Sue Lowden struggles with casino business, soars in real estate

By J. Patrick Coolican

Friday, May 28, 2010 | 2:01 a.m.

Sue Lowden has touted her career as a businesswoman on the campaign trail, mocking Sen. Harry Reid for having spent scant years in the private sector.

The former state senator and Republican Party chairwoman, who hopes to be her party’s nominee against Reid, has been described by national political reporters as a wealthy casino owner worth $50 million or more. Her story — she came from nothing — is one of uplift and socioeconomic mobility.

For Republican audiences fond of the free market, it’s an appealing message: A hardworking entrepreneur who has to meet payroll and so will keep intrusive government out of the way.

A Sun review of financial and other records tells a more complex story, although ultimately one that still points to significant financial success.

Lowden sits on the board of Archon Corp.; her husband Paul Lowden is chairman and CEO. The company owns the Pioneer in Laughlin, a working-class casino on the Colorado River.

Although the Lowdens haven’t had much success as casino operators, that’s not their business plan, Sue Lowden said in a wide-ranging interview about her family’s business. Their true talent and interest are in the other pillar of Nevada’s economy: real estate bets that pay off big.

“We look at ourselves as a real estate and development company,” she said. (Paul Lowden wouldn’t publicly discuss the company or its results.)

A review of the company’s financial results over two decades shows a pattern: year after year of losses, with an occasional windfall profit after a shrewd real estate deal. Archon and its precursor companies have sold the Sahara, Hacienda and Santa Fe hotels, as well as land in Henderson near the Galleria at Sunset mall, totaling more than $400 million.

Archon owns, in addition to the Pioneer, two East Coast office buildings and 27 acres on the Strip at the old Wet ’n Wild site, once a source of endless speculation about potential resorts. Archon would like to be landlord to a developer of a sports and events arena, which would receive favorable tax treatment if the Clark County Commission revives a mothballed redevelopment zone.

Lowden said that through the years she’s been active on the casino side of the business, in community and investor relations, and in marketing — deciding casino themes and logos, as well as restaurant names and menus. (She fondly remembered finding out what people in northwest Las Vegas wanted and delivering an ice rink to them when they built the Santa Fe.)

Later, she became president of the Santa Fe and was in charge of day-to-day operations, which she said would be an asset in Washington.

“One of the problems in Washington is that they don’t have more people who have really run a business ... people who know how hard it is to run a business. Every check at the Santa Fe was signed by me,” she said.

Financial results show how difficult it can be.

In 1998, the company lost more than $62 million.

There was significant labor unrest at the Santa Fe, as the company fought the Culinary Union. The company racked up a string of labor law violations stemming from its refusal to recognize the union as the workers’ collective bargaining agent even after a federally supervised election.

They unilaterally changed work hours and reclassified workers, resulting in employees losing benefits. In an interview this year, the couple said they did so to cope with a bad economy, retaining as many jobs as possible but shifting many employees to part time.

The company’s stock traded at less than $1 a share and was delisted from the American Stock Exchange.

In 1999, a subsidiary, the Pioneer, sought bankruptcy protection.

“We looked at that as a reorganization. That’s what you do in business,” Lowden said.

The bankruptcy came as the company fought off corporate raiders, who had begun buying up company debt and hoped to seize control. Ultimately, they weren’t terribly concerned, Lowden said. A profitable sale was always in sight.

Indeed, they sold the Santa Fe, and since then, Archon appears to be grinding along again with little debt, positioned for the next real estate windfall.

Still, there has been some adversity in recent years. Archon management — the Lowdens — has fought bitterly with D.E. Shaw, a hedge fund and Archon shareholder.

In 2005, D.E. Shaw threatened legal action when Archon’s board proposed giving $4 million stock windfalls to two employees, David Lowden and Christopher Lowden, brother and son, respectively, of Paul Lowden.

The board proposed giving them each 150,000 shares priced at $1 a share even though the stock was trading in the high 20s. Paul Lowden turned down the same option award from the board.

D.E. Shaw sent a blistering letter to Lowden and then attached it to a Securities and Exchange Commission filing: “Your actions make us wonder whether Archon Corporation is seeking to be run as a family fief on which minority shareholders remain as serfs.”

The board backed off the plan, increasing the price of the options to $20.50.

Sue Lowden said it was not an insider giveaway but compensation for unpaid work done years before at the Santa Fe.

She also blasted D.E. Shaw, calling it “a vulture hedge fund, a Wall Street vulture hedge fund that are professionals at going after companies and suing companies.”

D.E. Shaw declined to comment.

An expert in corporate governance said Archon’s situation isn’t ideal.

“Investors should be cautious about getting into a company controlled by insiders,” said Nell Minow of the Corporate Library, a for-profit corporate governance research firm. “Sometimes that works because they have incentives to make the company profitable ... but other times they can misappropriate and use the company to their own advantage.”

The Lowdens have again clashed with D.E. Shaw in an ongoing lawsuit, in which D.E. Shaw and other plaintiffs allege that Archon has breached a contract by undervaluing preferred shares, to the benefit of the Lowdens.

“As a result of Archon’s breaches of the agreement with respect to the preferred shares, Lowden is positioned to achieve — personally — a net benefit of more than $8.5 million,” the complaint alleges.

A federal judge granted a partial summary judgment to the plaintiffs, although the matter is still in litigation; for that reason, Lowden declined to comment.

Sue Lowden, like many during this recession, seems to have been at the wrong place at the wrong time when she served on the Nevada board of Colonial BancGroup, an Alabama-based institution that had a number of regional boards; it was an honorific title and seems not to have carried governance responsibilities. The bank was seized by regulators and sold, although not before an attempt to win federal bailout money failed because of accounting irregularities and a resulting criminal investigation.

The Pioneer, like many casinos in Southern Nevada, and especially Laughlin, has struggled in recent years, having reduced its workforce by 100 employees, including through layoffs. Despite the layoffs, the Lowdens make more than $850,000 in salaries and bonuses, essentially unchanged from the prior year. Paul Lowden’s salary and bonus are unchanged since the ’90s.

Asked why they haven’t foregone some salary to save jobs, Lowden said the parent company has subsidized the struggling Pioneer, thereby saving jobs.

She criticized Reid’s campaign for its attacks on her for the Pioneer layoffs.

“Are you kidding me? Do you know how many people have been laid off in this state? Why doesn’t he come home and fix the problem?”