanwhile, the tribes, with more than $3 billion a year in estimated revenue and no state income taxes to pay, have spent millions on political donations. That’s enough to give them a voice in any piece of gaming-related legislation they please.

The tribes “are basically running roughshod over anything that any other industry wants to do, such as the card casinos or the racetracks,” Kelegian says. “Their attitude is they can do what they want, when they want, to whom they want because of their financial power, without regard to anybody else’s rights.”

Even the dimmest politicians in this state are fully aware of the Indians’ ability to put them out of a job. They recall how Antonio Villaraigosa, then the state Assembly speaker, ticked off the tribes in 1998 by backing legislative limits on Indian casinos and collective bargaining rights for their employees. Indian interests donated $350,000 to torpedo Villaraigosa’s 2001 Los Angeles mayoral campaign, which he lost to Jim Hahn. (They also spent heavily against him in his successful run for an L.A. City Council seat this year.)

Kelegian says that measures backed by the card clubs routinely fail in the state Legislature because of Indian opposition, overt and otherwise. A bill to allow clubs to raise capital through public offerings? “Never got off the shelf.” To let the clubs offer a blackjack game resembling Vegas-style “21” instead of the goofy, player-banked “no bust” variety now permitted? “Never got to a vote.” As for the clubs’ onetime dream of winning the right to install up to 200 slot machines per casino -- they know the tribes would never stand for it.

Nor do the tribes’ lobbyists just play defense. They now favor a proposed state Constitution amendment to freeze all non-tribal gaming at levels prevailing as of Jan. 1. (It is sponsored by, among others, state Senate Republican leader Jim Brulte of Rancho Cucamonga, who received more than $110,000 in tribal campaign donations in 2001-02.) The amendment would prevent the clubs from obtaining even the incremental enhancements to their games that they say keep the card-club experience fresh. It also would prohibit the installation of a type of interactive poker and blackjack machine that is arguably distinguishable from a slot machine and in which the clubs have placed a lot of hope.

“If that amendment were to pass it would be catastrophic,” Schneiderman says. “You could measure in months the time in which our cost of operations would exceed our revenues and we’d have to close our doors.”

Tribal officials contend that the card rooms overstate the extent of the tribes’ agenda in Sacramento. Although they insist on maintaining what they call their exclusive right to offer slot machines and certain Vegas-style table games in California, they say they’ve allowed plenty of card-club-friendly bills to pass. To the extent they’ve opposed others, that’s because they had questions about whether the bills fit the principles of “good government.”

But clearly there’s more behind the tribes’ lobbying than that. The resentment between the card clubs and the Indians runs deep.

“The card clubs fought tribal gaming every step of the way,” says David Quintana, director of governmental affairs for the California Nations Indian Gaming Assn. “Now they’re going to cry because we’re keeping an eye on the bills they’re into?”

One reason the clubs have been unable to gain much traction in Sacramento may be the industry’s checkered past. Many casino regulations on California’s books derive from the 1800s, when the state was forced to protect gold miners from poker sharps. However unfair it may be today, that’s the image that seems to stick in the public mind.

Things weren’t helped by the Justice Department’s failure in the 1990s to keep a leash on the Bicycle Club’s top managers, some of whom ended up charged with having run loan-sharking and extortion schemes under the G-men’s noses.

Still, one wonders whether the tribes’ apparent determination to eradicate the card clubs isn’t a sign of how they may be starting to overplay their hand.

It doesn’t take much for local activists to rally around local businesses threatened by encroaching competitors, and some tribes around the state are already taking heat for appearing insensitive to the impact that their casinos have on nearby communities. California poker clubs have not traditionally been cast as martyrs, but most club owners today are simply trying to eke out a legitimate profit as times get tougher.

Some people in the industry still harbor hope that the Legislature will come to their aid. A few lawmakers, Schneiderman says, “are weighing the political suicide they’d commit by going against the tribes [versus upholding] the needs of their community, and I believe they’ll do the right thing.”

But the more common sentiment one hears is close to despair. “The tribes should just buy us out and run the clubs,” Kelegian says. “Why not? They buy banks and other businesses. They may not be able to put slots in here, but eventually, with their political power, they’d probably get that too.”

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Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at golden.state@latimes.com.