Players International license questioned

David Strow

Thursday, Aug. 19, 1999 | 10:50 a.m.

The license of Players International's riverboat casino in Lake Charles, La., is being called into question just days after Las Vegas-based Harrah's Entertainment Inc. announced it would buy Players for $425 million.

The report, issued Tuesday to Louisiana's gaming control board by the state attorney general's office, alleged that former Players executives were involved in a scheme to pay off the son of former Louisiana Gov. Edwin Edwards in order to gain the governor's assistance in gaining regulatory approvals and killing potential competing projects.

Louisiana Special Assistant Attorney General Ray Lamonica said the findings were serious enough to warrant the denial of a license for the Lake Charles casino. Alternatively, he suggested that the board impose stiff sanctions against the casino to deter such actions in the future and to make the actions "unprofitable" for Players.

All of the officials named in the report have since left Players.

The Lake Charles casino is a key part of Harrah's decision to buy Players. Harrah's sees the casino as an entry into the Houston market, as well as a feeder for its soon-to-open New Orleans property.

Ralph Berry, spokesman for Harrah's, said the deal "doesn't change anything," for the company and that Harrah's was well aware of the Louisiana investigation prior to making its offer for Players. The deal is contingent on Players being able to transfer the licenses for its casinos to Harrah's.

"The inability to transfer any of the licenses would be material adverse changes in the deal, so obviously, the deal would not be able to move forward as structured" if the Louisiana license were lost, Berry said. "But it would be inappropriate to speculate on what would happen until we cross that line."

Players is involved in talks with the Louisiana attorney general aimed at preserving the Lake Charles license, Players vice president of compliance Frank Catania told the New Orleans Times-Picayune.

Wall Street analysts downplayed the significance of the report on the Harrah's-Players deal. Harry Curtis, a gaming analyst with Bank America Robertson Stephens, said it was unlikely Louisiana would want to jeopardize tax revenues from the operation by shuttering it altogether.

"Harrah's is not going to enter into a transaction where it pays X for a casino and, poof, the casino isn't there," Curtis said. "They will protect themselves.

"The interests of the attorney general and the interests of the state aren't always linked. It is in the interest of the state to have that casino run by a strong operator and Harrah's is a strong operator. The state certainly needs to generate the tax revenues the casino throws off annually."

Jason Ader, an analyst with Bear Stearns & Co., said the worst-case scenario for Harrah's would be the repricing of the deal to exclude the Lake Charles casino.

"But I don't see this jeopardizing the deal," Ader said.

But local analyst Dave Ehlers expressed extreme concern over the development, saying that the loss of the Louisiana license seemed a strong possibility. He added that the activities should raise concerns with Harrah's executives.

"This whole thing stinks," Ehlers said.

The report claims that Stephen Edwards, the governor's son, told Players officials they should "stick with him and he would show them how to do business in Louisiana."

Stephen Edwards received a $15,000 attorney's fee monthly from May 1995 to April 1996 from Players, according to the report. The company also supplied favors to Edwards' friend, Ricky Shelter, forgiving a $170,000 loan and paying him $250,000 in bonuses, the attorney general's office said.

At one point, the report said, former Players development director John Brotherton asked Shetler for help in preventing a competing casino from being approved in the Lake Charles area.

"How it happens doesn't concern me," the report quoted Brotherton as saying, citing a taped phone conversation between Shetler and Players executives.

The attorney general's report came in response to a suitability request from the board, which is considering the renewal of the Lake Charles license. Players is currently operating on a conditional license in Lake Charles.

Gov. Edwards, Stephen Edwards and others were indicted last year in a federal racketeering and extortion case involving the Players allegations. The trial is set to begin in January. Brotherton has been since granted immunity and no company officials will be indicted, according to the Times-Picayune.

Steve DuCharme, chairman of the Nevada Gaming Control Board, said there weren't any immediate concerns about Harrah's acquiring Players in the wake of the Louisiana report. The Nevada Gaming Commission's approval isn't needed because Players isn't licensed in Nevada, he said.

"It's not any different than when Jackpot (Enterprises) was attempting to acquire it," DuCharme said. "We had some discussions with Jackpot prior to their making an offer and the situation has not changed.

"Harrah's has been a longtime Nevada licensee and they have always tried to conduct themselves in the highest manner required by Nevada statutes. I'm fairly confident this will be thoroughly looked at by Harrah's compliance staff. If someone is ultimately found guilty of misconduct in Louisiana and if that person was still employed by Players or Harrah's, that would be cause for concern."