Missouri's "get-tough" gaming commission gives an embattled casino what it wants

The Missouri Gaming Commission talked tough back in October, when Station Casinos executives threatened to snub them.

The commission was insisting that the casino executives testify about bonuses they paid to Michael Lazaroff, the onetime hotshot lawyer who claimed an inside track to former commission chairman Robert Wolfson. When Station executives refused to honor subpoenas in August, commissioners voted to revoke the company's gaming licenses. When the suits again balked midway through an October hearing, the commission threatened to go even further.

Fine 'em a million dollars a day until they talk, urged commissioner Lynne Nikolaisen.

Top casino executives ultimately testified under oath and protest, admitting nothing and vowing a long legal battle. They insisted the Lazaroff matter was a tempest in a teapot that would be laughed out of court if it ever got there. Last week, the commission that talked tough raised a white flag and approved a settlement that preserves Station's dignity and the company's bottom line.

The settlement, approved unanimously Nov. 29 by the five-member commission, will allow Station to slink out of Missouri with a $1 million penalty. The money isn't due until 48 hours after the Las Vegas company sells its casinos in Kansas City and St. Charles for $475 million to Ameristar Casinos Inc., a deal expected to close by year's end. The amount includes $400,000 in fines assessed against Station for various gaming violations such as allowing a minor inside a casino, allowing gamblers to violate the state's $500 loss limit and mischaracterizing slot-machine payouts. Until the settlement agreement was announced, Station was appealing the previous fines.

Whether the Lazaroff fine amounts to $1 million, $600,000 or something in between, it's still a lot, says the commission's legal-affairs director, Kevin Mullally. "This is the second-highest fine levied against a casino in the history of the country, even if you make the assumption it's $600,000," he says. "I know it's bigger than anything that Nevada's ever done -- and Illinois, and Iowa, and Mississippi and all those others. I've got a call in to New Jersey."

Station paid Lazaroff $500,000 in bonuses it didn't report to the commission. Commission investigators believed Station was rewarding Lazaroff for using his friendship with Wolfson to curry favor, but the allegations remain unproven. In the end, Lazaroff -- who pleaded guilty to hiding the bonuses from law partners entitled to the lion's share -- proved an admitted liar whose word wasn't enough to secure indictments.

Even without indictments, the commission has the power to fine casinos three times the highest amount wagered in a single day during the past year, which in Station's case would amount to a $59 million penalty. No wonder Station lawyer Charles German sounds like he's gloating when he talks about the settlement. "I love it," he says. "We're definitely off the hook in the sense that all issues are settled. While it's a record fine from the commission's point of view, it's an exit fee for the company. To be able to settle all the litigation ... it just makes perfect business sense to do it. The million-dollar number, when you break that down to cost per share, it's de minimus (of no consequence)."

Mullally won't be drawn into a tit-for-tat debate about whether the fine -- which will end up going to Missouri public schools -- was too much or too little. He notes that the settlement includes a clause forbidding the parties from making any public comments beyond accurately explaining the terms, a stipulation German calls "amazing." "For a public agency, I thought that was rather odd," he says. Why doesn't the state want to talk about the settlement? "The clause itself kind of limits what I can say," says Mullally. But he will delve into the not-so-hypothetical. "If one were looking at a lot of the companies -- without talking specifically and being generic -- if you look at a lot of the publicly traded companies that are this size, they have -- and particularly in this industry -- many of them have very elaborate public-relations machines," he opines.

"Sometimes, in situations like this, it's best to just talk about the actual terms of the agreement rather than get into a lot of editorial-type comments and spin. If you think that they've got more spinners and resources than you do, then sometimes it's a good thing to just say, "We're not going to do that.'"

Even without spin, Station, which wins $790,000 a day from Missouri gamblers, comes out of this one looking better than the regulators. The investigation exposed several faults in the commission, including a lack of penalties for commissioners who violate ethics rules, investigators who took no action after discovering the bonuses four years ago and commission officials who time and again let Wolfson off with warnings even though they had evidence he was breaking the rules by talking to Lazaroff ["Joker's Wild," RFT, Nov. 1]. Meanwhile, Station admits no wrongdoing in the four-page he-said-she-said settlement.

"All that is said is there is probably grounds for litigation out there, they contend this, we deny it, and we're going to settle it so no one has to figure out what really happened," German says.

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