Santa Fe Gaming chairman to receive a bonus

Gary Thompson

Friday, Jan. 29, 1999 | 12:09 p.m.

Santa Fe Gaming Corp. Chairman Paul Lowden erased a $700,000 debt to the company last year when he was granted $700,000 in bonuses and other fees.

But Lowden "rescinded" half the bonus and "reinstated" half the loan last month as the company teetered on the verge of bankruptcy, according to a document filed Thursday with the Securities & Exchange Commission.

The document disclosed that as a result of the December actions, Santa Fe is now obligated to pay Lowden the $350,000 this year, while he still owes Santa Fe $350,000 -- plus interest from last January.

The filing, an amendment to Santa Fe Gaming's annual report for the year ended last Sept. 30, said Lowden received a $550,000 salary for the year.

Santa Fe reported a $63.9 million loss for fiscal 1998, compared with a $13.1 million loss for the prior year. A company subsidiary also defaulted on a $60 million note payment last month and hasn't paid interest on the debt for about eight months.

Nevertheless, the company's compensation committee granted Lowden a $600,000 bonus for last year, ostensibly as a "finder's fee" for locating buyers for the Hacienda and Sahara hotel-casinos years ago. The committee consists of directors James Lewis and John Delaney.

The SEC filing said Lowden was also entitled to receive $100,000 for personal guarantees he made regarding certain Santa Fe Gaming financing arrangements.

Last January, Lowden satisfied a $700,000 loan he owed Santa Fe by offsetting it against the bonus and fees.

But last month, the filing said, Lowden asked the company to rescind $350,000 of the offset until the current fiscal year and reinstate $350,000 of the debt "together with interest thereon from January 1998."

Santa Fe executives declined to comment on the transaction or explain what prompted Lowden to reinstate the debt and incur interest without receiving anything of value. No interest will be paid on the bonus owed him, the SEC filing said.

A hearing on an involuntary bankruptcy petition filed by certain Santa Fe creditors is scheduled for next month. Santa Fe has said it will file its own reorganization plan, as well. Based in Las Vegas, the company owns casinos in Las Vegas and Laughlin and plans a third in Henderson.

One theory offered by sources familiar with bankruptcy law is that the transaction may have been made in anticipation of a possible challenge by creditors to forgiveness of the company's loan to Lowden through issuance of the bonus.

Such so-called "preferential payments" made by debtors within a year of a bankruptcy declaration are often reversed by bankruptcy courts.