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Best of Liz Benston

Gaming Guru

Liz Benston

Las Vegans in on Huge Bay Area Casino Deal

18 August 2004

Two people with Las Vegas connections are poised to become part of a management team that is expected to run one of the world's largest casinos in the densely populated San Francisco Bay Area.

Palms resort owner George Maloof and Jerry Turk, former manager of the Fitzgeralds casino in downtown Las Vegas and now the head of the management company for the Pala hotel-casino near San Diego, are part of a limited liability company that is expected to develop and manage a major hotel-casino for the Lytton Band of Pomo Indians in San Pablo, Calif.

San Pablo, in the East Bay, is about 14 miles from Oakland and is less than 20 miles from San Francisco.

The Rumsey Band of Wintun Indians, who own and manage the Cache Creek casino near Sacramento, and the Pala Band of Mission Indians, who own the Pala casino, also will have a stake in the management company.

The casino is controversial because of its size and because it would be considered the first California casino in an urban area. Congress in 2000 authorized the federal government to take an existing card club into trust for the Lytton tribe, creating a mini-reservation on which the resort would be built.

Gov. Arnold Schwarzenegger is expected to sign a compact with the tribe Thursday, paving the way for plans to build a casino resort that would be up to 600,000 square feet and have up to 5,000 slot machines, according to the Los Angeles Times and Sacramento Bee. The property would be multiple stories and built atop the 9.5-acre card room site, the newspapers said.

By contrast, the MGM Grand casino, Las Vegas' largest, has about 2,900 slots.

The governor has so far signed renegotiated contracts with a few tribes that allow unlimited slot machines in exchange for payments to the state.

The management group would receive from about 20 to about 25 percent of the San Pablo casino's net profit over the life of the seven-year contract, according to newspaper reports.

The project would mark the first Indian gaming venture for Maloof, who is known for developing the off-Strip Palms into a successful slot machine haven as well as a sexy hotspot frequented by scantily-clad hipsters. Maloof also ran the Fiesta hotel-casino in North Las Vegas before it was sold to Station Casinos Inc.

"Everything we've done has been new and complicated," Maloof said. "The Palms didn't happen overnight and the Fiesta took years" to develop. "It's a business decision, just like anything else."

Maloof said he hasn't been scouting for tribal casino contracts and doesn't expect to aggressively pursue them like Station Casinos, which has contracts pending with multiple tribes in California.

"We're a private company and we don't have the pressures that they would have," Maloof said. "We grow at our own pace. Right now our focus is on this project ... as well as our expansion in Las Vegas."

Maloof's company began construction about a month ago on a second hotel tower at the Palms. The $200 million project is expected to include a recording studio as well as other amenities that are still under development.

The Lytton tribe has been the focus of a major lawsuit that has shaped tribal gaming policy and has also faced critics who fear the casino will spark a trend toward urban casinos outside of historic reservations. Others say the criticism is unfounded in part because the Lytton tribe didn't have a reservation to begin with and because its casino project was authorized by an act of Congress rather than the typical federal application process.

A federal appeals court in California last year upheld a 2002 decision by a federal judge in Sacramento who ruled in favor of the Lytton tribe's casino plans. San Francisco Bay Area card clubs fought the tribe, arguing that California's Proposition 1A -- the historic statewide initiative in 2000 that amended the state constitution to allow tribes to operate casinos on their reservations -- wasn't intended to give tribes the authority to build casinos outside of their reservations and in urban areas.

Similarly, Nevada Sen. Harry Reid tried to block the San Pablo casino with a bill that would have reversed the act of Congress that authorized the project. Reid remains opposed to the Lytton casino because he says it is not on a historic reservation. Reid has said the process by which the tribe obtained the casino opportunity isn't fair to other tribes and runs counter to the spirit of the Indian Gaming Regulatory Act, the 1988 law Reid helped draft that authorized tribes nationwide to develop casinos on their reservations.

When the amendment authorizing the San Pablo casino passed "that was the end of the battle in the Congressional sense," Reid Press Secretary Tessa Hafen said.