Ameristar suitability only hurdle remaining in Station Missouri deal

David Strow

Friday, Dec. 1, 2000 | 10:29 a.m.

Station Casinos Inc. has cleared one big hurdle in its plans to exit the Missouri market, after company officials signed off on a settlement that will end disciplinary action against Station in exchange for a $1 million fine, one of the highest in the history of the gaming industry.

But one hurdle still remains. The Missouri Gaming Commission must still find Ameristar Casinos Inc. a suitable buyer for Station's casinos in Kansas City and near St. Louis. Ameristar hopes to buy the two properties from Station for $475 million.

A hearing on Ameristar's license application is set for Dec. 20, and L.G. Ullery, chairman of the Missouri commission, said nothing "earth-shattering" has emerged yet in the ongoing investigation of Ameristar.

"The director (of the commission) told me five or six days ago that there's nothing negative," Ullery said. Ullery added that Ameristar had an advantage in the process because it had already been before the commission in its unsuccessful attempt to win a license to build a new casino south of St. Louis.

Since Missouri only permits a limited number of casinos, the state awards new casino licenses on a competitive basis, and Ameristar was one of several companies competing for a single new license. Isle of Capri Casinos Inc. of Biloxi was awarded the license earlier this year.

Speedy approval of Ameristar's licensing application was a big reason Station selected Ameristar as a buyer in October. At the time, Station's St. Charles casino license was set to expire Dec. 27, and the casino would have been forced to shut down if still owned by Station.

Time is no longer the factor it once was, as the commission agreed to extend Station's two casino licenses to May 31 -- more than enough time, if all goes well, for the commission to complete an investigation and for the deal to close. Station is now targeting February to close on its sale of the riverboats to Ameristar.

"So far, what I've heard is that the investigation is going very well," said Scott Neilson, executive vice president and general counsel of Station. "We're optimistic Ameristar will be approved. They're very suitable for licensing, and that certainly went into our determination in who to sell the properties to."

But one issue that has nagged Ameristar for years in Mississippi could arise again before the commission. Last year, a Mississippi jury handed down a $3.9 million verdict against Ameristar and Harrah's Entertainment Inc. for allegedly interfering with a competitor's plans to open a casino in that state.

That case is on appeal before the Mississippi Supreme Court. And it's an issue Ullery said will be addressed in hearings.

"I think it's a big 'might"' that the Mississippi case could cause problems for Ameristar in the licensing process, Ullery said. "If these (actions) turned out to be ... not in the proper vein, you bet it would be a problem."

The controversy erupted in 1996, when landowner E.L. Pennebaker Jr. and developer Jim Belisle asked for the Mississippi Gaming Commission's approval to build a casino near Vicksburg. The proposed casino would be further east of Vicksburg than casinos operated by Ameristar, Harrah's and Isle of Capri -- and as a result, would have been first in line for a flow of traffic from the city of Jackson.

The Vicksburg casino owners, together with Vicksburg city officials, launched a coordinated public campaign to derail the proposed casino. The gaming commission denied the application.

Pennebaker and Belisle sued Ameristar and Harrah's, accusing them of conspiring to convince gaming regulators to deny the application in an effort to hinder competition. A county jury agreed, awarding the two $3.9 million in damages. Arguing that the decision infringed on their constitutional right to free speech -- and that the site was unsuitable for historical and environmental reasons -- Ameristar and Harrah's appealed to the Mississippi Supreme Court, where the case is still pending.

In Missouri, Station's clash with the gaming commission arose over contacts made between its former counsel, Michael Lazaroff, and former gaming commission Chairman Robert Wolfson. These contacts are prohibited by Missouri gaming regulations, but would be permitted in Mississippi.

Ullery said he isn't yet familiar enough with details of the case to say if it would be a concern for him and the rest of the Missouri Gaming Commission in making a decision.

"I don't have any idea at this point," Ullery said. "It might be on the up-and-up and legitimate, and we might not have the true story yet. If it was against another competitor's business, and they had to abide by the same rules I do, that might concern me more."

A somewhat similar issue involving Ameristar arose recently, when it was discovered that Ameristar, together with Lake Tahoe-based Harveys Casino Resorts, provided virtually all of the $42,000 warchest used by the Nebraskans Against Expanded Gambling during their lobbying efforts against gambling measures during the most recent session of the state legislature.

Both Ameristar and Harveys operate casinos in Council Bluffs, Iowa, located across the Missouri River from the city of Omaha, Neb.

But that issue isn't really a concern for Ullery.

"I would have more concern about Mississippi than Nebraska," Ullery said. "I would think, if I was in the industry, that I would not want too much Indian gaming, because they don't follow the same rules that the (commercial gaming) industry has to."