Lawsuit casts shadow over Harrah’s-Players deal

James Webb

Wednesday, Jan. 26, 2000 | 9:41 a.m.

CHICAGO - The legal battle over a proposed casino in suburban Chicago is casting a shadow over the $425 million deal for Harrah's Entertainment Inc. to buy Players International Inc., including casinos in Illinois, Louisiana and Missouri.

Harrah's officials are pushing for the Illinois Gaming Board to approve the deal at its Feb. 22 meeting. But the regulators have one eye on a lawsuit challenging last year's amendments to the state riverboat gambling law, which included provisions allowing for the transfer of an idle casino license to suburban Rosemont.

The lawsuit, filed by jilted developers who covet the idle license for themselves, ultimately could invalidate all the gambling amendments. That includes a change that made it legal for companies to own more than one casino, and there's the rub.

Harrah's already owns a casino in nearby Joliet and would acquire the Metropolis riverboat in southern Illinois as part of the Players purchase, becoming the state's first dual operator. At recent board meetings, Gaming Board members have repeatedly asked Harrah's officials what contingencies they have made in case the law is invalidated and it becomes illegal to own two casinos.

Gaming Board member Joseph Lamendella suggested at a meeting earlier this month that regulators might face the unwelcome task of closing the Metropolis riverboat under such a scenario, if Harrah's could not get quick court action to prevent it.

"I know I'm supposed to be concerned about revenue, but I'm concerned about people too," Lamendella said.

"I would hate to see a situation where this board had to revoke and you folks were unable to obtain a (court-ordered) stay, and all of the sudden that facility is shut down, and 800 people are out of work," Lamendella said.

"We're willing to take that risk," responded Harrah's vice president George Loveland, who added that the company is prepared to invest $30 million in improvements in the Metropolis operation once the deal is closed.

He emphasized that the company expects the law to withstand the constitutional challenge and urged the board to act accordingly. But he avoided discussing the details of any contingency plans.

After the meeting, Loveland suggested the law could be amended again to allow dual ownership if the current changes are invalidated. And he suggested that even the old law could be interpreted to allow dual ownership, if two separate companies answering to the same parent corporation held the licenses.

Gambling critic Tom Grey urged the board to delay the Harrah's acquisition and predicted that Harrah's would use the specter of 800 layoffs at Metropolis to get its way if the law is invalidated.

"They'll hold 800 people captive," said Grey, head of the National Coalition Against Legalized Gambling.

Lamendella said after the meeting that the board is discussing the legal options with staff lawyers. He added: "I think we need to come to solutions before there's any action on Harrah's acquisition."

Board chairman Gregory C. Jones and board administrator Sergio Acosta have declined to comment on the situation, other than to say the board will consider the matter on its own timetable. It's unclear whether the issue will be on the February agenda.

Illinois regulators are especially sensitive to suggestions that they are operating under pressure from the casino industry, in the wake of controversy over their recent approval for Horseshoe Gaming to buy the other Joliet casino, the Empress. Former board chairman Robert Vickrey resigned two weeks ago after disclosures that a Gaming Board staff report recommended against that deal.

The deal also needs the approval of Louisiana's gambling regulators, who late in 1999 ordered Players to get out of the state and pay a $10.2 million fine amid allegations that former company executives paid extortion money to ex-Louisiana Gov. Edwin Edwards and his son Stephen to get favorable license treatment.

The settlement allows Players to keep its license long enough to consummate the sale to Harrah's, but Louisiana regulators have yet to schedule a vote on the deal. The agenda for their Feb. 15 meeting has not yet been finalized.