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Best of Liz Benston

Gaming Guru

Liz Benston

Casino Companies Still Paying Displaced Workers' Salaries

7 September 2005

Louisiana -- Many casino workers who lost homes and jobs in Hurricane Katrina will still receive their paychecks by mail or in person -- a small ray of hope for people who are struggling to rebuild their lives.

Each of the four Las Vegas-based casino operating companies with properties damaged by Katrina are still paying workers displaced by the disaster -- a cost that in some cases is covered by business interruption insurance.

The companies, which include Harrah's Entertainment, MGM Mirage, Boyd Gaming and Pinnacle Entertainment, have set up hotlines to get contact information for workers to send them their last paychecks for time worked as well as future checks.

All told, the companies employ about 14,000 people at their casinos along the Mississippi Gulf Coast and in New Orleans, the areas most affected by the storm.

Harrah's Entertainment has pledged to pay workers up to 90 days after its casinos closed.

Just how long other workers will get paid is uncertain.

Other companies have been less specific about the duration of those payments, saying it could depend on whether their casinos reopen in the next several weeks or whether workers take other jobs within their companies.

Boyd Gaming said the company would pay workers at its shuttered Treasure Chest casino for the next eight weeks "assuming we are still closed, and then we will re-evaluate the situation at that time."

Tuesday, Pinnacle Entertainment Chief Executive Dan Lee said payroll costs are covered by the company's business interruption insurance but said coverage isn't a sure thing and must be supported by efforts to get its casinos up and running.

"There is an obligation to try and mitigate the losses to the insurance company," he said. "I can't just pay the employees forever and expect the insurance company to reimburse us."

Pinnacle is attempting to "work it out person by person to see what they need" rather than pay workers under a blanket policy, Lee said.

Some employees are already back at work assisting in the rebuilding effort, while others might want to work instead at the company's Lake Charles and Bossier City casinos in Louisiana, he said. Both properties emerged from the storm intact.

MGM Mirage spokeswoman Yvette Monet said workers will continue to receive their paychecks and full medical coverage for an as-yet undetermined period.

"We're still conducting our assessments of the property before we make any decisions," Monet said.

MGM Mirage senior managers were in Biloxi Tuesday to assess the damage for the first time.

The company has begun sending out payroll checks, which are available at a distribution center at Beau Rivage or will be sent via Federal Express to employees who have evacuated the region.

In Mississippi, where all of the Gulf Coast casinos were either destroyed or significantly damaged, another uncertainty is where the rebuilt casinos would be located.

"There's not an easy answer to that," Pinnacle's Lee said in an interview last week.

Many observers have speculated that the damage caused by the storm could prompt legislators to revise a state law requiring casinos to be built on boats or barges over water.

If legislators allow casinos to be built anywhere in Mississippi, the Gulf Coast site "isn't the best site," Lee said.

If the casinos have to be built near water, however, then the Gulf Coast location might be the best option, he said.

If land based casinos are allowed, that might complicate the rebuilding process for the region's hotels, which weren't as badly damaged and were designed to be built next to riverboat casinos, he said.

On the other hand, the "safest and most expedient" way to rebuild might be to let casinos fill in the water with land next to their hotels and build casinos up to the same height, he added.

Pinnacle, which gets a greater percentage of its profit from the Katrina-ravaged area than its competitors, is "well insured" and doesn't anticipate the hurricane will significantly affect the company in the long term, Lee said.

While the company rebuilds its Casino Magic property in Biloxi from scratch and repairs its Boomtown New Orleans riverboat, Pinnacle is moving ahead with two $400 million casino projects in St. Louis.

The Biloxi rebuild will cost in the "hundreds of millions" but will be covered by insurance, Lee said. The company's newest property, the L'Auberge du Lac resort in Lake Charles, La., cost $365 million and has about 750 hotel rooms. The company's $400 million in insurance coverage is "adequate" to build a replacement property for Biloxi, which had fewer than 400 rooms, he said.

At the New Orleans property, which suffered minor damage, insurance is expected to cover the difference between what the reopened property earns and what it would have earned had there been no hurricane, Lee said. The company is also expected to receive insurance money during the time both properties are closed.