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Best of Benjamin Spillman
Benjamin Spillman

Owner of Fitz under attack

16 July 2008

PENNSYLVANIA -- Legislators in Pennsylvania want to revoke Las Vegas casino owner Don Barden's license to run a casino in their state.

Barden recently lost control of a casino project in Pittsburgh when he couldn't line up financing to retain a majority stake in the deal and now seeks to shift control to new investors.

Now state Sens. Jane Orie and Jim Ferlo want Barden to give back his gaming license.

They say Barden, who owns Fitzgeralds on Fremont Street in downtown Las Vegas, participated in a "last-minute bait-and-switch" when he handed the reins of the Pittsburgh casino to investor Neil Bluhm.

"His financial credibility has evaporated very quickly," Ferlo said.

Barden did not respond to a message left with an assistant at the Detroit headquarters of his firm, Barden Development.

In 20 pages of documents with the Pennsylvania Gaming Control Board, the senators criticize Barden's effectiveness as a businessman and urge the board to seek new bidders for the Pittsburgh license.

They argue Barden and the new investors are trying to circumvent the state's casino regulations by transferring a license among themselves instead of starting the process anew and allowing for new bidders.

The investors' effort "is a clear attempt to avoid any competitive application process for the Pittsburgh slots license," they wrote. "This is unacceptable."

Although Fitzgeralds is a separate business entity from the Pittsburgh deal and Barden's other casinos in Indiana, Colorado and Mississippi, the downtown Las Vegas property was dragged into the fray.

In May, when Barden was seeking to retain control of the Pittsburgh project, he promised to contribute $35 million and used Fitzgeralds as collateral. The idea was to convince bankers that he had a sufficient stake in the outcome of the project.

At the time it appeared Barden was destined to sell Fitzgeralds in order to raise the money because it is unlikely the property could produce enough income to generate $35 million for the Pittsburgh deal by the first quarter of 2009, the deadline for Barden's cash contribution.

When Barden announced he would relinquish his majority stake last week, it also meant he no longer needed to offer his Las Vegas casino as collateral.

But Ben Bubeck, a Standard & Poor's analyst who has written extensively about the Pittsburgh deal, said selling Fitzgeralds could help Barden offset financial troubles with his other companies.

As for Pittsburgh, the project is stalled and it isn't clear when it will get back on track.

After being selected over Harrah's Entertainment and others for the Pittsburgh license in 2007, Barden has missed construction deadlines and scaled back plans for the property.

He attributed the problems to the upheaval in the credit markets prompted by the national economic downturn and the mortgage lending crisis.

Ferlo said people in Pennsylvania are anxious to get the project back on track.

"(Barden) made a lot of great statements about commitment to the community. That has melted away pretty quickly," Ferlo said. "You see a half-built shell of a parking garage and a steel frame of a building."