Culinary, Lesser win seats on Santa Fe board

John Wilen

Tuesday, May 4, 1999 | 8:38 a.m.

LAUGHLIN -- Santa Fe Gaming Corp. preferred shareholders overwhelmingly elected two directors supported by a dissident shareholder and the Culinary Union to the company's board during its annual meeting Monday, rejecting two director nominees supported by the company's management.

The two new directors, Peter J. Siris and John M. Bradham, were elected at a meeting in Laughlin by identical margins of 4.7 million preferred shares to 330,678 shares for the company nominees.

"They're two highly qualified board members who will be added to the board," said David Lesser, general partner of New York investment firm Hudson Bay Partners LP, which owns 33.2 percent of the preferred stock. "Hopefully it will be very constructive in helping the company move forward."

But Chris Lowden, Santa Fe's, executive vice president of operations, noted that the directors will be only two of seven on the Las Vegas company's board.

"It doesn't really change anything," said Lowden. "I would hope that this doesn't become a venue for confrontation. If they have something positive to offer, I think that's great."

Siris, president of investment and management consulting firm the Siris Group, and Bradham, partner in Washington, D.C. law firm Peabody & Brown, defeated Howard E. Foster and Nathan J. Rogers, who were nominated by Santa Fe. Siris nominated himself, while Bradham was nominated by Hudson Bay.

The new directors will bring the number on Santa Fe's board to seven. Director William J. Raggio declined to stand for re-election to the board, citing his duties as a director of Venetian hotel-casino owner Las Vegas Sands Inc. As a result of Raggio's decision, the board decreased the number of regular directors to five.

Siris and Bradham will serve as special directors. The special directorships were created because Santa Fe has missed dividend payments on the preferred shares for two straight years. If the company makes the dividend payments, the special offices will be dissolved.

Santa Fe owns the Santa Fe hotel-casino in northwest Las Vegas, the Pioneer hotel-casino in Laughlin, and development land in Henderson and on the Strip.

In addition to their preferred shares, Lesser and Hudson Bay own bonds in bankrupt Santa Fe subsidiary Pioneer Finance Corp. Earlier this year, Lesser tried unsuccessfully to force Santa Fe into bankruptcy. He has long agitated for independent oversight of the company.

Just last week, a federal judge blocked a Santa Fe attempt to prevent Lesser and Hudson Bay from voting at the annual meeting. Santa Fe has sued Hudson Bay and Lesser, accusing them of trying to use bankruptcy court proceedings to take over or liquidate the company.

Lesser has bought all of his Pioneer Finance debt and Santa Fe preferred stock since late last year. But he denies trying to take over the company, saying in Securities and Exchange Commission documents that he just wants a return on his investment.

Both Siris and Bradham were offered to shareholders as alternatives to the company nominees in proxy materials filed with the SEC by the Union. Santa Fe is involved in a long dispute with the union over a union election held at the Santa Fe hotel-casino more than five years ago. The union claims it won the election. Santa Fe has yet to recognize the election and has filed numerous appeals.

The Union could not have put Siris and Bradham on the board alone. The union owns only a handful of company common and preferred stock.

But even without Lesser's support, the two outside director nominees received nearly 1.8 million votes. That compares to a total of 330,678 shares voted for the company-nominated directors. If Santa Fe Chairman Paul Lowden had not voted his 326,500 preferred shares in favor of the company nominees, they would have received only 4,178 votes.

"For the first time, this board is going to have two independent directors," said Culinary Union researcher Courtney Alexander. "It's not a change of control, but it's extremely important to the future of this company."

The independent directors will be available to scrutinize management decisions, including acquisitions, sales and decisions to float debt, she said.

"There'll be some scrutiny on some of the decisions this company makes," said Alexander.

The Culinary Union maintains a website called SantaFailure.com that criticizes the tight Lowden family control of Santa Fe, and various Lowden decisions. In bankruptcy and federal court filings, Lesser criticizes the company for what he calls "self-dealing" and "intercompany" transactions.

Paul Lowden owns 61 percent of the company's common voting stock.

"I believed, and still believe, that the appointment of independent directors was and is an important step for the future of the company as it is evident that Lowden's control of the directors on the board has repeatedly resulted in actions contrary to the interests of Santa Fe Gaming Corp. and its investors," states Lesser bankruptcy court papers filed in February.

Santa Fe argues that Lesser's attempts to put the company in bankruptcy and elect independent directors are moves to try to gain control of the company. The union, argues Santa Fe officials, is simply trying to force the company to sign a labor agreement.

In any event, Chris Lowden said the election does not change much. The vote margin was expected, because everyone knew Lesser owned a large percentage of the shares, said Lowden.

"It means that we have two additional directors, and that's what it means," said Lowden.

What's really important is results, he said, noting that financial performance has improved at both of the company's gaming properties.