Greektown casino investors did not pay city debt to qualify for license

Tuesday, March 7, 2000 | 9:31 a.m.

In 1985, the city of Detroit agreed to loan Trappers Alley Limited Partnership a $1.5-million package of federal aid, $308,700 of it in loans to the facility's tenants. Those loans were to be repaid only after Trappers Alley became profitable.

According to city records, Gatzaros and Papas and their wives took over responsibility for that debt and nearly $6 million in other city loans when they paid $2.4 million to buy into Trappers Alley in 1989.

Mayor Dennis Archer required all casino applicants to be financially stable, and paying up delinquent debts to the city was one of the ways to prove an applicant was fiscally sound.

MotorCity investors Herb Strather and Nellie Varner were forced to pay a $15,000 loan, including $11,000 in interest, to keep remain considered, according to records obtained by The Detroit News.

Gatzaros and Papas disputed the city's order to pay the debt. According to a letter city attorney Patrick Murray wrote to Gatzaros and Papas lawyer, Marie Racine, on Nov. 6, 1997, the city decided not to consider the $308,700 in loans to Trappers Alley tenants as a delinquent account for the purposes of the bid.

The city reserved its right to pursue legal action in the future, according to the letter. No action has been taken, however.

The city was in error when it notified Gatzaros and Papas of the delinquent debt, said Mike Neiswonger, spokesman for Gatzaros and Papas. Gatzaros and Papas were never responsible for repaying the loan, he said.

"The fact of the matter is this, they didn't owe anything," Neiswonger said. "Nobody took any action against them. The loan had been forgiven and hadn't been made to them. The city's records bore that out because the issue went away."

City attorney Phyllis James, who is overseeing collection of the Trapper's Alley loans, declined requests for comment to The Detroit News. Archer spokesman Greg Bowens said the mayor would look into the matter.

"They didn't get any special treatment," Bowens told The Detroit News.

However, an industry observer says the selection process was tainted.

"It sounds like it was a rigged deal from the start," said Bill Thompson, a professor of public administration for the University of Nevada-Las Vegas. "You have two groups juiced into a license, and what you end up with is money in their pockets and they're not going to even have the casino. It just makes the preferences a blatantly bad policy."