Malone, Lazaroff continue to haunt Station Casinos

David Strow

Friday, Oct. 27, 2000 | 11:21 a.m.

Missouri's top gaming regulator says it's unlikely the state will move to block Station Casinos Inc.'s sale of its two Missouri riverboats to Ameristar Casinos Inc. of Las Vegas.

However, the chairman of the Missouri Gaming Commission, L.G. Ullery, believes Las Vegas-based Station should be forced to pay a hefty as it exits the state, if the commission ultimately finds Station is unsuitable to hold a license in Missouri.

"I would really think there would be a very substantial fine against Station," Ullery said. "If they can close the deal with Ameristar ... I don't foresee the commission standing in the way of that sale unless there's something we're not aware of with Ameristar (that would make the company unsuitable for licensing).

"Whatever problems Station has with the Missouri Gaming Commission do not affect Ameristar and their purchase."

Ullery said he couldn't define how large a potential fine could be, but said the largest Missouri fine he could recall in his two-year tenure was $500,000.

On Wednesday, the commission adopted a measure stating that Station "has not yet presented sufficient evidence" showing why its riverboat casinos in Kansas City and near St. Louis should be relicensed. The St. Charles riverboat's license expires Dec. 27; the Kansas City riverboat, Jan. 15.

Before those dates, Station hopes to receive commission approval to sell the two riverboat casinos to Ameristar for $475 million -- a move that would make a renewal of the licenses a moot point. The successful sale of these casinos is linked to Ameristar's plans to sell the Reserve hotel-casino in Henderson to Station for $70 million.

As grounds for its finding, the commission alleged improper contacts between former commission Chairman Robert Wolfson and former Station outside attorney Michael Lazaroff that were not reported to the commission. It also cited "a pattern of failure to exercise proper management and control over its employees regarding compliance with applicable statues and rules."

This pattern included former Station executive Mark Brown's involvement in the creation of an anonymous flier aimed at Clark County Commissioner Lance Malone -- an incident that didn't even involve Missouri.

These actions, the resolution stated, "discredit or tend to discredit the Missouri gaming industry or the state of Missouri."

"If it was just the Mark Brown thing (concerning Missouri regulators), you might have a different situation," said Kevin Mullally, deputy director of the Missouri commission. "But if you throw it in with all the different conduct here, and it appears to be an institutional issue, and I think that's what the concern is."

Added Ullery, "Anything that happens in another jurisdiction as far as gaming is concerned is fair game in Missouri. It kind of goes on their record.

"Something like this would put the issuing of a (new) license in jeopardy. You can rest assured we'll look at that very closely."

Despite the re-emergence of the Brown-Malone matter in Missouri, Station spokesman Jack Taylor said Brown's recent resignation from Station had nothing to do with pending action in Missouri.

The company will be permitted to a hearing before the commission to show "clear and convincing evidence of its suitability" in an effort to get the licenses renewed. During this hearing, Station will be permitted to call its own witnesses and to cross-examine witnesses testifying against the company.

"Station has accused the five commissioners of being prejudged," Ullery said. "That's not true. We have not prejudged those folks. This thing could wash out that they leave the state in good graces."

Missouri gaming licenses can't be transferred from one company to another, so the commission will make a separate decision to issue a license to Ameristar on that company's merits. If a license is issued to Ameristar before Dec. 27, that would mean a refusal to renew the Station licenses would be an essentially meaningless penalty -- which is why Ullery said a big fine would be more likely, to set an example to other gaming operators in the state.

"Station would be liable for the fine," Ullery said. "I couldn't foresee Ameristar assuming that, but it's a business transaction. If I was buying a car, and you got a traffic ticket, I wouldn't want to have to pay for your traffic ticket."

A huge concern at this point is the pending expiration of the two casino licenses. In Missouri, commissioners can only vote for or against a license, so Station's licenses can't simply be extended for a short period of time to allow the casinos to continue operating until the Ameristar buyout could close.

That process could be sped up by Ameristar's unsuccessful effort to win a Missouri gaming license earlier this year. A "considerable" preliminary investigation has already been conducted on Ameristar, Ullery said, and that groundwork could help speed Ameristar's license application.

"No matter what, unless a transaction is done, and Ameristar can get its licenses by the 27th (of December), I would say St. Charles is in jeopardy, because you can't transfer a license from one business to another," Ullery said. "Those two deadlines are a major factor in this situation."

If that happened, 3,500 Station employees in Missouri would be put out of work.

"That has to concern a lot of people, and it concerns me, but it doesn't cloud my judgment," Ullery said. "It would be a sad situation, and hopefully it doesn't happen, but they shouldn't count on a sympathy (vote) as far as employees are concerned."