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Nevada Regulators Set to Question Station Casinos on Missouri Contacts

Back when Las Vegas was little more than a simple desert fort, the Midwest was a haven for gamblers.

Along the Mississippi River in the 19th century, from St. Louis to New Orleans, riverboat gamblers plied their trade along North America's mightiest river. For these gamblers, a state like Missouri was their home turf.

Missouri has proven rich soil for gambling's Midwestern renaissance of the 1990s. In the fiscal year ending June 30, 2000, Missouri's 14 riverboat casinos won $979 million from gamblers, a 9 percent increase from the previous year.

But that environment turned into a regulatory nightmare for two of modern gaming's most prominent names -- Hilton Hotels Corp., the predecessor of Park Place Entertainment Corp. of Las Vegas, and Station Casinos Inc. of Las Vegas.

Missouri's investigation of possible communications between Station's former attorney and Missouri's former top gaming regulator, combined with Station's refusal to testify in a public hearing on the issue, have some in the Midwest howling for blood, even while Station tries to sell off its Missouri holdings to a group of its executives.

"Call it gaming if you want, but we're talking gambling," the St. Louis Post-Dispatch said in a Wednesday editorial. "And the gambling industry is full of tough, smart and shrewd people who are used to getting what they want. They're used to playing with suckers.

"What Missouri needs ... is a watchdog that will stop scratching itself behind the ears and actually take a big ol' chomp out of somebody's leg. That somebody should be Station Casinos."

"It's clearer than ever that too many people, some of them public offficials, have taken foolish actions when it comes to gambling," wrote Kansas City Star columnist Yael Abouhalkah in a Sept. 3 column. "Gambling infects and corrupts almost everything it touches. Now Station Casinos is in the cross-hairs of regulators. Here's a bet: The company will sell its gambling dens and flee Kansas City by ... mid-2001."

Despite calls from Missouri that gaming regulators have been far too soft on operators -- the Post-Dispatch referred to the gaming commission as a "pussycat" - gaming analysts view the matter far differently. They view the Station situation as yet another example of harsh treatment of a gaming operator at the hands of Missouri regulators.

Establishing gaming in Missouri is risky enough, they point out, because Missouri requires riverboat operators to complete a casino's construction before it can even apply for a license, and places a $500-per-visit "loss limit" on riverboat gamblers. After the experience of Hilton and Station, several analysts said, few companies will want to brave the waters in Missouri.

"Missouri has been a difficult regulatory environment for Station Casinos, as well as all other operators," said Andrew Zarnett, gaming analyst for Deutsche Banc Alex. Brown. "I think there's little chance any new operator will want to make an investment in Missouri, given the way they have treated Station Casinos and Hilton Hotels prior to this recent event.

"They (Missouri regulators) have clearly shown that they are not friendly to gaming companies."

Despite this, Zarnett doesn't believe other gaming companies in Missouri like Harrah's Entertainment Inc. of Las Vegas will be rushing to leave, primarily because he believes there would be few buyers for the casinos.

"Everyone in that state has to stick it out," Zarnett said. "I don't think there's that many buyers for assets in the state of Missouri that would want to be scrutinized by the Missouri Gaming Commission. No one in their right mind will put themselves through that, given what Station and Hilton have had to go through."

Troubles with Flamingo

Ironically, both Hilton's and Station's troubles in Missouri began in one place -- the Flamingo Hilton riverboat casino in Kansas City.

After securing the site for the riverboat in 1993, representatives from Hilton met with Elbert Anderson, former chairman of the Kansas City Port Authority. After thanking Anderson for his help, a Hilton employee asked Anderson for what he wanted in return. Anderson asked for $1 million in local grants. One-quarter of this grant money went to KC Perspectives, a company operated by a woman with whom Anderson was romantically involved.

Both Hilton and Anderson later insisted that this wasn't an attempt at bribery. But in August 1998, after two years of federal investigations, Hilton settled with federal prosecutors investigating the Anderson case, paying the federal government $655,000. Though the Flamingo kept its license, Hilton agreed to sell the casino as soon as practical. Hilton did not admit wrongdoing.

The Anderson flap led to the resignation of several Hilton executives, including President and Chief Operating Officer Raymond Avansino, who resigned under pressure from the Missouri Gaming Commission in 1996. Though Avansino was not ordered to resign, Hilton officials made it clear they'd been told they wouldn't be licensed in Missouri if Avansino and others didn't resign. Avansino was a member of the Nevada Gaming Commission from 1981 to 1984.

The Avansino matter re-emerged during last week's hearings, after several commission witnesses testified that former Missouri Gaming Commission Chairman Robert Wolfson had said he knew Avansino had received a severance package to leave the company, contradicting testimony by Hilton Chairman Stephen Bollenbach in 1996. The source of this information was a letter given to Wolfson, apparently by former Station attorney Michael Lazaroff. Lazaroff had also represented Avansino.

Nevada, however, did not subject Avansino to the same treatment as Missouri. Avansino, now a Reno attorney, was named to the Nevada Ethics Commission in September 1999.

To this day, gaming opponents fume over Missouri's decision to allow the sale of the riverboat.

"They (Missouri gaming regulators) have been lapdogs to this point," said Tom Grey, executive director of the National Coalition Against Legalized Gambling.

Like the legendary Hope Diamond, the Flamingo riverboat soon proved a curse for Station, which hoped to acquire the casino in an expansion of its Missouri empire.

After Atlantic City casino mogul Donald Trump's bid to acquire the riverboat stalled before the Missouri Gaming Commission, Station entered the picture. On Sept. 13, 1999, Station announced plans to pick up the riverboat for $22.5 million -- a mere fraction of what it cost Hilton to build in 1997.

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