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How many knew that the Bicycle Club in California was being operated by the Federal Government?
Take a look at this article from the Wall Street Journal.
DonL
California Casino Founder Sues U.S.,
Claiming Poor Oversight of Seized Asset
By CHRISTINA BINKLEY
Staff Reporter of THE WALL STREET JOURNAL
George Hardie's casino was taken over by the federal government and, he alleges, run into the ground by bureaucratic mismanagement. Now he has filed a suit seeking $150 million in damages for the lost revenue and value.
The suit, filed in the U.S. Court of Federal Claims in Washington, is the latest twist in a long-running saga over the Bicycle Club in Bell Gardens, Calif., which was seized in 1990 by U.S. marshals under federal asset-forfeiture laws.
The seizure is believed to mark the only time the federal government has
run a casino. The casino has become something of a cause celebre, at one
point attracting congressional criticism of the government's oversight.
Mr. Hardie was the casino's founder and a well-known gambling operator
who still owns a 16% stake of the club. (Certain types of gambling clubs
are legal in California, although Las Vegas-style casinos are not.)
According to his lawsuit, the asset value of the Bicycle Club -- which was
so named for the best hand in low-ball poker -- plummeted under federal
management from $140 million in 1992 to less than $17 million earlier this
year.
Once a famed card club that drew legendary poker players from around
the world, the club became decrepit, its business overtaken by neighboring
casinos. Mr. Hardie says his income from the casino has plunged.
The U.S. Marshal's Service declined to comment. A spokesman noted that
the agency has denied similar legal claims from Mr. Hardie and other
investors in the past regarding the Bicycle Club. Mr. Hardie founded the
club in 1984 and operated it during its heyday. In 1990, the Department of
Justice seized the property after concluding it had been partly financed with
$15 million in drug-laundering money. Mr. Hardie, who testified without
immunity on behalf of the government in the money-laundering case, wasn't
charged. In a separate proceeding, he was allowed to retain his portion of
the casino.
The government seized control of the property in April 1990.
Under asset-forfeiture laws, the U.S. Marshal's Service is expected to sell
seized properties. But federal control of the club continued, as several
agreements to sell the property fell through. The lawsuit claims that the
marshal's service wasn't motivated to sell the casino because the income
stream created a conflict of interest. "It is obvious that the USMS believed
that it had a golden goose in the Bicycle Club," the lawsuit says. Selling
the club "would instantly cut off the largest revenue stream it had ever
received from a forfeited asset." The suit estimates that the government
received at least $38 million in casino revenues.
The lawsuit claims that the marshal's service paid fees of as much as
$650,000 a year to inexperienced trustees to oversee the club. The agency
cut back on the casino's maintenance expenses and laid off about 700
employees, according to its current manager.
Mr. Hardie says he wrote 28 letters to the federal overseers seeking
permission to make capital improvements to the property but received no
responses. He says he made four or five bids to buy out the government's
share at prices that put the club's total value at between $85 million to
$110 million, but was turned down.
Last May, a group of investors bought the government's remaining 30%
share in the club for about $5 million -- placing a total value of about
$16.7 million on the property. (The government's share was gradually
pared down after a series of lawsuits.)
The new manager, Haig Kelejian, criticizes the government's oversight and
the condition of the property. "The government was running the place
poorly. They were not in the casino business." Mr. Kelejian notes that
since he took over management in May, revenues have increased by
$26,000 a day.
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