Circus Detroit partners under scrutiny

Monday, April 26, 1999 | 10:19 a.m.

DETROIT -- As state investigators probe the suitability of those seeking to run casinos here, a newspaper says some investors in the Atwater/Circus Circus group have troubled histories.

It is one of three city-chartered groups seeking state approval to open casinos in Detroit. The others are the Greektown-Chippewa and MGM Grand groups.

The Michigan Gaming Control Board will decide this spring or summer whether each investor meets strict moral and financial standards.

Forty-five percent of the Atwater/Circus Circus casino is controlled by Las Vegas-based Circus Circus, whose key employees have withstood licensing scrutiny in other states.

Local investors -- 120 in all -- own a 55-percent stake in the company. The biggest individual shareholder is Marian Ilitch, with 17.5 percent.

The Detroit News reported Sunday on its review of public records on the local investors.

It said companies owned by local investor group leaders Herb Strather and Nellie Varner of Detroit have paid taxes late, and the U.S. Department of Housing and Urban Development cited a real estate company they own for several violations.

A bad real estate deal in 1986 led to the foreclosure of nearly 40 properties. This month, HUD issued five violations against a Detroit apartment building they own; courts have awarded their tenants about $750,000 in negligence claims.

Strather said the housing violations and other problems are the fault of outside managers he and Varner hired to look after the real estate holdings in 1994. The partners took back those responsibilities in February 1998.

"As entrepreneurs in Detroit, we have been challenged from time to time in making timely tax payments," Strather said. "But we have paid all taxes due, and I am proud of our tax payment record.

"We have paid more than $6.5 million in property taxes and more than $1 million in payroll taxes alone. Some taxes may have slipped through the cracks, but ... the delinquencies identified represent less than 1 percent of the taxes that we have been assessed, and they have all been paid."

Investor Michael Malik of Grosse Pointe was arrested in 1997 and accused of hitting his girlfriend's 12-year-old son, the newspaper said. The child is now Malik's stepson, but the boy's biological father is seeking custody. The charge was dropped after Malik served one year of probation and met conditions set by the judge.

"This story was ridiculously exaggerated and hurtful to our entire family," Malik said.

Strather, Varner, Malik and Thomas Celani, along with minor investors James Blain and J. Ronald Slavik, are accused in lawsuits of fraudulently cutting two other developers out of the Atwater Group, the News said. They deny the allegations, which are pending in courts in Wayne and Oakland counties.

Also, Varner's adopted daughter, Janniss Scott Varner, is accused of attempted murder in an alleged shooting in Nellie Varner's garage.

And Ilitch was an officer of the Detroit Tigers until 1996 and has been an active participant in land, parking and concessions agreements for Comerica Park. Though Ilitch says she doesn't own the Tigers, her husband is the Tigers chairman and owner.

Sensitive to gambling issues, Major League baseball may take a dim view of her investing in a casino.

The casino group this summer plans to open its $130 million temporary casino in the old Wonder Bread building.

The group's officials says flaws are to be expected with an investor pool this large.

Circus Circus President Glenn Schaeffer said his company won a rare opportunity to capture a new market when it signed on with the Atwater group in May 1997.

"If the mayor's vision for Detroit plays out like we expect it to, it's going to set an example," Schaeffer said.