Board OKs limited license for Golden Nugget partners

By Liz Benston

Thursday, Jan. 8, 2004 | 11:02 a.m.

Business partners Tim Poster and Tom Breitling still expect to close on their purchase of the Golden Nugget hotel-casino in downtown Las Vegas sometime this month, though regulators may only grant them a one-year license to run the resort.

The three-member state Gaming Control Board voted unanimously Wednesday to recommend the men for a limited license over concerns that they associated socially with Rick Rizzolo, the owner of the Crazy Horse Too topless club in Las Vegas and the target of an FBI investigation into alleged ties to organized crime.

The board recommendation will now be considered by the Nevada Gaming Commission.

"I don't see any evidence that you did anything to sever ties with (Rizzolo)," Gaming Control Board member and former Las Vegas FBI chief Bobby Siller said during the hearing. "You kept redefining (the relationship) and extending it. I think this whole process has been a wake-up call for you."

The limited license would require the dot-com millionaires and their company, Poster Financial Group, to re-apply for licensing within a year. New gaming licenses usually don't have such a limitation.

Poster's attorney Frank Schreck told board members Wednesday that the limited license would raise investor concerns that would hurt financing for the purchase. After the hearing, Schreck said he is still "confident" that financing will move forward, though he hasn't had time to fully examine the investment contracts because the one-year limitation came as a surprise.

In a separate interview, Breitling said the one-year limitation wouldn't affect the buyers' ability to finance the deal.

Funds for the $215 million purchase of the Golden Nugget properties in Las Vegas and Laughlin already are in escrow awaiting the approval of the license from the Gaming Commission.

"We're ready to close on the deal immediately," Breitling said.

A bond analyst who declined to be identified and who isn't connected with the financing agreed, saying the financing was virtually "a done deal." While the association of Poster and Breitling with Rizzolo has local significance, it probably won't raise much concern on Wall Street, the analyst said.

Poster Financial officials told board members they raised more in bond financing than expected. Officials said interest from more than 90 investors boosted their original $140 million bond offering to about $155 million -- the largest component of the financing package. The eight-year bond pays 8.75 percent -- a relatively low rate for a deal of this kind, representatives said.

The company also has secured a $20 million five-year term loan and a $15 million five-year revolving credit line from Wells Fargo Bank.

Thirdly, a group of investors share $50 million in equity. Poster and Breitling each have a $18.75 million stake in the property, tennis star Andre Agassi and former chairman of slot maker International Game Technology Chuck Matthewson each have a $5 million stake and former Expedia executive Rich Barton has a $2.5 million stake.

Poster, a Las Vegas native, began the hotel booking company Las Vegas Reservation Systems in 1990 with $5,000. Breitling moved to town and bought half a stake in the company in 1993. The company, later called Travelscape.com, began to focus on Internet bookings in 1998 and was sold to competitor Expedia Inc. in 2000 for $95.5 million.

Regulators peppered Poster and Breitling about their association with Rizzolo, saying the men socialized with Rizzolo even though he was the subject of an ongoing FBI investigation that broke in February with a well-publicized raid on Crazy Horse Too. The investigation may turn up information that could reflect badly on Poster or Breitling, regulators said.

"I want to feel comfortable that there's nothing in your background that's going to come back and embarrass the board and the state," Siller said.

Poster and Breitling said they patronized Rizzolo's topless club and dined with his entourage, while Poster also gambled with Rizzolo. The relationship grew after Poster and Breitling sold their Internet business and suddenly had more time to socialize, Poster said. He said he "began to disassociate" with Rizzolo around June 2003 as his gaming licensing investigation was under way.

Poster didn't go far enough, regulators said.

Regulators cited subsequent telephone calls and a plane trip with Rizzolo to the Del Mar race track in San Diego as evidence that Poster had not severed his relationship with the strip club owner.

Poster acknowledged that some of his phone conversations with Rizzolo were captured by FBI wiretaps. Poster said he was subsequently interviewed by the FBI about the conversations, including one that concerned a friend of Rizzolo's who owed $400,000 in gambling markers to Station Casinos Inc.'s Green Valley Ranch Station casino in Henderson.

Poster, who served on Station Casinos' board until the Golden Nugget purchase announcement in June 2003, said he invited Rizzolo's friend to gamble at Green Valley Ranch. The friend gambled on credit and was slow to repay the debt. Rizzolo's friend had repeatedly said he would wire the money but didn't, Poster said.

"I wanted to make sure it was paid ... I was getting nervous about it," he said.

Regulators also questioned Poster and Breitling about their social connections to other men with ties Rizzolo, including Rocco Lombardo and Vincent "Vinny" Faraci. Both have family ties to prominent crime organizations.

"Who did you think these people were?" Siller asked.

Poster said he was aware of regulators' concern about the men. On the other hand, Rizzolo's social entourage included such prominent community figures as attorneys, politicians and casino executives.

Poster also was questioned about his great-uncle Jack Franzi, a former oddsmaker for Coast Casinos Inc. who was forced out of his position after regulators charged him with setting betting lines illegally. Poster said Franzi is "like a father" to him but only sees the man occasionally, usually at family functions.

Rizzolo hasn't been convicted of any crimes and has denied the FBI's allegations.

While Poster and Breitling are not targets of the FBI investigation and have not been connected to organized crime, their association with Rizzolo and his associates has put their futures in the gaming industry at risk, regulators said.

"People such as you who are very successful and very young are often considered 'marks' by organized crime," Siller said.

"It's the M.O. of organized crime to extort individuals or work their way into the business ... even if you don't want them to," added Gaming Control Board member Scott Scherer.

"I used poor judgment," Poster said of his relationship with Rizzolo. "He and I had mutual friends ... it wasn't a conscious decision on my part to associate with him so much as something that had just developed."

"There's a very low tolerance for lack of judgment," Siller replied. "We will be watching very carefully who associates with who."

Poster and Breitling said they have never been involved in any business deals with Rizzolo or any of his associates, nor did they behave improperly in Rizzolo's company.

Schreck said his clients were up-front with regulators about their friendship with Rizzolo and stopped associating with him save for a few inconsequential phone calls and the trip to San Diego.

His clients "didn't understand the seriousness, at least in the eyes of gaming," of the relationship, he said.

Rizzolo is a gregarious person who socializes with prominent people and remains a "sought after customer in every major casino," he said.

"There is no relationship (now) with Rizzolo. I have no concern about that license being made permanent in a year."